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Musings In Cb

The Impact of the Global Digital Music Economy on the Music Business Paradigm

By Published: May 10, 2006
Will the lack of accountability be the downfall of the Open Music Economy?

Musings in Cb was started in 2001 and began with writings that centered upon issues related mostly to the impact of online music on the jazz scene. I eventually began including some of the other contemporary issues with regard to the digital distribution scene. All articles are written from my participatory ("in the trenches , if you will) perspective as an independent jazz recording artist and arts advocate.

AP LONDON - The Office of National Statistics said more Britons now use MP3s than the once-popular personal CD player. Dixons, a chain of electronics stores, said it sold an MP3 player every three seconds last Christmas season. "The MP3 player has become the default amongst music devices," said Hamish Thompson, a Dixons spokesman. "It is definitely the format of the future." The statistics office also added flat-screen televisions, digital camcorders and Internet music downloads to its "shopping basket" of goods.

Index
Global Digital Music Economy
Music Business Paradigm
Open Music Economy
Conclusion: Let's find a solution
Update




Global Digital Music Economy

You would have to had been asleep forrrrrr, let's see? Hmmm, for about 23 hours of most every single day over the last 5 years, not to have witnessed first-hand (in some actively coherent context) how global consumer confidence rose so rapidly toward actually making the act of routine retail purchases online the legitimate reality it is today. People can (and do) literally purchase most anything using the Internet and credit cards now. Particularly, I am one who will also applaud the successful security measures that have been initiated, and then taken through thoughtful implementation to protect all of us when we chose to engage in a retail transaction using this wonderful and convenient eCommerce technology.

These types of advances in the area of multi-media entertainment products will continue for quite some time also. For example, most products related to Digital Music (from the music files to the portable media players) are now so first-rate that every serious entity engaged in the retail or commercial aspects of the recorded music sales business, offers digital products along with their sale and distribution of physical music CDs or DVDs. Even the notion of hardcore jazz collectors using an MP3 audio device to play (and archive) their music collections is a consideration that likely exists more commonly today too. So, the Global Digital Music Economy is the defacto standard being used to develop the various modern business models in our industry. It is also safe to say that most music business plans include a digital distribution and sales division as a matter of course these days...

As artists, we now live in the time of unprecedented equal access to the music product consumer market place. This is due to the developments in Internet and eCommerce related technologies. The empowerment potential is truly unlimited for thousands of first-rate artists whose work might otherwise go undocumented, unconsidered, or unnoticed by jazz fans, if not for the new music business and distribution models which we use today.

Yet, with all of this seemingly good news for the recording artist on the one hand, significant concerns remain on the other. The same regulatory efforts that have been developed to protect the general eCommerce shopper have not been taken to protect jazz artists as business to business (B2B) consumers. So, despite all of the advances in producing recordings relatively inexpensively, and then having access to the global market place toward delivering the music to our fans; it is still relatively easy for the typical jazz artist to get "ripped off by another business. The problem with B2B eCommerce dealings is that there is no way for any artist (who is content provider) to actually audit sales done digitally.

If you sell a CD at a live show or at a local record store using some type of consignment arrangement, there is no doubt about the transparency of the retail flow throughout the life of such transactions. You do not have such comforts with digital eCommerce business dealings. You have to take the word of whoever collected the money first from the customer. This is especially true of some important eCommerce business to business (B2B) digital distribution products that we require in order to get our products, services, and music releases into the mainstream digital market places that are now available to most any artist.

Our new Global Digital Music Economy puts the power of choice in the hands of the consumer. Are consumers ready for this? I don't know the answer to that question. But, I do know that having the power to choose what music to purchase finally in the hands of the consumer again—is where it should always stay. Granted, with this new customer market being equally open for musicians who produce using laptop computers and studio software, there is inherently a lot more music to choose from. But hey, having "more choice is not necessarily a "bad thing either. And, as far as the "quality issue goes, there is a lot of great music being produced in many spare bedrooms around the world these days too. Besides, everything that is produced on a huge label is not always good either. Consumer freedom of choice is always the best.

Conversely, the same relative power does not yet exist for the artists who produce the music... And ultimately, true empowerment for the 21st Century jazz artist also includes the control (and understanding) of the business aspects of music, which as in this case includes contracting the services of other firms to perform certain functions for your organization. Without a balance in power in B2B issues, the jazz artist today will find that regardless of having access to all of the whiz-bang technology to produce records, and a really cool website, he or she is no better off than artists were in the old music economy.


