creative deconstruction

Listener Value vs. Commercial Value

Posted on 29. Jun, 2009 by refe in MUSIC INDUSTRY

What makes music valuable? And who is it valuable to?

I recently had a discussion with a musician who is convinced that new business models – specifically those involving free or open licenses, such as Creative Commons – “devalue music.” The spirit behind his position is simple: the less control he has over the tracks he releases the less revenue he will be able to extract from them.

Unfortunately, this line of reasoning is backwards for a variety of reasons. The biggest issue – aside from its cynical, borderline anti-fan sentiment – is that it’s based on the idea that profitability creates value, rather than the other way around. When a product becomes less profitable it has therefore become less valuable.

Yet, that’s not how it works. A product becomes less profitable because it has lost value. To over simplify it a bit – value determines profitability, and profitability is the result of value.

Of course, backwards logic inevitably produces backwards business models. In an effort to squeeze every last penny out of each track they release the lock it down with restrictions – stringent copyright laws, DRM, etc. They do whatever they can to ensure that no one is able to engage with the tracks in any way without the industry being compensated for it. This leads consumers to look for other ways of getting their music – ways that will allow them to use it how they want. Isn’t that why you bother to own something in the first place?

So is my musician friend accurate in his assertion that open licenses such as Creative Commons really “devalue music?” No – in fact, for many fans the freedom to share, remix, mash-up and engage with music only makes that music more valuable to them. Restrictions are what drains music of its worth. As a music lover, which would you rather own – tracks hindered by DRM, or open for you to use as you please? Pretty clear choice, right? Yet the record companies – as well as many artists – continue to ignore this reality.

Obviously, there is a big disparity between what is valuable to listeners and what’s perceived as valuable to the industry. It has gotten so bad that the industry actually believes that if they give the consumers what they want it will destroy their profitability. This is not a sustainable way to do business. It’s the consumer who ultimately determines value. Until the industry can learn to reconcile listener value and commercial value we’ll continue to be stuck right where we are today – battered by declining sales, declining consumer interest, and unwilling to walk the paths that will lead us back to stability.

Artists and the record companies need to make money – no one is suggesting otherwise. Yet, attempting to drive profits by decreasing value is nothing but a great way to ensure that even those profits you do find will eventually dry up. On the other hand, if you offer listeners something that they actually want, they will pay for it.

New business models are risky. Giving up control to the consumer is hard to do. Yet, some risk is necessary for real progress to be made. A changing marketplace should fuel innovation, not self-preservationism.

Tags: business models, copyright, Creative Commons, DRM, intellectual property