This Article Originally Published November 2000


by Michael Laskow

Well, here we are, a year or two in to the whole "music revolution" on the Internet "thing," and it appears that we've taken more than a couple of steps backwards. MP3.com's bet that the world is dying to hear a bunch of unsigned artists seems to have tanked.

MP3's next step, the so-called celestial jukebox, sounded like a good idea to me, but apparently not to the RIAA and the major labels that it represents. Geee... maybe it might have been a good idea for MP3.com to work out the licensing deals before they launched it. Could have saved them a few hundred million dollars. Looks like Michael Robertson's (CEO of MP3.com) "revolution" has become more like the final episode of 'Survivor,' and he's very close to getting booted off the island.

SpinRecords.com just closed its doors. ArtistDirect.com's stock started heading south on the day of its IPO, and is worth pennies on the dollar today. Pick a company, any music-related Internet company, and chances are it's in serious trouble. Why? Two reasons—bad business models, and the public doesn't seem to want what the companies are offering.

It's obvious that the public does want Napster. Let me re-state that. The public wants FREE music, and the ease with which Napster and its clones deliver the music to consumers. But, as easy as Napster et al are, there is still a long-term problem besides the obvious lack of payments going to artists, writers, and record companies. So far, it only puts the music on your hard drive, and not in your car or home stereo or Walkman.

True, there are portable digital players on the market, but none of my friends own them. Do any of yours? Maybe a couple hundred thousand early-adopters have them, but that hardly makes a dent in 35 million or so "active music buyers" in the U.S. market. That means the rest of us have to download MP3's of varying quality and ultimately burn those tracks on to CDs and play those CDs in our cars, homes, and Walkmen. Not the world's worst thing, but there are still a lot of the 35 million active buyers who probably don't have a CD burner yet.

My guess is that the future lies in the music subscription model—meaning that you'll pay ten or twenty bucks a month, and have unlimited access to streams (versus downloads) of any and all recorded music anytime, anywhere, and in any order you want it. Car radios are heading toward digital, cell phones are certainly heading in that direction (they'll become your Walkman—just plug in your headphones), and your computer will be the device that lets you choose modifiable, canned playlists, or design your own from scratch. Those "playlists" will go where you go.

You may also wish to take the "commercial" version of the subscription service that's free to the consumer, but comes with commercials—much like a traditional radio station, but you'll be the program director.

In the streamed world, you won't need to clutter up your hard drive with hundreds of MP3's. Why own the music when you can have it in an instant whenever you want it. In the parlance of my very bright friend Jim Griffin, music will become a service, not a commodity.

The music business as an industry generates about 40 billion dollars a year in revenue. Funny thing is, that there are an awful lot of people who love music, but don't buy CDs. I think most of them are soccer moms and dads who just don't have the time to browse the racks. But, they do love music!

So what if they could pay, let's say for argument's sake, AOL or their phone company, ten or twenty bucks a month to get such a service? Can't you imagine the number of active music consumers increasing by leaps and bounds? It could turn a 40 billion dollar industry in to a 100 billion dollar industry because it would be giving consumers what they want—music they love in an easy-to-consume format. How many people do you know who don't have cable TV?!

But what does all this mean to you, the great unsigned, up-and-comers?! What if these services proliferate? Will that kill the major labels who are in the business of finding new talent, developing that talent (yuk, yuk), and then selling hard goods? Most likely. How then will the subscription services find new music from new artists? After all, we can't live on a steady diet of oldies forever.

I'm guessing that the services will have genre specific program directors who will oversee their playlists/catalogs, but the companies won't want to hire A&R departments to go through thousands of unsolicited submissions per week because it will cost too much. They'll turn to outsourcing at least the first level of screening, and the program directors will take it from there. That's why TAXI will have even greater value to you and the music industry at large in the not too distant future.

Moreover, you'll have many services to pitch your music to, and you probably won't have to sign exclusive deals. In other words, you could have your music on ten services, and get paid by each of them every time one of your songs is listened to any where in the world.

It's going to get interesting kids. Stay tuned for further predictions.


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