New Business Models for Music

Abstract:     
This article is the fourth in a series by this author seeking to explore the impact of the technological revolution in the music industry. The first three built the case for three propositions concerning costs, copyright, and DRM, while this article explores the question of what economic incentives will suffice to facilitate an effective market in the absence of intellectual-property or copy protection. It bases its analysis, in part, on empirical evidence collected from interviews with musicians and music consumers.

The article first defines the problem: explaining why the old business models have eroded in the face of new technologies and of the changing role of the law — especially copyright law. Then, it builds on the author’s work in his New Architectures article, explaining who makes music, who consumes it, and why. These sections explain that while money plays a role in the marketplace for music, it is secondary to “hedonic” factors both for musicians, who make music largely for self-expressive and self-affirmation reasons, and for consumers, who listen to music for reasons including idiosyncratic perceptions of its quality, a desire to be part of a particular crowd, and vicarious identification with or attraction to the performers.

This Article then explores the essential role that intermediaries play in the marketplace. This section acknowledges that the new kinds of intermediation needed in the new technology-driven market place will not occur unless intermediaries can make money. Building on this foundation, this Article develops the elements of a business model that can sustain new forms of intermediation.

Number of Pages in PDF File: 150

Keywords: business models, music, music industry, indie music, intellectual property, copyright, copyright law, technology, marketplace

JEL Classification: K10, K30, L82

Accepted Paper Series