Don’t Give Up On The Music Market Just Yet

The huge and growing catalogue of music digitally available through an expanding choice of retailers and services might suggest that any supply side problems are well on the way to being solved. Look a bit closer however, and something is missing. There might be more songs, but the hits are coming from an ever smaller group of companies. And there are signs that, outside of a small handful of contenders for international success, less money is being spent on each new track.

This matters, because a thriving music sector depends on more people rather than fewer having access to the best studios, the best arrangers, session musicians, and everything else required to make excellent new recordings.

Chris Anderson noted that a long tail world favours aggregators over producers; how can the market be reshaped to put the incentive back into making great records, rather than simply collecting as much generic music as possible and tagging it for SEO? Some commentators advocate giving up on the market, and replacing it with a flat rate and a layer of bureaucracy. This seems to me a counsel of despair; we surely have not run out of other ideas quite yet!

Perhaps part of the answer is to look at how new music is coming to the market. Is there a flattening effect which is failing to reward creators who make an extraordinary effort? I’d say there is; a track that was made in a rush by people who don’t care is most often on the market at the same price as a piece made with love by a skilled and careful craftsman. The reward that flows back is a reflection solely of popularity, which clearly penalises musicians who are chasing something other than broad appeal.

This is carried through to the retail layer, where the way catalogues are traded makes it difficult for a business to find and develop a focus. Retailers and services are forced to buy huge quantities of music they don’t want in order to get what they need, and denied the chance to capture the value that they might otherwise have an incentive to create by serving a niche or two with currently undervalued music.

Between these two effects we have strong incentives to avoid diversity and to invest as little as possible in risky new music. There is no reason why music should have to do without the tools that just about every other market uses to allocate resources and signal value to producers. Both price and popularity can be expressed and captured in a wholesale market with fine granularity on the same kind of electronic trading exchange that supports future contracts in commodities, or shares in public companies. Discussions about databases would evaporate as the ability to interact with the market would depend on robust and reliable data management and standards. Exclusion and unfair trading would be a lot easier to detect. There would be no need to collectivise anything, or force participation, as better conditions for trade would by themselves attract buyers and sellers to the market.

This is easy to say but of course much more difficult to attempt, and might well do nothing to improve either liquidity or incentives in music. What can be said with some certainty is that it would create both openness and a lot more information about the value of music in the market, and would by necessity force the creation of sophisticated trading strategies on both sides. At least then we would find out what the market wanted, even if we might not like the answer.

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