MUSIC DISTRIBUTION ON THE WEB

by Aura Lippincott


Introduction

The business of music has three components: production, marketing and distribution. Each of these components is susceptible to technological changes that threaten to destabilize the established mechanisms of the music industry. This paper concentrates on the effects of the web on the distribution component of the music business process. Specifically in question is whether the advent of new web-based music distribution is a democratizing force in the music business due to its capacity to put the means of distribution in the hands of the artists. It is difficult to have a discussion about music distribution without discussing music marketing because the distribution parameters are dependent (in part, at least) upon the success of the marketing plan. Futhermore, these dual aspects of the music business are becoming increasingly intertwined on the web where both can occur in the same place and at the same time. Therefore, this discussion will necessarily involve some aspects of music marketing as it relates to music as a business process.

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The Music Commodity: a business problem

The business problem is for artists to get their music (or product) to their audience (and to get paid for it). The solution to this problem is found by utilizing a combination of marketing and distribution. The music industry currently operates via a proprietary business model where the record company acts as intermediary between the artist and audience, most often owning the music product and paying a royalty to the artist. In exchange, the label takes over the artist's business problem by marketing and distributing the music product to the widest possible audience. The major labels claim to effectively solve the problem, thus achieving a wide (and hopefully loyal fan base. In fact, they use this ability as a major selling point and negotiating tool to sign new talent and keep old talent. Although the majors are very good at wide distribution of a product once an artist has broken into the mainstream due to the established infrastructure that interconnects the marketing and distribution channels (i.e. MTV, record store chains, radio, etc.), they are not as good if an artist is unknown. Their marketing and distribution choices for new artists are governed by strict financial criteria based on the fact that they are making a capital investment on an unproven product. Obviously, this perspective could get in the way of new artist development (which is a primary goal of the artist in signing with a label). Record companies claim they have the process of breaking an artist into the mainstream down to a science, but some artists would disagree claiming it is neither art, nor science, but luck with a little bit of art and science mixed in. The successes of many independent artists in getting and keeping audiences provide proof that other methods of achieving the goal can work as well as traditional methods used by the major labels (for example, see the Grateful Dead article below). It is the fact that signing a deal with a major label may not get the artists what they want coupled with the new means of web distribution that pose a threat to the dominance of major labels in the music business.

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Music as Art versus Music as Commodity

Fundamentally, music can be viewed in two ways: as a commodity and as a form of art or creative expression. Using this distinction, one could argue that there are artists concerned with music as business and artists concerned with music as art form. The first type of artist is more concerned with the music as commodity and is probably oriented toward reaching the widest possible audience, thus approaches music making from this perspective and is faced with the business problem as descibed above.

The second type of artist is more concerned with music as creative expression, political statement or art form. These artists are probably less concerned with reaching the widest possible audience (of course, this is not to say that they do not want an audience) and with operating in the mainstream where this audience likely resides. Due to their different goal, they are not necessarily bound by the laws of the prevailing business model and do not have the same business problem. This group, by not having a stake in the status quo (and perhaps even wishing to subvert it) is able to utilize the new technology (perhaps in new and interesting ways because they are not bound by structured institutions or methods). They are potentially freed by the new technology because they no longer have to turn to intermediary labels to fulfill their goals. This is the group that stands to benefit the most from web-based music distribution (although perhaps only until the web infrastructure crowds them out). In addition fans of these artists will have a better means of seeking them out by using the web. In this way the web has provided them a means for an audience.

