With numerous new start-ups entering the digital music space, many of them ad-funded based, what is the effect on à-la-carte sales? Going further why do labels constantly state game developers/publishers and new business models undervalue their recorded music content?
Over the last decade we have witnessed an obvious sea change in the manner in which fans are consuming music. Just keeping up with the number of new start-ups announced almost on a weekly basis is a major task. Back in the days of the traditional CD, tape and vinyl records the music business had a strangle hold on the distribution value-chain. Some would say this led to artificially high prices and an overvaluation of music as a product.
On the flip side the industry has had to cope with numerous start-ups that set up and start businesses based around illegal copyright infringement of the labels recorded music. Then large corporate conglomerates like Google buy them up (i.e. YouTube) and play hardball with the music industry. So its not as if the industry has not had serious adversity to deal with. And yes it can be said that in the beginning the industry chose the wrong path and tried to fight technological change instead of working out how to monetise it.
Yet, how can government, industry and society in general sit back and accept that it is fine for their to be a perception that “let’s set up a business, we know to be illegal, but wait for the labels to come to us and then we will negotiate” attitude. There is little wonder the music industry has generally taken a defensive attitude instead off an offensive one. With the constant breaching of their copyrights by this endless supply of music technological based start-ups and their associated new business models devaluation of music as a product has occurred.
Is this the industry’s fault? Yes and no. Whilst clearly mistakes were made, like selling CDs for £10 when manufacturing them cost less than £0.25p per unit with a maximum of say an average recoupable recording advance of £500K in hindsight has been viewed by the fan as a ripoff. Yes I can hear label executives screaming and what about the massive marketing expenses as well? Firstly, marketing expenses are generally tax deductible and so this defence is unsustainable in TMVs view.
Yes suing your own customers for file sharing was so out of this planet wrong! However, now the industry has begun its fight back in terms of file sharing, especially here in the UK by targeting ISPs who despite their indefensible arguments have and continue to actively profit from illegal file sharing. But TMV does believe this is not where the core devaluation of music as a product has occurred. Did the tape kill the music business? Of course not.
Instead, TMV believes the core reason for the devaluation of music as a product has more to do with other businesses not giving credit where music’s worth is of value. A prime example of this is the video games sector. Back in the late 90s game manufacturers like EA and others tried to play the “promotion” game as an argument, much as MTV had so successfully done in the 80s. Games did and still do, increasingly depend on music to enhance their “user experience”.
Reinforcing this is WMG head honcho Edgar Bronfman Jr ‘s statement that: “The amount being paid to the music industry – even though their games are entirely dependent on the content we own and control – is far too small.” Yet on the contrary the games industry has been equally strong in their view with Activision stating that “There’s a misunderstanding of the value we bring to the catalogue…you sort of question whether or not, in the case of those kinds of products, you should be paying any money at all and whether it should be the reverse.”
Obviously there is a serious disconnect here. However how a video game company can assert that music content owners should pay them for using their music is beyond even TMV. Let’s get one thing straight, without the good music that labels LICENSE to game companies, these video games would be worse then stale turds in terms of sales success. Yes compromise is required from both sides. File sharing is affecting the games industry but not to the same extent of the music business. Albeit TMV believes that this is just a broadband connection speed issue, which will soon be biting at the game industry’s profits as well.
Moving on, Apple’s iTunes service and associated iPod products have also had their part to play in terms of Apple’s refusal to enforce sales of the album format. This has inevitably led to devaluation as consumers now have the choice to only purchase the single tracks that they like. The fact iTunes is still a global monopoly in terms of digital à-la-carte sales has also in TMVs view significantly contributed to the devaluation of recorded music.
In TMVs view DRM, device and service interoperability issues have been the most critical contributor to the devaluation of music. With CDs, tapes or vinyl, if you brought a record from any retailer the record WOULD play on ANY player. Why has the record industry not ensured this is the case within the digital realm both retailer and device wise is beyond TMV. Yes iTunes now has MP3s for sale, but if you read their T and Cs it is still an offence to transfer your tunes to a competing player. No wonder large swaths of music fans chose file sharing. In one respect we gave them no choice. Please also note that TMV do not in any way support illegal file sharing.
Going further, the launch of numerous ad-funded music services based around viewing or listening to advertisements to receiving music streams for free has in TMV’s view also partly contributed to the devaluation of music in the eyes of the consumer. Albeit, we believe the key reason for this is that these services have not adequately leveraged their propositions to advertisers to ensure viable advertising rates. Also, cover mounts have in TMVs view significantly contributed to this devaluation of music in the eyes of the consumer.
On a final note, TMV would note the following in order of importance as the key contributors to the overall devaluation of music over the last 9 years. First up, DRM, service and device interoperability issues, secondly new start-ups attitudes that they can set up and ignore copyright, thirdly the industry suing is own customers and associated bad publicity, fourthly games companies attitudes, fifthly Apples refusal to enforce album sales and the subsequent advent of à-la-carte sales and finally ad-funded models and CD cover mounts. So there you have it!