Excellent article on the front page of today's Wall Street Journal entitled: Sales of Music, Long in Decline, Plunge Sharply. The title gives the main thrust of the article but their are a couple of quotes that are relevant to advertising supported music:

Apple Inc.'s sale of around 100 million iPods shows that music remains a powerful
force in the lives of consumers. But because of the Internet, those consumers
have more ways to obtain music now than they did a decade ago, when walking into
a store and buying it was the only option.

Jeff Rabhan, who manages artists and music producers including Jermaine
Dupri, Kelis and Elliott Yamin, says CDs have become little more than
advertisements for more-lucrative goods like concert tickets and T-shirts.
"Sales are so down and so off that, as a manager, I look at a CD as part of the
marketing of an artist, more than as an income stream," says Mr. Rabhan. "It's
the vehicle that drives the tour, the merchandise, building the brand, and
that's it. There's no money."

Music is important to people but they don't want to pay for it. Again the answer is advertising supported music.

Gen Y TSL to MP3s Harbinger of Big Ad-Supported Music Market

Bridge Ratings just published the results of a study on Generation Y (those born between 1980 and 1993) time spent with different media.

Below is a chart from the study report:

The top 3 media are TV, Internet and MP3 music listening. TV is a $50 billion ad market, Internet is a $20 billion ad market, with TSL like this how long before MP3s become a multi-billion dollar ad market?

Will Apple TV Kill Advertising Supported TV?

Apparently the Apple TV device is going to start shipping this month. Already articles are appearing, which suggest that this device will kill advertising supported television. The premise is why would anyone want to watch commercials when they could pay $2 to download the show from iTunes?

Well there are a couple of reasons:

First, according to Neilsen the average American watches 32 hours of TV per week. At $2 per show that is a lot of money to avoid commercials.

Second, the experience of iTunes music shows that people don't want to pay for content and prefer to get it for free. A study released this week by NPD concludes that the number of music files downloaded for free from P2P sites dwarves the 2 billion tracks downloaded from iTunes since it's launch: "As reported in January of 2007, iTunes had just crossed the 2 billion song threshold. In that period of time, about 1.5 years, untold billions of files managed to transfer across the Internet."

The bottom line is that people always tend toward cheaper consumption of content. In my opinion advertising supports this, Apple TV does not. Therefore, it will not kill free advertising supported television. Remember, people buy iPods but don't buy many tracks from iTunes. In fact, the NPD report shows that people who purchased tracks from iTunes in 2005 purchased 11% fewer tracks from the store in 2006.

Attention Economy

Marc's last post touches on a paradigm shift taking place in the entertainment and media industries. An increasing number of philosophers, social scientists, and economists refer to our society as having an "attention economy."

Michael Goldhaber gives an excellent introduction to the concept here, but, for our purposes, the main thrust is very simple. In the old economy of the 20th Century, media itself was scarce, lending it a basic economic value. However, in the "information age", media is abundant to the point of distraction. Media - music, film, prose, etc - no longer holds inherent economic value. There is far too much of it. Existence is not enough.

Instead, the new scarcity is attention. Peoples' attention. Every person - every day - makes, by necessity, decisions about the voices, messages, and media to which they will grant their attention. This attention holds value, as it can be converted into action (buying a new pair of jeans, voting for a political candidate, bringing the author a machiato).

The trick for the media industry is to recognize that the attention their media receives is payment. In an attention economy, expecting an audience to pay twice - both with their dollars and with their attention - is absurd. "Piracy" is a self-contradictory concept. The act of viewing the media constitutes income for the rights-holders. Said rights-holders merely need to harness their media to spur a desired action - buy a t-shirt, go to a concert, vote for a certain political candidate.

This approach is, ultimately, nothing more than advertising-supported media. But it is not the bastard son of business plans gone bad. Rather, it is the true and inevitable heir of the 20th Century media business.

That said, welcome to right now. The audience is listening. Do something with it.

Value of Recorded Music Dropping to Zero

I have seen a number of blog posts recently, which apply economic analysis to show that recorded music will inevitably be free. The basic theory is that since there is no constraint on the supply of digital music files on the Internet, the fundamental demand curve will drive the market price to $0. I don't really buy this so I skimmed these posts and none motivated me to write my own post.

