THE ECONOMIST WRITES ABOUT THE NEW WORLD OF MUSIC DISTRIBUTION AND PROMOTION

In an comprehensive overview of how the net and technology are transforming the music industry, The Economist writes: “‘Dirty pop with wonky beats and sleazy melodies’ is how the Sweet Chap, aka Mike Comber, a British musician from Brighton, describes his music. The Sweet Chap [right] has no record deal yet, but he has been taken on by IE Music, a London music-management group that also represents megastar Robbie Williams.”

“To get the Sweet Chap known, last year IE Music did a deal to put his songs on KaZaA, an Internet file-sharing program. As a result, 70,000 people sampled the tracks and more than 500 paid for some of his music. IE Music’s Ari Millar says that virally spreading music like this is the future.”

“… nimble small record labels and artist-management firms will certainly get better results as they find ways to reach more people via the Internet. But the question facing the music industry is when that future will arrive. And the issue is most urgent for the four big companies that dominate the production and distribution of music — Universal, Sony/BMG, Warner and EMI.”

“Over the past four years the big companies have come a long way towards accepting that the Internet and digital technology will define the industry’s future… The big companies are trying to work out how they can harness the Internet. Consequently, they are having to rethink their traditional business models.”

“Historically, the majors have controlled physical distribution of CDs. Yet that barrier to entry will erode as more music is distributed on the Internet and mobile phones. Artists can, in theory, use the Internet to bypass record firms, though few have yet done this. The principal reason most have not is that they need marketing and promotion, which the majors also dominate, to reach a wide audience.”

“The majors have a tight hold on radio, for example, by far the most effective medium for promoting new acts… Could the Internet challenge them on this too? So far, bands have not been launched online. But that could change, and there is already evidence that data derived from the preferences shown on illegal file-sharing networks are being used to help launch acts…”

“In future, using the Internet, the industry will be able to appeal directly to customers, bypassing radio, television and big retailers, all of which tend to prefer promoting safe, formulaic acts. That could give the majors the confidence to back innovative, edgy music. But much smaller independent labels and artist-management firms can do the same, offering them a way to challenge the big firms head on…”

On a subject that Hypebot has been writing about for some time, The Economist writes that wireless internet is the next big opportunity: “The best distribution of all will come when, as many expect, the iPod or some other music device becomes one with the mobile phone. Music fans can already hold their phones up to the sound from a radio, identify a song and later buy the CD. At $3.5 billion in annual sales, the mobile ringtone market has grown to one-tenth the size of the recorded music business…”

“Out of the more than 100 online music sites that exist now, a handful of big players may come to dominate, but there will be specialist providers too, says Ted Cohen, head of digital development and distribution at EMI. iTunes is like the corner store where you buy milk and ice cream, he says, but a customer does not spend much time there. Real Networks’ Rhapsody, on the other hand, charges a monthly subscription in return for unlimited streaming music and gives descriptions that lead people to new artists. Recommendation services like these, as well as people sharing playlists, will eventually make the Internet a powerful way to market music as well as to distribute it…

“It seems clear that the only way for the majors to stay on top of the music industry into the next decade is to take more risks — both technological and creative — than they have done for a long time.”

Read the full Economist article here.