I've been using Pandora, the excellent music discovery service, for over three years now, discovering Death Cab for Cutie, Band of Horses, and other bands in the process. I was therefore dismayed to discover that Internet radio royalty fees threatened to bury Pandora earlier this year.
Fortunately, you can't keep a great service down: Pandora has notched two million users on the iPhone, becoming Apple's most popular iPhone application. As Jack Schofield of The Guardian suggests, this iPhone popularity should ensure Pandora's enduring presence in my life, and hopefully yours.
What still rankles me, however, is that Pandora should be in jeopardy at all. Why would the music industry lobby to raise Internet royalties on its music, when services like Pandora, Last.fm, etc. contribute to enriching the music experience, helping would-be buyers find more music worth buying?
I wrote recently on this topic, suggesting that music discovery is the future of the music business. I was writing about Apple's new iTunes Genius service, but Pandora is actually a better service, as it's more likely to turn me onto hitherto unknown music. This is something for the industry to embrace, not fight. Warner, for example, is actually learning that digital music can be a Very Good Thing: as it has embraced the Web, it has seen sales increase, while its competitors have flailed to double-digit declines.
I'm glad to see Pandora thriving on the iPhone because users love the service. I'd love to see it doing even better with the music industry loving it, too. It should show its love by lobbying for lower royalties on Web music services like Pandora. In turn, I firmly believe consumers will respond with cash for the industry.
Fair trade?
BusinessWeek takes a fascinating look at one player that is actually thriving in the troubled music industry: Warner Music Group.
Why is this interesting? Because it offers a useful foil to the software industry, and specifically open-source software.
While Warner's competitors have posted double-digit declines in their businesses, Warner has notched 5 percent growth:
How did [Warner CEO Edgar] Bronfman do it? He cut Warner's artist roster nearly 30 percent, ditching more than 50 acts that were no longer selling well. He refused to pay big bucks to keep the likes of Madonna and Nickelback out of rivals' hands. And he found some $300 million in annual cost savings. Result: Warner had more time and money to focus on new potential hitmakers.
Imagine that: the music industry actually doing what it's supposed to do--find and nurture new talent. Sure, everyone loves to hold onto a "monopoly" like Madonna or The Eagles, but Warner is demonstrating the new economics of music (and software): you have to innovate if you want to survive. You can't rest your laurels on old artists, or old software.
One Slashdot commentator recently anguished whether open source drives software pricing to zero, not understanding that this is the natural effect of free markets. This is why open-source subscriptions are so important to customers, as Red Hat notes (PDF): open-source subscriptions require constant innovation from the vendor in order to justify customer payments.
See the link? Warner's Bronfman is focused on helping find new talent for customers to enjoy. He realizes that he can't find one or two successful acts and milk them for eternity. Warner's model is music discovery, and people are willing to pay for that in part because they don't know how to pirate new acts of which they've never heard. Sure, people will start ripping off Warner once it has created new stars in the music industry, but by then Bronfman will likely have sold off the rights and moved on to other new acts.
In a similar manner, one of the primary values that Red Hat, in particular, provides the enterprise is open-source software discovery. Enterprises trust Red Hat to find and deliver the best in open-source software. Red Hat can and should be doing much more in this area, as today it only works in the operating system and middleware layers, but it's working on improving its value as a "software discovery mechanism" for the enterprise. Stay tuned.
It's not the easy money of yesterday, but there's no point in pining for the "good ol' days" of software and music because the Web has largely destroyed those old monetization models. Warner understands this, as do the SaaS and open-source providers. Do you?
The Wall Street Journal's "Mossberg Solution" yesterday looked into two new music discovery services from Apple's iTunes and Microsoft's Zune. The verdict went Microsoft's way, but the real winner in the services will be the music industry.
What should have been blindingly obvious before, what with Pandora, Last.fm, and other music discovery services helping consumers find music to love, was that the future of the music industry is discovery. Now that Apple has made it easy to purchase music, the next step for making a big industry even bigger is to help consumers find new products to consume.
The old model--expensive promotions through brick-and-mortar retailers and radio play--is giving way to instant gratification online, and I'm willing to bet that it's going to pay huge dividends.
As just one example, yesterday I upgraded my iTunes to version 8, which provided me with Apple's new Genius music discovery service. A day later, I've already bought an additional $15 worth of music--including songs from The Pixies, The Decemberists, and others.
iTunes' "Genius" in music discovery
(Credit: Matt Asay)Now that Universal and other music titans have discovered that digital downloads can pay off in industry growth, it's time to hypercharge that growth with efficient, online music discovery.
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