Shift Happens

Television delivers you content. You pay a fee for the content to the network for the infrastructure and content, but the biggest chunk of money comes from advertising. Corporations pay advertisers to create ads for their products. The advertisers in turn pay the network to be able to broadcast. You see the ad, buy the product and everybody wins. Advertising these days still pays for the biggest chunk of the creation of content. Everybody, from the writers to the catering service needs to put food on the table. But television advertising seems to be slowly decreasing ^[1]. The conversion rates aren't as big as they used to be, for a number of reasons. TiVo ^[2] is one. TiVo enables you to record television content without commercials to watch whenever you want to. Like with a VCR you don't have to stay home to watch at a set time because you can record it for later. BitTorrent ^[3] is another reason. Almost any current show is available right after it's been broadcasted on television, for free with again, no ads to interrupt you. You download the content to watch later, commercial-free. With the introduction of recording equiptment, questions about ownership and copyright arose. What rights do you have as a consumer, since you're paying a fee to the network already? You should be able to do with television content whatever you want, right? After all, you have already paid for it. It's not that simple though.

By taking away one of the elements from the system (money-to-advertisers), we are (perhaps unknowingly, unintentionally) changing the entire system. The revenue that advertisers are losing takes away money used to create television content; your favourite shows. People are losing money.

As with the creation of all new systems of commerce, the old one isn't going down without a fight. Hollywood and record labels are using the RIAA ^[4] and the MPAA ^[5] to crack down on internet sites that spread copyrighted content ^[6], prosecute people in an effort to discourage consumers, telling them that they're hurting their beloved artists. They are turning the age old concept of sharing ideas and knowledge into a criminal enterprise.

Let's take a look at an example. How would an immensly popular show, CSI, continue to exist when nobody watches the ads in between? During the first season, this series reportedly cost $1.5 million per episode to make ^source.

If we assume that a popular show has an estimated average viewers audience of about 20 million viewers and assume that an episode costs $2 million to make, it would amount to $0.10 per viewer to offset the costs. This doesn't include the cost to broadcast but if sold online through a P2P set-top box, there are none. Distribution would be from one central point, around which merchandise can still be sold. As internet speed per average consumer increases, extra-content- or higher-quality editions can be sold for a greater price. Regular cable subscription packages would be customizable per customer, allowing consumers to create a package with only their favorite shows and movies.

By letting consumers do this themselves, individual user profiles with preferences are created. This allows advertisers to created more targeted advertising for products. Consumers will get more relevant ads and the likelyhood of a sale increases. Consumers can even subscribe to specially created 'brand channels', where advertisers show new products relevant to the individual's profile. They can be awarded credits for every commercial they watch, which they can use to buy new content. If they decide to buy a product after having watched a commercial, extra credits are awarded.

In the music industry, a band traditionally signs with a record label, who handels their promotion and production, so the artists can focus on their music and get paid for it. This model dates back to before the internet. Because we can download every new album without having to pay for it, record labels are hemorrhaging money.

Although the battle has not been decided by far, we're also starting to see another side.

credit to radiohead

Roughly 12,000 albums are released in an average year, so the announcement late Sunday night that the new Radiohead record, In Rainbows, will be out October 10 is not itself big news. Sure, Radiohead is on a sustained run as the most interesting and innovative band in rock, but what makes In Rainbows important — easily the most important release in the recent history of the music business — are its record label and its retail price: there is none, and there is none.

In Rainbows will be released as a digital download available only via the band's web site, Radiohead.com. There's no label or distribution partner to cut into the band's profits — but then there may not be any profits. Drop In Rainbows' 15 songs into the online checkout basket and a question mark pops up where the price would normally be. Click it, and the prompt "It's Up To You" appears. Click again and it refreshes with the words "It's Really Up To You" — and really, it is. It's the first major album whose price is determined by what individual consumers want to pay for it. And it's perfectly acceptable to pay nothing at all.

Radiohead's contract with EMI/Capitol expired after its last record, Hail to the Thief, was released in 2003; shortly before the band started writing new songs, singer Thom Yorke told TIME, "I like the people at our record company, but the time is at hand when you have to ask why anyone needs one. And, yes, it probably would give us some perverse pleasure to say 'F___ you' to this decaying business model." On Sunday night, guitarist Jonny Greenwood took to Radiohead's Dead Air Space blog and nonchalantly announced, "Hello everyone. Well, the new album is finished, and it's coming out in 10 days. We've called it In Rainbows. Love from us all."

While many industry observers speculated that Radiohead might go off-label for its seventh album, it was presumed the band would at least rely on Apple's iTunes or United Kingdom-based online music store 7digital for distribution. Few suspected the band members had the ambition (or the server capacity) to put an album out on their own. The final decision was apparently made just a few weeks ago, and, when informed of the news on Sunday, several record executives admitted that, despite the rumors, they were stunned. "This feels like yet another death knell," emailed an A&R executive at a major European label. "If the best band in the world doesn't want a part of us, I'm not sure what's left for this business."

Labels can still be influential and profitable by focusing on younger acts that need their muscle to get radio play and placement in record stores — but only if the music itself remains a saleable commodity. "That's the interesting part of all this," says a producer who works primarily with American rap artists. "Radiohead is the best band in the world; if you can pay whatever you want for music by the best band in the world, why would you pay $13 dollars or $.99 cents for music by somebody less talented? Once you open that door and start giving music away legally, I'm not sure there's any going back."

The ramifications of Radiohead's pay-what-you-want experiment will take time to sort out, but for established artists at least, turning what was once their highest-value asset — a much-buzzed-about new album — into a loss leader may be the wave of the future. Even under the most lucrative record deals, the ones reserved for repeat, multi-platinum superstars, the artists can end up with less than 30% of overall sales revenue (which often is then split among several band members). Meanwhile, as record sales decline, the concert business is booming. In July, Prince gave away his album Planet Earth for free in the U.K. through the downmarket Mail on Sunday newspaper. At first he was ridiculed. Then he announced 21 consecutive London concert dates — and sold out every one of them.

source: Time

We are at the beginning of a new business model, where consumers are producing themselves. Promotion doesn't have to be done by record labels which tend to rip you off, you can do it yourself! With the internet you can reach millions of people instantly. If you make remarkable music, people are going to talk about it. These days with everybody being on a social network, what better way to promote your music is through your friends? Get people to talk about it, be pro-active about it! And if you can reach the right people, succes is imminent. Read more about how to target the right people in this chapter.

Prosumer is a portmanteau formed by contracting either the word producer or professional with the word consumer. The term has taken on multiple conflicting meanings: the business sector sees the prosumer (professional–consumer) as a market segment, whereas economists see the prosumer (producer–consumer) as having greater independence from the mainstream economy. ^{source: Wikipedia}

Scenario: Jessica has made a boardgame for her dad's birthday and he really liked it. Her dad suggested that she could try and sell it to people. Companies like CafePress enable people to create and sell their own things. They have standard bare products which you can customize however you want. When you're done, you can create your own online store and sell your creations. Jessica told all her friends and family where to get her game and created her own buzz around her own 'brand'.

Brands like Puma and Nike are starting to recognize this increasing need for customization and started their own projects. You can select a standard shoe and then customize it, choose materials or your own designs. This way you will end up with a unique product. This trend might continue into other products like cars, furniture, white goods and electronics.

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