The other category of artists mentioned above includes those looking for more mainstream success. Historically these artists had no alternative, but to sign with record labels that produced, marketed and distributed their music via means, that due to high cost and other factors, were available only to the labels. Prior to the web and other technological developments that reduced the "barriers to entry" into the music business, independent labels were the most viable alternative to major labels. With the advent of the web (and related music production software and hardware), many of these artists hope to bypass signing with labels by utilizing the web to distribute their music. They would thereby retain ownership of their music and potentially make a much bigger profit. They have the most difficult task because they are relying on technological means alone to achieve their highly market-oriented goals. These artists have the means to distribute and market, but not necessarily the infrastructure of marketing and distribution (e.g. MTv, radio, T.V. etc.) necessary to gain the attention of a wide audience or market. On the web (which is fast becoming structured to coincide with the infrastructure already in place and therefore most beneficial to the status quo), they must fight for attention amongst an audience of millions of competitors. They hope to gain and benefit from the commodification of a music product in a marketplace where the product is often desirable not because of its content, but because of the media hype surrounding it. It is highly questionable whether this desire can be effectively created in the public without the use of advertising and promotion best carried out, at this time, by major labels and not easily had by individuals. Of course, this is not to say that successful marketing by labels and individuals cannot, has not, and will not be done on the web, but it is a gamble at best. Thus artists interested in mainstream success may in fact be better off utilizing the strengths of the major labels even if they are no longer forced to. They may, however be able to use the powers of the web as a negotiating strength if they are highly sought after by major labels. In this way, the historical reasons for signing with a major label may have decreased slightly in importance.

Also within this second category are the successful artists, who are utilizing web distribution in order to reach their audience directly, cutting out the labels, distributors, and retailers. The web provides a lucrative distribution means as well as an added method of marketing because their audience is already looking for them and can now find them more conveniently via the web's additional avenues. The web provides an additional negotiating strength for these often powerful people.

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The Market: consumer whims and ways

One other area that shapes the issue of music distribution and marketing is the audience itself. Guaging the whims of an audience is the arguably the most difficult job of a marketer. Though the industry-choke hold on music-making and distribution no longer exists due to the viable alternatives described above, the vast majority of the music buying public is not interested in making the effort to seek out alternative music. The music industry will always be in the best position to reach this audience. So if a major measure of the "success" of your band and of getting your music heard is the size of your audience then you may be best served by going to the experts - the big labels - if possible. The bulk of the music listening public is not interested in pursuing music that is esoteric or difficult to find. They are mostly content with the choices that are in front of them. This is not meant to insult the intelligence of the music-buying public, it is simply an admission of the reality of living in a busy world of constant battles for one's attention, where seeking out and making intelligent music choices is a time consuming job that many people do not have time for. In this arena, the major labels are best positioned to successfully solve the business problem because of their tried and true methods of marketing and distribution. These methods are situated squarely within the capitalist free-market system and thereby utilizing all of its institutional benefits placing the products directly in the public sphere. Of course many others are willing to expend at least some effort to seek out music (as distinguished from seeking out the next album of a major artist at the nearest store) and they may indeed have the desire and persistance to sift through the web. For these individuals, the web provides an easier and more effective means of finding music.

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Web Distribution: democratic or free market?

For both groups described above the web provides a new means for music distribution via online retail, online direct label or artist sales, and direct digital downloads from artist, label, traditional/online retail and MP3 web pages. In effect, the web has provided an alternative medium in which to display one's product. The virtual geography of the web has rendered the traditional geographic and economic limitations of the distribution business irrelevant, allowing anyone, with relative ease, the means to distribute to a potentially massive audience. However, this means to distribute, by itself, does not render the music business more "democratic". The web is a free market sphere and, therefore does not operate on truly "democratic" principles of equality. In a free-market sphere anyone with the means can compete in the market, but in reality the means are elusive and not available to many. Free market systems do not facilitate freedom of expression to those without the capital to compete. Rather, they in effect shut out smaller interests or voices, who may not have the skills or capital needed to exploit the system's status quo infrastructure. It seems that this new distribution medium will not in the long term effectively change the power structure dominated by big media even if it does alter the distribution infrastructure of the music business. This is due in part to the point illustrated above that freedom of distribution is not the same as effective marketing and effective marketing is the twin component to distribution that helsp create an audience to distribute to. If this business problem is not solved then the artists can distribute all they want but they will not have anyone to distribute to. The major labels are currently the most effective marketers and distributors. They have the ability to get the word out to the widest audience and importantly, to monopolize the web gateways that serve as the engines to search for, find and download music on the web.

