If we are to explore the digital marketplace for both streaming and transactional downloads the music business might do well to look at what the film business is actually doing in the same space. We will quickly see that Spotify is not Netflix, but maybe it should be.
Readers will note the film business has not bought into the faulty logic that the only way to combat internet piracy is to make every film ever made, available instantly, on an all you can eat service for $9.99 a month. Some might argue that is what Netflix is, but people making that argument are obviously not current subscribers!
One thing that has struck us in the comparisons between Spotify and Netflix is that Netflix does not have every film, or even every current film, or even a large percentage of popular films. For the vast inventory that Netflix has, you also realize the service has a lot missing. But then again, what do you expect for nine bucks a month?
This is not to say that most in demand films are not available, somewhere (and legally). It’s just not available on Netflix. Other services such as Itunes, Vudu and Cinemanow (to name just a few) offer some films for rental while they are still in the theater, some for streaming rental prior to a home video “dvd” date, and there are constantly new variations and options.
Generally speaking films arrive at Netflix last in the distribution chain, if at all. This is a problem for Netflix in a lot of ways so they have responded to this by 1) offering competitive advances to film producers to get films earlier (generally in the cable window) and 2) they have begun investing in producing original content to differentiate themselves from the competition (this strategy worked particularly well for HBO).
Netflix in responding to their needs in the marketplace is actually investing capital directly into content creation in a meaningful way. Perhaps some artists should charge an advance for high profile new releases that will attract listeners to the service. Likewise, perhaps Spotify should provide funding for the financing and development of new artists.
So here is the question, is the record business really utilizing the new digital platforms correctly to address the current market place? Perhaps by looking at the options available to consumers from movie streaming, rental and download businesses we can find more robust and flexible opportunities for artists.
One thing we’ve noticed absent from the current offerings for example, is say, a $1 a day transactional streaming rental for an album. Why doesn’t this exist?
FILM RELEASE WINDOWING
The movie business releases films in what is known as “windows”. A typical feature length film is generally released in a pattern that looks something like this:
1 Film Released in Theaters
2 Film Released later on Video on Demand (Rental)
3 Film Released later on Cable and/or Broadcast
3 Film Released Later on Home Video (Rental and Purchase)
4 Film Released Later on Netflix (Subscription)
There are variations on the above, but the point being that you can not buy the DVD of a blockbuster film the day it opens in theaters, nor can you view it on TV that night from the usual cable movie channels. Today these windows are being rethought as the film industry explores different release models including how digital platforms are utilized as part of a theatrical release.
RECORD RELEASE WINDOWING
We’ve heard people say that the record business historically has not windowed releases. This is only sorta true. It is true that a record is released to all outlets in all configurations more/less simultaneously on a single release date. There may be some exceptions with the availability of say vinyl, but mostly it is true that labels do not withhold music releases from different markets or distribution channels. But maybe that’s not exactly either right if we look at it closer.
Generally speaking, a historical record release “window” looks like this:
1 Radio Airplay prior to a commercial release of the single
2 Commercial Single Release
3 Album Release at Full List Price, but “Discounted” at Retailers
There’s not much more that is done until the album gets to be a catalog title, which the record industry would refer to as a mid-line title. Some records, drop one more step from midline to budget. Records that generally make the last drop may have been albums by artists who had one hit on the album.
Today, these traditional old physical model windows built around pricing incentives don’t really make sense on digital platforms. New Releases on Itunes are not discounted on release date and then return to their suggested list price a week or two later when the discounting ends. So if record release windowing is not based in pricing incentives, perhaps it should be based in accessibility incentives.
DIGITAL PLATFORM MUSIC RELEASE WINDOWING
What comes next is the starting point for a discussion to break free from much of the current controversy over whether or not Spotify is fair and sustainable. It is an attempt to rethink the digital music distribution landscape in the same way the film business has with varied consumer offerings and options.
We’d love to see some new players in the marketplace for music that function much in the same way that Vudu or Cinemanow do for films. These would be transactional streaming rentals.
1 Single Release Digital Transactional Download 99 cents
2 Single/Song Release Digital Transactional Streaming Rental 10 cents for 24 hours
3 Album Release Digital Transactional Download 9.99
4 Album Release Digital Transactional Streaming Rental $1 for 24 hours
5 Select Songs Released to Subscription Streaming Services, not whole albums.
6 Album Release Subscription Streaming Services
The key to a future where streaming may be the preferred delivery method is dependent upon more variations and flexibility in the the business model than currently offered by Spotify. There are a range of opportunities in exploring business models that allow for streaming rentals, and limited access to different material at different times.
If every decision we make is based upon the extortion of illegally operating and infringing businesses, surely we will pay the price in a race to the bottom where eventually everyone loses except the companies getting our labor for next to nothing.
