The Music Industry Evolution – How Localisation, Social Networks, Niche Markets and the Long Tail Will Change Music Forever

By Yaro Starak
11 Comments

How much niching can you handle? The long tail has been mentioned on my blog many times – the concept of millions of markets selling hundreds rather than hundreds of markets selling millions. It’s also clear that although the Internet is a global technology, the localisation factor is paying dividends and search engines are working hard to provide local search. Niching and localisation go hand-in-hand; one of the best ways to niche a market is to localise.

So how will localisation, niching markets and the long tail all work together to change our future?

Take the music industry. Right now it’s a short tail. A handful of artists sell millions of records. They are heavily promoted by a handful of record companies that make millions of dollars.

The Internet is changing that. Music distribution has the potential to benefit from a long tail effect online. That’s a good thing for artists.

It’s reasonable to assume that as time progresses music distribution will occur online more than through any other means. CD’s will be a thing of the past, but we’re not quite there yet. ITunes is good, but it still focuses on mainstream music and Apple has to buy the rights to the music from the big record labels. It sells mostly a short tail of music, millions of the same few tracks.

In the future a service like iTunes will be for music what Amazon.com is for books. Amazon operates in a long tail. Millions of different books sell a lot more combined than the top selling individual books. So while bricks and mortar bookshops make the most from top selling books because of limited capacity and scope, an online store has an inventory of millions and has the capacity to cater to millions of tiny markets and consequently makes more money from the total sales of a millions of different books rather than a select few.

The music industry is a huge economic divide. How about this for a gap between the rich and poor – a few thousand artists are living the dream, world-wide celebrities with fame and fortune, while millions of musicians struggle to make a living and work part time “real” jobs while they attempt to get their music careers going. It’s not a happy picture for someone who’s passion is music and should be playing and performing for a living.

In the future independent artists will be able to do what most successful small business Internet entrepreneurs do now – niche and localise their market. Most artists may not become multi-millionaires, but by marketing locally they will be able to establish a niche following. As search engines and content delivery methods become more and more individually tailored, localised and instantly delivered, services like iTunes will be like Amazon, offering a massive inventory of unsigned independent artists compared to the few thousand CD’s available at your local HMV. Better still, distribution will be instantaneous with tracks downloaded and consumable on demand, taking instant gratification to a new level.

Picture this: You are down at your local club listening to a local indie band. You hear a track that just goes off, you love it. You just have to have the track. You pull out your next-gen web-wired iPod music player, log onto iTunes portable, input the band name and have instant access to their entire catalogue of tracks. Over the course of the evening you listen to six different bands and purchase a track or two from each. You spend about $15 on music that night. So do a few hundred of the other people at the gig. Each band walks away from the evening with a few thousand dollars of direct sales.

Back at home later that evening you log into iTunes and check your recently purchased track listing. In the listing for each purchase you find recommendations for other artists and tracks you might enjoy, including recommendations directly from the artists themselves. The gypsy band you heard last night draws inspiration from an all girl rock ballad group. You sample their tracks and buy a few. You browse through listings of what other people purchased if they also liked the tracks you bought and find a few more gems.

It’s the ultimate in social-networked, localised, niched, instant gratified and personally tailored music distribution.

Better still it spreads the wealth around so more artists can make a living doing what they enjoy and less money is funnelled off to the big record label marketing machines. Instead of slaving away at hundreds of free gigs, working like a dog to spread the music for no monetary reward, artists operate like micro-businesses and earn direct rewards for their output. Something is not right when an artist has to do hundreds of free gigs in the hope of being picked up by a label that is just going to commercialise their music, take a stranglehold on their image and take a huge chunk of their future earnings.

The future of music presents an opportunity that is a win-win for artists and music fans. Artists gain the potential to make a living from their work and control exactly what happens to their career and image. Fans receive exposure to a much greater variety of music choices and will no longer be hand-fed mass-media commercialised music by iron-fisted profiteering corporate institutions.

My only wish is that it could happen a lot sooner than it appears it will. We need to hurry up and strip the powers away from the old record labels. They’ve had too much control for too long and they are not adapting to the future. Innovate or die.

Yaro Starak
Music Fan

******

Rick Aristotle Munarriz from the Motley Fool thinks that Google may be the next music distribution giant.

Fool.com: That’s why I believe that, years from now, the major labels won’t be the same batch of old-school vinyl pushers you see today. As ludicrous as it may seem, I think that the real power brokers in the music industry will be Google (Nasdaq: GOOG), Yahoo! (Nasdaq: YHOO), and Microsoft (Nasdaq: MSFT).

Oh, they don’t even know it yet. It may be years before they even come around to connecting the dots, but they will connect those dots. That’s because those three companies are the ones leading the way in localized search.

