The Elusive Business Model

It’s redundant to say the music industry is going through some major changes. The business model of selling discs for the top 2% or so of artists has ended. It will not return. So what is the new business model? The glorious thing is that nobody knows. It is a free for all out there right now and there has never been a more exciting time to be in this chaotic industry.

As the new business models are being formulated, we are seeing a lot of beta’s and experiments. Most of the new social networking sites for music are in beta format. And many major artists are experimenting with online sales, free download giveaways, and new relationships with promotions companies. Live Nation has just signed U2, Jay-Z, and Madonna for amazing amounts of cash. But the verdict is still not out if Live Nation has it right either. And we may not know for many years as most of these major deals are for 10 years. Does Live Nation have the correct business model to realize a return on their investment?

One verdict did come out recently by the band Radiohead. Last year Radiohead released an album on their website free of charge (actually, pay what you want, but many chose the free option). The idea was that this would build interest come tour time where they would make $15+ a ticket rather than $2 per cd sold. Yesterday, Radiohead said the free giveaway was a one time gig, useful for the time it was used. It didn’t sound like they would do that again. Many in the industry were looking at this test that has also been replicated by Coldplay, NIN, and others.

It will be interesting to learn more of why Radiohead will not do this again in the future. Did they feel it cheapened their music? Did they lose a lot of potential income? Other interesting questions are if the people that downloaded for free would have bothered to purchase the album without the free option?

It’s an exciting time and this blog will continually monitor the new business models being presented.

Stay tuned,
Erik
erikrostad.com