Will ad-supported music save the record industry?
The record industry is in dire straits, and ad support may be its salvation
FOR IMMEDIATE RELEASE
June 30, 2008
Contact: Tom Jeffries
Phone: +360-468-2108
Email: tjeffries@Divvycast.com
The imminent demise of the record industry has been predicted since Napster made its appearance in 1999. And there's good reason for worry. Tower Records, the cornerstone of brick and mortar music distribution, closed its doors in 2006. Sales drop every year. High profile bands opt out of major label contracts and attempt, with varying degrees of success, to chart their own course.
Yet music consumption is at an all time high. Free downloads on the peer-to-peer (P2P) network comprise an incredible 70% of all traffic on the internet, with well over a billion music tracks being downloaded every month. Sales at iTunes are responsible for turning Apple from a company many thought was doomed to fall before the onslaught of Windows-based computers into a bright star on the tech horizon. It seems like everybody is listening to music all the time. That begs some questions: how can the record industry take advantage of the high level of music consumption, and why has it not done so already?
Ownership rights for music are complex, and that's a major reason it has taken so long for the record industry to find a positive way to respond to online downloading. There is a copyright for the performance, another for the song, and yet another for the lyrics. Each party is trying to protect its interest in the face of declining revenues, which makes agreement difficult.
The rights situation is a mess, and it distracts everyone from finding solutions. At last winter's Digital Music Forum in New York, "some of us were concerned that representatives of the various rights holders would come to blows onstage", said Tom Jeffries, CEO of Divvycast, LLC, one of the key companies in the emerging field of ad-supported music. "Their animosity towards each other distracts them from addressing the real issue, which is the fact that most music distribution today is done by free downloads rather than paid purchases."
iTunes and other online download sales outlets help, but they are nowhere near replacing record store sales. Increasingly copyright owners are realizing that one of the answers is the ad-support model that made commercial TV successful. Lenore Skenazy put it succinctly in her column in the May 5, 2008 edition of Advertising Age: "The music industry is in a shambles, so the money has to come from someplace else: advertising."
This is not new. Nearly two years ago the Wall Street Journal, in an article titled "Record Labels Turn Piracy into a Marketing Opportunity", described early attempts by the record industry to monetize P2P downloads. Rapper Jay-Z put together a promotion with Coca-Cola that allowed an 8 minute clip of his June, 2006 Radio City Music Hall live concert to go out over the P2P networks. Coke did a similar promotion with DefJam artist Ne-Yo, with 3.5 million downloads over 6 weeks.
According to the article, Katie Bayne, senior vice president of Coca-Cola North America, said the promotion "has so far exceeded our goals that you should look for us to do more." The article also stated that, even in 2006, there was "a growing recognition among some record executives and performers that the people who are downloading illegally are frequently huge music fans and that marketing to them may be more desirable in the long run than suing or otherwise harassing them."
Current technology offers myriad ways to market to music fans. Individual tracks or even entire albums can be packaged in microsites with banner ads, pre-roll and inserted audio ads, and rich media ads. These microsites include embeddable widgets that can be put on fans' MySpace, Facebook, and other social networking sites. The microsites include tour dates, ways to buy tracks and entire albums, and concert tickets.
Copyright holders have been slow to jump on this opportunity, but as revenues continue to decrease from traditional channels and the opportunity of advertising revenues becomes apparent, they are falling into line. Jeffries commented that "a year ago we were signing contracts with lots of independent artists, but the major labels and major artists were very reluctant even to talk to us. Recently a major artist management firm in LA emailed me saying that they could offer Divvycast nearly any artist we, or one of our advertisers, were interested in. That's a huge change and makes the size of this opportunity clear. With top-tier advertisers and top-tier musicians there is no limit to where this can go."
Advertisers are hungry for the targeted exposure they get from music consumers. Every artist has a specific fan base with clear demographics, whether they appeal to younger listeners downloading from the P2P network or older, more affluent fans of well-established artists. It has taken several years, but artists and record labels have realized that they are not going to make enough money selling CDs to keep the industry thriving, and advertising income from so-called "free" music can be much more than just a replacement for revenues from Tower Records. Record labels and artists that don't get the message won't get the money. It's that simple.
It has been said that every problem carries within it the seeds of a solution. The woes of the record industry have been deep and well publicized, and blame has been laid from the beginning on free downloads. The irony is that those very free downloads, with the addition of advertisements, may prove to be the solution.
For more information contact Tom Jeffries, +360-468-2108, tjeffries@Divvycast.com,
www.Divvycast.com.
Divvycast, LLC, founded in 2006, is the online nexus of performers, sponsors, and fans