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Nevermore

Do you think Edgar Allan Poe could have made money if he sold The Raven separately from 30 other poems?

This is a question posed in the U.K. Register article examining the “value gap”, or the amount that sound recording revenue has fallen since 2004. The report suggests that Apple (and others) should take the blame for the woes of the music industry (British) for unbundling the song from the album format.

“The Value Recognition Strategy working group was created last summer – largely at the impetus of the indie labels and collection societies, but backed by all sectors of the industry – to examine alternative revenue opportunities for digital music. The growth of MP3 has seen large hardware manufacturers such as Apple and media companies such as News Corp’s MySpace prosper from music, but returning little or nothing to composers, songwriters, and sound recordings owners.

It’s what economist Will Page, of the MCPS-PRS Alliance, calls a “broken supply chain”. Revenues from telecoms companies and service providers dwarf the revenues from the beleaguered music business.

The conclusion that unbundling is the chief factor is richly ironic. When Apple launched the iTunes Music Store in 2003, it did so with the backing of all four major labels. The labels had failed to see digital music as an opportunity, and launched only small scale and piecemeal commercial offerings. At iTunes, consumers chose one or two songs from a performer’s repetoire for 99 cents a song, rather than pay $9.99 for the CD.”

Since that time Apple has reaped tens of billions in sales of iPods, while the labels have lost tens of billion in sales of CDs. It has almost been a complete one-to-one swap of revenue from the label’s, writer’s and artist’s pockets – into Apple’s. See an analysis I did of this a while back here.

Read the whole Register article here.

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Comments

8 replies
  1. Bruce Warila says:

    “a complete one-to-one swap of revenue”

    Dave, that’s too simple. The car companies did not kill the horse and buggy; the electric companies did not kill the candle. Humans wanted cars and light bulbs and new industries rose to satisfy the demand.

    I found myself typing this ten minutes ago: “the music industry is still selling gasoline while consumers have begun to fly spaceships…”

    The music industry needs innovation beyond the MP3 thing. Money will come back to the industry when we make rocket fuel instead of gasoline.

    Lack of innovation is the problem, not iTunes.

    When MP3s and iPods are such a new thing, it’s hard for people to envision a lack of innovation; however, these things will seem like dinosaurs in three years. You only have to play with an original iPod to see how fast the technology is changing.

    Money for labels, artists and writers is just around the corner.

  2. dkusek says:

    Hi Bruce

    Cool site you have…

    Regarding the one-to-one swap, I don’t agree with your analogies. Free music is fueling the shift, not new industries. There is no way that the iPod would have been successful at all if people had to pay for every track they put on it. Apple is riding on the backs of the pirates and getting away with it. The iTunes store is a simple insurance policy that keeps them from being sued by the labels.

    Otherwise, I like your optimism. “Money for labels, artists and writers is just around the corner.” – care to elaborate?

  3. Bruce Warila says:

    Dave,

    I did not want to elaborate on the 29th, but click to Unsprung now and you will see my vision for putting more money into the pockets of labels, artists and writers..
    http://www.unsprungartists.com/fat-decks/

    The industry has to move beyond the MP3 and into other pure digital packages that have the same value as a CD. We call these packages “FAT-Decks” (Fan-Artist Trading Decks). We started working on this vision in 2002. Before we bring this product to market, we are looking for critical input. The product announcement is in blog form. Your input would be great.

    I am hoping to get the industry talking about a new vision for the future. Music can be free, but the industry needs high-margin, reoccurring revenue producing products like our FAT-Decks to be economically viable.

    On your comment: There is no way that the iPod would have been successful at all if people had to pay for every track they put on it.”

    My response: People did pay for every track in every iPod. They paid with their time (to hunt, rip, download, etc) and time is money. The industry has failed to figure out how to build a time-to-cash-money conversion machine.

    My time to find any song is FAR more valuable then the .99 cents I pay for a song. You can take my songs, but I never want to lose track of the list of songs I love. The time spent building my playlists is far more valuable then the cost of the MP3.

    The title is confusing, but I had fun describing my Time To Money Machine concept here: http://www.unsprungartists.com/unsprung_wisdom/2007/9/26/2007-buy-warner-music-theyre-not-that-stupid.html

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  1. […] Read the rest of this great post here […]

  2. […] Jon wrote an interesting post today onHere’s a quick excerptThe growth of MP3 has seen large hardware manufacturers such as Apple and media companies such as News Corp’s MySpace prosper from music, but returning little or nothing to composers, songwriters, and sound recordings owners. … […]

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