Many people, including myself, have said it’s inevitable: digital music is going to be given away legally for free, while musicians and songwriters try to make livings in other ways. But just how inevitable is it?
The United States is currently a redoubt against the two major types of major-label-supported models in which third parties subsidize the cost of music: ad-supported (Spotify, Deezer, We7) and device maker supported (Play Now Plus, Nokia Ovi Music Unlimited). There’s constant talk of Spotify launching in the US market, but it resembles past talk about iPhones on Verizon Wireless: mostly rumors and wishful thinking.
I have found, through work that I’m doing for another startup experimenting with a subsidized model, that there’s a schism in the music industry which can only become more pronounced as downward pressure on music pricing increases. The schism is this: generally speaking, record labels don’t mind free music as long as they get their revenue from somewhere, while music publishers are against the idea. Of course there are exceptions, but that’s the rule.
The reason for this schism is fairly simple when you think about it: recorded music companies are mostly publicly traded corporations on the quarterly-earnings treadmill. While some major music publishers are owned by publicly traded companies (e.g. UMG Music Publishing or Sony ATV), songwriters and publishers are represented by collecting societies, which have no such near-term pressures.
Moreover, songwriters do not stand to gain much from the alternative business models that are appearing in the Age of the Free. Songwriters don’t tour, sell T-shirts, or do 360 deals. And collecting societies, because of their nonprofit status and longer-term financial views, can afford to be philosophically committed to preserving the value that consumers perceive from music.
Some of the major collecting societies are going to fight free music to the death. It will be very hard to dismiss them, and if one of them refuses to license to a free-to-consumers service, it means that service doesn’t launch in the country where the collecting society operates.
Although music publishing is less glamorous than the record business, it’s growing in revenue and becoming more powerful while record labels shrink. (For a good glimpse at current music-biz economics, read the article in the current issue of The Economist.) If and when publishers and their collecting-society allies call the shots, legal music giveaways may not happen, or will at least be postponed.
One clue to the schism can be found in the FAQ of the Music Anywhere service that Catch Media launched with Carphone Warehouse in the UK a couple of months ago. For a small monthly subscription fee, the service lets users take music files they already have and sync them onto other devices and stream them from any web browser.
The marketing materials for this service contain references to terminating user accounts “in extreme cases where it becomes apparent that most of a person’s music collection has been [in] fact pirated.” When I first wrote about this, I thought that statement absurd: the service is offering record labels royalties from music that was probably not obtained legally. I would have thought that the record labels would welcome the chance to get paid from so-called pirated content.
That last sentence is probably true. But in at least the case of one major European collecting society, it’s not: this would be considered “amnesty for pirates” and is therefore morally repugnant. Lots of music publisher and collecting society propaganda talks about the need to preserve the public’s perceived value of content. I’ve expressed this view myself.
So far, no one has “cracked the code” on subsidized music models; none of them have achieved much volume. Spotify has been trying to steer its free users towards paying while it also tries to get wireless carriers to subsidize users. Nokia’s Comes With Music is being rebranded in an attempt to accelerate its slow growth. Pandora seems to be increasing the frequency of ads on its free service — and I doubt they’re all paid for; they are repetitive ads from the same businesses — in a gambit to drive users to upgrade to the paid Pandora One (hey, it worked for me).
But the day may come when someone builds a subsidized music model with the potential to displace iTunes. When that happens, a lot of soul-searching and difficult conversations about free music will take place within the industry.