More thoughts on the Rick Rubin article

My last post was just a knee jerk. Now I have settled in on it and here is what I think:

  1. The assertion by Rick that we need to move to a subscription model assumes the centrlization of music.  This is flawed, and even his own research suggests it – people don’t get their music from centralized outlets (radio, Tower Records), they get it increasingly from their friends. And to push the example, nobody would suggest the centralization of concert ticketing for all venues – it’s just silly.
  2. The research done in the “Big Red” program is flawed. Think about who was in this program – college interns who have access to internships at Columbia. Could it be more demographically skewed?  Of course they think MySpace is dead, and Facebook is still cool – that’s where they are. Maybe some of the concepts are good, but before you overhaul your entire business, you should do a little more homework than some interns you hired to work for you.

Additionally, as consumers and companies realize the power of niches, it’s going to be more difficult to centralize the business model (as in the traditional record industry). And subscriptions are not the answer. Subscriptions work for the fairly wealthy who have no problem taking on an additional $10-20 per month (or $120 – $240 per year) for something they don’t own, never will and will have to give back – or pay more to get. They also don’t work for people who want to own their purchases (which is about 80% of the market currently).

But, if businesses really really want to do some kind of subscription model (for which I predict much backlash and further breakdown of the centralized business model), then it’s going to have to be some artist tax that gets distributed by SoundExchange – much like for radio now, but instead for downloads. That is not so hot for revenue for most companies today; except SoundExchange.

And even if bandwidth does allow for music to “come from the cloud” – that cloud is still a real thing and still costs money. And who pays for that when the users won’t pay for subscription? Advertisers – like in radio? Maybe – but that’s not enough to sustain a $32 billion industry.

Posted on September 3, 2007 in Market

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