Labels are always looking for something to fill the void left by declining album sales. Next up: premium artist apps.
Lady Gaga is planning a computer application she says will integrate extra content, chats, games, fashion and films along with her next album, "Artpop." Announced in a blog post , Gaga revealed that "Artpop" will be a "multimedia experience" released for iPad, iPhone, mobile devices and computers.
A premium app makes sense for Gaga. First, she has the capacity and resources to produce the content and the technology to make a great premium app that doesn't skimp on the flourishes and fun. Second, she has the fan base to make a premium app cost feasible. Third, her fans have proven to be quite technology adept. Like Gaga, they like gadgets.
Premium apps will have a tougher time with sub-Gaga artists. The market for expensive, hands-in, interactive products is far smaller than the market for less interactive, less expensive recorded music. Few artists have the number of fans Gaga has. And quality of apps will vary by artist and developer, resulting in some disappointments.
But the incentives are in place for a surge in premium artist apps: artists will want to deliver the best products for the fans and executives will want to plug the hole in their income statements. Financial officers and consultants tend to speak in terms of replacement value. CDs replaced the cassettes. Streaming is augmenting and will, someday, replace downloading. Tracks and playlists are slowly replacing the album. People can live without cassettes, CDs and downloads, but you'd be hard-pressed to find anyone - especially someone who grew up rolling joints on album covers - who wants to give up entirely on the album format.
Thus, people have gone to great efforts to extend the life of the album: the DVD album, the slotMusic, microSD card/album by SanDisk, the Sony BMG album download card, the iTunes LP interactive album format, and the iTunes Pass suite of content for a fixed price, to name just a few.
The premium artist app is next in line practically by default. It is the next album and holds the weight of the record business on its shoulders. Expectations will run high because the future is all too easy to see: Imagine a scenario in which album sales are 50% their current levels, track sales are only 30% higher than today, and streaming services are just starting to pay a fair share of the bills thanks to partnerships with major telecoms. Some serious fans buy vinyl, but that's far too niche to have the necessary replacement value. The other option is the artist-branded app, a premium product that delivers the kind of immersive experience an album did decades earlier.
Many of the experiences in a premium app can be delivered a la carte and free with off-the-shelf or premium tools. In fact, Gaga launched Backplane to help herself and other artists build better online communities for their fans.
The app gets back to the thing the record business loves best: getting paid for selling a unit of something. No subscriptions. No advertising. No accounting for touring revenue in an expanded rights artist contract.
We're four or five years away from the scenario I described above. Current albums (new releases, in other words) are down 12% year to date and would be down a cumulative 52.7% five years at that pace. Track sales are up 6% year to date and would need to increase at 5.7% per year to gain a cumulative 30% in five years. That leaves a big hole to be filled by streaming and whatever new product labels can develop.