Tuesday, October 16, 2007

Building a b(r)and

Last week, rock band Radiohead released their latest album on the internet. Nothing new, except that fans have a lot to say in the purchase process: each decides how much he or she is willing to pay for it. A precedent in the music industry.

The music industry's business model is changing. The drop in revenue coming from records (whether be it from material or unmaterial formats) needs to be compensated by increased revenues from touring, sponsoring, merchandising... Ringtones can help, but also more "creative" ways have been developed to extort money out of the fans: during live performances, a band requested its teenage crowd to call a specific number with their mobiles so they could get a video of themselves at that performace and share it...

Apparently, new ways have emerged to milk cash out of the fans. However, it still remains unclear how the whole business model should be re-conceived. Recent events have demonstrated the artists and labels willingness and attempts to adapt: Sarah Bettens released her album through a newspaper, which required the newspaper to double its circulation. Madonna resiled her contract with Warner for a "360-degree" contract that including concert, merchandise and endorsement deals (and - who knows - video games...). And multinational record companies have dropped selling songs protected by digital-rights-management. Have they lost any hope in capturing value from online sales? This week Economist article provides an answer to that. Clearly, changes are undergoing.

Besides its innovative pricing policy for the download version, Radiohead is also set to release a box containing several LP's, cd's, booklets and artwork. Price tag: 40£. Thus, on the one hand, songs available for download to anybody; on the other hand, value-adding merchandising, in line with what the most loyal fans would expect.
In any way, unconditionally agreeing with the consumer's demanded price once again shows how the consumer is getting has the final word.
Consumer empowerment: not only in the building of a b( r )and, but also in the pricing of its products… and record companies should realize that as well.

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