The music industry needs to fundamentally change its way of operation. The way it worked historically is that the music industry developed acts and acted as venture capital did in the 90’s – invest tens of millions of dollars and then harvest. Harvesting was done through CD sales. However on the CD’s were usually 2-3 good songs and a bunch of crap. Every year CD prices would rise a little. It worked for the music industry and let to ever growing profits.

 

One thing changed, consumers decided they want quality. Consumers wanted to just pay for the content that they actually wanted and iTunes ushered in the era of content choice and cheap content. 99 cents for one song of $17 for album. The price per song was the same but you got choice as a consumer.

 

Then add in file-sharing and distribution of free music (stolen) and music revenue plummeted. It creates a challenging environment for music.

 

So what’s the solution? Clearly its sue 10 year olds. The music industry sued 10 year olds. ATTACK YOUR CUSTOMERS. Sadly that’s how the industry thinks. I have a lot of friends in music and in digital music, in media, social media and the overall web across all sides of the issue. However I can never justify suing my customers who stole a $17 CD for $10,000. It’s the most egregious penalties and again going after 10 year olds!?

 

So what’s a solution? I can’t claim to have a solution other than can offer a few suggestions:

 

  1. Music should function more like the venture industry
    1. Stop spending money on big acts
    2. Acts self-develop using social media and cheap recording tools
    3. Allow angel investors to invest in artist careers at the early stages. The $10k – 500k to develop an act should be private angel money or seed funds for music
    4. The record industry would function as publishers and distributors and marketers helping scale good content.
    5. Users will buy singles and albums as they saw fit
    6. The industry would need to make money on ancillary licensing like ringtones, ringbacks, game/movie licensing etc… which is something that will be very hard for individual acts to do on their own
    7. More options to pay for music: Subscriptions, Ala Carte, Digital Albums, in store CD’s, Ad supported free music, music embedded on devices etc…. the music industry should support ANYONE who wants to create a music service WITHOUT requiring upfront payments. Just pay the toll when you play a song and send a check. Why waste years on negotiations and guarantees when it stifles how these services can actually compete and scale? Let them grow, charge your toll. Everyone wins.

 

We’ll see how the industry develops.