News Update :

Online Creative Destruction: Music Blues Part 2

Wednesday, August 29, 2007

Quick Summary: The developments around the social media / Web 2.0 are a clear and present danger for the traditional music industry.

How the music industry should handle these issues is a subject of debate. There are some who even argue that the amateur culture, as a dominant factor of the Web 2.0 developments, and the alleged violation of intellectual rights will put an end to professional creativity and eventually drive the mainstream music industry out of business. Others take a more moderate position arguing that the music industry will finally adapt to the new reality and differentiate its approach.
The industry’s response to the threat has so far been fragmented and weak. Despite some earlier success like closing down Napster and a few other of the early file sharing sites, the phenomenon of illegal downloading is for all intents and purposes by now beyond any control. Paradoxically, in spite of the fact that iTunes and other subscription-based sites have shown that there is a promising market for legally downloaded music, many of the industry main players are still looking to these developments with suspicion. Another worry, fuelled also from the success of YouTube and other video sharing sites, is that the next victim of the social media will most probably be the film industry but also any other form of information-based industry (games, publishing etc).
The best these industries can do is to start working on the problem putting it in its proper perspective and forgetting the success formulas of the 60s and 70s. The objective should be to try to understand the new market landscape and develop ideas that will allow them to use the new technology to their advantage. An important issue here is to find new ways of communicating with the virtual customer by applying some new forms of marketing aiming at reaching the new centers of market influence (bloggers, podcasters, online communities etc.) as well as the online Long Tail. This means that those involved understand and accept the fact that the days of the very fat cows are over. Minimizing their development and distribution costs - maybe starting by bringing back to normal levels the exuberant fees they pay to both talented and untalented artists – will allow them to compensate for the reduced revenues.
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