Shark: 'Good morning sir. Can I interest you in advertising your company through our most excellent media broadcast service? It is the leader in its field and attracts more of your target audience than you can shake an industry demographic at... and it's a gift at our present rate.'
Mark: 'Wow, that sounds just perfect for my very specific marketing requirements! Where do I sign?'
Shark2: 'Good morning madam. Thank you for subscribing to our free broadcast service. We greatly appreciate your support. But did you know that our paid package is ad free?'
Sub: 'Sounds perfect! Where do I sign?'
Shark to Shark2, with a rub of his hands: 'We’re gonna be rich...'
Ad Adversaries
On my first visit to Japan, I was impressed to find that television broadcast supported two channels of audio rather than the UK’s one (in fact, Japan's broadcasters were capable of distributing high-definition analogue TV as long ago as the late 1980s).
But I was puzzled that TV wasn’t stereo – wasn’t that what pairs of audio channels were for?
I soon realised that this was far smarter than simple stereo. For a start, two channels could be used to support multiple language broadcasting, such that Western programmes could be be dubbed into Japanese without losing their appeal to English-speaking viewers. But even better, the Japanese consumer electronics industry was trialling a system that would allow (then popular) VHS VCRs to be automatically paused during advertising breaks. Genius!
Or so I thought, until I discovered the controversy this was causing.
It transpired that Japanese television advertising buyers were vehement in their belief that they were entitled not only to the slots in real-time broadcasts that they had bought but also to corresponding space in any recording that was made of the programmes around them. I wasn’t able to stay in Japan long enough to follow the procedings in detail but the power of the advertiser won out.
Now it feels as if we are readying for a re-run.
Dew point
With the record business in disarray, new alliances are forming and new business models are being developed. Among them are on-line delivery services such as iTunes, Napster, Last FM and Spotify. With Spotify (spot-and-identify), music is available for free – although access is becoming more difficult. Part of this business model is for advertising slots to generate revenue. The other part covers how Spotify pays for the music it distributes. During 2010, Spotify paid out more that €45m in licensing fees and questions were being asked of its long-term viability. Its latest move sees the company bartering equity for music. Effectively, subscribers rent music rather than buying albums, while music publishers are able to gain a stake in the company in lieu of some royalties. A stake in their future.
And, in an echo of Japan’s VCR venture of the mid-1980s, subscribers can opt to pay for what Spotify gives them for free – the same music archive but with the ads taken out. More genius!
The future suggested by all this is one in which nobody will own music, films or even much in the way of computer storage. Instead, everything will be stored on the internet in a form that has been tagged The Cloud. Expect to see more clouds gathering soon.
The music business is complicit in these developments. It now believes that subscriptions, rather than music sales, are its best prospect – reflecting the decline in its ability to find and market new talent. As it prepares to close 60 shops in the UK, high street retailer HMV is acutely aware that most of its revenue comes from back catalogue. Right now, the record business is living in fear of its possible failure.
In fact, publishing is ready to eclipse record companies. Talking to Mike Pelanconi – owner of Ironworks Studio in the UK – left me in no doubt that he believes it. And he has little in the way of sympathy for the record companies.
Pelanconi is not making the usual references to parties and ‘entertainment’ but at the contrast in attitude towards paying musicians and handling other costs. Apparently it’s OK to hire in equipment to sit unused in a studio corridor, but taking good care of artists is a big ask.
Having watched vinyl displaced by CDs and then iPods, some of us will see media servers as another move away from what made the music business great. But maybe our mistake was our support for the major record companies in the first place.