Hannah Montana, Radiohead, Virginia Tech, My Band, and the New Music Business Model
In the future, when we look back on what will soon become the next business model for the music industry, people will regard Hannah Montana as a pioneer, or maybe simply the catalyst that got things started. But if we look at things the way they are now, the signs of a coming music business revolution are as plain as the nose on her perky face.
Evidence? The symptoms are all around you.
When thousands of fans couldn’t get tickets to see Hannah Montana, there was plenty of finger pointing all around. Missouri’s attorney general sued three ticket brokers for violating consumer protection laws, while the attorneys general from Pennsylvania and Arkansas sued ticket resellers. Ticketmaster went after a software company that it says makes and distributes computer programs used to flood its Web site with orders.
States are prosecuting ticket brokers because their citizens can’t see Hannah Montana for a reasonable price. Even the companies that make the technology scalpers use to harvest tickets are under attack.
In her ruling, the judge determined that that RMG’s software harms Ticketmaster and the public “because it denies consumers the opportunity to purchase tickets to events at a fair price.” Collins cited reports of complaints by fans, including many parents who were priced out of getting tickets for Disney Channel’s Hannah Montana concert tour.
Not to go off on a tangent, but I am a season ticket holder for Virginia Tech football games. I don’t get to see many home games due to my musical endeavors so I end up selling most of my tickets on Ebay. I list them for face value (this year, that would be $44 each) and let the market determine a final price. For games against even the weakest opposition, my tickets sell for no less than double face value - for the higher demand games, count on at least triple. Why? Because of that wonderful economic principle known as supply and demand. When demand increases but supply remains fixed, price goes up. Virginia Tech football tickets are finite in supply, while demand for them is very high, so people are willing to pay a lot more than face value for them.
Which brings me back to Hannah Montana. The fact that scalpers are getting $2000+ for what is essential a live action episode of a Disney series should provide a major EUREKA moment for the music industry. And coincidentally, something else has happened recently that is strongly related to this EUREKA - the rather brilliant buzz marketing trick pulled off by the British band Radiohead.
The rock band Radiohead surprised the recording industry status quo when it bypassed its label and told fans to pay what they want for the downloadable album In Rainbows. Now some fans say they are also surprised - and not in a good way.Some who downloaded In Rainbows and volunteered to pay as much as $20 found out the hard way there were caveats. Many were initially disappointed to learn In Rainbows digital tracks were encoded at a low bit rate of 160K bps (bits per second).
…But discontent with the Radiohead release doesn’t stop there. Radiohead’s management also confirmed to the newspaper USA Today that the scheduled January release of a physical CD of In Rainbows may include extra songs.
Some fans now are miffed they by the fact they may have to buy the album twice to enjoy better sound quality and the complete In Rainbows album. USA Today quotes several irked fans who said there was not adequate disclosure about the low audio quality download and expressed buyer’s remorse.
Wired is reporting that the Radiohead promo downloads are averaging $5-8 each, while plenty of them paid zero. In other words, Radiohead fans are voluntarily paying this much for low-quality versions of a CD that will be released at full quality in January.
What can we learn from these three supposedly unrelated events?
- When there’s high demand for a limited supply of an artificially low-priced commodity, innovators will find a way to capture the value left on the table. Those states are mad at the scalpers for charging high prices - Hannah Montana’s management should be mad that the scalpers are making more than they are for their OWN PRODUCT. (If the demand is so high, why isn’t she scheduling multiple night shows and cleaning house?) Just like the VT season tickets, the market determines the price. The only thing that is undeniably clear from this debacle is that HM’s tickets were priced waaaaaay too low.
- In the past 30 odd years, the music industry’s business model has steadily evolved from one of albums (with live performances for marketing album sales) to one of live performances (with downloaded MP3s for marketing and establishing the brand for the artist). The customer experience used to be in owning the albums - now it’s in seeing the performers. In the 70s I could pay $6-8 for any decent concert - and the same amount for an album. Now I pay $60-90 for a good concert and next to nothing for MP3s. Fans are willing to pay out the wazoo to see the object of their adoration in person.
- Even though the Radiohead ‘music revolution’ turned out to be a marketing scheme, they might be on the track of an actual new business model. Pay-whatever-you-want MP3s at first, with the complete CD and other merchandise in a boxed set later, followed by an extensive higher-priced tour, with the first two events aimed at promoting the third. That way they get paid three times, with each appealing to a different stratum of their fan base.
The big winners for this will be people like me, who have no problem paying zero for downloadable content, and have no desire to shell out three figures to see a rock concert. Adjusted for inflation, I’ll be paying next to nothing for my music. And Radiohead won’t care because they’ll be making their money from their deepest-pocketed fans, at least until their fanbase becomes too old to chase them around. And in 20 years or so, they can do a “Hell Freezes Over” concert reunion tour for $3000 a ticket and no one will mind in the slightest.
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[...] Check it out! While looking through the blogosphere we stumbled on an interesting post today.Here’s a quick excerptSubmitted By InnovationCatalyst On 10/17/2007 Description In the future, when we look back on what will soon become the next business model for the music industry, people will regard Hannah Montana as a pioneer, or maybe simply the catalyst that got things started. But if we look at things the way they are now, the signs of a coming music […] Points 1 [...]
[...] is in music, where MP3s are now becoming cheap commodities used to promote live performances (where have you heard THIS prediction before?). It places the value on the really scarce commodity - the performer’s time - and removes it [...]
[...] is in music, where MP3s are now becoming cheap commodities used to promote live performances (where have you heard THIS prediction before?). It places the value on the really scarce commodity - the performer’s time - and removes it [...]
[...] Hannah Montana, Radiohead, Virginia Tech, My Band, and the New Music Business Model Posted on October 17, 2007 by Innovation Catalyst Open Source Innovation has moved - here is the new link to Hannah Montana, Radiohead, Virginia Tech, My Band, and the New Music Business Model. [...]