In today's Digital Music News, however, Paul had a post that I want to comment on. Paul's post references a quote the French economist Jacques Attali made at MidemNet in January:

"The only thing that is rare is the time you share with the artist"

Exactly. And that is why what the music industry needs to sell is that time people spend listening to music. Just like radio and TV sell the time people spend with those media. Hence, ad-supported recorded music.

SellaBand

I just came across a company promoting an ad-supported music concept called SellaBand. I like any music business model based on ad-support, but I find this model to be a bit busy and it requires an artist to raise $50,000 to get started. If SellaBand achieves any success it will be very niche.

Here is a description of the service from the website:

01 Sign up for Free

Please read our Terms and Conditions. You will have to accept a number of important conditions that will protect the position of both the artist(s) and the participating music lovers. Because you're probably not a lawyer, we have tried to make this document as easy and understandable as possible. If you agree with the conditions, please accept and continue.
Use the search page to find an Artist you like and believe in.

02 Create a Profile

Make your own Artist page on SellaBand.com. Create a profile that appeals to potential Believers. Upload a picture, a biography and a maximum of 3 demo-songs that represent you as an Artist. Tell your fans where they can see you play live, where they can find your own website, etcetera. Do you have a MySpace account? Let your Believers know!
Read our (simple) Terms and Conditions, accept and continue.

03 Raise $50,000
In total there are 5,000 so called Parts of $10 each. So, what you have to do is find 5,000 Believers who will buy 1 Part. Or find 2,500 who will buy 2 Parts. Or find 1 Believer who buys 5,000 Parts. Anyway, we think you get the picture.
For the first time fans and Artists can be in business together. Therefore each Artist issues 5,000 so called Parts. Parts cost $10 (plus transaction costs) each. Together Believers have to raise $50,000 to get their Artist of choice in the studio. At any point before your Artist has reached the Goal of $50,000, you can withdraw your Parts and pick a different Artist. You can even get your money back. It's your music. It's your choice.

04 To the Studio
Once you've reached the Goal of $50,000 SellaBand will provide an experienced A&R person to guide your recording process. Together with a top Producer you get the chance to record a collection of your best songs in a state-of-the-art Studio.
Help your Artists of choice to raise $50,000. You can do this via communities such as MySpace or simply by enthusing your friends. Once an Artist has reached the Goal and has raised $50,000, it is no longer possible to buy Parts from this Artist. Only these 5,000 Partholders will be in business with their chosen Artist.

05 Limited Edition CD
All your 5,000 Believers will receive an exclusive Digi-Pack CD with the result of your professional studio-recordings. This limited edition CD will be sent to the homes of your Believers.
Once your Artist has raised $50,000 SellaBand will assign an experienced A&R-person to this project. Together with a top Producer, your Artist will record a CD in a state-of-the-art Studio. During the process you will get an exclusive sneak preview of this exciting process.

06 Free Downloads

Your songs will be given away for free on a download portal on our website. What do you mean, giving away my music for free? Yep, and the beauty of it all is that you can make money while the whole world gets to hear your music for nothing. How? Well, look at the next point.
As a Believer, you will receive a special package at your home address, including a limited edition of the CD. Play it loud and use it to promote your Artist.

07 Make Money
All advertising revenue generated via SellaBand will be shared equally between Bands/Artists on our download portal, their Believers and SellaBand. This three-way split is based on the market-share of a band on our download portal. In other words, the number of times your music is downloaded for free (by unique visitors) is crucial for the money you and your investing fans will make. So, spread the word and promote your free downloads!
The music on the CD will be given away as free downloads on our download portal. All advertising revenues generated on SellaBand will be shared equally between you, the other Believers, the Artist and SellaBand. The amount of money you and the band will get paid depends on the advertising revenues and the market-share your band gains on our download portal.

08 Make More Money
A so called regular version of your CD will be made available. You get the chance to sell this product at shows, through your own website or via our online partners. The net profit of these sales will be equally divided between you and your Believers.