Selling Music in a Digital Age: Recent Developments

Following up on my last post, I would like provide updates on some recent developments within the digital music retail world. First - and quite a personal dismay - is the new website Made Loud, which is a digital online music retailer for the independent artist / social networking site. Obviously, the developers of Made Loud read my most recent post that covered this exact business opportunity and stole the idea from me (wink, wink). Despite my personal resentments, after perusing the Made Loud site, its apparent that they have put a lot of thought into the project. Artists can create a page, upload their music and set a price-per-download rate, and then commence with reaching out to fans. It is a win-win situation for the artist who owns all of his or her own master recordings. In fact, according to the FAQs section of the site, "Artists keep 80% of all digital download sales and 85% of all merch sales. Artists also choose their own pricing." (par. 3). Purchasing is made almost too easy through Pay Pal. In a music world that has been dominated by conglomerates and umbrella corporations for decades, Made Loud and sites similar to it are paving the way towards the future of this industry.

The second exciting development that caught my attention is the new digital music retailer LaLa, which offers 10 cent downloads of songs as well as a full, free preview listen of the whole song prior to purchasing. The catch: one can only listen to his or her songs via a web browser, meaning an internet connection is required at all times during use. At first, this sounds like a major annoyance, but in a tech-obsessed world dominated by internet phones and computers, the idea makes a lot of sense. With all of one's data stored electronically on the company's servers, there is no need for the information to be stored on a personal hard drive; all one would need is a phone or computer with an internet connection. According to this article by Michelle Quinn, a staff writer for the LA Times, the company also offers an MP3 download for an extra 79-89 cents, which of course can be store on a hard-drive. Quinn further states that, "Lala has a deal with labels that lets it scan a user's music library and offer the user those same songs via any Web browser [...] That gives Lala information about a person's tastes so it can target music suggestions" (par. 15-16). Additionally, according to the "How It Works" section of LaLa's site, the service can "quickly match the songs on your computer to Lala's licensed catalog [...] Songs you already have and playlists you've created are instantly added to your Lala collection for free" (par. 2).

It is important that these sites continue to develop and spawn multiple imitators. For too long, the music industry and its consumers have had only one option for the purchase of music - the record store. With these recent developments, the industry and its constituents are finally adapting to new, simple methods of e-commerce, albeit light-years behind other industries. With the major setbacks brought on by the pirating of digitized music and the state of the U.S. economy in general, things for awhile were looking quite bleak. Yet, these exciting new websites prove that there is light at the end of the tunnel for the music industry.

Myspace Music: The Good, The Bad, The Ugly

A recent music industry blog article caught my attention the other day. It is written by Dave Kusek, the Vice President for the Berklee School of Music, and it features his thoughts on the recent revamping of "Myspace Music". Without going too deep, essentially Kusek shuns the new addition to the site claiming that this new music section is just a copy of the existing social media sites, and has therefore lost sight of the indie artist. In his exact words, the new addition "falls short of the comprehensive one-stop online music store" that most people were expecting (par. 5). In order to paint a more complete picture, I am attempting to build upon his remarks, and by offering my own insight into the matter, ideally provide some sage advice for the music industry gurus out there.

Kusek's discussion overlooks a key fact that is important to this discussion - the fact that Myspace is a corporation; one which essentially makes its money though advertising. Since its inception, Myspace has been focused on one goal: get as many users as possible and then hit them with advertising. Trent Lapinski, a blogger and internet "techie" discusses this point in his article The Business of Spam 2.0. He states that Myspace (since its beginnings), was a "site created by a marketing company known for viral entertainment websites, pop-up advertising, spam, spyware, and adware", utilizing clever marketing tactics to give it a friendly, so-called indie feel (par. 2). Most people can plainly see through that friendly facade, however, especially considering the fact that Myspace has always been a free service. The notion that its creators ever cared for more than anything than advertising dollars is absurd, with the music portion being one of the most clever marketing tactics used to cover up that fact. Consequently, while the site did have an indie feel to it and appeared to appeal to the upcoming/indie artist, that perception was always entirely overshadowed by advertising. Now, with the addition of the new, revived music section, Myspace is further bolstering its ad revenue by allowing for the hottest and biggest artists to be featured on the site. It is easy to see how one of the best ways to gain advertising revenue is to have the biggest/hottest artist as a part of your media, (much like how TV network affiliates pay a license to use the hotter network TV shows to generate greater revenue for themselves).

Kusek also purports that the new music section merely copies the other existing sites such as Imeem, Last.fm, and a host of other music and social media sites (par. 7). Is it to their disadvantage? Probably not - the added advertising revenue created as a result of having access to the four major labels' content will be realized in a way that meets all prior expectations. Om Malik, founder and senior writer of Gigaom.com, recently stated in this article that -according to Myspace CEO Chris DeWolfe - Myspace is not trying to establish itself as an online retailer because there is really no point in competing with iTunes (par. 2-3). In essence, Myspace is establishing itself as a social-networking site that allows one to search and discover new music and then go and buy it from Apple. In a way, its simply another marketing tactic on the part of the 4 major record labels who - according to Kusek - own a 40% share in the new venture (par. 12).

One might be asking, where is the entrepreneurial business opportunity in all of this? The answer is already in existence and it is called CD Baby. CD baby has been focusing on the independent and upcoming artist for years now, and has been hugely successful within that smaller, niche market. There exists only one shortcoming, however, and that is the fact that there is no social-networking aspect to CD Baby. This is most likely a result of a conscious decision on the part of the owners and is therefore a key to their success as a highly differentiated online music retail site. That said, however, think about the possibilities if one were to create a site much like CD Baby, which also included a social-networking aspect, allowing for artist-to-fan interaction through email, message boards, and the like, all under the online music retailer umbrella. This would make it easy for upcoming artists to control their own interactions with fans, promote their own music, and then provide them with an easy method of purchasing their music. If you take CD Baby's already stellar track record and tack on a social-networking aspect, it is easy to see how one could make a healthy profit from sales commissions and advertising with the coupling of social-networking and online music retailer.