Online Creative Destruction: Music Blues Part 2

Quick Summary: The developments around the social media / Web 2.0 are a clear and present danger for the traditional music industry.

How the music industry should handle these issues is a subject of debate. There are some who even argue that the amateur culture, as a dominant factor of the Web 2.0 developments, and the alleged violation of intellectual rights will put an end to professional creativity and eventually drive the mainstream music industry out of business. Others take a more moderate position arguing that the music industry will finally adapt to the new reality and differentiate its approach.
The industry’s response to the threat has so far been fragmented and weak. Despite some earlier success like closing down Napster and a few other of the early file sharing sites, the phenomenon of illegal downloading is for all intents and purposes by now beyond any control. Paradoxically, in spite of the fact that iTunes and other subscription-based sites have shown that there is a promising market for legally downloaded music, many of the industry main players are still looking to these developments with suspicion. Another worry, fuelled also from the success of YouTube and other video sharing sites, is that the next victim of the social media will most probably be the film industry but also any other form of information-based industry (games, publishing etc).
The best these industries can do is to start working on the problem putting it in its proper perspective and forgetting the success formulas of the 60s and 70s. The objective should be to try to understand the new market landscape and develop ideas that will allow them to use the new technology to their advantage. An important issue here is to find new ways of communicating with the virtual customer by applying some new forms of marketing aiming at reaching the new centers of market influence (bloggers, podcasters, online communities etc.) as well as the online Long Tail. This means that those involved understand and accept the fact that the days of the very fat cows are over. Minimizing their development and distribution costs - maybe starting by bringing back to normal levels the exuberant fees they pay to both talented and untalented artists – will allow them to compensate for the reduced revenues.

Online Creative Destruction: Music Blues Part 1

When it comes to new technologies the law of creative destruction is merciless. One of the latest victims of the new generation of Internet applications - commonly referred to as contextual Internet, Social Media or (more often) Web 2.0 - is the music business. The industry’s picture is gloomy: sales and revenues are in a tailspin and there is a general feeling that the good old trusted music marketing knacks simply do not work as they used to. A clear symptom of this is the steady decrease of hit albums since the year 2000: only one music album released in the new millennium is found in the Top 20 list of hit albums of all times http://www.rockonthenet.com/xtra/toplps2.htm

Industry insiders, stockholders and even academics try hard to figure the best course of action. The main causes of the problem are known: File sharing, illegal downloads and the decreasing power / lack of effectiveness of mass communication are mostly blamed. Less people seem to realize that another source of troubles is the explosion of the special interest micro-markets that have switched a large part of demand for music from the hit album to the “Long Tail” at the cost of the official labels that have dominated the music scene for the last forty years. As a result a steadily increasing chunk of the demand for music is shifting towards remixes and amateur online music, circulating through blogs, podcasts and other Web 2.0 type web sites. Music amateurs and enthusiasts have access to freely available, open source software that turns them into composers, performers, producers and distributors of remixes or other shorts of “garage” music, that is further virally distributed among funs. In other words the music industry does not seem to be the victim of technology only but also of the victim of changing consumer predilections.