What should the music biz do next ?

Steve Jobs asks for DRM free music, something the entire world has been asking for. If anything, Steve is a catalyst, but towards what ? What should the music industry do ?

It should learn from the rise of Google, Youtube and even the disastrous SDMI to create a new world of music. Here is what I suggest:

1. Create an Itunes competitor that is a joint initiative open to all music companies and independent artists , supported by the Big 4 and funded by a private equity group.. Hire an entrepreneurial CEO that you can agree on, let that person hire the people to run the show and get out the way. If its a compromise effort it Will fail.

Then let the company find the best multi-platform user interface that they can find. Build, lease or buy it. Whatever it takes to get you a front end that rivals Itunes and ITMS.

2. Populate the above site with 100pct of each participants’ available catalog. Cd’s and Downloads in DRM free format. 100 pct of catalog is critical. If its available anywhere, it has to be available here. Exceptions weaken the new company and create opportunities for politics and gamesmanship. Make sure that the labels participating are either all in, or dint let them in.

3. Price the music based on a holistic variable pricing algorithm that incorporates all sources of revenues. More about this in a minute.

4, Make a requirement of all labels/participants that any websites they have , 100pct of them prevent search engine crawlers . To make this work, references to your content can’t appear in any search engines other than the one you are about to create.

5. Create a search engine that is all things music and has the exclusive index to all things on all your websites, and reaches out onto non participants sites that allow indexing.

6. Go to Google and Yahoo and make them bid against each other to provide a Panama/AdSense like system that sells advertising on the Search engine and all the music sites owned by the participating labels, but ALSO calculates the optimal price for the DRM free music sold or offered for free on the site.

Why limit variable pricing to advertisers for PPC ads ? Why not incorporate the total value proposition of music across the entire spectrum of platforms offering the music ?. Does anyone question the interdependency of value among all outlets of music ? Does the popularity of downloads of a song, its ring tone, its video, its CD sales, even ticket sales, licensing, sponsorships and merch sales affect the other elements ? The total revenue available from the artist ? Of course it does. Leverage Google, Yahoo, maybe even MicroSoft or Amazon or others to create a system that takes input from all revenue sources and prices (with constraints as defined by the owner of the content, ie min/max price for a product, and/ or break even point in net margin dollars for an artist or the entire label) to optimize whatever the goals of the company are, whether its overall sales/profitability , or possibly, maximizing the number of downloads and visibility for an artist. (which could of course mean that the entire structure extends to formulas for optimizing the career earnings of an artist feeding into this system)

The challenge isn’t understanding the interdependencies. The challenge is optimizing revenue across the entire scope of options.

Put in simpler terms, there is a place for a vertical search engine for music to come in and dominate just as Youtube did for video. (only with legal access to the content this time). Call it AllofMP3.com for fun๐Ÿ™‚. It could generate enough traffic to actually have more value than the aggregate value of the record labels themselves if done right.

The more traffic the site gets, the more advertising it sells and more clickthroughs it generates Whether the ads are audio, video or text, PPC, preroll, variable pre roll (every X full length song streamed as a demo , get a 10 sec ad) display or whatever is next, the more you generate there, the less you can charge for music. The pricing can even vary for music on a minute by minute or day by day basis. That alone will drive tons of traffic as people follow the “stock price” of their favorite artists.

The numbers and the holistic approach will hopefully teach the industry what drives total revenues in a given period for a given artist,or the label as a whole. Is the right price for music in this environment 10c, 25c, 50c or a dollar a song ? Is it an annual subscription for an artist ? No one knows now, but this type of environment will teach the industry the right way to sell music, just as Google’s pricing algorithms have dominated the search advertising world.

7. Extend the system to provide real time sales information from sales outlets whether they are brick and mortar or on line. This makes the system smarter and provides better opportunities for all outlets to make money

This is a business that would change and dominate the music industry. Unfortunately, its more dream than anything else. It would take cooperation in an ego driven industry. It would mean taking a quantitative approach in and industry that is driven by art.

None of which changes the facts. The marginal cost of delivering a song digitally is minuscule, its minimally perishable and fully replenishable (it may decline in value only as interest declines, but it never disappears and never has to be re manufactured). That creates an opportunity to develop a yield management system that changes how music is offered to the public.

Or the industry just gives Steve Jobs DRM free music and we all buy from Apple.

45 thoughts on “What should the music biz do next ?

