Friday, March 10, 2006

Long-tail dynamics and the music industry

20060226_iphoto_longtail_2Thinking about the practical implications of the long-tail dynamics outlined in a previous post, I recalled an initiative of incumbents in the music business in France. That was late January and it was triggered by the fact that French Parliament chose to confirm the right to have copies for private use and to consider peer-to-peer systems as valid ways for users to have legal copies. To compensate authors and composers, they created a flat tax on all broadband Internet connections...

In its weekly publication Epok dated 20-26 January 2006, French retailer of cultural goods (music, books, concert tickets, DVD…) made public the figures of cost to bring to market a CD of Thomas Fersen. That was to justify the price of a CD... Very interesting figures.

On a total investment of slightly over 554000 €, traditional marketing initiatives (TV advertising, billboard, print ads, other marketing communications) claim about 220000 €. The production of physical media (CD, DVD…) required in the traditional industry to distribute content cost about 150000€. None of these cash outflows is necessary in a long-tail model for the music industry.

In this case, the investment required to have that artist's new songs distributed digitally by using a long-tail model would have been lower by over 350000€. That saves about 60% of the investment, which gives ample marging to imrpove the deal for the artist and to bring music to market at a lower cost such that illegal copies would be insufficiently attractive (to be confirmed). Of course, there is one slight little problem: if we went for the long-tail model, that would leave quite a few intermediaries out of the loop... Tough life.

Now this is one of the reasons why I think Jamendo can make a significant impact on the music industry: they lower the cost of distribution of music by applying the principles of web 2.0 and by respecting the dynamics of the long-tail.

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