Can blockchain save the music industry?

June 15th, 2016 by Peter Evans-Greenwood | Centre for the Edge

Are artist-driven blockchain-based services like Mycelia and Mediachain the future of the music industry?

The industry is in a knot. Albums sales are down, and could even be described as plummeting. Streaming revenues are not growing quickly enough to fill the gap. Even the one gleam of hope – concert tickets appreciating faster than the consumer price index – is problematic as the lion's share of the gains have been grabbed by top earners.

The hope is that this new generation of blockchain-enabled services will slash distribution costs, resulting in more money going to the artists.

They may, however, be trying to solve the wrong problem.

Most, possibly all, industries are splitting in two – low cost, and high value – with the mid-market dying. This is a trend that the Centre for the Edge is seeing across a range of industries and sectors. The mass market, where everyone bought the same thing, is dying, and we're transitioning to a market where individuals make their own trade-offs between high and low cost.

In the past consumer choice was limited and we were forced to compromise. The media companies exploited this in the CD era when they all but eliminated singles, forcing us to buy an entire album just to hear one tune. (It's not surprising that album-only CDs drove revenue to its highest level ever.) And then this thing called the internet came along.

The internet, express freight and the modern smartphone (née iPhone) radically expanded the choices available to consumers. This moved us from an environment where the producer had control of the producer-consumer relationship, to one where the consumer has control. All of a sudden consumers found that they could reach around the globe to find either the cheapest product or the best product (at the best price); we were no longer restricted to selecting from local merchants chose to stock.

The immediate consequence was the death of the mid market. Consumers started to arbitrage high and low cost products. One day you might be buying bespoke shoes for $500 as you've bought into the shoe maker's narrative. Tomorrow you'll refuse to pay more than $2 for thongs as you "just need some thongs". You can only afford $500 shoes as you saved money on thongs.

The music industry appears to be going through a similar transition.

The music equivalent is streaming vs. the Kickstarter style fan packages ("I want the vinyl hand delivered on a velvet pillow by the lead singer").

The folk buying into streaming don't want a complicated relationship or to be forced into purchasing tracks they don't want. They just want chart hits and they want them cheap, and they don't want to pay per-track (or even worry about what track is playing).

True fans, on the other hand, have bought into the artist's narrative and money is no object. They'll happily contribute to a crowdfunding campaign for a new album, or buy a deluxe version of the latest reissue with a t-shirt, additional studio tracks, and a personally signed beer coaster.

And we should also not that the same person who refuses to pay more than $20 a month for streaming to provide some general ambience in the home, will happily pay through the nose for that deluxe package or concert experience for the artists they truly value.

The middle ground, where music is packaged into bundles (albums) and sold for a fix unit price, is dying.

Services like Mycelia and Mediachain might best be seen as an attempt to perpetuate that mass market music model. Mass market album and CD profits were good for both labels and artists while they lasted, and these services remove cost and confusion from the process. Consumers, though, have moved on.

Consumers define value differently than the mass market does.

For mass market value is a question of features, functions and brand, making value something of an objective measure.

Today, consumers only care about "cheap", for those products they just need, or they define value very subjectively, in terms of their relationship to the producer and the community that surrounds them.

Selling songs (or albums) at a fixed price is probably not the future of the music industry – regardless of how the tracks are delivered – as it doesn't align with how consumers define value.

The future of the high-cost part of the music market is an open question. Value here is subjective and consequently much more ephemeral, making this something of an undiscovered country.

Streaming, on the other hand, clearly has a future as a low-cost service for those individuals who just want to add some ambience to their lives.


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