Andrew Zolli starts the article out by talking about how information wants to be free and that companies that released their content for free (in the early days of the internet) pretty much cannibalized their own sales and trained people to not pay for their content. According to Digital Media Wire Daily, Zolli’s statement is accurate; only 19% of online news consumers are willing to pay for online news content. What Zolli’s solution to the free content problem for these companies is for them to wait for new digital content distribution platforms to be developed, so that a new paid content model is developed for them to monetize. Zolli actually states that these content distribution companies have to “hold on” and try not to go bankrupt while they’re waiting for someone to figure out how to monetize their content in the future. Zolli’s main point in this article is that since this particular content can’t be monetized right now, these companies need to put their fate into the hands of unknowns in hopes that those individuals or companies can figure out a way that will benefit the content distributors and allow them to remain in business.
The music industry, although they did not facilitate the free distribution of music, has been severely impacted by the use of the internet, just like the news content distributors Zolli mentioned in his article have been. The music industry should not listen to Zolli’s opinion, stated in the article, about waiting for someone else to come along and fix their problems. If record labels and distributors sit around and wait for someone to fix the free distribution issue, they are sure to go out of business sooner rather than later. Many major companies, like EMI for example, are barely hanging on by a thread and can’t afford to rest their fate in someone else’s hands.
What the music industry can learn from Zoller’s insights about new digital content distribution platforms is that they should capitalize on all of the ones that are currently out and those that will be coming out in the future (be it subscription models, streaming models, internet radio stations, et al.). The fact is that since digital music distribution developed, the music industry has tried to fight it in almost every way possible. It wasn’t until the iTunes store arrived in 2003, that major record labels strategically pursued digital content distribution strategies. Since then, major record labels have partnered up with other digital distribution outlets but have also remained skeptical and wary of newer ones. The most recent example of the music industry’s skepticism, about what I personally feel to be the best potential solution to the “free” problem, is with the streaming service Spotify.
Spotify enables users to access a plethora of musical content and, more importantly, allows users to create collaborative playlists and share their musical tastes with friends. The collaborative playlists enable users to promote their favorite music to others, who might not have been aware of it, thus assisting artists and labels by facilitating word of mouth promotion. Although Spotify offers a great service to music fans, and for the most part eliminates any need for them to illegally download music (because the music is already available at their fingertips whenever they want it), it is only available in select parts of Europe.
The music industry, rather than embracing this company, for the immense benefits it has to offer to both fans and the industry, has been focusing on the potential negatives, which has made it quite difficult for Spotify to launch in the U.S. The initial U.S. release date for Spotify was set for March 2009 and after many release date changes is expected to actually launch in Q3 of 2010. The reason why Spotify’s U.S. launch has kept getting delayed is due to the music industry not wanting to license their entire catalogs to the company because of sales cannibalization fears. First of all, even though users can employ the service to listen to all of the music they want for free, there is an option for users to purchase the tracks from a third party vendor via the Spotify platform. Secondly, Scott Cohen (the founder/VP of The Orchard) has noticed that rather than cannibalizing sales, Spotify has actually boosted his company’s income. In Cohen’s interview with Billboard Magazine, he stated that, “Spotify is already boosting income for labels—the more tracks that are streamed on Spotify the more downloads occur on other services—we are not seeing any cannibalization.”[i] Many of the major record labels don’t share his opinion, particularly because of a recent study by the NPD Group (which stated that, “consumers using free streaming music sites that let them choose any song at any time make 13% fewer purchases of digital music”).[ii] The fact is, whether it’s Spotify or some other digital distribution service, the music industry needs to stop fighting and embrace them, in order to see how music consumers really want to obtain their music, as well as, to see how much they’re willing to pay for it, while still trying to devise methods of their own about how to cure the “free” problem.
[i]http://www.hypebot.com/hypebot/2010/02/spotify-were-not-cannibalizing-download-sales.html
[ii] http://www.fastcompany.com/1562878/spotify-users-buy-13-less-music