  1. wee do need new music today from the 60,s 70,s 80,s when music had real values, and people or shall i say artist were into real insturments no musical robot machines that are called new school music instead of being called animated music from real school music,because theirs no old school music,because its a fact music never gets old yust better with a variety doc loves all music types check me out at demotrial.com youill find a variety of my taste in classical music punch in california/doc enjoy my friends.doc jones ps.give new artist a break youill love what wee have to offer the music industryie.

    Comment by doc jones -

  2. Mmmm…, the holistic variable pricing algorithm – complex pricing potentially makes for a worse customer experience, especially if the end goal is converting what is still an early adopter downloads market into a mass market phenomena. I agree with Steve Jobs on simple pricing, but also believe there needs to be price tiers (as you see in physical retail where catalogue & compilations are priced differently from new releases).

    Make a requirement of all labels/participants that any websites they have , 100pct of them prevent search engine crawlers – think this might be a red herring labels dont always control artist sites which account for the bulk of traffic. Label sites themselves are not that significant in traffic terms.

    Thanks!!!

    Comment by Citimobility -

  3. Brilliant. Too bad they wont do this. Or start making good music. And they wonder why their sales are declining. I guess scaring kids into buying music is the way to go.

    Comment by Frank -

  4. Great post Mr Cuban. I agree 100% that DRM-free music is what the consumer wants and the only thing that can save the music industry.

    Check out http://www.audiopyro.com

    We developed the system over the past 2 years to generate a songs value based a number of things including, song popularity, artist popularity, genre, etc. The artists that we have on the site love it as it rewards them for actively promoting their music. Since the music on the site is 100% DRM-free, the users love the site also.

    Comment by Daniel Williams -

  5. “Then let the company find the best multi-platform user interface”

    Songbird would be perfect for this.

    http://www.songbirdnest.com/

    Comment by Chris -

  6. Very simple, let the tech companies (Google, Apple, etc..) who are currently making the big money off the digitalization of the music industry buy out the Big 4 and let the labels do what they’re suppose to be doing in the first place which is ARTIST DEVELOPMENT. Break away from radio because 10 million spins will not equate to 8 million albums sold in a time when people want mp3 files for their player. Save alot of payola money. If you want to still play the CD game then bring down the cost to around 7-9 bucks and market it as the best way to burn music to your mp3 player (DRM free so it supports any player, higher bit rate, no risk of viruses, etc…) People will buy more albums once the labels break from the radio trap and develope the type of artist that can give you 10 quality tracks as an album.

    Comment by Pop -

  7. Your idea has no legs. What your business mind fails to realize is that Apple’s success has nothing to do with iPods or Steve Jobs or the music companies or DRM, but everything to do with great software. iTunes is great software that is so easy to use that even a computer novice can feel like an expert. The pricing plan was simple, the software was simple to use and, when used with an iPod, everything “just worked.” The music companies will never be able to recreate this success. Even Microsoft with all it’s history and software engineers haven’t been able to create a piece of software to rival Apple’s solution. (The Zune is an embarrasment) And I know you are against anything Apple, why I don’t know, but Apple is the only outfit that created a solution for all computer users, regardless of platform. Hate Steve Jobs and Apple all you like, but they got it right and they continue to “innovate.” The real definition of the word and not Bill Gates’ personally invented meaning of the word. So create all the business plans you want with committees upon sub-committees upon sub-committees and while you are doing that and the music companies argue over pennies, Apple will be releasing a touch screen, wi-fi, wide screen true video iPod. (Innovation) And the rest of the world will go back to square one, grasping at straws and desperately tring to catch up.

    All that said…. Go Mavs!!!

    Comment by Jay -

  8. Very few people want to pay for streaming audio. Think about any other product, when does it ever make more sense to rent than to own?

    Comment by michaelGregoire -

  9. Mark your initial premise,
    “Create an Itunes competitor that is a joint initiative open to all music companies and independent artists , supported by the Big 4 and funded by a private equity group.. Hire an entrepreneurial CEO that you can agree on, let that person hire the people to run the show and get out the way. If its a compromise effort it Will fail.”
    simply will not pass the anti trust test nor even the current anti-trust decree signed by the big four. Due to previous efforts (successful I might add) to fix the price of music cds, the big four are largely prohibited from operating in this manner.

