Less is More (continued)

« i-mate k-jam | Main | And The Survey Says ... »

Less is More (continued)

I’ve posted on this topic a bunch, sometimes under the related Small Is The New Big theme.

I come back to it with an angle on the music business. I don’t know the exact numbers but it’s pretty clear that ringtones are generating close to half the total online music revenue of major record companies.

How is it that a five second sample of a song is worth $1.99 and the entire song is worth $0.99? How is it that these five second samples are getting more and more popular as the sales of the songs themselves stagnate and may actually be in decline?

It’s a lesson in microchunking and probably a whole lot more. I have friends who bemoan the end of the album format. But what will they say when the single format gives way to the ringtone or its kin? It could happen. I know that many artists are recording ringtones these days when they go into the studio. And Jackson told me this weekend about a new rap format whose name escapes me right now. This new format is a short track designed for play in clubs.

To me this makes perfect sense. In the digital world where it is easy to re-aggregate on the fly, the microchunk is the better format.

Blog posts versus books.

Youtube SNL skits verus the entire SNL show.

Ring tones versus LPs.

It’s the future. We better get used to it and start creating content that can be microchunked.

Comments (8) | | TrackBack (2)

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d83451b2c969e200e550222ab68833

Listed below are links to weblogs that reference Less is More (continued):

» The music industry: a sinking ship? from Digital Media Review - The future is not what it used to be
Last Wednesday, I attended a panel on the music business, titled Challenges and opportunities in the music business but left with the impression that all the industry wants to talk about are challenges. ... [Read More]

Tracked on Feb 6, 2006 8:46:02 PM

» Are Ringtones Microchunks? from SortiPreneur
I have written about microchunks before. It's a term I have adopted from Fred Wilson. Today, Fred posts about the size of these microchunks, bringing to debate, if, as the song (on iTunes) is replacing the album format, the ring [Read More]

Tracked on Feb 7, 2006 9:06:02 AM

Posted February 6, 2006 in Venture Capital and Technology

Comments

Hi Fred,

I work in mobile content, and with the years I´m seeing (and selling) more interesting and evoluted formats and products. Most of those products, by right, should not exist. I mean, why pay 3 $ for a ringtone, when you can buy the track for 1/3 on iTunes? Because you´re not buying a record, you´re making a statement. You´re expressing yourself, and telling everyone: "ehy, that´s me, and I like that song". It´s also good fun. :)
Alas, most of the mobile content you can find on operators´portal or on off-portals it´s easily available for free on the Net, and often it´s relatively easy to port it to your phone, without spending a dime. In the last years, everyone in the mobile industry has done a lot of money with that, but now the novelty is wearing off, people are starting to require high-quality, up-to-date content, and the rules of the games are changing. What I´m seeing is: it´s not enough anymore to microchunk any old dog... to get on operators´decks (and, in the US, this is the only way to make big bucks) you have to differentiate, have a really strong business proposition and execute pretty well.
By the way, I´m happy to read a post abut mobile content on your blog... with over 2 billions mobile and counting, I think the opportunities in this field can easily overshadow those on the web, 2.0 or not...

Posted by: Giordano | Feb 6, 2006 4:02:10 PM

Fred, your stat needs be carefully parsed. You say "ringtones are generating close to half the total online music revenue." True -- if the data is for *online" music revenue only. A look at *all* music sales tells a perhaps less paradigm-shifting tale?

On 1.30.06 the WSJ reported "Combined sales of ringtones and digital downloads tripled last year to $1.1 billion, generating about 6% of the music industry's revenue. Most people in the business estimate that ringtones accounted for about two-thirds of that revenue."

So ringtones account for 3-4% of total music sales. Interesting, for sure. And growing? Like a weed, naturally -- we all know starting at zero makes growth rates look wild. But paradigm shifting? All online music accounts for only 6% of music sales after what, 10-11 years of the web? And 4.5 years of iPod/iTunes mania? Jury is still way out, I think.

Also, today's San Jose Mercury News has an AP story headlined "CD sales dip, but downloading is not to blame":

http://www.mercurynews.com/mld/mercurynews/entertainment/music/13787499.htm

The big take-away from that survey, I think, is that people aren't turning away from distribution models, they're turning away from outrageous price gouging.

Hey music industry, wanna save yourself? Cut CD prices to $4.99, maybe $7.99. The unit margin on a CD was bogus and egregious to start with (the true cost is under $1). Now, 20 painfully expensive years later, it is just offensive, and in an age when people have so many other places to spend their entertainment dollars -- and when real wages have barely kept pace with inflation while media product marketers extract more and more rom our wallets -- it has become untenable.

Posted by: steve | Feb 6, 2006 4:20:20 PM

Giordano has it right - it's the function of the music that makes it more valuable, not the size of the chunk.

Ringtones are actually very cheap compared to other public identity markers (t-shirts, shoes, bags, cellphones).

But remember that the ringtone isn't usually the first window of distribution -- the song gets established as a hit, and _then_ the ringtone has value (because it needs to be recognized by the right people in order to function as a valuable signifier).

(I did almost buy a "Mr. Pibb + Red Vines = Crazy Delicious" t-shirt a few weeks ago... kind of glad I didn't now!)

Posted by: Nicholas | Feb 6, 2006 9:14:05 PM

I believe it was the new media prophets, Arctic Monkeys, who phrased this best:

"There's only music / so that there's new ring tones"

Posted by: Fraser Kelton | Feb 6, 2006 11:56:52 PM

i was going to start my post with that line Fraser but i thought i was starting to overdo it with the Arctic Monkeys!

Posted by: fred | Feb 7, 2006 8:32:44 AM

The unit margin on a CD was bogus and egregious to start with (the true cost is under $1).

So video games should cost $1...

MS Office should cost $1...

DVD's should cost $1...

The unit cost of manufacturing a disk is a total red herring.

CDs cost so much because the vast majority of bands that the labels pour marketing and development money into fail to sell, and never even earn back the money it cost to record, manufacture and distribute the album.

Most of the money you pay for a cd goes into promoting and developing the CDs in the cut out bin.

Don't get me wrong, the labels are greedy idiots. Their biggest mistake is not understanding how to use the internet in the realm of music research and artist development, not distribution.

Posted by: Erik Schwartz | Feb 7, 2006 11:24:32 AM

You know my position, but I'll state it again, smaller sucks.

The hip hop club format is called 'mixtape', as in; 'here's a mixtape joint I just made'.

Posted by: jackson | Feb 7, 2006 2:25:40 PM

wireless home security cameras wireless home
security home security camera system home
security wireless home security system wireless

home
security
concert Ticket Sales concert Ticket

Sales
concert Tickets concert Tickets
online concert ticket sales online

concert ticket sales
sold out concert ticketsold out concert
ticket
concert ticket sellers

concert ticket sellers concert ticket

broker concert ticket for

sale concert ticket for sale concert

ticket pricesconcert ticket prices
wireless home security camera wireless home