The Trichordist 
I see the logic in this argument, and one definitely hopes that Netflix will continue to invest more in its products, and inspire other players to do the same. But right now? Let’s say they are definitely the channel of last resort when it comes to distributing films. For most Indy film-makers, giving these guys a movie is tantamount to rendering it worthless. We are doing the equivalent of Wile.E. Coyote, running on thin air over the edge of the Grand canyon so long as anyone imagines that a few cents paid per movie in any way equates to the investment required to keep production at sustainable levels.
The solution is actually quite simple.
DRM.
Movies have it on Netflix.
Movies have it on Amazon.
Videogames have it on Xbox, Playstation, and the PC.
Music doesn’t have it.
Too many musicians came out against DRM, and too many still vehemently oppose it. Until musicians actually support DRM for their work, they will work for free, while others profit off their labor.
What I am curious about is why are musicians against DRM for their own music, even though they use it every time they watch a movie at amazon or netflix? Do they consider themselves to have less Natural Rights and Human Rights than actors and directors?
What about the sound-mixers and engineers for musical albums? Do they have less Natural Rights and Human Rights than videogame producers?
Is the screenwriter a higher form of Human with more Natural Rights than the songwriter?
How did this come to be? And again, why do so many musicians oppose DRM for their own art, while supporting it for the art of filmmakers and videogame creators?
Please discuss!
Long story short, if artists simply said:
“Our music will only be made available on DRMed ecosystems like Apple once had.”
The crisis could be averted and an artistic renaissance would blossom with new marketplaces that respected property rights, Natural Rights, and Human Rights.
The big question is, why, instead, do musical artists insist that DRM is bad for their art, but only good for film and videogames?
Netflix does not have to compete with DRM-free movie sellers. Amazon and Apple both DRM protect the films they sell, but they do not DRM protect the music they sell.
Again, if someone could please answer my question, perhaps we could address the simple crux of the matter, “Why are musicians anti-DRM for their music, but pro-DRM for films and videogames?”
Are filmmakers and game-maker creatives endowed with higher Natural Rights than musicians? Is this somewhere in the Declaration of Independence and Constitution? Perhaps it is in the Bible or one of Larry Lessig’s books?
One of the funniest things one can do is google “Artists for DRM.”
The first dozen or so results are dominated with titles about how artists are AGAINST DRM.
The big question is, if artists are against DRM, why are they complaining that the middle class artists are getting crushed, while the infrastructure which once developed and promoted even the top artists is dying?
There seem to be a few hundred “creative folks for good internet” organisations.
But which of them, if any, support DRM for musicians, in addition to videogame creators and filmmakers?
And why, if they are against DRM for musicians, do they complain that while the videogame industry is booming the music industry is dying?
The videogame industry is not booming, who are you kidding? BitTorrent piracy is killing the VG industry just like motion pictures. Revenues are declining.
http://www.gamasutra.com/view/news/40265/Is_video_game_retail_dying_Three_theories_behind_Januarys_sales_downer.php
I use Amazon for streaming motion pictures. Netflix selection is less than weak. Aamzon has almost everything you could order on DVD available to stream for a few dollars a “rental” viewing. “Owning” the movie in your locker is more expensive. That would be a sustainable economic model fro music streaming.
I think this is a very viable alternative to what we are seeing today, and have done some thinking about this very topic. I saw the Kevin Spacey speech where he lauded the way film was giving consumers what they want, in a format they were willing to pay for, but music hadn’t managed that yet.
I’d love to see some experimentation with these concepts but it will be hard for someone to have an incentive to be first to test it out. Will keep an eye out for anyone doing something similar so we can discuss it here!
Interesting stuff. David, can you recommend further reading on windowing and how it might be applied to digital music distribution? Thanks.
How about a hybrid streaming rent to own model where a customer pays a set amount to per month, say $10, which gives them credit to stream in a rdm protected application like spotify. Every stream costs 5 cents, as the listener streams they are also purchasing on a layaway plan. They stream so many times at 5 cents per stream, say 25 times and they then own the song. An email is sent to link them to the download which they can access anytime in the future and listen to anywhere on any device. The songs that don’t reach download status earned a reasonable stream rate and may eventually get owned as the listener streams. The spotify like host can earn a percentage of the 5 cents.
Steve – that’s a great idea and one of many that should be getting explored.
We don’t know what the right mix of service and pricing options are, but we do know we are a long way from finding all of the opportunities that would be mutually beneficial to both creators and consumers.
The biggest problem with Spotify is the revenue pool ceiling from the subscription base. It’s just dog eat dog because everyone is competing for more of the finite pie, whereas transactional models (including transactional streaming) the sky is virtually unlimited.
The biggest problem is accepting that for streaming services to exist they must be 1) subscription based and 2) all you can eat. There are many more models to explore that would provide greater revenue for artists and flexibility to consumers.