    Comment by Brian Despain -

  10. This is my take on the music biz:

    http://www.jeremiahjacobs.com/blog/archives/000223.html

    http://www.jeremiahjacobs.com/blog/archives/000192.html

    Comment by Jeremiah -

  11. This is definitely going in the right direction. I had proposed a similar concept to digital music services Echo (2003) and Streamwaves (early 2004) who were looking to compete with the established services. Although I negotiated with Echo and partnered with Streamwaves, both of these online music service companies died a slow death because the industry acted like they supported them, but in reality, the industry dragged its feet and demanded exorbitant fees. While I agree that Mark’s strategy is optimal, it needs to be realistic. My proposal outlined a strategy that could actually be implemented without the huge leap that Mark suggests the industry take.

    You can take a look at those proposals here: http://www.4Entertainment.biz/images/Successful_Sponsored_Music_Venture.pdf & http://www.4entertainment.biz/images/4_Entertainment_Sponsor.pdf.

    In response to Mark’s blog:

    1. Create a competitor to iTunes supported by the industry and funded by a capital equity group…

    A good idea. MusicNet & Pressplay were the industry attempts to control the pipeline. Echo was the music retailer attempt. As Mark points out, any new joint inititiative has to be free of industry control, but given their support. Spiral Frog is close to what I was proposing, but they are still trying to clear hurdles. They couldn’t even keep their CEO. I suggest finding and buy/lease an existing back end that already works. If we wait for someone to build it, the industry will be dead by the time it’s completed.

    2. Populate the site with 100% catalog…

    This just won’t happen and this fact needs to be worked into any game plan. IMHO, a commitment to 75% of the catalog is possible and would work. Eventually, the other 25% will see the missed revenue opportunity and come to the table. The biggest problem of getting 100% catalog is that there are so many fingers in the song pie — label, artist, managers, publishers, etc. They can’t agree amongst themselves on many things, and probably won’t on this issue until the situation is extremely dire. So the venture needs to work initially with less than 100% of what’s out there.

    3. Variable Pricing…

    This is the future for ad pricing of sponsored music. Too complicated if it’s meant to be a way for consumers to purchase the music — although a simple three-tiered pricing might work (25-50-99 cents). My concept was to “auction” the ad space — which was based on the PPC concept. Hot properties could even go for more than the 99-cent fixed rate they get now. New artists could be sponsored for a low price (e.g. 5 cents), and as the popularity increased, so would their sponsorship price. This meant that new artists could actually make money off of a promotion, where now many are forced to give away a free track to build a fan base. This was of special importance to me, because I represent several emerging artists. Also, labels themselves could “sponsor” a hot artist with an ad for their new artist, allowing the new artist to piggyback on a fan base. Of course, sponsorship pricing may differ for downloads vs streaming. Variable pricing is not new to the industry. It’s already standard for concert ticket prices. The more popular the artist, the bigger the concert sponsorship and the more the artist can charge for the tix.

    Advertisers can select content to sponsor based on the genre of the song (or even select a specific song) to focus on particular demographics. It’s already done in the radio industry, and has the capability of being even more precise online.

    4. Prevent search engine crawlers…

    I don’t believe in this type of closed system. Every portal tries to do some sort of exclusive access to their content and in my experience it only hurts the content owner. I want references to my artists’ music to be everywhere. Not sure, but I think Mark’s idea was to keep the price of the ad at a premium by limiting it’s availability to the “approved” service. But this is just an opportunity for someone to control the pipeline again, which goes against the Internet mindset. It’s up to any ad-sponsored music service to generate the appropriate traffic. Competition is healthy. YouTube and MySpace have competitors. It keeps portals honest…forces them to be innovative and improve their services. Just by being the “official” portal, an industry-supported service will have an advantage.

    5. Search engine & exclusive index…

    Search engine good, exclusive not good.

    6a. Get Yahoo! and Google to bid for right to provide ad system.

    Yes. Use the professionals to do the heavy lifting.

    6b. DRM-free music…

    This will be tough, but it’s coming soon. The pressure is on. Although DRM is despised by consumers, getting “free” ad-sponsored content would help the pain.

    6c. Google/Yahoo system that takes into account all artist revenue streams to optimize career earnings…

    This would be best for the artist. But there are too many fingers in the multiple revenue streams of an artist to get the various artist reps (e.g. label, manager, agent, concert promoter, publisher, band members, etc.) to agree on what is best long term for the artist. For example, publishers won’t take less revenue to help the label generate more. The fractured way revenue is generated for an artist prevents any real coordination of an artist’s future. However, linking, tracking & analyzing the various revenue streams to assign a “value” to an artist would be helpful to the music industry and corporate sponsors. Then again, this may be just too much to bite off at first, and we shouldn’t let it get in the way of other initial efforts.

