The music industry 2.0: blind-sided by a disruptive business model 2.0
The paperback book, Ecommerce Well, has a short section on the variety of business models proliferating in ebusinesses and the internet. Why are business models so important? Why was it worth a few pages in the book? An example may be worth a thousand words.
Yesterday, Prince sent shock waves through the music industry when he challenged the prevailing business model in the music industry with a disruptive business model – clearly showcasing the power of this technique.
First a very short, rough background. What is the current business model in the music industry? Basically, record labels make money on “records,” and artists on concerts, etc. The artist basically leverages publicity from the records to promote their concerts.
Has the landscape changed? Are there other ways for artists to more cheaply promote their concerts? Is there an alternative business model for the artist?
So, returning to our example, what has Prince done? In this case, Prince is offering his “record” free as part of a newspaper run. The run is around 3 million copies.
Prince basically has used 3 million newspapers and all the massive indirect publicity to rebuild his brand and book his concerts. His “promotion” has apparently been subsidized by the newspaper deal since they has seem to have paid some form of licensing fee. (The newspaper plans to recoup its costs through advertising and increased sales.)
The record distributors are not very happy, but their profits are typically aligned with record labels, not artists.
The artist however has the newspaper licensing fees, the concert profits, and massive brand advertising. If executed well, this strategic maneuver could potentially reward Prince handsomely.
The music industry is facing a brave new world. This clash of business models is certain to create much heat and dust. In this battle the terrain most definitely is shifting in favor of the artist who is increasingly being presented with more options. Is this the beginning of a major paradigm shift for the artist? Will vested interests in the music industry be nimble and agile enough to react to the new realities with a tranformative new partnership with the artist?
Other Reading: If you want the exact details of the Prince deal see this BBC article. (Although the most salient aspects of the case are already presented above.)
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