Music Business Paradigm

Even in this new downloadable digital media age, we find that music distribution and distributors are still an issue. Even with all of the consumer conveniences that eCommerce provides the market place; the business to business (B2B) economics do not include any legal requirements that artists must be provided unfiltered access to all the official receipts, accounting records, verifiable distribution and sales data. This issue remains largely unregulated, and therefore it remains unresolved. Some firms who provide the service of digital distribution to independent artist get good grades in this area. However, just a few minutes randomly surfing through some of these businesses websites will show that the majority of others in the digital music distribution and sales business fail miserably.

Again, I honestly believe that all of these digital distribution businesses (including web-only labels and MP3 sites) should be required to be regulated and licensed at least at the state level by the attorney general's office. It is the only way that they will do the proper thing. If the business is legit, there is nothing to worry about and licensing should not matter. It is a relatively simple and honest thing to do. Providing this B2B data is necessary whenever an artist who produces digital products for sale utilizes another business as a digital distribution intermediary (who is paid a commission of some sort — usually from the artist earnings pool) to deliver the digital product seamlessly to the actual music buying customer.

Today, it is literally impossible to verify or truly audit these types of B2B transactions. Artists must "take the word of the intermediary digital distributor business where sales figures and earnings are concerned. Is it just me, or is something wrong with that picture? I like to think that most people are honest, but that is the world I like to live in. Reality says that is not always the case though. So, even if we go with my optimism and for that sake, let us say that "4 out of 5 digital distributors are honest ; we can still do better, that remaining "less than honest one should not have such a broad opportunity to plunder...


Open Music Economy

The economic landscape of the recorded music business is a lot different than it was during the 1960s, 1970s, 1980s, and even most of the 1990s. Today, the big thing is Digital Distribution of your music to the services like iTunes, Rhapsody, etc. This is where we all have to remain on our watch, because this is one of the few places where advantage of the artist is being taken today. Too many jazz artists still seem to know nothing (or very little) about how a website works, much less what is reasonable conduct to expect from a B2B and eCommerce relationship with their digital distributor. This is one of the very few remaining ways that someone else can make money off of you, as a recording artist, in this new age...

Therefore, I believe that there must be some form of legal regulation of certain major aspects involving the business to business (B2B) paradigm which inherently exists between artists and the rest of the industry-related businesses of the 21st Century. Again, from what I have experienced and continue to observe at this writing, is that a significantly huge B2B imbalance still remains in the relationship between the business service providers of digital distribution access and their artist customers. And the sad thing for me to see all over again, is that most independent recording artists likely do not realize what is going on yet...

I term this new mutually shared opportunity between recording artists and the retail distribution entities, an Open Music Economy. Again, I believe that there should be some regulatory processes that are required for someone to even put up a website and engage in proprietary eCommerce as a digital distributor of music. These people who wish to engage in this business of distributing other artists' music, while also collecting and disbursing funds, should be bonded and licensed by the government of their state—at minimum.


Conclusion: Let's find a solution

It is only logical that the various businesses engaged in digital distribution also be regulated and required to apply and qualify for a license like any other legitimate business does. Any formal digital distribution service agreements (verbal or written) offered and accepted should be legally binding, and finally, there should also be an actual conduct of periodic accounting audits that occur to ensure that all monies are being distributed properly.

As it stands now at this original writing of March 22, 2006, there is no way for an independent jazz artist to "audit most of the firms who digitally distribute music. Some may think the above sentences of requirements are harsh. However, the reality in most cases is that there is no way to audit most digital distributors. Any Digital Distributors (or firm that an artist relies upon to sell digital content through an eCommerce system) can tell you that you sold music or you did not. It is up to them to decide whether or not to be honest because you can't check up on them as things stand at this writing...

The subtitle of this article is actually a question. And, I think it is a good one, based upon what I have been observing over the course of more than 10 years in the online music distribution arena. With the advent of numerous recent technological developments, even just within the last 5 years alone, it puzzles me as to why someone has not plugged this hole in the loop. It further puzzles me as to why more artists are not crying foul...


Update

In an effort to better track digital music sales, this CNET news article of May 4, 2006 states that several big-name record companies, digital music services and music rights agencies have founded a consortium called Digital Data Exchange. So, I guess this "musing" was not too far off the mark of a major area of concern...



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