Future Music Business Models: A Response

TThe founder of Million Media, Neil Cartwright, very recently wrote on the topic of future music industry trends, citing current trends he thinks are the only viable future business models for the music industry. According to Cartwright, they are:

  1. Free to consumer;
  2. Subscription;
  3. Direct to Fan.

At the outset, this is a solid start. In the past year we’ve witnessed the success of brands like Spotify, the predominant force in the Subscription model. It also represents Cartwright’s first example – the Free to Consumer model – insofar as its free service goes. And yes, it follows the business model, as set out by Cartwright, that “[f]ree to consumer is either going to be ad or brand funded”. That does seem to be the way the industry should go. In fact, there is an argument that the industry should better utilize advertising in all areas, but I digress.

Representing the Direct to fan model as Topsin, Bandzoogle, and Bandcamp, Cartwright proceeds to make two errors: one, an oversight; the other, an inaccuracy.

The oversight is his saying that the digital download store is an aberration. He focuses on iTunes, but I suspect this extends to digital markets such as Amazon.

[L]arge companies are very quick to jump on new technologies that reaffirm their business models, but very bad at adopting technology that disrupts it…[s]o, we have a situation where the dominant business model is iTunes – single pay downloads – because that is closest to the established model.

Neil Cartwright ‘The Three Future Models of the Music Industry’

Cartwright, though arguably right in saying that large companies can be slow to adapt their business models, overlooks the power of iTunes and its ever-expanding song library. That iTunes does not yet offer a subscription-based service in the vein of Spotify is irrelevant. The catalog is there; the technical know-how is arguably already there and easily acquirable if it isn’t. Amazon, for instance, offers Amazon Prime, currently focused more on film and television, but a subscription service nonetheless. It could viably expand its realm to include music. Similarly, Amazon has firsthand experience of providing a subscription-based postal DVD rental service, Love Film. More pertinently, Amazon is the owner of Audible, the ebook subscription service online. It doesn’t yet include music, but Audible is a flexible name, easily adaptable to mp3.

And why should a multinational company like Amazon make a hurried switch to a subscription-based digital music service while the digital download store business model makes as much revenue as it does. The IFPI (International Federation of the Phonographic Industry) Digital Music Report 2012 supports this perspective, where it is estimated that “3.6 billion downloads were purchased globally in 2011, an
increase of 17 percent”, and although iTunes’ stance on a potential subscription service remains unclear, it’s evident that Amazon possesses the framework.

The inaccuracy, on the other hand, rests on Cartwright’s interpretation that Kenneth G. Mages means that the future business model of the music industry is mobile. I don’t think that’s quite what Mages is getting at, but it is an acceptable interpretation. However, Mages could simply mean that mobile is the acceptable medium upon which Cartwright’s three business models will do battle. That Mages refers to Spotify as a case in point is key to viewing mobile more as a medium than a business model. After all, Cartwright’s three business models are already enjoying success on the mobile medium, and very much fit to its confines; they work within its parameters, mutually benefiting in the process.

I’d like to add that you can read Neil Cartwright’s thought-provoking blog post. He has done an excellent job in raising these issues.

Samuel Agini is the Editor of Andrew Apanov’s Dotted Music Blog. You can contact him at sam.agini@dottedmusic.com