Will pop eat itself?

• This column was first published in the November 2007 issue of ITWeb Brainstorm magazine, under the title “Music business turned on its head”. If you’re in South Africa, you may wish to subscribe to the high-quality print version.

Ever since peer-to-peer music downloading became popular, the music industry has been in a deep crisis. Now comes the denouement.

The kid that started all the trouble was 18, a college dropout named Shawn Fanning. He created a piece of software called Napster, which started a peer-to-peer music downloading craze. Record companies were in a flat spin.

Now, eight years later, the game may finally be up for the record companies.

They spent these eight years accusing peer-to-peer networks of facilitating music piracy and building their businesses on the back of artists and copyright owners. The notion of fat-cat record company executives appealing to fans’ sympathy for starving artists sounded just a little hypocritical, and consumers accused the Recording Industry Association of America (RIAA) of profiteering.

It in turn argued that copyright was designed to reward artists fairly, while paying record company executives for providing services to artists such as marketing, producing and distributing their music. Without them, the RIAA argued, new music would be stifled. Artists would never get exposure.

Consumers shot back that record companies just pumped out overpriced formulaic pop, colluding with radio stations, using the playlist system, to flood the airwaves with lowest-common-denominator rubbish. By contrast, they said, peer-to-peer networks enabled them to find obscure music or higher quality material that simply didn’t get promoted through official channels.

As legal downloading services began to emerge – most notably Apple’s iTunes music store – established artists, such as Prince, began to give away their music. This was a slap in the face for the RIAA (and staunch record company defenders such as Metallica), but it wasn’t exactly a business model, so the impact was limited.

Record companies were losing sales. They attributed this to illegal file sharing, but research found the cause to be the economic downturn and fierce competition for disposable income from computer games and DVDs.

At the same time another trend emerged. Traditional marketing via playlists on radio, music videos on television, advertising and movie tie-ins, was increasingly complemented by online reviews and recommendations and word-of-mouth marketing via social networks such as MySpace and Facebook.

The ease of distribution via the internet and the growth of “social marketing” made it clear that something had to give. The idea of interacting more directly with fans had huge appeal for artists, and neither artists nor fans would be too distraught by the notion of cutting out the middleman.

Finally, last month, a band named Radiohead made the first big break. Not only did it release its new album, “In Rainbows”, exclusively on its website, but it allows buyers to choose how much they would like to pay for it. [Update: the album is no longer available for download online, but can be bought as a CD.]

“No really,” the website says, “it’s up to you.”

This “trust model” of buying music is truly novel. No data is yet available on how much (if anything) consumers do choose to pay for the music, but it would be surprising if Radiohead didn’t make money from the album. It is a well-known outfit. It has shown that it trusts its fans to reward it fairly, and that trust will likely be reciprocated. Besides, it is saving loads on traditional marketing and distribution via record companies, so even if the average price paid for the album or tracks is low, it should still turn a profit. [Update: official numbers remain unavailable, but estimates are that though a majority didn’t pay, it made on average between $5 and $8 per album, for total revenue of $6 million to $10 million on initial sales.]

The key question, however, is whether such a model can be sustained. Will consumers continue to pay for new music once the novelty wears off?

And if it is sustainable, how will this impact traditional record sales?
In 1988, the KLF published a booklet, entitled The Manual (How to Have a Number One the Easy Way). It was funny, but was also serious: number one hits can be engineered. Follow the formula, and you’re guaranteed to succeed.

If this traditional record company model is broken beyond repair by Radiohead’s trust model, the hundreds of formulaic pop artists that blare at us from every speaker in every club and shopping mall today could find themselves unemployed by the direct choices of music fans. The fat-cat record companies will wither and die off. Nobody will be able to tell aspiring artists: “Come in here dear boy, have a cigar, you’re gonna go far.”

That cigar will have to be earned from fans, directly. If Radiohead’s model works, the era of the record company executive is truly over.