Sacrilicious Marketing

Image courtesy of my friend and Playboy Golf's, Courtney Neitzl | Click to see more images of Courtney

Arghhh, those darned Danish skallywags, finally figured out chasing music sharers just ain’t a wise move. After millions of dollars were spent by the Denmark based anti pirate group, Antipiratgruppen (I’m not even making that up), it’s legal counsel, Mary Fredenslund explains to Politiken it will put an end to its legal pursuit of pirates.

“It requires very strong and concrete evidence to have these people convicted. We simply could not lift the burden of proof,” says Fredenslund. And the facts substantiate that. In the past year, four cases against alleged pirates have come before the High Court in Denmark and the overall result for the copyright holders has been negative. Three of the defendants were acquitted due to insufficient evidence, and in the one case where a file-sharer was convicted, the defendant had confessed. So, that kind of news has got to suck for the US music labels who are still in cahoots with the film industry to take down Pirate Bay and basically just freaking the F out over any and all music pirating sites. Hell, they’ve even been able to convince some artists like Lilly Allen that music piracy is killing their industry!

Resource | Lilly Allen Says Crazy Stuff, Joss Stone is Sane

Resource | Anti-Piracy Group Throws in the Towel, Pirates Walk Free

Funniest Thing About Music Piracy? It’s considered “Organized Crime.”

Most Interesting Statistic on Piracy? File Sharing represents 35% of all Internet traffic.

Why is the music industry freaking the F#$! out about this piracy issue?

Let’s look at the numbers. Since the 90s, the consumer spend on recorded music has dropped from its high of $14.6 billion in 1999 to $10.4 billion in 2008. Forrester Research predicts that by 2013, revenues for recorded music will reach as low as $9.2 billion. Why? File sharing and college kids. The college market is the largest consumer market of recorded music. In the early part of this decade, college kids started using file sharing sites like Napster where they could freely share music. Why pay for music you could get for free from your friends? Sales started to decline and the music industry got nervous, taking aggressive legal action against Napster in 2001. But cutting off Napster’s head did not slow the decline in sales, hundreds of new file sharing sites and services popped up to take its place. In 2003, the Great White Hope, iTunes debuted a legal music download solution and the pay per tune model was cemented. Sadly, that same year, The Economist reported, “paid digital downloads grew rapidly, but did not begin to make up for the loss of revenue from CDs.”

Resource | Film: Steal This Film | The Story of the Pirate Bay Raid

(I highly recommend this film – it is a real eye opener on how Hollywood can pressure a government into action and how file-sharing really works and a business model that would embrace it.)

So, why do artists (good artists) still get rich and labels go broke?

Artists don’t make much on record sales in the first place, most of their money comes from concert sales, merchandise and endorsement deals. Many times, a label does not share in those revenue streams unless the artist took a 360 Deal, a new kind of artist/label contract pioneered by EMI in 2007 where the label fronts more money to the artist but expects to share in all the revenue streams from the investment.

Inexpensive recording and mixing software has made it possible for the public to produce high quality music in their basement and distribute it over the net. This lowers the overall cost of record production and distribution for the little guy. When the little guy can sell less and make more than the label, that’s not good. It indicates the costs are just too high for production and marketing.

While less and less is being spent on recorded music, more and more is being spent on music related hardware and software. An expected byproduct of that has been the failure of nearly half of the recording facilities in the Los Angeles area as reported by the Los Angeles Times earlier this year.

Some take this as a harbinger for the apocalypse of the music label but I see it as a great opportunity.

Because more and more small bands and artists can produce their own studio quality music at a far lower cost and distribute it over the Net, labels should be able to make wiser investments in artists. Many artists never make money for their label, so their labels end up taking a loss on them. The provable sales and fanbase the Internet can provide before an artist is signed, lowers the risk of that investment and should lower the cost of marketing campaigns.

Labels should become software companies. If sales of music recording software is increasing and recorded music sales are declining, it makes sense for labels, that have access to the marketing channels for music to build software cheap for the masses then sell add on marketing and distribution services. Basically, the printer/ink model would work wonders here. You create an inexpensive one off recording software solution then upsell buyers into residual services like a configurable music website with integrated player, hosting, media buys on industry sites, internet radio buys, demo CD production, music distribution and marketing tutorials, etc. Labels could become resources for the public, aspiring artists and DJs not the ENEMY. If I were a label, I would start buying up small music technology companies or partnering with Apple and building a solid software solution, a social network akin to HULU but more like a radio station and a collection of resources for artists. And, if I were Billboard, I’d have already done this with my existing website! But, then again, maybe that’s what Google has planned for Google Music Search.

If one of the primary marketing channels for music to the masses is radio then why aren’t more labels taking to the internet to improve their value with their own Internet radio or video solutions? Couldn’t a label or a conglomerate of labels start their own online radio station with their own Billboard-esque chart utilize new and existing DJ talent and create universally syndicated radio stations for specific genres? Consider that Hulu is on-demand but does not allow you to fast forward past the ads, a very similar model could be created for music plus each tune can link over to iTunes or an internal store system for purchases.

The Conclusion | The Music Industry Needs a Xanax

So, in conclusion, like I have said before, the music industry on the whole is adverse to the upheaval and change file sharing and the free music model create. Huge marketing dollars are put into the production process and between recoding sessions, studio time, CD production and radio buys.  While Sony, Universal, Warner and EMI dominate the production side of the business, Live Nation, the largest promoter and venue owner dominates the live event and concert side of the business. If these music industry giants considered themselves public resources for software, music marketing, radio and music downloads and built a solution that could integrate all of this into a social network, there is no reason for labels to keep worrying about revenues and business models, they just need to adapt and change. The biggest boost to them could actually be the crowdsourcing ability of a radio-esque social network that could reduce the cost of marketing music to the masses and the risk of artists investment.

Popularity: 6% [?]