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11 Comments

  • All of that still depends on individual’s acceptance of paying for music. It is a difficult concept to grasp for those who have never had to pay for it.

  • Maybe paying for recorded music – but there is always the possibility of developing new revenue models – i.e. giving away free music as a loss leader and making it back on merch (that’s short for merchandise), concerts, “raunchy” calenders, confectionary – or even say local bands having subscription based websites – or my favourite; selling your lyrics as prime real estate for product placements – soft drinks, big macs, “rauchy” calenders. The sky is the limit (not literally though).

  • Alborz – you can’t tell me you have never ever bought a CD? I know you’re a young guy but you must have been listening to music before burning CDs or downloading MP3s?

    Yaro

  • Jason

    Wasn’t the whole point of artist releasing CDs to get people interested in seeing them live? I feel for the artists as they may be losing millions, however at the same time…I feel for the local artists that are thriving because now they can get their music out, without the need of a huge record label.

    I can’t wait until tv goes bunk…only a matter of time — go tivo go!

  • William

    I am a music fan, but on the same note I’m no expert. This idea to me really seems so clinical and bleak. Mp3’s are a great way of getting exposure, but replacing cd’s for compute files? Usually bands I haven’t heard of don’t blow me away anyway, so I doubt I’d waste money buying there music. They’re much better off playing and getting better, developing their live shows. Playing more live shows also gives them direct feedback, if people aren’t getting into them they should know something’s up.

    I wouldn’t say there is a huge divide between rich and poor in music anyway. There is a divide but it’s a good motivator, and really this is only a problem in places like Australia where the market is so small. Indie bands in the UK and US can make a good living and not have to compromise. New bands already sell stuff at there shows anyway, a lot of bands start there career living off merch sales.

    So as far as I’m concerned mp3’s should just be about getting there sound out for free, for the fans like me who aren’t willing to pay money for every single new band that comes out. I highly doubt they’ll ever replace cd’s anyway, if anything they’ll just complement each other. People like the physicality of there music collections, personally I’m proud of my music collection. Also what will happen to limited releases?

  • I can guarantee you William that CDs will be a thing of the past and digital music (maybe not MP3 since it’s not the best technology) will be the replacement.

    I actually quite enjoy a lot of live indie music from a range of genres and certainly “in the moment” I would spend a dollar or two to buy the track I was listening to. I love instant gratification.

    You know I’m quite proud of my music collection too, but it’s not CDs I have, it’s MP3s in folders on my computer.

    You must remember though that when you say “computer files” it won’t be just that desktop box you have at home – every device you have will be digital and using computer files. In the future it will just be normal to use computer files to listen to music, watch a movie, record television, just like it recently became “normal” to use round discs for movies rather than flat tapes.

  • I don’t buy record company figures of lost sales due to the free downloading of music. When this first happened with napster, let’s face it we were downloading single songs. There wasn’t a chance in hell that I was going to buy that groups CD. I just wanted the song.

    When I was a kid, we recorded “the song” straight off the radio onto a cassette. Millions of kids were doing it, but there wasn’t the mass exposure of the web to document it. Why weren’t the record companies whining then? Blank cassettes were selling quite well.

    Today, I use iTunes and Limewire. If I do buy a CD I immediately upload to iTunes for the convenience. I can’t remember the last time I’ve been to a bricks ‘n mortar store. I used to practically live there. I recently bought a USB turntable to turn my old vinyls into MP3’s. Every generation has it’s innovations in music. Record companies adapt or die, as it should be.

    Don’t cry for record companies or artists for that matter who ignore long tail – they do so at their own peril. We as music fans have always taken care of ourselves and adopted what ever platforms suit our needs. We can thank the gods that there are folks out there who are clever enough to keep us wanting to hear more by making it easier and cheaper to get it.

    Digital today – what will tomorrow be. Saty tuned.

  • [...] The Music Industry Evolution – How Localisation, Social Networks, Niche Markets and the Long Tail Wi… [...]

  • ema

    this is not a sustainable model!
    1. to produce a song to put on online store you need money.
    2. why I have to need to buy immediatly the song after a concert with my wi fi device? wasn’t the same with merchandising out of the gigs?I could buy a cd there!
    3. how can unsigned artists have so much audience to justify this virtuous circle in buying music online? small artist play in front of 2-3 people often!

    and there’s more bugs, i’m sorry!

    i think that major company still have an important role in music, they only have to understand how to move in digital world sooner.

  • I think the music industry has a love-hate relationship with social sites. On one hand they can propel the popularity of the artists but on the other hand people aren’t spending as much money because of illegal downloads and such like.

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