New Music Business Models

I have avoided the subject of music for some time now. The arguments have been either about courts (which have nothing to do with business) or about efforts to get around court rulings with technology (which doesn’t build businesses, either).

Now the strategy of one major publisher, Universal, is starting to take shape. It’s safe to look at the music business again.

Last week, Universal bought MP3.com for roughly $5 per share, which still comes to $372 million. The same company also owns GetMusic.com, Farmclub.com, and EMusic.com.

All this gives Universal almost 40 million registered users and 120 million monthly page views, according to the BBC. (Yes, that’s just three page views per user per month.) But it also gives the company a variety of sites where it can now explore a variety of business models.

EMusic is already charging music lovers $15 per month — $10 per month if they sign up for 12 months. It tracks downloads and pays artists for each one. Its library is mainly limited to independent labels, but Universal could beef that up (perhaps with an upcharge).

GetMusic and Farmclub represent the hype machine. GetMusic mainly supports established artists (those with contracts). Farmclub supports struggling artists who don’t have contracts.

Practically forgotten musicians (“Frampton Comes Alive”) and unknown musicians want their music spread widely. That’s the only way to generate the buzz needed to make tours pay. My guess is that GetMusic will also begin pushing “make your own CD” offers.

MP3.com sits in the middle. It has a huge library of music, much of which was “donated” by artists looking to be heard. Its My.MP3.com service could offer sharing of music licensed by Universal for a set monthly fee.

Universal will have the opportunity to do a lot of playing around with pricing here. It can test what the market potential is for selling singles online, selling CDs online, and selling access to its own or independent catalogs online. In this way, the publisher can begin negotiating with the market.

For artists, the news is far more ominous. Universal has now tied up the main routes that struggling independent artists have developed for reaching their audiences without the labels.

Universal could now attempt to tie these artists down with one-sided contracts for the “privilege” of offering their music through these sites, and even more one-sided contracts for the “privilege” of being featured. Since Universal would retain all information on downloads, these interactions would be a one-way street.

The alternatives are for musicians to create their own labels and competing business models. Michael Jackson, for instance, owns a huge catalog of music (including some of Paul McCartney’s) and could quickly build a service. Other “dinosaur” acts could create their own online fan clubs and allow fans access to demos and outtakes that were formerly exchanged in the gray market.

The bad news is that even before the new game begins, the labels have placed themselves firmly in charge. The good news is that the search for online-music business models can now proceed. If, for musicians, those models prove superior to those they had before, perhaps artists’ lawyers and business managers will then go after those one-sided contracts.

But at least now we’ll be able to try to do some business in the market rather than in the courts. That’s news everyone in Internet commerce can celebrate.

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