Gerd Leonhard: Pre-Web Music Economics versus Web-Native Music Economics

Our world is changing at a very rapid pace


Our world is changing at a very rapid pace, driven by new technologies and – more importantly – the cultural and societal changes they cause. The crucial thing to look at is, of course, not the technology itself, but how it is changing people’s habits, behaviors and paradigms, since invariably all habit changes become revenue-logic changes, as well.

So, I have taken a shot a summarizing the most important differences between a pre-web music business and a web-native music business, below. If you have any doubt that we are indeed moving into a fully web-native (i.e. starting with the Internet, not adding it to the mix) environment, please consider these facts:

  • Broadband penetration is rapidly increasing around the world, in particular Mobile Broadband
  • Google and a company called O3B is putting 16 low-orbit satellites into space in order to provide low-cost or even free Net access to ‘the other 3 Billion’, starting late 2010 – guess what that will do to music-sharing
  • Mobile devices will be the primary way of accessing the Net, for billion of people, especially in the so-called developing countries

Pre-Web Music Economics: Fans are…Consumers. Scarcity of content (and distribution) = money.Centralized, top-down marketing & promotion is the standard. Computer & wires = Internet access. Professionals make content, consumers… consume i.e. buy it. Mass-markets rule- many people listening to or watching the same thing. Friction (aka distribution) is an important part of how a nice flow of $ is generated.

Total control of every step of the ecosystem is crucial (EGOsystems abound). Content is King. Exclusive copyright is queen. Content monopolies, rights-cartels and oligopolies. Enforcement. Push. Large networks, and hits, rule. Walled gardens bear nice fruit. Near-time web & simple database search is good enough. Marketing = Monolog: listen to me, and then…buy this. Consumers trusting companies. Advertising = interruption (unwanted communications from untrusted sources). Privacy = ‘on’ by default. Mass-media rules. Broadcasting, too. All my stuff is on my own machine. Pay cash or don’t get or …leave. Free = bad. Distribution = power. Power = money.

Web-Native Music Economics: Users & followers not (just) consumers. Abundance creates new scarcities… of attention. Everything and everyone is decentralized (production, distribution, buying, selling). Mobile devices are the default mode of Internet access. Content is produced by professionals, pro-sumers, usators, users, amateurs… all at the same time. Utter Fragmentation of media and media consumption.Friction is Fiction. Trust is crucial (i.e. the new currency). The rise of ECOsystems & interdependence. ConTEXT is King (yes, content, too). New public licenses, usage rights & ubiquitous licensing standards are becoming a must-have. Open content platforms. Engagement not enforcement. Pull & attraction economies. Networked not (just) Networks. Walled gardens wither and die. Real-time web & social search become more and more important.

Marketing = conversations: listen & engage… then talk. The new era of ‘trusting people like me’. Advertising= engagement. Privacy becomes an action I must take. Mass-niches prosper. Narrow-casting. All my stuff is in the Cloud. Pay with attention (and with cash). Freemium=good. Influence = power.

Just to make sure you don’t get bored, here is a very much related podcast of my recent keynote speech at the Austral-Asian Music Business Conference in Sydney:

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