Are we done bemoaning the lost days, when teen agers skipped down to the local record store on the way to the soda shoppe and picked up a handful of 45’s? Has the last tear fallen for a time when stoned college students waited for the last track on side one to end, put down the bong, and waltzed over to the record player to turn the disc over? When labels handed out cash advances to marginally talented bands knowing that the sheer volume of sales would justify the cash they’d never recoup from the flameouts?
Ok, record sales are down and will stay suppressed. Streaming audio, though-see Pandora, Spotify, and now iTunes Radio-is huge, and will continue to grow. Of course artists gripe about the paltry pay outs they receive. But hey, if you were one of those who received a 40k advance in the mid-70’s, you may still owe money to the label that signed you.
The Digital Millennium Copyright Act, enacted by Congress in 1998, helped usher in the age of webcasting and “personalized” or “semi-interactive” online radio. The iPhone, and smartphones and apps in general, helped take the consumption of these products to an entirely new level. Like Pandora (and Spotify), iTunes Radio will offer a free service. Advertising-free Pandora currently costs $36 per year; Apple will charge $25 for iTunes Radio, though iTunes Radio comes bundled into iTunes Match, so the comparison is not exact. All three services are based on the depth of their catalog and repertoire, the power of their recommendation algorithms, and the care that their editors take with catalogs and genres.
Seth Schachner is the founder and CEO of Strat Americas, a global digital medial consulting firm. Earlier in his career he was the force behind the growth of Sony Music’s Latin American Digital and Mobile business. “One of the opportunities that exists for Apple is to integrate track or album purchasing with iTunes Radio-it’s definitely something that a label would look at positively, as Apple holds paying accounts, and part of the idea here is to drive purchases. Apple’s in a great position to monetize the casual listening experience, essentially.
“Historically, Apple’s biggest digital music model is the “a la carte” purchasing model, ie, ‘99 cents a track.’ That’s ownership. The interesting question is whether the model will shift on a long term basis from a purchasing model to an access model. Let’s assume for a moment that the average consumer buys 25 iTunes tracks a year at a buck a track. Then consider the paid subscription model and ask this question: why would a consumer want to buy “a la carte” if they can “get it all” for $10/month from a premium subscription service like Spotify or Rhapsody?
“If Apple-or its competitors-can attract enough paying subscribers, the bet is that the new paying subscribers will offset those buyers who no longer want to purchase music on an a la carte basis. If so, they will have grown their business. In my view, 10 years from now, while people will likely still buy a la carte, it’s quite possible that the market will continue to see more and more paying subscribers, and less a la carte purchases. In that case, the ‘access model’ wins out, essentially.”
Seth Schachner has something to say. If you’d like to learn more about him, check out his website, www.stratamericasonline.com.
Related Topics: MixSounds