Regardless of whether the digital distribution of music by online retailers results in a viable revenue generating model or not, their will be value in the “gathering, organizing, selecting, synthesizing and distributing [of] information.” The shift in value and power between these intermediaries is where the differences in these points of view begin to show. The Carlson School of Management sees value in online retailers in the qualification of content, but Dolfsma believes this role will be filled by online communities and other organizations that “simply [have] to become a reliable source of information providing information that can be trusted”.

A generally accepted opinion is that the market for physical music media will decline significantly in the future due to the Internet and compressed audio formats. In “The end of the CD as we know it”, Bakker forecasts a drop in CDs sales “is most likely irreversible”. In “The Move to Artist-Led Online Music Distribution”, the authors envision “obsolete” music stores that need new gimmicks and services to “enhance their customers experience [in order] to retain them”. None of the articles discuss new innovations in audio such as SACD and DVDA, music DVDs, multimedia content on enhanced CDs, bonus discs, collectors booklets and artwork or other value added incentives only available on physical media.

There is no doubt that the Internet is forcing the media industry and the laws that govern it to change. The history of the relationship between the media industry and technology has been well documented since the invention of the printing press by Johannes Gutenberg in 1455. Since then, the player piano, the phonograph, the radio, the VCR, the audio cassette, the CD and the MP3 have threatened to devastate the media industry. With each technological advancement, the media industry has kept up with legislation through litigation; plugging the holes in intellectual property law as they are created by innovation.

The Internet “has facilitated the most extensive and widespread climate of copyright infringement since the advent of copyright protection” (Langenderfer & Kop, 2004). Indeed, as Gutenberg’s invention changed the world, so has the Internet. How the industry will cope with this new climate remains to be seen. It is likely, however, that society will continue to provide an incentive for artists to create and their works will need to be gathered, organized, qualified and distributed. So intermediaries will always be required and since theirs is a valuable service, the economics of art will continue to exist but the power will shift back to the artists where it belongs.

How do we measure the success of artists without measuring the revenues of the major labels?

Are musicians better off now that they have unlimited free marketing? Yes.

Is the record label dead? No.

There is still a significant need for smart, agile and savvy music business people. Musicians will continue to need managers, A&R, producers and a marketing team just as any brand needs a creative agency to define the strategy for selling their widget.

Yes, I hate to say it, but musos are, from a certain point of view, an economic point of view, brands. Brands which have become exponentially more faceted. Years ago, a star could walk off the stage and leave a mysterious mist in his wake, his true personality and personal adventures available only within the vivid imagination of his adoring fans.

Now I can watch my favourite band getting shit-faced on the tour bus, heros beating their wives, and formerly luscious divas getting arrested for looking like crack-whores.

My point is that success in the music business is more than being a deadly guitarist or tortured lyrical soul. You have to be an attractive, charming, cooperative, patient, polite, articulate, ultra-talented workaholic with longevity to be primed for the big time.

In an earlier post, I reviewed “How Will the Music Industry Weather the Globalization Storm?” by Wilfred Dolfsma (2000).

Digital technology’s role in changing the way consumers experience music and the resulting shift in relative value within the music market structure is analysed in “The end of the CD as we know it… Shifting consumer behaviour and changing business models in the music industry” by Dr. Piet Bakker (2004).

In this second article, Dr. Piet Bakker of the Amsterdam School of Communications Research discusses the effect of digital music on consumer behaviour and the potential future business models for the industry. He illustrates how digital technologies, and MP3 in particular, have changed the way music is experienced by consumers.

The increase of computer use and communications technology has put any song instantly into the hands of fans and entire music libraries can be carried in their pockets. The relationship between the consumer and the artist has changed and caused a shift in the music business model that is not based upon the manufacturing and distribution of a physical product but on live performance.

The author demonstrates that although the diffusion of digital music has contributed to declining CD sales, the consumption of music overall has not decreased. He discusses the validity of the music industry’s claims that downloading music from the Internet has had a dangerous effect on both the economy of music and cultural diversity. Bakker maintains objectivity by citing data from the IFPI and the Recording Industry Association of America (RIAA) to explain their point of view while being critical of their conclusions regarding downloading and piracy. The argument that MP3 is “by no means inferior” to the CD music experience is subjective however, and thus is not a sufficient reason to discount the CD market entirely.

Bakker maintains objectivity by citing data from the IFPI and the Recording Industry Association of America (RIAA) to explain their point of view while being critical of their conclusions regarding downloading and piracy. The argument that MP3 is “by no means inferior” to the CD music experience is subjective however, and thus is not a sufficient reason to discount the CD market entirely.

Continued tomorrow…