(This was originally posted by Jay Frank (@repojay) at his blog, FutureHit.DNA. Jay is SVP of Music Strategy for CMT, author of the book Futurehit.DNA and a member of Billboard's Twitter 140 list of the most influential music industry bloggers.")
DIGITAL OLIGOPOLY & SUGGESTIONS ON BREAKING IT
This week, the UK-based AIM (Association of Independent Music) announced that their members receive over 94% of their digital revenue from 3 outlets: iTunes, Amazon and Spotify. The story, first reported in Music Week and then in Digital Music News and MusicAlly, highlights that 51 other companies are splitting the remaining 5.6%. AIM CEO Alison Wenham is not looking at this positively as she tells Music Week, "There are now a series of monopolies and it is jolly hard for anyone else to get a slice of the market."
The Digital Music News story appears to be the more interesting coverage, simply because they highlight other important angles. For one, these are the figures for UK-based labels. In the US, Spotify can probably be replaced with eMusic. Also, AIM acknowledges the niche success of Beatport as an exception for music in the dance genre.
On the surface, this seems like a justifiable rant to highlight an issue. When you dig into the realities of the digital business, and the necessity to embrace them for monetizing Futurehits, it's not that black and white. There is not one solution to this problem, and we need a reality check. While I'm not a fan of oligopoly and applaud AIM for drawing attention here, I also want to find solutions rather than complain. As with artists, it is best to work on solving the issue yourself than wait for someone else to present one to you.
CREATE MORE DIGITAL INDIE RETAIL
So 51 companies represent 5.6% of revenue. That equates to a .1% average for each retailer. That sounds about what one might have expected from any individual indie record store 20 years ago. So the question isn't why are 51 companies generating so little. The question is why aren't there 500 companies representing 56%. Beatport is a shining example of a successful niche digital music outlet (with premium pricing, no less). Every genre should have outlets just like it. In order for these outlets to get there, they need support…from the labels.
SUPPORT INDIE DIGITAL RETAIL
Indie labels need to actively support indie retail, yet this study suggests that may not be happening. Years ago, these same labels didn't hesitate to drop several grand on indie retail listening posts, end-caps, fliers, and newspaper ads. Yet I have not seen any indie label do the same in the digital space. Yes, the margins are smaller and revenues are lower. I get it. But the principles are the same. The only way to gain these additional outlets is to nurture them. They are up against that same oligopoly AND have the added headache of major label licensing issues. Don't complain that a baby is skinny when you're not willing to feed it.
IMPROVE YOUR OWN RETAIL EXPERIENCE
I went to the label sites of 5 AIM members. Only one of them had a retail experience that I, as a consumer, could easily understand. One label didn't even sell music from their site. You need to sell music easily and in any way that you can. One site integrated Topspin for their retail experience, yet nearly buried the Buy links to a point of invisibility. The world is now littered with a ton of music. If a fan comes to your label's site, they are highly likely to get engaged. Don't make the experience hard to find or hard to complete. The fewer clicks to purchase, the more likely a purchase will be had. So don't complain others don't sell enough for you when you yourself can't sell your own music well.
RECOGNIZE THE NEW DIGITAL WORLD IS NOT JUST ABOUT SELLING
While I haven't seen the list of the 51 other companies (talk about terrible ease of use…believe me, I hunted!), the first thing that struck me was that YouTube was not in the list of top companies, yet Spotify was. I realize that this is UK-based, and that YouTube ain't exactly a windfall given the view-counts, but their volume would suggest they are more than .1%. I'm presuming this is because they neglected to count revenue from free ad-supported streaming services in their figures. This is like a bakery complaining that cake sales are down while not including the sales of cupcakes, which are made with the same batter. YouTube, if you work with them, can be a significant source of revenue. My friend Ben Patterson's company DashGo counts YouTube as his 2nd largest revenue source. Let's stop separating digital sales and digital streaming royalty. The pie has shifted and it needs to be examined as a whole.