    7. Sales data…

    Getting real-time sales data would be helpful to labels… it would allow them to make adjustments to maximize revenues. More likely to happen online than with the bricks & mortar contingency. B&M is a whole other story. Let’s try to focus on the online services, where it’s do-able. Wouldn’t it be great for labels to get valuable, instant music sales data that pinpoints who actually cares about their artists? And, have a chance to reach them directly? Think of the merchandising and concert ticket opportunities! Research is a key component of making a new system work and to generate maximum revenues for the labels and artists.

    Comment by Mike Lane -

  12. I have a question for you. How can I contact you?

    Sincerely,
    Brandon

    Comment by Brandon Moore -

  13. An Open Letter to Steve Jobs and Mitch Bainwol prompted by their recent statements regarding the role of DRM.

    Mr. Jobs says that DRM cannot effectively protect recorded music when it is transmitted digitally. He is right. The music industrys many experiments with DRM have all met with effective technological countermeasures. Moreover, news of each successful hack quickly found its way to everyone who cared. There is no reason to believe that the results will be different next time, or ever.

    For his part, Mr. Bainwol insists that DRM is essential to the music industrys survival in the digital age.

    The problem is that the Internet is fundamentally incompatible with the music industrys traditional sales-based revenue model. Through the Internet, the market for sale of individual recordings can be saturated in a moments time and without payment of any royalties to songwriters, music publishers, recording artists or record labels. Neither law, nor technology, nor moral suasion will change this fact.

    Mr. Jobs suggests, and I agree, that DRM should be abandoned as a tool for the protection of recorded music. However, before Mr. Jobs can implement his DRM-free utopia, the music industry must have a viable alternative business model by which it can continue to thrive. Mr. Jobs has not suggested one. Mr. Bainwol denies that one is needed; intending, instead, to continue efforts to preserve the industrys sales-based revenue model. In any event, in the absence of an alternative business model suited for digital transmissions of recorded music, Mr. Bainwol cannot even begin to discuss the possible elimination of DRM.

    I propose such an alternative in the attached White Paper.

    Mine is a comprehensive approach to rights licensing and rights management that does not depend on the efficacy of exclusionary DRM technology for its success. A solution that simultaneously protects the integrity of copyright, promotes technological innovation, facilitates the growth of all manner of licensed digital audio services (including P2P), and meets consumer demand. In the aggregate, music industry rights holders would do no less well financially under my proposal than they do now under the system that my proposal would replace.

    With this alternative business model in hand (which includes a plan for its implementation), there can be no further justification for the music industrys failure to respond constructively to the changed circumstances imposed on it by emergence of the global digital communications network.

    Comment by Bennett Lincoff -

  14. Mark,

    This sounds like an interesting idea. Why don’t you take a stab at it?

    C.

    Comment by Charlie -

  15. What the music biz needs to do is stop signing all these carbon copy pop stars.

    They need to get back to what music is about which is the artist,the song and the emotional connection. These days the music industry is all about image. Find some hot young chick, hire a bunch of producers to write simplistic music with a catchy beat, have the hot young chick sing some repetitive nonsense over top of easy to remember catchy beat and shove said young hot chick down everyone’s throats.

    OR

    They find some gangsta wanna-be thugs who look the part, put a grill in their mouth, hire a producer to make simplistic easy to remember beats, have the rapper rap some nonsense that says nothing over said beat and they carbon copy it and make money.

    The True artist is dead, the record companies have killed the true musicians which is why the public do not buy CDs anymore cause today’s music is horrible and not worth buying.

    Comment by Donnie Howard -

  16. I agree that the music industry needs to do something, but it doesn’t need to create a competitor. Creating a big player like that is risky and expensive! What it needs to do is pay for a bunch of hotshot consultants to come up with a dozen business models that they’ll support — implement one of these, and they agree to license you music under some compulsory system (like radio has) so that you can play it without having to negotiate with every individual label. Then they let the VCs fund the companies that try out these dozen models and take all the risk. When the market has shaken itself out, and the number of even moderately successful businesses is down to Apple + 2-3 others, they can buy the ones that have succeeded. Sure, they’ll pay a premium, but they don’t have to take any of the risk and they don’t have to do something they’ve never even tried to do before — created a big tech company.

