Masnick on Music

Mike Masnick, who earlier put together the rather nice explanation of Trent Reznor's business strategy, continues to be one of the most sensible analysts of the current state of the music industry. Today he writes:

...selling music is just not a good business model, but it doesn't mean there aren't good, music business models. It's just that selling music isn't a very good one. Instead, you need to learn to use the music (which still needs to be good, and is still the central reason why these other business models work) to sell something else -- something scarce, which can't easily be copied. That can be attention, access, time, creative ability, cool physical products, whatever. All of those things are made more valuable the more popular the music is, and you can build all sorts of powerful and immensely profitable businesses once you recognize that.

But if you still think that selling the music or making money directly from the music has to be at the "center" of any music business model, you're shutting yourself off to the largest opportunities out there. But, the thing is, music has always been a product that makes something else more valuable. While there was some disagreement on the panel from someone about how record stores were profitable in the 70s, that's a case where the music was making the vinyl (and later, plastic) more valuable. Today, it makes iPods more valuable. As the big box retailers know, it acts as a loss leader to bring people in to buy higher margin goods. Music is great at selling other, higher margin things. If you ignore that in the music business model, you're missing the big opportunity.

This isn't to downplay the importance of music, or say that the quality of music doesn't matter. It absolutely does. But the music is not the scarcity, and you don't make money off of selling something that's abundant. You use the abundance to figure out what other scarce goods it makes more valuable and you sell those.

What BoingBoing taught me today

• There's now a database with service records of soldiers from the Hundred Years' War. Robert Fogel did awesome work using data from the US Civil War showing just how much economic growth has improved our lives since the 1850s; I wonder what will come of this new dataset.


• You may have heard of the experiment from the 30s where the researcher raised a chimp infant alongside his own son. You may not have heard the "what happened next".

  The real reason he abruptly halted the study, then, was likely because of results that Kellogg never anticipated: his son Donald started imitating the chimp.
  
  For example, though Donald had learned to walk before Gua joined the Kellogg family, he regressed and started crawling more, in tune with Gua. He'd bite people, fetch small objects with his mouth, and chewed up a shoe. More importantly, his language skills were delayed. At 19 months, Donald's vocabulary consisted of three words. Instead of talking he would grunt and make chimp sounds.
  
  Gua got sent back to the Yerkes center in Florida, where she promptly died. And Donald? Not much is known of his life, but, at 43, he committed suicide.
  
  This study got a lot of press when it was published, but Kellogg ended up deeply regreting it -- not because of what it did to his son, but because it prevented him from being taken seriously as a scientist.

• Another dodgy use of copyright: this time, to keep folks from fighting their traffic tickets in the UK. Are speed camera photos really what folks had in mind when trying to protect the returns to intellectual innovation? I hope not.


• Bat shark repellent exists and is effective

Trent Reznor and business strategy

Midas Oracle points me to a fascinating lecture on Trent Reznor's business strategy. In short, Reznor has found a way to make money in the music business without relying on copyright. The lecture is excellent. I've known lots of the bits and pieces, but the presentation below puts it all together nicely. I'm generally opposed to using Powerpoint or videos in my lectures, but I will air this one in the week I spend on the economics of copyright in my current topics class.



I used to say that David Bowie was the smartest guy in the music industry because he came up with a way of consuming today future royalty streams: Bowie Bonds. You could even argue that Bowie was there hedging against risks caused by effective copyright erosion.

Today, Reznor's the one to watch.

Full disclosure: have been a fan since Downward Spiral. Not that I don't like Pretty Hate Machine; just that farmboys from southern Manitoba had barely heard of Skinny Puppy and Ministry in the early 90s. Nine Inch Nails didn't show up on the radar there 'till 1994, or at least not on my radar.