Although the music industry is late in entering the market, they will surely catch up. One must not underestimate the ability of the music industry to integrate new methods into their business practices adapting them to their own models or adopting new models. They have seemingly endless capital to buy successful upstart companies (along with their innovative distribution and marketing techniques). This continuing assimilation by major media media companies of web companies will eventually decrease the forum for individual distribution, rendering what seems democratic in theory, undemocratic in practice. Their major hurdle to integration of web distribution seems to be in creating, marketing and implementing an effective means to protect their investments (SDMI is currently being developed) without hopelessly alienating the consumer.

In summary, the web has undoubtably created a new albeit, crowded marketplace in which to sell one's goods, but does not have a built in effective way to gain the attention of an audience. The most effective use is made of it by those who already have the attention of an audience, whether artists or major labels, through a major traditional media or web presence. The web is ruled by free market which is not the best way to promote democratic notions of equality of voice.

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Music Business' Effect on the Web

Further examination of the effects of the major media and other corporations on the web, may help answer the question about whether web music distribution is democratizing the music business. A major factor in the web's future is the music industry's lobby to affect intellectual property legislation imposing taxes and royalties on new technological applications. Along with legislation, the industry is attempting to protect itself from "piracy" by using encryption standards for digital music like SDMI. Unfortunately this criminalizes all copying before it has been judged illegal pirated music and also limits those who distribute digital music that is not encrypted and therefore may not be compatible with players. Once the difficulties of protecting copyright and profiting on digital music distribution are ironed out, the music business by its shear size, power and ownership of a huge catalog of marketable and desirable music will become the dominant presence on the web for music distribution. Mergers of major labels with AOL and other media/internet companies in the music and web business will always be with proven companies and designed to widen or keep market share. It is the music business's effect on the architecture and content of the web that threatens the web's democratizing influence. Because our system of economy and government is based on free-market capitalist principles, the capitalist business model will influence and mold every aspect of our society, even those, like the web that seem to be inherently democratic. The web will change the music business by shifting the power structure within it. However it is unclear that once the dust settles the web will have done anything more than shift power from one corporation to another. Media giant record labels will not fade away, while bands and independent labels split up the market share, nor will the same labels maintain their current market share (nor create a free music, open market atmosphere as espoused by some). Rather a variety of factors will cause the industry and the web to converge, leaving room for new profits to be made by new or old companies or artists depending upon their individual market decisions. These factors will be influenced by government regulation, technological developments and economic factors and will result in a new business model that will ultimately leave the major power and profits in the hands of the status quo. This does not mean that musicians who are not interested in major label success, will not benefit from the web's new role in distribution. They may indeed increase their success by utilizing the web, however this will be on an individual basis, just as it is today. The web has created an opportunity to succeed outside of mainstream circles, but those opportunities have always existed. In the web they have merely taken on a different and possibly more powerful face.

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Conclusions

Currently, it appears that the web is best utilized for the distribution of successful artists music. It is also best utilized by artists not interested in mainstream success, but interested in an audience nonetheless. On the other hand the web is a crapshoot for unknown artists interested in mainstream or wide success. They may find an audience of millions or they may be lost in an audience of millions. The major (and minor) labels will utilize the web more and more, closing the gap that allows individual voices the bubble up to recognition and attention.

Eventually it seems that the major labels will become masters of this medium, perhaps learning valuable lessons from today's independent pioneers. These technological changes coupled with economic forces will most likely result in new business models, but within free-market capitalism, not new truly democratic models outside of it.

Some ideas for further exploration:

In order to fully examine the question of whether web-based music distribution is having a democratizing influence on the music business, one must first discuss and define the concept(s) of democracy. This, was difficult within the scope and timeframe of this paper.

In concluding, it seems that there is a tendency to call free market capitalism "democratically" based. The web most definately appears to operate via free market principles. However, the web interfaces that users are given ("choose") to access cyberspace direct them to particular sites or particular companies where they can then exercise "choice." This, it seems is probably not democratic in the true sense of the word.