    Comment by Wade Armstrong -

  17. M.C.

    Brilliant overall. I love your dynamic pricing idea and don’t understand why the Entertainment industry doesn’t embrace this. Why does a new band trying to get attention have to charge the same price as Justin Timberlake’s new album.
    I think this should work at the movie theatre’s. Opening Weekend for SpiderMan 3—charge everyone $20! Then dynamically change prices. Sell tickets months in advance for a discount if you want. New arthouse film that only 2 people have watched?—offer for $3 and build up an audience and momentum.
    The problem is the entertainment industry is not run by businesspeople. Mark uses big words and numbers that these folks don’t understand!

    Comment by Ed -

  18. Brilliant, Mark.
    You’ve now got one year to file the patent for it.๐Ÿ˜‰

    Comment by Steve Morsa -

  19. The person in slot 25 might possibly have an arguement if this is the same group who is pitching the idea of “content is king” -vs- “cash is king” methodolgy.
    There is a group in Atlanta that might have the model that could fix the majority of “new” popular music sales. The pitch I heard was interesting. Yeah! Apple owns the “FairPlay” technology that the RIAA or the Big Four should have owned to make the industry more “open.”
    The DRM was such a quick launch it just caught the record industry sitting on their hands. The record companies in general (or at least the one I collect checks from) just went along with the idea. Later the truth was told by Apple’s success. Too late though. Mr. Apple’s model gave him full leverage and all he wanted to do was fix the problem. HA!
    Now the entire music industry is playing buy the lead of Mr. Jobs. The Apple brand won’t share technology if the competition will take away and use it to reduce their $.025 a download profit. Apple could sell the technology to the BIg Four. No that won’t happen. So, what you are saying and what I heard in a spill from this firm in Atlanta is nearly the same thing.
    The extrordanary missing part of your suggestion is the widening the content. Then there was the suggestion of online music stores getting in bed with corporate. Everyone else has. The added reveune in which could be split among Record Company, Artist and Online Record Store. No that won’t happen either.
    So it is left to Ford-verses- Chevy.. We just need a Chevy and Microsoft ain’t it!

    Comment by M.P. -

  20. I think your idea of an empowered CEO/subsiduary (committee = death ) is very good. And something needs to be done. But in the short term, they all have to do it if they ever want to sell in Walmart again. My Swiftian “modest proposal” is that the majority financial interest in the sub be owned by WalMart and the operational control belong to Amazon. ( Hell is the oposite. ) WalMart has the muscle and experience to make large companies toe the line. And Amazon has the experience of being pleasant to customers.

    Alas, in the real world, I suspect the music companies would be better off if they just let Apple handle it rather than whatever dismal attempt they and RIAA stumble into next decade.

    Comment by Lee Davis -

  21. Geeez Mark,
    no offense to you..but you were too busy to browse a proposal from an atlanta firm (well too late now.. not doing business with anyone in GA. ha ha!) to do such a thing in march of 2005. did anyone get a proposal to align the online store into a real market place? of course not. it is a great blog? of course. is it doable? yes, but not using people who have been under the current big FOUR system. Why? this is what messed radio up.. PAYOLA.
    the best of the idea you missed. this is the idea that made it all work. make the music cheaper by….. yep!

    http://www.jdmmobile.com

    too late

    Comment by Jimmy Daniel -

  22. Shit Mark,
    no offense to you..but you were too busy to browse a proposal from an atlanta firm (well too late now.. not doing business with anyone in GA. ha ha!) to do such a thing in march of 2005. did anyone get a proposal to align the online store into a real market place? of course not. it is a great blog? of course. is it doable? yes, but not using people who have been under the current big FOUR system. Why? this is what messed radio up.. PAYOLA.
    the best of the idea you missed. this is the idea that made it all work. make the music cheaper by….. yep!

    http://www.jdmmobile.com

    too late

    Comment by Jimmy Daniel -

  23. The exclusive browser idea….we used to call them browser hijackers.

    Comment by Tim -

  24. Mark, I think this is mostly a good idea. To those saying that DRM free music would just lead to people uploading songs onto p2p, websites, etc. Those songs are already on the p2p services; another copy is not going to lead to more downloads.

    One problem pointed out earlier is that there’s no reasonable way to lock out search engines. robots.txt will keep out reputable search engines like Google, MSN, Ask, Yahoo!, etc, but Isohunt, Mininova, The Pirate Bay, etc. have shown just how easy it is for someone to build a search engine that serves a niche with some sort of demand. Robots.txt is nothing more than a convention. What you’d need is some sort of authentication scheme for the authorized search engines to access the database. Let’s call it Database Rights Management, or DRM. Wait a minute… But seriously, everything you said except for this is technically feasible and probably a smart business decision.

