A couple of years ago, I wrote a piece on the changing economics of the music industry using the power curve (long tail) to describe the shifting toward a new middle class (or working class) musician. I was very pleased when Chris Anderson picked up the piece for his long tail blog as a side bar. I conclude that we will have more professional musicians, but where is the opportunity in the new industry?

How will a dollar of revenue be distributed in the future? The chart below illustrates the progression of how a single dollar in music revenue has been distributed in the past as technologies have evolved.

Pre 1990 major labels were responsible for the entire lifecycle of music production and consumption.

During the 1990s the personal computer drastically reduced the cost of producing high quality music recordings and CD duplications. This spurned a dramatic increase in independent labels (Indies). The increased competition drove the costs in A&R, Artist Development and Recording & production down.

However, to get music played on the radio and get CDs distributed to stores let alone acquiring shelf-space required the Indies to close a distribution deal with the major labels. The result: major music labels enjoyed oligopoly profits from their stranglehold on distribution.

Post 1999 the Internet downloads of MP3s have become the number one method of consuming music worldwide. The vast majority of this music consumption and sharing is illegal and conducted over Peer-to-peer networks: under the radar.

The New Millennium Clearly the opportunity in the new music economy is in marketing and distribution. It is our opinion that the successful business model is the one that will embrace and enable the Internet as a means of music distribution and that one that will free consumer consumption habits (file sharing) as the means of marketing.

More on this coming.

music, long tail, music industry, music economics, music marketing, working class musician, project opus