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BIBLIOGRAPHY AND RESOURCES

About These Resources

This is an area of technological development that has a tremendously broad and interesting cultural impact. It is an area that, due to its popular subject matter (music), major players (big media and influential artists), and huge market (everyone), is widely covered in the Press. It is impossible to provide any more than a limited annotated bibliography and resource meant to illustrate a few of the issues addressed in the preceding paper. The articles are grouped into ten areas that are relevant to the issues discussed above, that are again by no means exhaustive of the issues important to this subject.

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Digital Democracy (this section is currently undeveloped)

Schuler, Douglas. Reports of the Close Relationship Between Democracy and the Internet May Have Been Exaggerated: Challenges and Opportunities for Rapprochement May 17, 1998 from the Democracy and Digital Media Conference


Artists utilizing the web for distribution and marketing (please note that this list is predominantly comprised of already successful-at some stage at least-bands who have broken with their labels; are utilizing the web as an additional means to reach their audience; or have not gained their initial audience though the web)

Beck: new album available on MP3 2 weeks before it was released.

David Bowie, founder of Bowie.net ISP and MP3 proponent. His interesting perspective on MP3 and the "so-called music revolution" comes out in an interview in Slashdot internet magazine.

Public Enemy, one of the first big name groups to experiment with web distribution www.bringthenoise.com, who Public Enemy tracks on the web without permission. Chuck D is a vocal supporter of the disintermediation of the music business through the web. An example of a new system working for an already successful act.

The Grateful Dead are widely respected for their innovative marketing and distribution techniques, they have manages to win, keep, and grow a wide fan base by not holding too tightly to the purse strings via copyright and merchandizing. For an interesting examiniation of their marketing and distribution techniques (that the majors labels are surely watching) see

Hill, Sam and Rifkin, Glenn. Listen to the Band: Grateful Dead Promotional Items Marketing Techniques, Entrepreneur, June, 1999

Excellent article detailing the Grateful Dead's "radical marketing" techniques that did not utilize advertising and promotion to gain an audience, rather catered to a niche market of loyal fans. Details importance of cultivating and maintaining a relationship with fans that emphasizes respect.

Braun, Stephen. Hot Acts, Hidden Microphones, LAT, October 16, 1999

Coverage of bootlegging at concerts and discussion about whether it helps sales by promoting the good will of an artist's fans or whether it is a copyright violation that threatens the property of the artist (or label).

Ice T Released his latest album solely on MP3.com

Master P - Working his way into being a one-man media mogul. His marketing style is not bound by any traditional methods, rather uses all means. See articles below

Diamond in the Rough: What sets master P apart from other Hard Core Rappers? He's a Master of Marketing who owns his music and built a hip-hop empire around No-Limit, the Hottest Brand name in the Business. Fortune, September 27, 1999.

Master P, owner of No Limit Records, as well as film, clothing, sports and toys companies, is profiled in this article. It names him a world-class marketer and entrepreneur, who maintained ownership of his music when major labels came calling by only signing distribution deals.

Music as art (of course, only a very small sample used to illustrate the distinction made above).

Laurie Anderson

Mouse on Mars art band duo whorelease their work on their own label, Sonig

Negativland quintissential and infamous art band whose clash with U2 almost resulted in their demise. They record and distribute their music independently via mail order and their web page.

The Residents cryptic art band--I think this link is to their official page...

Skam (please note this link is under construction), an English electronic label, that is very interesting for the ultimate commodification (fetishization) of their music that they gain by creating demand through scarcity.


Independents (once again, a very small sample used to illustrate the points made above).

Asphodel small independent label releasing mostly electronic and DJ culture music.

Astralwerks former independent purchased by Virgin Records

Bongload

Grand Royal label and home to the very successful and critically acclaimed Beastie Boys

Om Records Berkeley-based independent

Proper Distribution see article below

Olson, Catherine Applefeld, Proper Distribution: An Indie with a Difference, Billboard, Nay 22, 1999
An indie distributor of smaller labels devoted to developing acts and treating them as creative entities rather than financial entities. A one-stop distributor, marketer, promotional arm, and talent management company. Interestingly, I failed to find their presence on the Internet. This article also interestingly notes the trend towards indie and major distributors merging as well as online and retail sales.