    The variable pricing system should come with a caveat – No track for more than $.99. Then the consumer wouldn’t be able to complain about the “pricing system similar to the airlines,” since everyone will remember that music was expensive UNTIL this system was introduced.

    Comment by Shane -

  25. There is one site out there that could actually pull off Mark’s idea pretty quickly. It is allmusic.com. The company (AMG) already has over 8.5 million songs cataloged. They serve as the licensed database for online music etailers like Yahoo, Microsoft, Amazon and the like. I don’t think you would even have to address the search engine issue. If a one-stop shop music site had 100% of the catalog for the Big 4 – the masses would follow.

    Comment by soldaddy -

  26. A simplified version of this is already present in Yahoo. Go to http://music.yahoo.com/ (formerly known as LaunchCast) – I’ve listened to the music streamed there for a long time. They charge a minimal monthly payment for the songs.

    Comment by JD -

  27. I like the proposal for a platform and I think that various companies are trying to build it, but each is missing a critical piece of the equation.

    Two examples are:

    http://www.musicip.com/dns/index.jsp
    http://webreprints.djreprints.com/1611701393815.html

    Both of these efforts can be thought of as a new kind of copyright registry that uses fingerprinting technology to capture the “dna” of the song. What many people might miss is that this same technology can be used to built a search engine. The same technology that provides all kinds of useful (and monitizable) services to its users could have a built in security mechanism.

    The key missing piece is the formal adoption of these fingerprints as a true digital copyright. The venture would need to leapfrog over the laws and set a new standard. The idea would be that the first entity to upload and register (stake) their claim and establish their fingerprint for a particular work would be granted that piece of land the copyrighted universe. If someone else tried to upload the same piece they could only be provided with “derived work” copyright. Once this system became established it would cause a very fast kind of gold rush “stake your claim” kind of effort that would force all the major players to register all of their content.

    I agree completely that 100% of all the content needs to be in the system or it all breaks down.

    Comment by William T. Radcliffe -

  28. It’s too late. The music industry will face it’s toughest battle in the coming years. Prices are way too high for music downloads and like it or not, music downloads will continue to grow in importance. I don’t think that the major music industry can save face by dropping prices. The quality of the crap being released is another hurdle the industry has to jump. This is something that would cost more in artist development and flies in the face of the current singles-driven model. I don’t see the industry fixing both problems.

    Comment by michaelGregoire -

  29. Sorry Mark, but this is the worst idea you’ve proposed on your blog
    (at least since I started reading it). The first, obvious problem is anti-trust. No way in hell this gets past that issue. Second problem: customers want a simple and friendly experience, and that includes the pricing. I could go on, but those are two enormous nails in the coffin.

    Comment by Erik Carlseen -

  30. What Mr. Jobs proposes makes it easier for competitors to compete with him, and allows the user to make wider choices on where they source music. If there are no DRM’s for download, then the company with the best players and the best music store will prevail.

    Clearly there’s an advantage to the market leader, but it also releases the millions of ipod users to buy music from Sony Connect or Microsoft if they so choose, it also allows Zune or Sanso users to buy their music from iTunes if they choose to.

    It’s a safe gamble for Mr. Jobs, as he has the justified confidence that his products will have stronger appeal to the end user. He is one of the few corporate titans that gets the fact that if you give a customer what they want, in an easier and more attractive format, you prevail. And rather than “trap” a customer by locking them in to your store, and locking the competitores out, you create a bigger market by allowing your store to serve all music players.

    The best way to end piracy is to make it convienent to and easy to be legal. The end of DRM would do that, and music labels would ultimately sell more music as a result.

    Comment by Jon Jackson -

  31. good post mark. but be honest that is the easy and best way to handle not just music but all content (video). here is the problem and i think you get it more than most valley guys because you have to deal with the nba on this all the time…the media industry is setup to be sold by humans. i worked in media at a huge brand and let me tell you the attention you get is off the charts from the abc, cbs, and nbc’s of the world. these sales guys get paid tons to do what they do and some are pretty good.

    the only way your outlined plans works is if the system in place also for those sales guys to still sale as they do now around content and let them just upload the buys into some back end system. i think having google/yahoo there makes sense too but you combine the sales teams of the three mentioned above and a market place for the long tail (i.e. google)and you have a money making machine.

    i hate when i see people think it has to be one way or the other on the sale of ads around content. i think it needs to be both for at least the next 15 years or so. the reason is the people that are buying just done get this space (see my last blog post) and they need a human to help them waste their budget. they are not smart enough to get it on thier own.

    just think i go to entertainment.com and i buy all my music, tv shows, and moives. i would even throw in a section for ugc (why not stick it to youtube as well).

    marx.

