An anonymous reader notes that there have been rumblings in the music industry of trying to shut down freemium services like Spotify’s free tier and YouTube’s swath of free music. The record labels have realized that music downloads are gradually giving way to streaming, and they’re angling for as a big a slice of that revenue as they can manage. The article argues that they’re making the same mistake they always make: that converting freemium site listeners (in the past, music pirates) to subscription services will be a 1:1 transfer, and no listeners will be lost in the process.

Killing Freemium is the Worst Thing for Artists
https://medium.com/cuepoint/killing-freemium-is-the-worst-thing-for-artists-5c1b022bad78

Ending Spotify and YouTube’s free tiers will increase piracy, not sales or signups

The Death of Music Sales
If CDs are “dead,” so is iTunes.
http://www.theatlantic.com/business/archive/2015/01/buying-music-is-so-over/384790/

CDs are dead.

That doesn’t seem like such a controversial statement. Maybe it should be. The music business sold 141 million CDs in the U.S. last year. That’s more than the combined number of tickets sold to the most popular movies in 2014 (Guardians) and 2013 (Iron Man 3). So “dead,” in this familiar construction, isn’t the same as zero.

And if CDs are truly dead, then digital music sales are lying in the adjacent grave. Both categories are down double-digits in the last year, with iTunes sales diving at least 13 percent.

The recorded music industry is being eaten, not by one simple digital revolution, but rather by revolutions inside of revolutions, mouths inside of mouths, Alien-style. Digitization and illegal downloads kicked it all off. MP3 players and iTunes liquified the album. That was enough to send recorded music’s profits cascading. But today the disruption is being disrupted: Digital track sales are falling at nearly the same rate as CD sales, as music fans are turning to streaming—on iTunes, SoundCloud, Spotify, Pandora, iHeartRadio, and music blogs.

Now that music is superabundant, the business (beyond selling subscriptions to music sites) thrives only where scarcity can be manufactured—in concert halls, where there are only so many seats, or in advertising, where one song or band can anchor a branding campaign.

Nearly every number in Nielsen’s 2014 annual review of the music industry is preceded by a negative sign, including chain store sales (-20%), total new album sales (-14%), and sales of new songs online (-10.3%). Two things are up: streaming music and vinyl album sales.

And how about the hits? The top 1 percent of bands and solo artists now earn about 80 percent of all revenue from recorded music

He suggested that despite the common wisdom many of us have suggested, the entertainment industry’s business models aren’t actually obsolete. What is obsolete is what people think the industry’s business model is. And, the worst thing is that the people most guilty of this are the industry execs themselves.

We’ve been arguing that there are plenty of business models that don’t involve actually selling the content, but involve selling other, related products that are made valuable by the content. In fact, that’s what both the music and the movie industry already do. Everyone may think that you’re buying “music” or “movies” but that’s very rarely what you’re actually buying. You’re buying the experience of going to the movies. Or the ability to have the convenience of a DVD. Or the convenience of being able to listen to a song on your iPod. And, in many cases, it’s not just one thing, but a bundle of things: the convenience of being able to hear a song in any CD player, combined with a nice set of liner notes and the opportunity to hear a set of songs the way a band wants you to hear. It can be any number of different “benefits” that people are buying, but it’s not the “movie” or the “music” itself that anyone is buying.

So the problem isn’t that the industry’s basic business model is obsolete — it’s just that everyone thinks they’re actually selling music or movies, and that leads them to do stupid things like put DRM on the music to take away many of those benefits, or making the movie-going experience that much worse by treating everyone like criminals. What they’re doing, and why it’s hurting them, is that they’re actually taking away the features that they used to be selling — and missing out on opportunities to sell other benefits as well. So while we may still point out that the basic business model is obsolete, it may be more accurate to simply say that it’s the understanding of the business model that’s really out of date.

In an effort to make it difficult for the public to find pirated content, copyright holders send millions of takedown notices to Google every week.

Unfortunately not all of these requests are accurate.

Spinnin’ Records, one of the largest independent dance music labels, has been sending several unusual takedown requests to Google. The record label asked the search engine to take down the Twitter pages of several of its own top artists, including Afrojack, as well as its own account. Google, thus far, has refused to help out with this blatant attempt at self-censorship.

A recent report found that when you remove digital rights management from albums, revenue actually increases. TorrentFreak reports that music revenue increased 10% on general content and 30% on what it called long-tail content — proving that buyers don’t like it when you place restrictions on content.

Back in the ’90s, probably about the time Napster surfaced, it suddenly occurred to executives in the entertainment industry that they might have to confront this Internet thing. But they feared this new distribution channel too much to embrace it, and instead they sought to control it with digital rights management (DRM).

