March 21st, 2007
I was struck by this quote from a music business manager in the WSJ article about the complete collapse of CD sales:
Jeff Rabhan, who manages artists and music producers including Jermaine Dupri, Kelis and Elliott Yamin, says CDs have become little more than advertisements for more-lucrative goods like concert tickets and T-shirts. “Sales are so down and so off that, as a manager, I look at a CD as part of the marketing of an artist, more than as an income stream,” says Mr. Rabhan. “It’s the vehicle that drives the tour, the merchandise, building the brand, and that’s it. There’s no money.”
No money. The content that used to be at the center of the music industry has been reduced to a loss-leading marketing platform for the real business, which is live entertainment and related merchandise sales. Apple’s iTunes is not really a platform for selling music but rather for selling hardware.
It seems in recent years that as the music industry goes, so goes the rest of the media industry. Is there reason to believe that other forms of content will suffer the same fate as music? There’s one critical commonality to what the Internet and digitization has done to all content that would support this theory: disaggregation
All the focus on the digitization and online distribution of music — and now video — has been on piracy. But what if that’s just a red herring?
You could argue that the most striking consequence of digitizing media and distributing it online is that all content is now available in a discrete, granual form. Music file. Article page. Video clip. Podcast. Photo. There are very few places on the web that require you to buy a whole package in order to get one item.
This is a radical transformation of the content business. Think about it.
How many CDs have you bought for just one song? How many magazines have you bought just to read one article? How many cable channels do you subscribe to in order to watch just one channel? How many radio stations have you kept on in the car because you heard one song that you liked? How many newspapers have you bought just to read one section?
The media business has always been about selling you content that you don’t really want by stapling it (literally or figuratively) to the content that you do want. The digitization of media on the network has obliterated this model. What if music is just the canary in the coal mine?
There’s already one high-profile instance of this trend in the video content business. TV clips on YouTube. I’ve heard a thousand times the argument that media companies should embrace YouTube as a “free promotional channel.” Let users upload clips of your shows — don’t sue YouTube– it’s free promotion.
This argument has bothered me every time I’ve hear it, and now I know why — because it’s following the pattern of music sales in the quote I cited above. Can’t make money off the content in one channel? Use it to promote your other channel. BUT, that assumes that the other channel is not, in fact, being eaten alive by the channel you’ve written off as free promotion.
Henry Blodget posted a dialectic about whether Google is the “King of Media,” which was based on this assumption:
For the purposes of this debate, I’m going to assume that to be “King of All Media” one can’t just be a distributor.
I would assume just the opposite — that content distribution businesses, or more accurately in digital network terms, content platform and content aggregation businesses (think Google, YouTube, MySpace, Facebook, Digg) are the only real media businesses left.
Oh well. If Google has its way, maybe the content business can transform itself into a direct marketing business.