/// Music for Nothing and the Fans for Free

October 29, 2011  |  All Things Digital

Consumers won’t pay for recorded music in the future — but fans will pay for music experiences. When the dust finally settles between the artists, labels, and distribution companies, everyone will finally realize fans are more valuable than recorded music. As traditional monetization models for recorded music sales slowly fade away, new monetization methods centered on the fan will emerge. How do we know music will become free? The stats point to this trajectory. Total revenues for CDs, vinyl, cassettes, and digital downloads worldwide dropped 25 percent from $38.6 billion in 1999 to $27.5 billion in 2008, according to the International Federation of the Phonographic Industry (IFPI). The same revenues in the U.S. dropped from a high of $14.6 billion in 1999 to $10.4 billion in 2008. As the stats show, sales of recorded music are headed one way — down. Sure, digital music sales have been on the rise in recent years, but they have only partially replaced physical sales, so the overall sales figures are still headed south. And it surely isn’t because people are listening to less music. It’s simply because the old adage holds true: why pay for something that you can get for free? In addition, artists, the ones with the talent, aren’t making money off digital sales. Artists get about $0.09 per song sold digitally on iTunes or Amazon. So for a million downloaded hits, an artist earns $90K. Subtract manager, lawyer, agent and other “fees”, and an artist selling one million downloads would barely make minimum wage off of the recording. Source: CNN , Forrester Already, there is a deluge of great (and legal!) sites providing free music — including Pandora, YouTube, Spotify, Grooveshark, MOG, Rdio, and other online destinations. This is a big change from the early days of online music, when free meant illegal. Today, music start-ups have caught on to the profit potential in “giving it away.” Companies like Pandora, which generated $67M of revenue in 2011 Q2, and Spotify with over two million paying users, don’t charge for entry-level service.

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Music for Nothing and the Fans for Free

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