Swim very small UK-based


The Majors (BMG, EMI, Sony, Universal, and Warner), RIAA and Big Media (Microsoft, Amazon.com, RealAudio, etc.)

 

Christman, Ed, Majors Fear of Net Set Aside for or Universal/Amazon Heal, Billboard, September 4, 1999

Overcoming the issues standing in the way of web distribution. Note the major companies involved in this deal as they strive to split up the market share.

Christman, Ed, Sony Revamps its Progams for Developing, Debut Acts, Billboard, March 27, 1999

Minimal deals to distributors designed to break new talent by offering financial incentives/discounts aimed at distributors keeping the stock longer. What about artist development? This article is also interesting for Tommy Boy Records founder's comment on the internet as an additional medium for selling records, but "bricks and mortar will be here forever." An attitude that has kept many majors from entering the online fray. They have more to lose and a much higher stake than the smaller labels and individual artists.

Hansel, Saul, Key to Music is E-Promotion: Direct consumer contact is lure for BMG and Universal, NYT, April 8, 1999

Perhaps they have learned their lessons of the Grateful Dead?

Hickman, Angela, Money-Making Web Music, PC Magazine, February 23, 1999

SDMI development to protect prior and future investment. Once implemented one of the main concerns of the majors will be dealt with allowing them to safely offer their product on the online market. See the Diamond Multimedia case for Major Label arguments as put forth by the RIAA.

Jones, Christopher and Sullivan, Jennifer, More Popular than Sex, Wired, October 14, 1999

Portals, like AOL, Lycos, and Yahoo buying up digial music sites and player providers.

Richtel, Matt, Univeral Music and BMG form team for Web venture, New York Times, May 27, 1999

Small steps to move forward to conquer the web market.

Stroud, Michael, Music to Microsoft's Ears, Wired, November 15, 1999

Trachtenberg, Jeffrey A., Music industry fears bandits on the information highway, Wall Street Journal, August 2, 1994

Universal Music Creates Label for Digital Age, www.audiocafe.com, November 11, 1999

Creation of Jimmy and Doug's Farm Club desiged to reach talent and the audience directly.

Copyright Protection Efforts (SDMI, litigation and contacts)

Anderson, Lesslie. Sony Tries to Lock in Artists, May 21, 1999, The Standard

Telling step by Sony to contractually protect their property from a huge unknown: the Web

IBM, Sony agree to make digitally delivered music technologies compatible Partners tune up Web-music plans, Electronic Engineering Times, May 31, 1999

Livingston, Brian, Readers Share Their Opinions about the New SDMI Music Standard and Why It Will Fail, Infoworld, August 16, 1999

Oaks, Chris. RIAA, Diamond Sweep Away Suit, Wired, August 12, 1999

Ozer, Jan, A Secure Future for Music: Protecting Artists' Rights, PC Magazine, September 21, 1999

Robinson, Sara, Recording Industry Escalates Crackdown on Digital Piracy, NYT, October 4, 1999

Sullivan, Jennifer, RIAA Suing Upstart Startup, Wired, November 15, 1999

Tweney, Dylan, Net Prophet: Secure Digital Music Initiative Cannot Stop MP3, Infoworld, April 26, 1999


The Internet and Entertainment

Boyd-Merritt, Rick, Insecurities: Intel and the Recording Industry Association of America find out that the Internet means an end to their proprietary business approaches, Electronic Engineering Times, March 8, 1999

Very interesting point that digital distribution in a huge digital marketplace spells the end of a proprietary business approach where the label owns the music and doles it out to fans for a price paying a royalty to the artist. Even if this isn't completely true it certainly weakens the bargaining position of the major labels, thereby changing the proprietary business model. For information about the courts etc. see Diamond Multimedia case.

Moody, Glyn, Top of the Pops, New Scientist, June 19, 1999

Music business' fear of piracy and the distribution component of digital music leads to SDMI as a means to protect commodity.

