Friday, January 12, 2007

What’s That Sound? THWAP goes the long tail! – Part II

How “Sampling” Will Save RIAA
Sampling is an industry term for users listening to new music in order to find music they like. Broadcast radio is probably still the primary means of sampling music for most people. However, with people starting to express more varied tastes traditional radio formats are less and less effective because they try to cater to the broadest set of tastes and ignore niche tastes. So, to summarize so far, RIAA makes less money off of each individual artist and therefore spending more on any one artist is a bad investment. On the other hand, there is no effective way for them to spend less but expect the good artists to organically rise to the top and spark more sales. The answer, of course, is better sampling.

The Economics of Sampling
As I’ve said before, I have two main beliefs about why RIAA is making less money these days: 1) the product (music) is relatively less compelling than DVDs and games as each passing day goes by; 2) people have fixed budgets and RIAA is losing share to other markets.

You might be thinking that sampling doesn’t make music more compelling and therefore it can’t alter the purchasing choices of individuals – and I think that’s right. However, sampling does have two incredibly powerful economic aspects in its favor:
1) it reduces marketing costs dramatically thereby increasing profit;
2) it brings a new set of pocket books into play – advertisers!

The first point about reducing costs is self-explanatory so let’s get right into the advertising opportunity. You may not realize this but every time you listen to a song on the radio, RIAA gets paid. The more you listen the more money they make. Stated differently, the more you sample the more money they make. Who pays for all of this? Every other industry except the music industry – that’s who! While advertisers try and reach you to sell everything from sneakers to bubble gum, RIAA gets a slice of the pie when you sample music off of broadcast sources. Nice, right?

Listen And Love It
I’m sure you’ve figured this out by now, but we view BroadClip as the ultimate sampling tool. We view these changes as the natural progression of the radio market to match what’s happening in other markets. Fifteen years ago there was only one way marketing – print ads, broadcast TV, billboards etc.. Today we live in an interactive age of clickthroughs and targeting. That trend hasn’t caught up to radio yet.

When you time-shift/place-shift radio that you like, you discover new music in the process. Everybody wins – you get to listen to targeted radio without spending countless hours sifting through stuff you won’t like, RIAA makes more money, and internet radio stations have a viable business model because we can clear ad dollars to them (think along the lines of what Google does for bloggers and other content sites). Now that’s free love!

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