Retail music sales have declined steadily during the last nine years. Now the economy is in a major downturn and CD sales are slumping even more as consumers tighten their purse strings. Downloads are increasingly popular, but have yet to achieve revenue numbers equivalent to retail sales. On average only three percent of music on an iPod is purchased from the iTunes Music Store.
The industry is searching for a new business model. Here are five new methods of selling music that are currently being tested by many artists and labels.
Free Music
Many major music industry players hold the opinion that illegal downloads have been the culprit of falling revenue. Since illegal downloading is so prominent, many companies have embraced the concept by giving music to consumers at no cost. In many cases, free music is a loss-leader used promote other music related merchandise such as t-shirts and concert tickets. Pop artist, Prince, gave away a copy of his last album with the purchase of a British Sunday newspaper. This outraged music merchants, but Prince maintained that it was to promote his upcoming UK tour. As a result, every tour date sold out as soon as it went on sale.
SpiralFrog.com is experimenting with allowing users to download music for free after viewing advertising. Typically these type of sites have a revenue-sharing agreement with participating labels.
Pick Your Price
History was made when rock band Radiohead released their album with a voluntary price tag. The album was available for download and users then paid an amount equal to the value they perceived it was worth, including nothing at all.
Magnatune.com has built their business model around this technique. Albums carry a low minimum price and then users can express their appreciation for the music by optionally paying more. The minimum album cost is around $5 and users tend to purchase a higher quantity of music at this price.
Price Point = Demand
AmieStreet.com is based on a “pay by popularity” business model. All of the music on the site is free to begin with, however, the more a track gets downloaded, the higher the price goes up; the cap being $0.98. This contrasts iTunes model in which all tracks, regardless of popularity, are the same price.
Subscriptions
Subscription services have been around for several years. Rhapsody has come to the forefront of this business model. Users pay a regular monthly fee to access the extensive catalog of music. Music is played either through the company’s software or through a web browser. Songs can also be downloaded for $0.99.
Rhapsody is additionally available “on the go” for the user with their Rhapsody To Go service. The subscriber purchases a compatible MP3 player and loads it with songs from the Rhapsody catalog. Songs can be changed often as long the monthly membership is maintained.
Music Tax
The basic principal behind the music tax concept is that Internet service providers would charge a flat-rate fee as part of the Internet service plan in exchange for the right to download and share music. File sharing would decriminalized and the music industry would have a new stream of revenue. Many proponents are of the opinion that this would create revenue equal to or greater than CD sales 10 years ago.
Other variations of this concept could include a tax on digital audio players or direct taxation through the government.
Conclusion
Gospel music is one of the last genres to be affected by the changes happening in the larger mainstream music marketplace. The advantage to Gospel music being one of the last genres to be hit with digital revolution is that maybe a new business model will be developed and proven before Gospel music experiences the troubles that other genres have had in the past.
The demographic that primarily buys Gospel music is unlikely to illegally download their favorite quartet’s latest project. However, it is to the advantage of everyone to develop new techniques to market and distribute music. The Gospel music audience tends to regenerate itself every five to 10 years. That being said, the next generation will be familiar with advancing technology. By then, all of the companies that have tried with no success will have dwindled and the mainstream media outlets will become status quo. I believe it is a positive challenge for all of us to embrace the technological changes in the secular music and media industry. Not only for success, but for the possibility that a life could be changed via these unconventional outlets.
Author: Steve Allen
| Author's Website: http://squareonestudio.com
Written: 02/12/2009
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Category: Steve Allen
Comments: 9
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I agree with the Price Point = Demand model. Our economy is surrounded by this "principal." Without it we the people of the U.S. would just be a third world country. Bottom line is you have to find the equilibrium price and keep it there. If you go above you'll lose sales, and if you go below, you'll lose your bottom line and run out of stock. My thoughts are to let the demand figure the price. The more the demand, the higher the cost’ Simple Economics!
Yes the retail music sales have reduced but surprisingly the downloads have not got the expected results.Price Point = Demand model seems a great idea and it seems the mostly to work.The other models presented by you are also noteworthy.
Wow. An interesting article. You have listed five methods of selling new music and I am impressed with the Price Point = Demand Model. The reason being, price of music changes according to rise or fall in its demand. People wont' mind paying more, when they understand why they are being asked to pay extra for their favorite music.
I can understand how the music industry is angry with illegal downloaders. It's taking money from them and also the artists. The upside is that if people truly enjoy the music they're listening to, they might go out and get the CD anyways. They might even go to concerts, buy tee shirts, ect. I really enjoyed your article. Great job with your five points.
You've provided several choices but which model is better suited for gospel music or, better yet, which model has had the most success so far for the genre? There has to be at least a few gospel artists who've had success with digital distribution already. What is your opinion?
It is good that you have addressed the problem of falling Retail music sales. The solutions suggested are also great. The best one according to me is Price Point = Demand. It is feasible and the people would not mind paying an extra buck to get their favourite music.
THis is a very interesting article. The music industry is not seeing the revenue it used to, and this must be very frusterating for artists. I do not think the free music method, would work, except for occasional promotions. The pick your price does not sound like a good idea either, obviously people would pay less than its worth. The price point=demand or subscription method would probably be the best options.
What happens to Songwriters and Publishers. How will they get paid? I'd like to know where BMI, ASCAP and SESAC stand in this discussion. How will the songwriter make a living if the music becomes free? Will they make a cut of the concert tickets and T Shirt sales?
Just wanted to let you know how much I appreciate your knowledge and abilities.
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