How the music industry got it wrong
Lesson 3: The music industry is thriving, it's the music companies that are stuffed
No-one
is arguing that consumers don't want music anymore. Quite the reverse: the
easy availability of music on iPods, PCs, mobile phones and elsewhere mean
that music is more in demand than ever. What is suffering is the bloated,
inefficient, archaic structure of record labels that were set up in the
days of scarce distribution and limited competition, when the album ruled.
Whether Guy Hands' Terra Firma can make a success of EMI remains to be seen;
what is clear is that the days of massive record labels making enormous
profits on a limited number of titles while running inefficient infrastructures
are well and truly over.
Lesson 4: Profits come from secondary sources
One part of the music industry remains highly profitable - music publishing. That is the business that owns the underlying copyrights and licences it out to films, commercials, video games and other media channels. They generate revenues from ringtones, radio play, in fact on any occasion when a business wants to be associated with the brand, band, sound or emotion that a particular track can offer. So it is not the case that music cannot generate money anymore. Simply, as per Lesson One, that with the consumer setting the price, music companies must seek to exploit alternative sources of revenue wherever possible.None of this is new to the games industry. In-game advertising has been exhaustively discussed in these pages. Micro-transactions are a rapidly growing source of revenue, particularly in the Far East. Massively multiplayer games, like Runescape or indie game Dark Wind, offer a reasonable level of gameplay for free, but some of the cooler features, like owning property or advanced missions, are reserved for paying subscribers. The lesson from the music industry is that in some cases, giving the game away may be the best strategy, provided that the alternative sources of revenue are clear.