    Comment by marx -

  32. Getting 100% of songs or even titles online is a legal fiasco that requires willing participants, which includes estates that historically have no desire to change their mind. So you’d be compromising right out of the gate. I guess you can assume acts like Radiohead and Led Zeppelin (who currently aren’t available digitally) would get on board, but at what price? You can talk all you want about variable pricing and you might as well given the costs will be absolutely variable.

    To dodge web crawlers, why wouldn’t you just create a stand-alone app?

    You can’t ignore the interdependencies in that industry because too many of them have legal ramifications that the music labels do NOT control. The labels are NOT vertical enough. It isn’t because of the art that this won’t work, it’s because of the entrenched business and legal models.

    Comment by John Davidson -

  33. DRM is virtual packaging. Get rid of it and the packaging becomes channels, just like the cable networks whose business model then applies. AppleTV is setting itself up (alongside Amazon/TiVo, Xbox360, and PS3) to be an internet-based cable network. iTunes is the strength of Apple, and they target a small niche market to keep themselves happy. No DRM enables stuff to be bought anywhere to be played anywhere, and that ebenfits us all when we don’t want to be restriicted by hardware. MS may not like it, but they are playing the same game that cable companies did and will suffer just the same or settle for a small niche market.

    Comment by Jake Lockley -

  34. Great idea to set up a platform getting the labels out of the way hits one of the main obstacles square on. There are already competing platforms in the market so as long as labels do not put their catalogue solely through this platform, most likely not a problem.

    Getting 100% of catalogue. On DRM free, some commentators argue that DRM is a distraction from another issue is it the retail or the subscription model which will win in the long term? I have not seen the economics of music subscription businesses, but am very familiar with download economics which are currently unattractive. From the user side. A subscription model can make more sense but I am not yet convinced that social trend of owning music has been overturned in any significant way by this rental model. This will take time (probably lots of it!).

    On to the holistic variable pricing algorithm – complex pricing potentially makes for a worse customer experience, especially if the end goal is converting what is still an early adopter downloads market into a mass market phenomena. I agree with Steve Jobs on simple pricing, but also believe there needs to be price tiers (as you see in physical retail where catalogue & compilations are priced differently from new releases).

    Make a requirement of all labels/participants that any websites they have , 100pct of them prevent search engine crawlers – think this might be a red herring labels dont always control artist sites which account for the bulk of traffic. Label sites themselves are not that significant in traffic terms.

    Like the idea of creating a music search vertical, although the PPC is low in this space given the low margins currently generated by digital and offline sales. This could change if brand advertisers see upside in aligning themselves with music marketing opportunities. Definitely worth exploring this idea.

    And then the idea of getting Google and Yahoo bid against each other to provide a Panama/AdSense like system that sells advertising on the Search engine and all the music sites owned by the participating labels, but ALSO calculates the optimal price for the DRM free music sold or offered for free on the site: A music search vertical opportunity in a developed advertising market may be an attractive syndication opportunity for Google or Yahoo, although I suspect that this could be a one horse race given Googles massive lead in search syndication. Whether there is enough money in the vertical to justify investment in new search technology is up for debate, although development work may not be required at all. Googles adsense for content product scans webpages to generate relevant PPC ads. On the adsense side, I cant imagine any significant development work is required for Google to return relevant sponsored links based on the music query submitted by a user (although given the huge variety in song titles there may be some interesting ads returned guesses on what sergeant peppers lonely heart club band would return?)

    On the last point of calculating optimal pricing for DRM free music am intrigued but dont really get how this would work. The industry value chains are fragmented and involve many stakeholders unifying the data sources from each of them to work out optimal pricing is a huge task. Nothing is impossible but I suspect there are simpler ways of achieving what you propose.

    Comment by Dominic -

  35. Sorry, sounds way too complicated. And no, I don’t want to buy music with a pricing system similar to the airlines.

    Comment by PXLated -

  36. I think that the industry is finally going to start moving in the right direction.

    I understand what you proposed is a dream, but I don’t think that it would ever work as you describe. Just because you lock out search engine spiders, doesn’t mean you won’t have people manually creating a search engine that would try to compete. Also, I don’t think this is the right way to do it even though it does promote the free economy price.

