OR: The internet
economy, doing stuff for free and why that will make you more profitable. OR: Shift your channels, or they’ll shift
you.
Who remembers
the ‘dot-com’ boom? Fortunes made and
lost over the idea that a website could, and would, make you rich beyond the
dreams of avarice. It seemed so logical
– you have a website, you fill it with advertising and the money comes rolling
in. Easy! So what went wrong?
There is a very
long answer, to do with speculative
investment and venture capitalists getting over-excited, but the short
version is that consumers don’t value (and therefore won't pay for) what they
can get online for free.
As an example,
let’s look at one of the first industries to be hit by the immediacy and ease
of online distribution as the dot-com bubble began to wilt. Remember Napster? Napster and the widening usage of mp3s and
broadband internet forced the music industry to fundamentally change its
business model, pretty much overnight.
According to The Recording IndustryAssociation of America (RIAA)
“In the decade since peer-to-peer (p2p) file-sharing site
Napster emerged in 1999, music sales in the U.S. have dropped 47 percent, from
$14.6 billion to $7.7 billion.”
Time was, a band
got signed by a record label and got money up-front to be recouped by album
sales. Music consumers bought the records or CDs (for around £15 for an album)
and watched the bands on Top of the Pops.
Then napster and peer-to-peer distribution happened. Virtually overnight, music went from
expensive to free (subject to a pc and internet connection).
The first thing
the record companies did was to panic and stop signing ‘real’ bands, so the
late 90s and early 2000s were a plague of Steps and Sugababes and
Vengaboys. But in the peer-to-peer world
of the internet, something else was happening.
New musicians were able to bypass the bottleneck of the industry using
free website and media hosting like Geocities, then Myspace, then Facebook
and Youtube.
Ed Sheeran, the UK’s most
pirated artist, stated on the BBC website:
I've sold 1.2 million albums, and the stat is that
there's 8 million downloads of that as well illegally.
"Nine million people have my record, in England, which
is quite a nice feeling.
"I'm still selling albums, but I'm selling
tickets at the same time. My gig tickets are like £18, and my albums £8, so ...
it's all relative."
Ed, and others
like him, are happy to give away nearly 90% of their work for free. It costs him nothing if someone who was never
going to buy his album anyway downloads it from a torrent or a file-sharing
site, and that person might well then spend the money they save on a concert
ticket instead. Nobody really loses, and
arguably, we may all be richer for it.
In the old world of the A&R man, would Ed and Florence and Jessie have been
signed? Quite probably not...
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