Independent Music coming of age

It finally seems that there is life in the Independent Music Scenee in India. The largest socisal network in the world and the oldest recording company in India think so!

HMV's SaReGaMa has launched an Underground Label to tap into things beyond Bollywood.Through a series of auditions in popular pubs and clubs, word-of-mouth and a network on the ground, Saregama accessed over 300 demos and went through them to select 30 acts across three metros. These tracks are being produced as a 3-CD series: The Underground Delhi,The Underground — Mumbai and The Underground-Kolkata.

Saregama has also invited young student filmmakers to compete for creating music videos for the tracks. This involves tie-ups with film schools and independent upcoming filmmakers in the three cities. The videos will be polled on mySpace.

The first volume in the series, Bombay - The Underground - The Best Of What’s Next is already out in the market and is priced at Rs 150.

Independent Music seems to be finally coming of age in India. As someone who has been an active part of the scene as a musician as well as a consumer, this is great news.

MySpace India: Smells like Teen Spirit

MySpace has finally launched in India. What I like about the product is that it is willing to take a huge risk by going ahead with its Music Mantra ni India as well, where nearly 70% of all Music sales is Bollywood. Independent and upcoming artists have never had a platform to get promoted. As an artist myself, t has been my biggest problem with the entire music scene in India.

MySpace seems to be correcting that now as the first large Internet player to focus on independant artists (music or otherwise).

Will it work? The market seems raw and small, but if someone an pull it off, it has to be MySpace. MySpace is part of NewsCorp which helps it leverage a good deal of content from Star, an asset that none of the other internet players in India (except perhaps Web18) can boast. But what a Web18 or a TimesGroup lacks is the simultaneous focus on open technology. MySpace's open developer's platform should be quite interesting out here for India has one of the largest and most active developer communities.

I feel it's exciting to have a somewhat niche social network, and an entertainment social network that doesn't totally bank on Bollywood and Cricket. It's a gamble but if they can pull it off, it can change the way people view entertainment in India.

Amie Street: A glimpse of user-driven pricing

Amie Street follows a very innovative demand-driven pricing model which is determined by its popularity among the consumers. While companies are struggling with how to maximize revenue with minimum pricing, this startup has come up with a DRM-free model for promoting and selling music harnessing the advantages of a social network.

All songs start at a price of 0. The price of a song rises with its popularity which is determined by two network-driven attributes: number of downloads and number of recommendations. The demand-price relationship is modeled on a pricing calculator available on the site. Prices can rise to a maximum of 98 cents, which seems to highlight that a song on Amie Street will always be cheaper than an itune.

Users get a recommendation token (REC) for every dollar spent in purchasing music on the site. Users recommend (REC) songs they like and believe will be hits. If the song price increases after the REC, the user is awarded based on the price increase, an incentive which effectively helps drive the demand-based pricing. Internally, this is a measure of the credibility of the user as well. RECs are given out judiciously to prevent song inflation.

The model offers a great deal of flexibility to both artists and consumers. Artists keep 70 percent of proceeds after the first $5 in sales and are not required to sell their music exclusively through Amie Street. The consumer downloads DRM-free music at a cheap price and can search, browse or listen over streaming for free. The Amie Street model combining a social network with a recommendation system fosters niche music communities and helps people discover new music by exploring what similar users like.

The model does have its shortcomings. Focusing on independent bands alone will never let it reach the neutral, casual consumer. The users of a social network-driven music store end up being other artists or people really interested in a narrow genre of independent music. This ‘social retail’ makes user acquisition circular and does little to attract a wider, more mature buying audience. Amie Street currently doesn’t have mujch to offer to the bigger artists who can reach a much wider audience through the iTunes’s of the world.

Despite its shortcomings, Amie Street is an indication of things to come as music distribution and pricing moves from being a record-label-directed-push to a demand-driven-pull structure.

Free music philosophies in today’s world

There exists a school of thought in favor of some amount of free music in today’s world. Most of the arguments point towards crating a user base which can be used to generate revenue by peddling other products, an offshoot of the Grateful Dead model earlier discussed.

One of the arguments is towards crating a presence in markets where the average consumption of that kind of music is very low. This is somewhat similar to the spread of software, through piracy, in India and China which contributed to an economic boom, gave Microsoft good brand presence and defined a nice market for commercial software in companies and government offices. In the case of music, this would work by creating a culture and hence a demand for that kind of music. A lot of fusion and world music has gone around the world in this fashion.

Another model involves giving out low quality ad-infested music for free so as to have the consumers come back to buy the higher quality versions. This, along with streaming samples, has been tried by various players with varying success.

These models can’t make money out of giving ALL music to ALL consumers free of cost. Several subscription services are working towards such a business model and most believe that the solution lies in an advertising model which can generate enough revenue to make it profitable. Selling secondary goods (beyond merely advertising) may also work but someone is yet to come up with products whose sale can support such a model.

DRM and the common man

To put it simply, DRM tools are getting more complicated by the day. They obviously need to since it’s a race against some of the best cracker brains in the world. The consumer loses in the process since any protection methodology that is too difficult to crack for a cracker is usually too inconvenient to be accepted by consumers. Uncrackable content usually locks the market.

The other problem with DRM is when different companies bring in their own proprietary formats which are incompatible with most players. As a consumer, I’d like to listen to my music anywhere I want to rather than on a few proprietary boxes only. Music is an experience good and inconvenience has several hidden costs to it.

DRM is probably not the best way to fight piracy. Inconvenience is often a bigger cost than monetary effects.