    Let’s just start with removing DRM and then take steps forward to a future where music can be purchased online without the labels freaking out at every technological advancement.

    I also wonder how much of this plan by Jobs is to make it easier to create and update the software for his new iPhone so that it spreads like wildfire?

    Comment by Web Traffic -

  37. A few reasons why I don’t like the idea;

    1. You can’t lock search engines out of a site (without making the user experience awful), all you can do is stop crawlers with robots.txt. The only thing that will happen is other search engines will popup, with all your music ripped and offer them for less.

    2. DRM-free music is a bad idea and the Big4 will never accept it. What will stop someone buying a bunch of tracks and putting them on a service like rapidshare? Where’s my revenue coming from that?

    3. The tier system of the music industry is designed so people expect to pay more for the most popular artists, not less. Why throw money away?

    4. PPC ads on a music search engine when you can’t sell music through it? There’s not much value there. You can get fans of that artist to click a link to a marketing campaign featuring that artist, but the value just isn’t up there with direct sales marketing on regular search engines.

    5. Antitrust laws, not just in the US. The Big 4 labels teaming up to form a monopoly on music sales….

    I know making a post like this will appeal to the fanboy community, Jobs’ timing is perfect. But Mark, you know enough about the big labels to know they’d never go for your plan.

    Comment by Adam Cains -

  38. Sounds unmanageable, but then, I imagine Jobs already figured he’s going to win out on this one. I don’t think iTunes should have to give up its own platform – it’s just a business move to make the music only available on its own platform.

    The problem with the music industry anyway is that no decisions are made on behalf of the musician – unless they started the company themselves. That all along has been the really sad part.

    ~Andrew at http://news.smartremarx.com/

    Comment by Andrew -

  39. One of the flaws I see with this plan is there is no way to lock other search engines out of the content. It seems to be just replacing the DRM with exclusive access to the content.

    If all the publicly available music content is available at one site you can bet all search engines will be indexing that site.

    Comment by Eric -

  40. Music biz must deal with this. And hopefully they won’t hit bottom before they realize.

    Let’s look at it this way. The music business already distributes music with no DRM(unless you were Sony last year). It’s called a CD. You can buy a CD for $9.72 at Wal Mart or even cheaper if you look around. The same digital album is $9.90 – $9.99 on ITunes. 2 (or more)kids can walk in, share the cost, rip the CD and have unrestricted mp3’s.

    Why not AT LEAST try to sell them the MP3’s online so they don’t have to do the leg work!!

    You have to sell mp3’s. Sorry. That’s what the consumer wants.

    It’s like if Eastman Kodak tried to convince themselves people still wanted film.

    Find great talent. Live within the world of consumer needs and adjust your business accordingly.

    Comment by nowtro -

  41. Although I like Mark’s plan it will be almost impossible to get all those major players to agree to a plan. Like he said… too many egos involved.

    For me, I have no problem continuing to buy from Apple and if the industry gives Apple DRM free music I think they will only grow more. They have done the best job packaging a great music store combined with a great portable player, so I have no problem continuing with Apple.

    I do believe that this could create more competition and would probably lead to even better innovation, so I welcome it.

    Bryan

    Comment by News Blog -

  42. Do you realize all the music will still end up on an iPod. You are playing into Steve’s hand and I love it.

    Comment by Danny Conway -

  43. I’m in a band.

    I propose that we offer all of Pixar’s movies and Magnolia Picture’s movies in a DRM-free format.

    I also suggest google and apple relinquish all of their patents, as “information wants to be free.”

    Someday the musicians–the artists and creators–will bypass all the bickering middlemen bilionaires with a DRM system of their own.

    We’ll keep the profits, and we won’t have to deal with fanboys, record labels, and doublespeak. Just our fans.

    Some friends and I are building that system right now.

    See–technology and DRM are commodities.

    Art isn’t.

    So as time goes by, we hold the cards.

    And we get to call the bluff.

    Comment by Steve Jacoby -

  44. Right on! Vertical search is the wave of the future. Google and Yahoo organic search results are crap. There is too much clutter indexed by the serch engines. No algorithm can fix the problem.

    Comment by soldaddy -

  45. I think the joint initiative idea is a good one…something like that is a long time coming.

    Comment by Todd -

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