Digital music payment models

(Credit: Business Week Online)

A panel named Reinventing Payment Models for Digital Music sounds pretty boring, doesn't it? In fact, the SXSW panel was infinitely more entertaining than the Ultimate Music Recommendation Smackdown. Shocking, I know. But the entire audience was cracking up for the majority of the session. It's rather hard to get the comedic interactions of the panelists across in this medium, so you'll just have to bear with my relative lack of humor as I try to relay the meat of the information.

The gist is that the majority of artists make very little from music downloads because the contracts they're under are outdated and based on physical media and the stipulations that go along with that (such as container fees, pressing, and so on). Changing the way artists are compensated is an understandable concern, seeing as how the future of music likely rests in the digital landscape. However, it's also important that an appropriate pricing scheme is set for the consumer. For one, when it comes to music downloads, the consumer is both the distributor (which pays for the required broadband connection) and the manufacturer (if burning discs), so we should not be charged the same as we would for physical media. Plus, if the consumer thinks the pricing is unfair, we're more likely to not purchase the music...and might even feel compelled to steal it.

One thing I'd like to bring up here that was mentioned several times throughout the panel is the idea that buying music is now seen as "unhip." I don't really agree with that statement. Personally, I think stealing music is unhip. I for one don't want to be thought of as a thief. Further, it seems to me that buying vinyl is considered pretty hip, though I may be biased due to the prevalence of DJs in the San Francisco Bay Area. But what do the rest of you think? Is buying music unhip?

[Jaybilal]

My opinion doesn't matter much and here's why

Most people that I know don't think like I do. I agree with you that stealing music is "unhip" (Ironically the wording in that statement alone is enough to question one's "hipness"). But most people see these musicians wearing fancy clothes and living in expensive houses (thanks to MTV's cribs) and have little simpathy for them. When you throw in the confusion that is DRM it doesn't help the matter. I can't tell you how frustrated I was and how glossed over my wife's eyes were when I told her about the DRM problem that caused her Real Music Store purchases not to play on her Sansa e260. Full disclosure here I listen to Rap and R&B which sports artists that are certainly not shy about showing off their wealth. This is the same genre that created the words flossin' and bling-bling. That being said REAL music fans really care about their favorite artists and want to make sure that they keep making music. However the problem may be that there aren't a lot of REAL music fans out there, instead most of us just listen to what's playing on the radio or TRL or BET's top 10 and decided to follow the rest of the crowd and download that.

[ralfthedog]

Stealing from an artist is a crime....

Stealing from an artist is a crime. Stealing from a record label is a public service.

[FJKB]

StealingsBad:PayingForLowBitRateCrapMusics UN-HIP

I am among the iPod users that usually purchase their music from stores (Brick and Mortar),Amazon & often used meaning no $ for itunes or the labels. When I open the $10.00 - $15.00 disk I load it into itunes and likely will never see it again. Why do I not buy from itunes? I WANT GOOD SOUND I WANT LOSSLESS and freedom. I am very confident that many people would pay an extra 25% for full lossless files without DRM. Offering a 2 tier pricing structure would make sense for the labels and Apple because; they get more money that is simple extra profit with no additional cost; that is good for profit margins and everyone loves that. The buyer that pays a hefty markup is not the type likely to be using P2P networks. Even if they were they could not possibly cannibalize 25% of sales. Please improve iTunes and do what you are supposed to sell music to people in the easiest way possible.

[bblackmoor]

iTunes is for suckers

iTunes is for suckers. Why pay extra for DRM-encumbered songs in a nonstandard format? Why fill the pockets of the Digital Rights Mafia? The clueful music buyers go to places like AllOfMP3.com, which offer music in a variety of formats at reasonable prices and without obnoxious DRM. And more of what you pay actually goes to the artists, which I happen to think is a good thing. RIAA, naturally, disagrees.

[av5]

Artist compensation

On the issue of compensation, whenever a song/album is brought physically, downloaded digitally, payment systems that record this transaction should be standardized to give whatever % to the artist and / or record label (if this has been done already?) There negotiation has to goes to whomever can be solved, this may be somewhat simplfied yet it might lend to some finality to the issue?

[wazhar]

Pay for the Live Sound

I think the whole business model for the music industry should use some sort of algorithm whereby the loyal fans could get stuff for almost free and the later you purchase the more expensive it gets.

And once you are a paying customer, you get discounts for concert tickets. And later when they have boxed sets or whatever, you can get another discount. I mean, it is all about creating communities.

[bblackmoor]

Follow the leader

My recommendation is for the Big Four music publishers to follow the uncontested leader in online music distribution: AllOfMP3.com. Their payment model benefits both artists and consumers. As a bonus, it doesn't benefit the leeches and middlemen, like RIAA and their ilk. So everybody (who deserves to win) wins.

[j1webb]

Publishers have no reflections in mirrors

It has long been known by anyone in the music business that publishers are blood sucking vampires and will steal artists blind. The music business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like dogs. There's also a negative side.

Until music downloading came along, artists had no way of auditing what was sold nor what the publishing and distributions cost overhead was. So the music publishers could pad the overhead with no fear of being discovered.

Since the publishers now demand a good audit trail from the download sites, that means artists can also get the same information and that is what is really crushing the publishers profits. The skim is being elimiated and so there goes all of the money the music publishers felt rightfully belonged to them.

The RIAA has no interest in making sure the artists get their fair share, they know they now have to make their money in a more honest way. But they still want to charge a percentage for pressing the CD, packaging the CD, warehousing the CD and distributing the CD. Even though they don't incur these costs on online sales. But they have signed contracts that the artists can't get out of.

The publishers used to be considered just the pimps, but now they are also the prostitutes, They have it, they sell it, and they still have it.

I think Starbucks music publishing model (and others like it) will finally break the hold the big 5 publishers have on the music industry and the artists. Paul McCartney just signed a contract with Starbucks and you can bet he is not giving away the same huge percentage the other artists are locked into. Paul has long been refusing to release a great deal of his music for on-line sales because he saw how bad the ripoff was and he was financially well off enough to not have to make a deal with them. Slowly, other artists will do the same thing with their new music and eventually the tipping point will be reached and artists will be able to get their fair share of the pie and hopefully the publishers will wind up with a stake through their hearts.