Changing Business Models

Changing Business Models

Recently, I heard on NPR (National Public Radio) that Tower Records had filed for bankruptcy.  It got me to thinking.  We used to make regular pilgrimages to Tower, never alone (Adult Supervision Required), always leaving the store heavy-laden with CD's.  We haven't done that in years.

Nowadays we almost always buy our CD's on line, usually on Amazon (yes, I know it isn't the cheapest, but I'm there a lot and they seem to have everything — see below).  Occasionally, we buy a CD when we're in a book store (Barnes & Noble? Borders?) or on the road, but not very often.

The truth of the matter is that although we listen to music all day, every day, we don't buy nearly as much as we used to.  Before you assume I belong to the Napster generation and call in the RIAA, let me assure you that I have never downloaded a single tune.  So I've been thinking about what's going on here:

(1)  We've been buying music since we were pre-teens, a very long time.  In the course of that history, we've bought everything we really love at least three times — on records, cassettes and CDs.  Once we got it on CDs we didn't need to buy it again.  A lot of our visits to Tower Records were during the days when we were “upgrading” our music library to CDs. 

(2)  Most of what we like is classical music (not easy to buy these days — and fairly static, except for new versions of what you probably already have) and classic jazz, pop, and blues.  So we've got all of the Stones, the Beatles, Roy Orbison, Simon & Garfunckel (alone and together), and so forth.  Hundreds of CDs.  Most of the new stuff coming out isn't very appealing. 

(3)  But we still love to hear new music.  So if we hear something we like, we go straight to the web and order the CD and it comes in a day or two.  My next phone will no doubt let me do that without going to the nearest computer so I won't have to write it down or remember the details.

See what I've said (I'm an economist, so I find this fascinating):

(1)  Record stores as distribution channels are a waste of time — they're not where you hear the music and they're an inefficient way to find what you want.  I can access a better inventory at a cheaper price on the web.

(2)  Record companies aren't loosing business (at least my business — or my friends — because I've asked them) because we're busy downloading and sharing, but rather because there's so little coming out that we'd like to buy. 

(3)  I've learned that there is a new way to find and buy music — web sites that play and distributed tunes and albums from singers who don't choose to go through the big distribution companies.  One of my faves, John Prine, a kind of Urban Poet, does that.  He also distributes for some of his friends.  I suspect a lot of music is going that way.   The artist has more control (and he gets to keep more of the money).  The music lover gets more choices.

Keep in mind that it isn't just the music industry that's being affected that way.

Dave Winer has been buys writing on  that news about politics is being pulled away from the media and given back — at least to some extent — to the voters.  That was (we think) what was going on in the Dean campaign.  This election season, some of the liveliest campaign coverage may occur not on the TV talk shows, but on the web blogs of knowledgeable and passionate voters.  I don't know if that's a business (big media is), but if it collects enough face time maybe we'll figure out how to make it into a business via advertising or affiliate marketing.

Newsletters used to be a lucrative paying business.  Experts wrote for a small, very interested audience and charged hundreds of dollars a year.  On the web, information is too freely available for this model to be readily supported, so many newsletters now go out for free, mine among them, but they go out to much larger audiences.  Marketing costs are zero, and author/editors can write pretty much about what they please — their only cost is time and reputation. 

And that's what they write for — reputation.  Newsletters become part of their persona and its public profile, extending their voice to a much larger audience of potential colleagues and clients.  The newsletter becomes their calling card, a way of offering their intellectual credentials, and what happens next might be informal and random or follow a fairly structured sales process.  We prefer this “let's see what happens” model.  [amywohl News]

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