I’ve been thinking about this business of music and how the “freemium” approach to marketing and customer acquisition has impacted it. I was just a young kid back in the tape club days. If you were a teen-ager in the 80s you know what I’m talking about. Those get 12 tapes for 1 penny, with the fine print committment to purchase 10 more tapes in the next year or two. Which actually grew into the CD club in the 90s before the digital age started to break that model in the early 2,000s.
If you were like me, then you probably grabbed 10, 20, maybe 30 tapes in those dayes for a penny before refusing to buy the rest of the tapes you signed up for. I remember getting the featured tape of the month automatically if I didn’t fill out that form telling them not to send it. Then you had to go through the hassle of sending the tape back to get credit again. A few collection letters later, and a change of address…then I was back in the “get 10 tapes for what felt like free” game!
There were a lot of big record label business built around that model. In fact, the record label I work for was built around a tape “continuity” club model 25 years ago. The margins were big in those days. The customer retention to churn (the guys who bailed like me) ratios worked in favor of the business. The clubs grew. The albums moved. Everyone was happy…even the kids who took the tapes and ran.
So what is my point of this post? It is simply this, the race to free will never kill the music business. From premiums to freemiums, and everything in between, the business of music won’t die because of free. What happens is the industry adjusts. When radio became more of a mass communication form, the threat of “free” music across the airwaves threatened music. Then the evolution of the format moved to cassettes and tape players that could record! Blank tapes were sold, and people shared music for free!! You remember the days of the original “playlist” you put together for your sweetheart. It wasn’t paid for, and it was illegally shared for free. Sound familiar??
Take a look at what happened in the 90s when CD recorders, the internet, and file-sharing all collided into a decade that free became another threat! These disruptive technologies didn’t kill the business of music. It fed the market appetite for music consumption and I would argue grew several touring artist careers. The next decade of the 2000s saw the digital music market space explode. Devices could carry thousands of illegally shared songs. So the industry responded with DRM to contain it. They failed. iTunes prevailed. Apple changed the music sales and consumption game. The music business was changed forever again.
All of these landmarks in the history of music were paved by “free” access and sharing of music. It didn’t kill the business. It ultimately made it adapt to the market technologies and demand. Now as I look at “free download of the week,” Spotify, MOG, RDIO, Pandora, and a dozen other free & paid streaming services I see the continuity club/”tape club” age emerging on steroids. These platforms thrive on mass sign-ups that they try to convert to a premium. The majority goes for the freemium access level, and the end result…fans get access like never before.
These new technologies, access, and consumption behaviors won’t kill the music business. Just like the past, the business will adapt. The margins have flipped. The channels are packed full of music like never before. The smart labels will emerge by moving these bases of fans to a live experience. They will monetize a new innovative music experiences. Most importantly, they will act as a service for both the artist and the fan, establishing a relationship with meaning. It’s not the latest marketing scheme or advertising buy. It’s real content with real fans that will survive from premiums to freemiums..and everything in between.
Breathe In & Smile Out,