A music distribution business model may emerge that is both profitable and fair for creators, users, and creator-users. Distributors, record labels, and the public are in dialogue through market forces. Through confrontation and adaptation, a price and distribution model for music files suitable for the current technological context could be determined. In this post, I will examine current and projected music distribution models, and weigh in on their potential for success.
First, let’s think about why it is difficult to figure out a price for music files. The current price for a music file on the distribution sites carrying tracks owned by the major record labels is $0.89-$0.99 (amazon.com, itunes). The continuing use of free, peer-to-peer file sharing networks to download copyrighted music is a testament to the fact that many music listeners think that the per file cost of music is too high. Copyright holders respond by attempting to stop users from using free P2P clients, through direct litigation against free P2P client sources and individual users. This political and legal battle goes on outside of the direct market for music, which limits the effect it can have on market price.
However, in modifying music user expectations, the presence of P2P clients has directly influenced the development of for profit music distribution models. Music users know music can be distributed for free, so they won’t accept high prices. Music users also have higher expectations for quality, and they reflect those expectations with their purchase patterns. Music user quality and price expectations were doubtless responsible for itunes’ recent decision to offer DRM-free files and to change its price structure.
The most successful alternative distribution models will incorporate what users found appealing about P2P clients, affordability and community, while compensating artists. Many admitted users of P2P filesharing networks admit that artists ought be compensated for music files, but argue that paid distribution options are inflexible, overpriced, as well as inferior to the best P2P clients. There is no lack of support for a business model that compensates artists at a reasonable market price. Nearly 70% of respondents to an online Wired survey claim they would pay $10 for unlimited music downloading every month. It is likely that many will resist purchasing music until a reasonably priced model emerges.