Technology will transform the Music Industry value chain – Part 2

Technology itself will not force the music industry into freakonomics, and legislation will not protect the music industry from ending up that way. However, people want to share music. It’s human nature. And, most people will obey the laws of their land, if they are able. That means, it’s in everyone’s interest to present people with options for sharing music within the boundaries of fair use. Otherwise, we are forcing them to use technologies for illegal purposes.

The same technologies that RIAA wishes to control can be used to foster more effective business models, with reduced costs or higher volumes. Technology enables the creation of entirely new business models when it is incorporated into the business model itself. In other words, technology becomes part of a business process. It’s time that the RIAA drop it’s lawsuits, stop it’s lobbying and spend its money on embracing technologies that can quickly help in the transition from industrial-age manufacturing economics to digital economics.

The music industry needs to rethink their approach and begin incorporating technology into the model itself. Apple understands this very well, and has even begun to overcome the problem of teenagers without credit cards through its gift card approach.

The music industry could create a super eCommerce and music sharing site containing far more than the 3,500,000 songs on iTunes. They could setup music purchasing accounts with banks so that teenagers without credit cards can easily purchase songs. They could implement loyalty programs where sharing music can be used to motivate the purchase of music among friends, these loyalty programs would reward the person sharing whenever an item they shared was purchased by their friends. They could implement a subscription model, similar to emusic, and at the same time offer a purchase model on a song by song basis. They could reward people for volume purchases, or for hitting and exceeding annual targets.

Last week, I asked my 15 year old son why he didn’t join the online fan club of a particular band he is fond of. He told me they wanted to charge $10 per year to join and maintain his membership and all he got was a newsletter and discounts on the band’s concerts, which he knew he wouldn’t be allowed to attend until he was older. He said it just wasn’t worth it. I asked him what if they were to charge $20 and he would also get a free song to download every month in additional to the newsletter and concert discounts. He said that would be a bargain and he would have asked me for a credit card to use. When you consider this, for $20 a year he gets 12 songs, more per song than the 99 cents paid at the iTunes music store, and up to date news about the band he really likes. He would then tell his friends who also like the band about how great the experience is and some of them may sign up too. Unfortunately, this particular band hasn’t embraced this approach. This is just an example of the kind of loyalty program that embraces technology and incorporates it into the business model.

These are but a few of the ways the music industry and the RIAA could quickly gain the respect of the consumer and illegal file sharers while managing its own destiny in its move to digital economics.