Why the record companies must accept and adopt digital distribution

It hit me tonight while switching between channels on satellite radio during my drive home. People have put forth ideas like this for awhile now, and I thought it was probably true, but now I know for sure: targeted (even omnidirectional) specific narrowcasting for small audiences is the future of music.

It just has to work this way, and here's why:

1. What people want

Very simply, people want what they like. Not necessarily what they already know, but almost certainly something similar to that. This isn't restricted to particular bands or artists. The way I listen to music on satellite radio is determined by my mood, which is affected by everything around me. After a stressful day at work I might like to listen to jazz standards. Late Friday or Saturday nights I often love driving to electronica/techno. Other times I might be feeling nostalgic and want to listen to 80's hits. Almost any artist within these particular genres will accommodate my mood.

What is so great about satellite radio for me is the variety of music I hear within the genre-channels. Every day I hear something I haven't heard before along with the familiar favorites that drew me to that particular channel. My music nerd friends who either have or have recently dumped satellite radio tell me they've heard everything that's in rotation and have higher quality audio on their iPods anyway, but it's still fresh to me.

2. How people want it

Easy, portable and cheap. Bulky, physical discs are not easy to obtain (it still requires a trip to brick-and-mortar retailers or delivery via postal mail) or cheap to buy. In an ideal distribution world I will hear something I like while driving or at home, flag it for immediate or delayed download and once the song is downloaded it will either be available for streaming or be pushed in its entirety to every one of my music/media devices, ready for immediate and infinite listening. The streaming or pushing can be done either peer-to-peer among my devices or from a central server.

99 cents a song is ok for now, but once this is the primary method of distribution we'd better be looking at 25 to 50 cents a song or better yet, unlimited downloads for a flat monthly fee. I'm also ok with the way satellite radio currently works, namely, a constant stream of genre-specific music with no local physical preservation for a low monthly flat fee. I don't particularly care whether I can hear any one specific song at exactly the time I want it as long as I know the music will keep coming. I know I'm going to hear something I like and my artist/song presets will notify me when one of my favorites is about to be played.

3. What artists want

I'm stretching here as I am no expert on this, but these are my thoughts and opinions. All of you pros, amateurs and hobbyists please let me hear yours. Ultimately, artists want people to hear their music. The Internet is the most efficient distribution mechanism yet known for digital music. We know it works, people use it every day for just this purpose. So, if artists want people to hear their music they should use the Internet to distribute it. Notice the absence of "record company" in that equation.

Artists also want some sort of recognition as authors of works, and hopefully some amount of compensation for the effort and creativity expended in order to create such works.

4. What record companies want

In a word, money. From what I've seen, heard and read it is rare for a record company to actually care about an artist beyond what the artist can contribute to the record company's bottom line. About the only thing record companies seem good for these days is "big media" promotion and in some cases, distribution. See Internet, supra.

So what's an outdated, desperate, old-guard, head-in-the-sand pre-Internet industry to do once the effectiveness of lawsuits fade and people are sick and tired of paying multiple times for the same song just so they can play it as a soundtrack on their game consoles and walk around with it on their digital music players?

Hopefully, come to its senses and rethink the business. Otherwise it will die.

What can happen

Apple has demonstrated with iTunes that people are willing to pay to download digital music if the price is right. Microsoft has demonstrated with Xbox Live that people are willing to pay to download digital movies and TV even though the prices may not be quite right yet. There are still issues with Digital Rights Management, but I am hopeful the market will help relax these unreasonable restrictions once it is realized that the sky will not fall if a song is transferred from PS3 to PSP to Xbox 360 to PC to Zune to iPod and back again.

Some ways record companies can adapt to this new permutation of the consumer-driven music industry are:

• provide the highest quality, "official" versions of songs for download;
• add value to "official" versions by including lyrics, album art, concert promotions, etc.;
• create song "extras" for particular media devices, e.g., an interactive rhythm game for the Nintendo DS touchscreen, Xbox Live achievements if a preset number of others download your original remix of a song, or a podcast interview with the artist for digital music players;
  
• at the artists' individual discretion, make raw tracks available for remixing by consumers or DJs;
• allow consumers to participate in new album or single song releases by designating particular (or randomly selecting from a list of unique identifiers given for "official" purchases) consumer authorities who will receive pre-releases and be allowed to review and promote them via their blogs, affinity groups, or otherwise. These authorities could track what they've helped to promote, thereby creating a sort of Xbox-less achievement system;

All of these form a sort of self-eating watermelon of promotion, sales, feedback, reputation and reinforcement that could allow record companies to remain relevant, albeit in a much different and less bloated form than they exist now.

Consumers

The recording industry is not the only one in the path of this runaway train. Consumers, too, must change their perception about what it means to "own" music. Possessing multiple sleeves in a binder containing slabs of plastic with dots stamped into aluminum foil is nice, I suppose, but consider whether it even matters that you don't "have" a particular song if your downloading plan allows unlimited song downloads for a small monthly fee. This way the whole "filesharing for free" cycle is short-circuited: it is simply easier and faster for me to obtain a reliably encoded high-bitrate song, exactly the version I want exactly when I want, than it is for me to coordinate with someone else to obtain a copy of the same song that may or may not be of an acceptable quality.

Next?

Whether distribution happens via satellite radio, Internet radio, municipal wi-fi or promotional USB thumb drives by postal mail really doesn't matter. The ideas are here and they are catching on. Consumers have made their preference known, so record companies had better decide if they're going to take a swing or let the ball zip by as it kisses the inside of the baseline.