What can newspapers and magazines learn from record labels?

Posted on May 22, 2009

The music business has been feeling the pinch from free digital distribution, and in some ways it has felt it earlier than newspapers and magazines. So it’s worth looking there for some ideas on how the whole thing might play out. When it comes to the paid-versus-free content debate, which is currently raging across blogs and newspapers, what does the music industry tell us?

(Courtesy of Cagle.com)

(Courtesy of Cagle.com)

Firstly, a product that has a zero marginal cost of reproduction and distribution, will undoubtedly be reproduced and distributed for free, whether legally or illegally. The cat is out of the bag, and it will not be going back. Of course, people still pay for music, and systems such as iTunes make the process easy and affordable. But millions of people easily avoid paid content, and there is no going back to the old model. And unfortunately for news publishers, music is much more persistently valuable as an asset than news and opinion, which tends to be obsolete soon after publication.

Secondly, for the small amount of content which can be sold for a price, there are many ways to skin the aforementioned cat. Music stores have adopted a huge number of sales models, some of which have simply just confused the consumer. Some brokers have given music away for free, with the aim of generating advertising revenue to cover the cost – the classic media model. Although there is little current demonstration that this is effective, an inevitable reduction in music streaming fees and the potential of improved advertising effectiveness should fill this gap. Other stores have experimented with a range of prices, and of delivery formats, and of digital-rights-management restrictions. Some have tried subscriptions, and some have even tried to build the cost of music content consumption into the price of the delivery device. (On that note, Nokia’s Comes With Music is the best example of this, and according to what I have heard from inside Nokia it has been an epic failure. The newspaper group Hearst, with it’s announced e-reader should bear the example in mind.) There have also been more unorthodox models, such as forcing readers to view or act on advertising or product trials in order to receive free music. The most interesting charging method I have seen in the music industry is Amiestreet, which finds a market-driven price by charging more for content (up to a low ceiling price) as it becomes more popular, and rewarding those who “discover” content that ends up being popular. It would be very interesting to see if a newspaper or magazine can pull that off: charging for content piecemeal based on its ‘desirability’.

Thirdly, the content producers (artists) must find other ways of being remunerated, and charge more through these in order to cover costs. Artists have started touring/gigging more, and making more of merchandising and licensing deals. These revenue streams will never amount to the sale of millions of CDs, but they provide enough to pay the artist, and a smaller cut for the record label (which has historically taken a large proportion). For newspapers and magazines, these revenue streams include advertising, sponsorships, additional paid products such as white-papers, industry reports, how-to guides, and iPhone apps, events, other brand-extensions and partnerships with related service providers, custom publishing and branded content creation, and exploitation of marketing data. The blend and exact implementation of these revenue streams will obviously vary from sector to sector, but there are publishers who are demonstrating significant value in each of these areas.

Fourthly, the funding model for content creation has fundamentally changed. The traditional funding and distribution mechanism for music, namely record labels, has experienced huge decline in revenues as the new market reality has exposed their value add as being much less than what they bring to the table. Although most major artists are still with a record label, there has been a shift away from this approach, with several high profile bands going it alone, and thousands joining collectives and light-weight “non-labels” like Artists Without a Label. Several major acts have been signed by event ticketing companies, and the era of “brand-sponsored music” is likely to be very close. Similarly, newspapers and magazines, the traditional kingpins, are losing their grip on content creation and distribution. Millions of bloggers, some incredibly talented and with large audiences, are creating content, which in many cases is better than that of traditional publishers in their niche. Blog networks, and crowd-funded journalism models are starting to enable new publishers to compete. And the huge growth of custom publishing and branded content is subtly starting to pervade every media channel we use.

What is certain is that the traditional business model has changed. The old way of working is over, and there is no tried and tested publishing method that can be relied upon. However, although paid content won’t work for most publishing sectors, there are many potential revenue streams on which to focus, and new methods of funding content creation are appearing. And when content can be charged for, there are several interesting methods of charging that should be explored. For those who are willing to carefully dismantle the old content creation and distribution structures, and replace them with leaner, flatter, faster methods, the opportunity is huge.

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1 Response

  1. [...] The major flaw with this, and it has proved a stumbling block for most newspapers (and indeed record labels in the music industry), is that it is not the content that must be monetised, but the audience. Yes, quality news content [...]


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