Research Models on Prediction of the Indie Music Industry-6.
In 2007, musician Prince gave away free copies of his album at his concert effectively including the price of the CD with the purchase of a ticket. Although this might work for established artists with a loyal fanbase, people will likely not purchase tickets for a more obscure musician whose work may be unknown. In order for the free album to be of value, the industry would have to find a way to protect these works, which brings back the original issue facing record companies. You may read about ths in detail in my blog Research Models on Prediction of the Indie Music Industry-5.
Schultz suggests that the most relevant structure may be one rooted in sampling. Before the emergence of the Internet, the radio served as a sampling mechanism for the indie music business offering consumers a free preview for a more informed purchase decision. Free downloading vastly expands the variety and amount of such previews allowing more niche tastes to be served and cultivated. At the same time, this wider availability can hurt the indie music industry if it begins to displace the demand. This is where concerts may fit as a revenue driving force with the actual prerecorded indie music as a sample increasing willingness to purchase concert tickets. This setup could help the industry as a whole grow if customers are more satisfied with their music choices. Sampling may facilitate this process. In a theoretical situation where prerecorded music becomes a free advertisement for concerts, a separate and large business, would be eliminated and instead become an additional expense for a concert+business only a fraction of the size of today’s recording industry. Once again, we see the shortcomings of a scenario in which the music business relies solely on concerts.
According to Schultz, there are several characteristics of the concert business, which may also counteract its positive effects. First of all, the supply of shows is inherently limited as there is only a certain amount of time and space for these events. Second, demand is hindered by practical constraints, including the necessity of consumers to be in the right place at the right time to be able to engage making for a greater opportunity cost than other experience products. Also, the nature of shows, often crowded and plagued by illicit activity, may hurt their demand among a large portion of the population. In these ways, among others, it is far easier to casually enjoy recorded music than to dedicate resources to attend a concert. In addition, the scarce nature of concerts in contrast with the rising availability of free music magnifies this conflict.
The ability to reach audience from a wide range of locations achieved by the Internet may be countered by the time and place constraints of live entertainment. Schultz concludes that concerts by themselves do not provide an adequate way to fully fuel the recording industry. The shift, though, does not have to be this drastic. Instead, live entertainment serves as one of several ways that the music business can help capitalize on the new opportunities created by improvements in technology. Dewenter, Haucap and Wenzel ‘s 2012 paper provides the most recent discussion of the “indirect network effects” between file sharing, concert ticket sales and music recordings. They attempt to understand how demand for recorded music affects demand for concert ticket sales and vice a versa. The authors describe the relationship as analogous to that of books and movies based on those works to that between recordings and live concerts. Reading of a book may enhance the experience of viewing the movie, while the movie will likely bring in more revenue with the sale of more copies of the book. Through their analysis, they compare the current scenario, in which recording and concert industries are separate, to a business structure that incorporates both. They find an integrated model to be a more profitable one, in agreement with the contentions of Curien and Moreau and Schultz.
In my next blog I am going to write more about the impact of internet on indie music business as a whole. Please share your experiences and I will add them to my future blogs.
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