The Music: It's trust, not technology
Kevin Marks, proponent of mediAgora, notes my post regarding business models for niche music markets and blogs to ask:
OK, Tim, which bits am I missing from mediAgora?
Or put another way, isn't mediAgora an ideal component of the choice of revenue model?
Now, Kevin is an acquaintance, who knows darn well what sort of bear he's baiting, therefore I assume he means the question sincerely. It's also typical in some ways of various commenting posts, e-mails, and pointers to plans that I've received since starting this string of articles. So, be careful what you wish for, Kevin!
Let's start with context. In the cited post, I mention four business roles: artist, production facility, genre manager, and platform provider. Of the two novel entities, the genre manager is purely a marketing organization. The platform provider does use technology and has as one of its goals enabling revenue streams for the artists and genre managers. If mediAgora - or other new technology - fits anywhere, it's there.
Having said as much, I don't believe that any new technology is required to create the music platform provider. While I didn't say it explicitly, the pointers to existing businesses studding the list of features for the platform were a deliberate clue that I believe all of the technology - and indeed most of the business elements - that are needed already exist. In the internal parlance of our fund, it's an integration and market play, not a technology company. At the most, it's required to assemble technology to enable the business, it doesn't compete on it.
Of the two tasks facing the platform provider entity, marketing is the greater one. The technology bits can be bought, licensed, or accessed by partnering. The head geek of this operation would have an integration and ops background. The business goal for the technology platform is a lowest total cost roll up. So to all the folks who've sent me pointers to various technology based plans to implement the mid-market strategy, I want to say: You are starting with the wrong market entry premise.
The tougher task is going to be rising above the noise produced by the combination of label-oriented digital music sites, various P2P systems and their wars with the labels, and the sundry DRM, microtransaction or device technologies, all making it hard to be seen and heard by both artists and customers. When I say 'build it and they will come' with regard to genre artists, the it I have in mind is not a technology, it is a credible, visible market presence. Credibility likely does require subsidizing and building out a few genre markets and specialists as I previously suggested. Financing the initial genre markets, establishing general market awareness, and integrating or partnering for the necessary technology and operations capability is likely a matter of some tens of millions. It is not something that is likely to happen in a garage.
But doesn't success require (take your pick) a pass-along / MLM model for revenue, an open bid system for pricing, or a market for song, sampling and other derivative rights, or some other techno-bit? No. I don't think so. I believe Umair Haque is on the right track, with his transaction-cost-based analysis of the failure of the label model. What's going on now is a breakdown in trust between music vendors and customers. The old model of bundling songs onto physical CDs and distributing via storefronts is destroying value. Whether or not the labels are indulging in opportunistic behavior, or are just crippled by channel conflict, the customers know - or feel in their bones - that they are being exploited, and they are retaliating. The loss of trust destroys markets.
Putting trust back in place is not a matter of technology, of cryptography, DRM, or transaction systems. It needs a new deal among customer, artist, and packager/promoter. One that eliminates as much as possible of the existing information asymmetry, and the obsolete bundling embodied in a mass-produced CD. We don't know all the parameters of that deal, as yet. We do know the customer will be the ultimate arbiter. We can also suspect, based on lots of experience with consumer markets, that it must be simple and understandable. That, to me, tends to argue against models that multiply transactions, and therefore transaction costs, and toward alternate bundling strategies. That might be all-you-can-eat subscriptions, it might be preferred access to artists as a result of paying for MP3s, it might be pay for concert tickets and download all you want. It's not likely to involve storefronts, or mass-produced CDs. Things like Magnatune are wonderful experiments in finding out what the new market will bear.
What Magnatune acknowledges is that, at the end of the day, customers have to want to pay for the music experience, because the digital genie is out of the bottle, and will not go back in. I choose to be an optimist, and believe that there are enough listeners out there who want to have the artists keep working, to support a real business model that gets the money to the right people. I believe that if people such as my hypothetical genre managers really apply themselves to adding value, they can make an MP3 anchored in their realms a lot more valuable that one snagged for free, but out of context, from a pirate P2P system. Lastly, one of my reasons for pointing to the indie/genre markets to begin with is a feeling (and I am projecting) that most listeners find their genre favorites as part of individuation. Attending to a top-pop act is about being part of a group, about socialization. Picking your favorite genre artists is about becoming yourself. That's a lot harder relationship to cheat on, a better place to rebuild trust.
As far as the interesting technology bits or frameworks of desiderata such as mediAgora, carry on, but beware the needless multiplication of mechanisms. Remember the curse of Xanadu, with all its marvelous hypertext transclusion algorithms and royalties-by-the-byte. Which never shipped, and is now a footnote to history, while you read this crufty, under-architected hypertext system with no obvious business model, that merely conquered the world.
