Really, really bad news for music labels. To nobody’s surprise, album sales (as opposed to singles) dwindle and dwindle. Making the news worse: digital album sales -while growing- aren’t turning the trend. Worst news: single sales have exploded (up by 1000% over same time period), but aren’t even close to plugging the revenue gap from physical sales.
It’s going to get better, but not by much. Friction (the relative difficulty of delivering a good to the consumer’s hand) determines scarcity , and scarcity determines price. The bottom line that the music industry is going to have to confront is this: Most of the friction in music came from the media, not the music. Now that the media is digital instead of physical, most of the friction is gone and is never coming back. There really is no solution in the current business model. The music itself wasn’t as valuable as the industry thought it was – the end.
News is going through the exact same thing. News, like music is growing. It’s infinite, in fact. More people consume more news today than ever before in the history of man. But newspapers and magazines are dying, because the friction was always in the medium. Now the industry is begging for subsidies, trying to save the news. But the news is fine – it’s just not as valuable as they thought it was. They’re really trying to save paper.
Studios will follow. They have more time, because there’s still some friction in gigabyte movie downloads (as opposed to megabytes in music and kilobytes in news). But it’s only a matter of time. In the meantime, the edges of the physical medium begin to get weeded out.
Conclusion: If you’re product can be digitized, then you had better make sure the business model can accommodate the loss of friction in the medium or prepare for a more modest profit line. This I will call the Seth Godin Doctrine.
The natural question is: Is there an industry where a decline in the medium didn’t mean a decline in value? Answer: Yes – software.
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Update: Go here if you want the source of this line of thought.
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