Goodman, Fred, Is MP3 the End of the Music Business? Rolling Stone, April 1, 1999

Addresses the issue of lost revenue to the music business from free music as distributed on the web in the form of MP3 files. Others argue that this just wets the appetite of fans. Perhaps the Grateful Dead see the issue this way, although it would be hard to use this arguement when talking about piracy.

Grossman, Wendy, Putting the Squeeze on music: benefits of Internet to music industry, Scientific American, May, 1999

Makes important point that Internet distribution benefits the music industry as a whole. .. by allowing more direct customer contact.

Isenberg, Katie, Web Hits: Will the Internet Make the Record Business Obsolete?, New Republic, September 6, 1999

Informative overview of the issues involved with digital music distribution and the major labels. She comes to the same conclusions that this paper does--that it provides an outlet for some and a bargaining chip for others.

Nelson, Chris, Making That Band-To-Fan Connection, www.sonicnet.com, April, 28, 1999

Nelson, Chris, Online Music Sales to Top $5 Billion By 2005, Study Says, www.sonicnet.com, November, 25, 1999

Ozer, Jan, Entertainment will be Virtual, PC Magazine, June 22, 1999 MP3

Sullivan, Jennifer, Bring in da Webnoize, Wired, November 15, 1999

Coverage of growing annual conference held about issues of music on the web.

MP3 and Digital Distribution (a few sites distributing music via MP3 downloads. They often have a combination of old and new music by signed and unsigned artists).

Emusic.com

Firstlook.com

Garageband.com

MP3.com

Myplay.com

Payola.com

Riffage.com

Rioport.com

Reuters, Search Engine Under Fire, Wired, March 24, 1999

Lycos MP3 search engine angers the music industry. They claim it promotes piracy.

Sullivan, Jennifer. Napster: Music is for Sharing, Wired, November 1, 1999

Software allowing users to find and trade MP3 files on the web. The designers claim that it is designed to help sell CDs and the music industry claims it promotes piracy.

Kaplan, Carl S. In Court's View, MP3 is Just a 'Space Shifter', NYT, July 9, 1999

Gillen, Marilyn A. Hardware Firms Offer New Digital Options, Billboard, September 4, 1999

Nelson, Chris, Music Industry Crossing International Borders to Fight Web Pirates, www.sonicnet.com, 10, 29, 1999

Neslon, Chris, Digital Nation: Paying to Play in Cyberspace, www.sonicnet.com, 10/27/99

Nelson, Chris, MP3s Appear to be Helping Album Sales, www.sonicnet.com, 11/11/99

Nelson, Chris, MP3 Outlives Naysayers' Forecasts, www.sonicnet.com, 11/24/99

Nelson, Chris, MP3s Punk Up the Net, www.sonicnet.com, 3/31/99


Online Retail and Online Demand CDs

Fitzpatrick, Eileen, More Retailers Join Online Fray, Billboard, May 15, 1999

More consolidation and more online competition to crowd the online waters and compete for maret attention. Some claim to try to tailor their product to the tasted of regional audiences similar to niche marketing and CD-on-Demand services.

Reece, Doug, Music Retailers can Buy Online Via Navarre, Billboard, December 12, 1998

Holland, Bill, Get Down and Digital: CD sales are going onto the Web, Time International, February 22, 1999


Sources for Information and News of the Internet Music

Digital Distribution and the Music Industry '99

Digital Nation on www.sonicnet.com a weekly report on web music.

Electronic Freedom Foundation Cafe covers intellectual issues surrounding digital music distribution. Including provacy issues, fair use, and intellectual property. Also links to Wired News MP3 Rocks the Web and MP3.com news.

Media in Transition site discussing political issues of the digital era.

Musicstation global music information network

Webnoize provides daily news about the "digital music revolution."

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This paper was presented to Professor Howard Besser's Impact of New Media Information Resources: Multimedia and Networks class in the UCLA Department of Information Studies, Fall 1999. I was also a member of the Creative Arts Focus Group.