Ad Supported Music Unsustainable - A Guest Commentary - hypebot

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Glenn

Could Bill cite a source for the claim that the online music business is valued at $30 billion?

Key question: How do unpaid P2P downloads add value to the online music industry?

Julian Moore

People seem to all be looking for one way to 'fix' the woes of the music industry

There isn't one way and never will be. Online advertising I'm sure will grow to aid music revenue, but will just become another source of income.

Business as usual, just spread more thinly over more ground. But not one 'answer'.

dick

With the major labels, CD pressing plants,MTV, radio stations and hoards of middle men now out of the picture, we now only need 12% of that 30 billion to sustain the artists and creative community. That's all we ever saw in the past. From someone who makes their living as a songwriter, this new add driven model sounds fine to me.

Bill Houghton

The $30 billion figure is based on data within the RIAA's 2007 annual report. Specifically the 1.7 billion sales figure for digital downloads, plus an additional 20 illegal downloads for each legal. I won't recreate the math, but all figures are available in the RIAA 2007 report.

Thanks.
-- Bill Houghton

Cait

This is an interesting issue... I am a 20-year-old student, and am definitely a target of music industry efforts to curb illegal downloads and create new money-making methods of music distribution. This post contains the idea that only 20% of consumers' attention is aimed at online media--but even if only an average of 20% of a randomly selected subject group of widely ranging ages pays attention to online media, does it not count for anything that probably more than 50% of young people's attention is focused only on online media? I think, given that all of the issues surrounding ad-supported music programs and problems in the music industry rotate around people under 25, young publics' media attention should be studied to determine whether or not ad-supported music programs are worth it--national averages do not really work, in my opinion.

Cait (http://lossfurwords.blogspot.com/)

Matt @ Kurb NZ

If pro bloggers can do it I dont see why muso's can't.

eric hebert

I agree to a degree. Ad supported ALONE won't sustain it. Does TV ads support the industry. Last time I checked I still have to pay for cable. The ad supported model will be one of multiple business models (paid high quality downloads, exclusive content/clubs, touring, merch, etc.)the industry will use, just like other industries. None will support it alone, but combined it they will thrive.

Iceman

You CAN"T add value to something that users are downloading for FREE. That seems really obvious, at least to me. The RIAA is fighting a battle that's already been lost.

That's why I see all these labels going to 360s within the next 5-10 years. They cant add value to the music as product, so they're going to capitalize on the artist as a brand.

Ad-supported models are cool, as long as some of that monetization actually ends up in the pockets of the artists. Funny how things come full circle, though. Conventional radio is just ad-supported music. So I guess there'll be a new age of payola on the horizon...?

L

The 30 billion dollar figure for the online music industry doesn't make any sense, and since it is such an extraordinary claim it needs strong evidence. You need to back this up with more than hand waving in the direction of RIAA claims.

What does the "an additional 20 illegal downloads for each legal" mean? That those 20 downloads are lost revenue at the same price as the paid downloads? But if downloaders are sensitive to price, that math goes out the window.

Note that RIAA figures are partisan to an extreme and often fail the laugh test. Your 30 billion here is along those lines.

Secondly, this isn't logical: "At current price levels, every song will have to generate at least $1.00 of advertising revenue to cover expenses. "

Every song will have to generate a dollar to cover the same *charge* is what you mean, not to cover *expenses*. Expenses are orders of magnitude lower.

And even if the logic was correct, the economics aren't. The purpose is to maximize profits, which means lowering price to raise volume until the net revenue (-cost) stops growing. Without addressing volume the $1 price point is meaningless.

The meaning of the $1 price is that it creates the same kind of low-volume high-price business that the majors are emotionally comfortable with.

L

http://www.tucsonweekly.com/gbase/Currents/Content?oid=oid:107198

"Piracy has caused a $3 billion deficit in the marketplace, Duckworth [a spokesperson for the RIAA] says." That values the p2p part of the online music business at $3 billion, not twenty, and even that requires taking the RIAA's claims at face value.

Again, your $30 billion number doesn't pass the giggle test.

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