Lessons From Jay-Z, MySpace, And iTunes

A number of recent announcements in the music industry caught my attention:

My take: That’s quite a bit of news for one week. The music industry is clearly going through some significant changes. Here’s what I think we can learn from these moves:

  • Convenience matters. Why is iTunes so popular? It’s terribly convenient. Most people don’t have a desire to unwrap shrink-wrap, open a plastic case, and caress a metal CD. They want to hear music. iTunes provides the easiest way to fulfill that desire. Universal, Sony, and Warner are teaming up with MySpace because they recognize they they need to create an equally convenient option in order to dampen the growing power of Apple’s music retailing empire.
  • Money matters. MySpace may be a “Web 2.0” company that grew up fostering connectivity across its members, but it still lives in a “Finance 1.0” world where revenues and profits are really important. Especially when you are a part of a big conglomerate like News Corporation. And Jay-Z had no problem walking away from Def Jam (where he had been president) for some more, a LOT MORE, money.
  • Experience matters. Why on earth did Live Nation give Jay Z a $150 million deal when his record sales are declining? (His album from last year, “American Gangster,” sold one million copies in the US compared with “The Black Album” from 2003 that sold more than three million.) Because the concert industry is booming. While people may buy fewer CD’s, the concert industry grew 8% last year to nearly $4 billion. Digital distribution hasn’t dampen people’s desires to have a memorable concert experience. And this opens up even more revenue streams.
The bottom line: Music might become a loss leader in the music industry.
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