Creating a Merit-Based Music Economy: Compulsory or Blanket Licensing for Interactive Subscription Services

A. The Business of Music Hits and the Star System

Most of the traditional commercial music business is concerned with popular music, which is primarily concerned with big hits: hit songs, hit albums, hit videos, hit artists, hit concert tours, hit radio formats, hit merchandise. Everything in the music business is focused on discovering hits, developing hits, producing hits, promoting hits, and exploiting hits. If it's a hit, it's a success. If not, it isn't. The stakes are pretty simple.

Well, maybe not all that simple... Not all hits are successes, at least not for the artists. But, you can be darn sure that if it isn't a hit, it isn't a "success" in the ultimate sense. In order to have a chance at success in the traditional commercial market, an artist has to be a star, a celebrity -- it's as constant as death and taxes. Here's how it all basically works.

A1. The Essence of Mass Media

One of the key constraints of the music market is the way the audience discovers new music. If the audience doesn't know about the music, it certainly won't buy it. How do music fans find out about music? People hear music on the radio, they read about it in magazines and newspapers, they see videos on TV, friends and colleagues tell them about it, they hear it accompanying TV shows and movies, and nowadays they're also starting to discover and sample it on the Internet. With the exception of word of mouth and some (but not all) Internet resources, these are all mass media.

A mass medium is a method for delivering some kind of information or entertainment from a single source to a large mass of people. It's sometimes called "one-to-many" as compared with "many-to-many" and "one-to-one" media.

Examples of "many-to-many" are: email lists, conference calls, or any other collective meeting format. Examples of "one-to-one" are: most telephone calls, letters, much email, voicemail, and our normal face-to-face conversations and business interactions in day-to-day life.

Mass media are also often called "broadcast" media. They generally include TV, radio, print periodicals (newspapers/magazines), and many web sites that don't have interactive features (especially web sites produced by print media republishing their content online).

Mass media have some fundamental features that shape content flowing through them.

They produce a single program of content for everyone in their audience at the same time. One size fits all -- everybody gets pretty much the same thing.
Their business models are mostly about maximizing the size of the audience. There is standard revenue from delivering the content, so the more people who get it, the more money you make. This is true whether the audience pays for it directly or advertisers pay for delivering the audience's attention to their ads.
Finally, there are a relatively few number of successful mass media, compared to the number of people in the audience. There is a finite number of TV channels, radio stations, newspapers and magazines to serve thousands to millions of people in their audiences.

The more successful players there are in a mass media marketplace, the more they tend to dilute each other and become less successful on average, because each individual member of the audience can only pay attention to a finite number of them over a finite period of time. In today's information-glut society, we are likely already near saturation.

This is sometimes called a "zero-sum game" -- for every audience member one media adds, they generally subtract it from some other media's audience. All the additions and subtractions across all the media generally have to total out to zero, as long as the audience stays the same size and spends the same time across all media.

Mass Media Business Models: Successful mass-media companies are those that reach the largest possible share of their market, at the expense of all competitors in the market. This tends to allow only a relatively small number of successful media, because media with small audiences drop out of the market. With a fixed overhead for creating and distributing content, and a predictable amount of revenue from each audience member, there is a minimum audience size below which the company loses money. Only those companies whose average audience is above break-even will succeed over time.

But, if the audience grows well above break-even, the potential profits are enormous. "The Publishing Model" has finite overhead costs, marginal single-customer profit, and the exponential potential of cheap mass production. Also, much mass media is supported by mass advertising, which has the same one-to-many structure. (This is one reason advertising can be so annoying: it is often crudely targeted, by aiming anonymously for a large group instead of addressing the individual needs of each person in the audience.)

To be sure, cable technology and other developments have increased the number of mass media players in recent years. Local or niche media may be able to survive with smaller audiences, as they devote their content to local or niche topics. But in general these developments haven't changed how mass media operate in principle. These are minor variations around a major theme.

Mass Media makes Collective Culture: Mass media are all about capturing as large an audience as possible simultaneously, with a single program of common interest. They embody the essence of collectivity: We are all the same. We share the same experience.

This is what being a star is all about: Stars are present in the mass media. If you are not visible in the mass media, you are not part of a common cultural experience. And if being part of a common culture is a requirement for being visible to your audience at all, you have to be a star to get to your audience to any significant extent.

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