Free as in Free Music

I got hooked on to P2P during my days at IIT. Having spent 200 bucks per cassette thus far, the concept of free music just changed my world. P2P downloads heralded an all new era in music consumption and created a consumer base which never existed; a set of consumers looking for free music.

This consumer base actually consists of three segments depending on how one defines Free Music.

Free as in Freedom
Consumers want freedom. A single source (P2P service: subscription or free, subscription service) providing access to all types of music would serve as a one-stop destination satisfying every need of theirs. This is why the subscription services organized around labels fail to attract these consumers since their offerings are likely to be incomplete and restricted by label contracts.
Freedom would also involve compatibility with any machine. Hence, a player supporting only proprietary file formats wouldn’t go down well with them.

Free as in Free Lunch
There is a segment of consumers with low band loyalty which would go for any type of music as long as it is free. They would prove to be a consumer base even in a scenario where all copyrighted music was paid as long as the freely available music was a representative sample of all music.

A combination of the two
And that is where all the audience is; the bulk of the so called Napster Diaspora.

Free Music and P2P: A cultural revolution

The music business has profited from the cultural creativity of every form of anti-establishmentarianism; from the hippies of the 60s to the Satanists of the 90s. The P2P generation of the new millennium, a similarly apolitical youth subculture, has confronted the music industry with an impossible demand: free music.

Unlike earlier forms of youthful rebellion, peer-to-peer computing is a direct threat to the economics of the music industry. The recording companies tried to ignore the new economics that online media had to offer. They never set up a virtual marketplace fearing it would lead to the disintermediation of the industry and would wipe out their investments in disc pressing plants.

In the absence of legal downloads, people began swapping digital copies of their collections with each other. Sharing music was free and fostered an active online community. Napster cashed in on this creating a virtual meeting-place for swapping music files. Each youth subculture achieves notoriety by antagonizing its elders. Just like hippies and punks, the users of Napster were united through a minor form of civil disobedience: breaking the copyright laws and sticking it up to the recording establishment.

As it turns out, the music industry won the battle but never won the war. Napster shut down its free sharing but more sophisticated P2P programs: Gnutella, Morpheus, Freenet etc. took its place. Proprietary software creating a central meeting place was replaced by open-source software directly connecting users with each other.

Free Music will eventually win. Free music was not merely about a legal battle or about copyright infringement; it went beyond that to spawn a new consumer mindset.

The Power of a User Base: Lessons from the Grateful Dead

The Grateful Dead have often been hailed as trying a most revolutionary business model by allowing fans to record their concerts and share it and by earning from Concert tickets and Merchandise. The Dead are one of the greatest bands of all time despite giving their stuff for ‘free’ till very recently.

The model really tends to innovate by redefining what is being sold. The Dead got a good consumer base (the fans) by giving away their primary product offering for free and leveraged that to earn revenue from secondary products (tickets, merchandise). This is somewhat similar to what Linux did in giving the OS out free of cost and earning on documentation, support and such other stuff. By redefining what you are selling, you suddenly tend to occupy a position different from any of your competitors.

The model sounds very attractive but comes with an obvious catch. You need to be sure that your secondary products can serve as a sustainable source of income. It worked for the Dead because they toured heavily and had a sizable group of “Dead-heads” following their concerts.
Giving something away for free to capture a big user base has been around in some form or the other. Such a model promises several scenarios:

• Scenario 1: Provide something for free, get a user base, sell them other stuff and earn revenues. Like what the Dead did.
• Scenario 2: Provide something for free, get a user base, and now sell this user base to other businesses. Typical example being advertising on Broadcast TV which provide programs for free to TV Viewers.
• Scenario 3: Your product warrants repeat use. Provide the product for free; get a user base, charge for the same product. An extreme case is the case of illicit drug pedaling. Even having the first few classes free at a Dance school works this way.
  

Online business models understand these scenarios well. Many models focus totally on acquiring a user base by offering something for free. Generating revenue out of it comes at a later stage. Advertising on social networks is a classic case in point. Providing basic services for free and enhanced services at a cost is a ploy used by several websites. Giving a trial version of software to the user to get him hooked on and make him pay after the trial period is another such method.

If you can't beat 'em, join 'em!

"I was working on the proof of one of my poems all the morning, and took out a comma. In the afternoon I put it back again."
Oscar Wilde, Irish dramatist, novelist, & poet (1854 - 1900)

The last fifteen years have seen more mayhem in the music industry than all the preceding years put together. The shift from cassettes to CDs and rising CD sales, followed by the sharp decline in sales with the advent of P2P file sharing and some reassuring albiet miniscule boost to sales in recent years. None of these phases has had any predictive bearing on the succeeding one resulting in huge swings in the fortunes of the various stakeholders. The very media moghuls who minted millions in the first half of this period suffered heavy losses as they helplessly watched while billions of mp3 files exchanged hands with absolutely no revenues to the industry.

The natural human reaction to disoder is control and the music industry behaved similarly. Lawsuits and regulation followed and DRM technologies have been hot for some time. But in the long run, none of these measures are going to prove to be a sustainable attack on the illegal 'arm' of the business. Every copyright law has a loophole waiting to be cashed on, every regulatory system is limited in effectiveness and every DRM initiative will be broken.
The future, then, lies not in regulation but in innovation: in giving the users the freedom that they have with free music and creating innovative revenue models to sustain such efforts. Regulation is important, yes, but is mere fire-fighting at best. If the music industry is to prosper in the future, the answer lies in innovative business models using the very means that was used against them: digital and online music, same ol'' wine in a brand new skin. It's high time they stopped rewriting the comma.