Sometime back, I had written about how Web 2.0 was really about a fundamental shift in business models. It seems like a shift is underway in the Music business. This post on Warner Music’s woes highlights the symptoms of what is really taking place.
Historically, there have been four actors involved in the Music business – the artist, the studio, the distributor and the customer. Clearly, the artist and the customer are indispensable. However, the studio and the distributor are increasingly threatened – the former more than the latter.
Studios used to play an important role in the pre-web/immature web world because their employees actively sought out artists with good talent, cultivated and promoted these artists and ensured the success of these artists. They were really adding value – it was simply not feasible for either the customers or the artists to easily find each other. Of course, over time this gate keeping role translated to a lot of power for the Studios – they were able to promote artists irrespective of the level of talent, leading to poor choices for customers and poor deals for artists.
With the rising maturity of the web, there is really no need for any of the function Studios play. Artists can easily get exposure and the quality of their talent can be vetted by the web community at large. Once established, artists can even directly hawk their wares to their customers (like the Radiohead example in the blog post I cited above). The music industry now operates purely on meritocratic principles.
The mature web also brings a whole new distribution model to music – digital downloads. Outlets like iTunes and Amazon have displaced distributors relying on selling physical media.
Ultimately, I see the emergence of a few large music marketplaces that bring artists (especially those trying to establish themselves) and customers together. These marketplaces would be very efficient in bringing the best music at the best prices to customers and ensuring just rewards for talent.
Over the next few years we should witness a tussle between Studios and Distributors to establish themselves as one of these marketplaces. On the one hand, Studios have relationships with artists (not sure if these are very strong relationships) and on the other Distributors have relationships with customers. I would myself bet good money on the distributors winning this one – they seem to have a much stronger hand …
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