The first of four panel discussions at today's Digital NARM (NARM, for the uninitiated, is the acronym of the National Association of Recording Merchandisers) convention underscored the fluid, rapidly changing, experimental nature of the nascent digital music industry. A broad discussion featuring representatives from three online music retailers (Amazon.com Inc., Napster Inc. and eMusic.com Inc.) and three distributors (IODA, IRIS Distribution and The Orchard Enterprises Inc.) laid bare the continuing uncertainties of what music should cost, who will pay for its delivery, and who gets compensated in the end.
After listening to all six engaged in discussion for more than an hour, my conclusions were these:
- Consumer behavior in digital music is still being defined, so companies large and small are continuing to experiment first in the hopes of "figuring out the economics later," as eMusic's David Pakman (pictured) said. Retailers, distributors and disruptive startups will continue to forge short-term deals with each other until
they know more about what's going to work.
- The retail price of music remains undefined as well. Pakman called it "an elastic good," while The Orchard's Greg Scholl said flatly that it's priced too high. Scholl added that companies can instead "create value with music" and share the rewards in other areas of the industry. The consumer controls both these things, and more. "If you jerk people around, they'll just turn you off," said Pakman.
- Free, ad-supported services such as Last.fm and Imeem provide "price pressure" toward zero, which makes setting fair terms in any agreement very difficult. (There was no mention of piracy, the "other" free music source.)
- Music has a very long tail, with the vast majority (about 80%) of commercially available recordings selling fewer than 100 copies. Hits still rule the day, but as Scholl put it, the "elbow" of the long tail that lies somewhere between smash hits and deeply obscure artists accounts for a lot of sales, and is becoming increasingly important. As music from less popular genres such as classical and jazz becomes harder to find in stores, more sales will occur online.
Independent labels and distributors, which increasingly control that long tail and "elbow," are more apt to experiment with new ideas than majors are.
Although some of the participants are fierce competitors, there was a glimmer of unity when all concurred that any innovation that makes the pie bigger will be a boon to a struggling industry. Amazon's Bill Carr credited the indie community with driving innovation, and suggested that major labels should experiment more.
"I applaud any rightsholder who can test new models and explore ways to grow total dollars for the business," he said. -- Paul Bonanos
See Digital NARM conference schedule
Continue reading below