Movie studios and record companies were already regretting the digitization of their content. For them, CDs and DVDs were bad enough, allowing for perfect digital copies, but the Internet was much worse: a channel through which people could share these digital copies and bypass the entertainment companies altogether.

Reactionary fear just seems to come natural to the entertainment industry. It had feared cassette tape players (“Mixtapes are stealing our revenue!”). It had feared radio (“Who’s going to buy records when they can hear music all day long for free?”). And of course the movie and television industry had feared cable and VCRs and fought them tooth and nail.

With that history, it isn’t exactly surprising that entertainment executives didn’t engage the Internet phenomenon with forward thinking. They weren’t about to build distribution networks of their own to battle Napster and its ilk. Instead, they fell back on their default mode, a defensive crouch, and came up with what they thought was a way to control digital distribution by attaching DRM to the digital content they sold.

It was warped thinking, and it produced bizarre results. Does DRM punish pirates? Not really. The people it hurts most are the entertainment giants’ paying customers.

And the content could be stolen because, of course, DRM, like all technology, could be broken. This effort to use brute force to control the uncontrollable was doomed to fail, but the entertainment industry seemed incapable of even imagining that it could find a way to take advantage of the best distribution platform the world has ever known.

Is it any closer to seeing the truth today? A few enlightened executives might be, but for the most part, the entertainment companies are still obsessed with control.

The music industry — and the television and movie industries — appears to be in free-fall. After years of having an exclusive means of delivery, its market hold has been fragmented by the internet and increasing distrust of big media. Looking over the past decade, the picture adds up to a slow and steady decline with downloaded forms of media failing to replace the profits of their physical counterparts.

Although the industries responded with initiatives to stop piracy, many observers disagree that piracy is the root of industry’s woes and think instead that there is a need for a new business plan in the media industries because the old profit model has failed. However, no one is sure what that plan will be, since media is no longer a high margin industry with tons of excess profit between cost and sales price, but a low margin industry where people aren’t willing to pay much for media. Think of the difference between a 1990s-era $150/month cable bill and today’s $15/month Netflix bill.

The new holy grail is to find a business model that allows bands to have more promotion than being independent can provide, but does not lead to the excess and inefficiency of the big record labels of the past.

“Iron Maiden’s BitTorrent data suggests Brazil is a huge driver of fans – and given Brazil is one of the biggest file sharing nations on the planet, this is a strong indicator of popularity,” said Greg Mead, CEO and co-founder of Musicmetric.

“With their constant touring, [the] report suggests Maiden have been rather successful in turning free file-sharing into fee-paying fans. This is clear proof that taking a global approach to live touring can pay off, and that having the data to track where your fan bases lie will become ever more vital.”

DRM was once praised as the ultimate tool to prevent music piracy, but new research shows that the opposite is true. Comparing album sales of four major labels before and after the removal of DRM reveals that digital music revenue increases by 10% when restrictions are removed. The effect goes up to 30% for long tail content, while top-selling albums show no significant jump. The findings suggest that dropping technical restrictions can benefit both artists and the major labels.

Music and news are very different businesses, but the digital age presented them both with a very similar problem: how do you get someone to pay for something they can get for free?

It’s a question the music industry is tackling with some success according to the latest Ofcom report on media piracy. So what can news and entertainment publishers learn from this?

The fall in piracy has accompanied growth in digital sales which helped the music industry grow revenues 0.3 percent last year – the first rise since 1999 when physical CD sales were at their peak.

After years of protesting about illegal downloads and filesharing killing paid-for sales, the music business has focused on convincing people to pay by building and supporting better and more convenient digital products.

Apple’s iTunes provided an easy way to buy digital music when it launched in 2003, but its success had no effect on burgeoning online piracy. The real innovation has come from affordable, good quality streaming services, most notably in the UK and across Europe with Spotify.

Getting people to pay isn’t just about good products, it’s also about price.

All those newspaper groups that have arbitrarily set their subscription package prices at around £10 a month should take note that the likelihood someone will pay takes a sharp upward turn under £7.50.

Nevertheless, good digital products, sensible pricing for an attractive package and investment in marketing, can all persuade people to pay for content that is easy to get elsewhere.

As the summer concert season approaches, music fans and the concert industry that serves them have a common enemy in New York. And in Russia. And in India.

That enemy is the bot.

“Bots,” computer programs used by scalpers, are a hidden part of a miserable ritual that plays out online nearly every week in which tickets to hot shows seem to vanish instantly.

Long a mere nuisance to the live music industry, these cheap and widely available programs are now perhaps its most reviled foe, frustrating fans and feeding a multibillion-dollar secondary market for tickets.