Selling Minor Chords in Exchange for a Happy Tune
Discovering and Implementing the Most Appropriate Media Distribution Model
Suggesting an ideal pay-for-content business model for Online Media Distribution (OMD) is much like suggesting that your favorite color should be orange. Given that there's at least 16 million colors in the digital universe, I wouldn't stand to make much money selling orange.
Welcome to the 20th century business model. To date, every business model put forward that attempts to profit from the distribution of media files over the internet is based on the principal identified above.
Previously, media distribution consisted of controlling and filtering physical property that consumers could buy. Retailers knew that the best way to make a profit was to sell the 'hot' items, which are only 'hot' because the labels wanted them to be that way. Furthermore, most retailers would agree that a large percent of their sales relied on 'impulse' shopping: consumers dropping in, browsing and buying one or two CDs that they hadn't originally planned on buying.
Today, consumers demand more than what retailers are willing or able to keep in inventory. As genres become better – and more narrowly – defined, retailers and labels find it difficult to keep up. Impulse demand is no longer being satiated. Consumers seek other means for obtaining new music; retailers are left behind.
Finally, the cost of a CD hasn't changed to reflect competitive forces or the introduction of cheaper reproduction technologies. As a result, a new CD still averages $20, whereas many consumers (although not most) know that they're buying about $0.50 worth of physical property. As technology changes, the industry has not kept up, both in terms of deliverables or in terms of price.
These and many other reasons are just a few examples of why consumers have resorted to online media distribution as opposed to physical distribution when obtaining (but not necessarily buying) media files.
A new business model is needed to account for these changes. The problem that we all face is that the existing industry, ie. the 'Big 5' labels, has tried to 'export' its model of physical distribution to the web. Of course, this doesn't work because of one key issue: we're not in the 20th century anymore.
Corporations that thrived in the past will cease to do so when they can't account for individual tastes. 'Pushing' product on consumers in a digital age has been no better thought out than pushing hamburgers on a room full of vegetarians.
Individuals have clearly shown that they would rather steal than continue to listen to the drivel that labels continue to push on us. Younger consumers are reaching back to through the history of music and are collecting tunes from the Who and Led Zeppelin. They're also digging into search engines for remix versions of their favorite tunes from the Chemical Brothers, Moby, Limp Bizkit, Fat Boy Slim and the Charlatans. A bigger audience than ever is trying to discover 'world music'. All the while, they're asking again and again: "Why should I pay for a song when I know the artist isn't getting what they should?"
Furthermore, we know that consumers would pay for songs if the price was right. However, the cost to produce a CD en masse is about $0.50. The average price per CD: $17.99. The average amount that an artists receives: $0.12.
Given the numbers above, it's no wonder bigger bands are going out on their own. They've broken away from – or are at least attempting to do so – the contracts that hindered their artistic efforts. They're opening their own shops because they can. Why limit the distribution of your music to one or two stores, when you can spend a few bucks on a site and sell everything online?
Physical distribution will still occur, but on a more intimate basis. Artists will be the retailers and consumers will still be able to get their liner notes and CDs. The only problem for many artists: how do you attract a large audience? Answer: you have to join up with music portals and you have to promote yourself.
For many artists, this is a new and unpalatable concept: they have to be prepared to operate as a business. They have to start doing all of the tasks that a label used to perform. In other words, the transition from old to new will NOT occur overnight!
Finally, changing technology (ie. the formats that consumers use to hear or see their music) is a very big issue. DVDs have just started coming out, yet they don't offer a realistic combination of audio, video or interactive. MP3s are the product of choice for downloading, but how long will it be before there's a different standard, at which point the consumer is going to have to pay for more gear to play this stuff? In other words, as the technical infrastructure changes, consumers keep feeling like they're getting screwed.
In summary, greed and unwillingness to adapt to a new marketplace have resulted in the labels saying goodbye to what used to be a pretty reasonable and loyal audience. They would rather sue than accommodate. Restrict as opposed to relinquish.
It is within this context that we propose a new model: www.BarChord.com. BarChord.com is based on the principles of "Direct-Demand-Distribution", or "3D". 3D accounts for many factors that didn't exist just a year ago:
1. Direct interaction between consumers and artists (and in the case of BarChord, venues as well), allowing for reduced costs and increased customization of performances;
2. Demand generated by artists having a financial incentive to use our tools to promote themselves and build their own unique audience. Those that don't, won't make any money from paid downloads; and
3. Distribution of all files using the latest and greatest in download technology, including the world's first business which allows artists to offer consent to participating with file-sharing networks.
Of course, our model is based on other principals, including "good pay for paid goods", a system which pays artists 50% gross on all of their paid downloads; and not charging the artist when they make their content available to the rest of the world. Finally, artists have the right to not charge anything at all, making our property appealing to those that continue to refuse to pay for content, no matter how low the price.
Another important element of our model is that we don't exclude managers, labels, promoters and others that have helped artists in the past. Our site has been designed to accommodate this type of activity: if a manager wants to register 20 bands, they can easily do so, all under one account.
Finally, our model doesn't rely on paid downloads. Instead, we've got a diversified revenue stream from advertisers and sponsorships. In the future, we expect our model to be supported by ticket sales, hosting, software licensing, classifieds, paid links and email advertising.
Those familiar with economics will recognize that we have created a marketplace for musicians and consumers with BarChord.com. By adhering to the basic principles of supply and demand, we have attracted the attention and regular patronage of thousands of artists and tens-of-thousands of registered users. A new marketplace is in the making and we intend to support it.
Our numbers speak for themselves: traffic has been growing exponentially and the number of artists has skyrocketed. Every day, new artists register with the site and provide new music for the public. Every day, consumers sign up, find tunes and are obviously more than happy to pay a buck or two for popular but unique tunes.
What do we plan on doing next? There's 15,999,999 more colors in the digital universe. Take your pick.