Digital Music Sales, A Wedge Theory

Given the inadequate justification for Long Tail Theory, it stands to reason that some model will eventually emerge that will help forecast digital music sales. In addition, there will be a new generation of services that will help to fill the current void that exists between artists who are selling millions of downloads and artists who are selling hundreds of downloads.

Briefly, the Long Tail Theory is the idea that high distribution (the head) representing the hit songs will be outnumbered by the lower distributions of infrequent sellers of digital songs. The sales data for 2008 contradicts the theory as there were 10M of 13M digital songs that had zero sales. There was no tail. In addition, the major problem with the theory is justifying the necessary resources to produce such songs with very low returns. Additionally, the theory seems to ignore mass psychology applied to buying behaviors as well as it applies to establishing social commonality.

I believe that the more accurate sales model would resemble a wedge with a notch taken out of the middle. Furthermore, I believe that the model wants to become a perfect wedge in a perfectly market driven, capitalist environment. The notch represents the flaws in our market driven, capitalist environment, or the degree to which our system does not follow the more idealistic capitalistic model. To be clear, the notch represents the absence of elements for those residing in the tail end available only to those residing in the head end such as promotion budgets and organization.

First of all, there is a good reason why the distribution would resemble a perfect wedge in a complete vacuum of overriding economic forces. It is actually very simple. The Gaussian distribution is well known to most people who have ever been graded on a curve in school. It is the idea that a small percentage of students will make A’s, a somewhat larger percentage of students will make B’s, most of the students will make C’s, a percentage resembling the B’s will make D’s on the opposite end, and a percentage resembling the A’s on the opposite end will make F’s. It represents a naturally occurring phenomenon that applies to many elements of society in general. I submit that it also applies to the quality of available music. The problem is that this distribution does not represent the current sales distribution. Why? Because the system is designed only to select those songs deemed as airworthy and have a potential to become a hit in the opinion of an Artist and Repertoire professional. This is one of the economic forces that distort the natural distribution. That is, in a perfect world, the sales distribution would resemble the distribution of quality in songs. That is, the higher the quality, the more sales. Some may argue that in a perfect world, there would be no politics surrounding the selection of artists, no favors or payola, or no disparity in power. But, it is the game that we call life and there is no changing it overnight. In other words, those of us who happen to like free enterprise, which remains the basis for any of us to dream of success, tend to accept the good with the bad.

The good news is that the “notch” represents opportunity. There are now people who are helping each other to overcome the disparity in resources. There are collaborations and services offered to help others achieve their dreams.

The bad news is that the system is in a state of rapid change and it will take a while for certain folks to emerge as legitimate providers of services and assistance with a proven track record. In the meantime, there will be many who will be disappointed by some of the “resources” that are becoming available on a daily basis. It is a natural process in a period of great opportunity to have many people attempt to provide services and then have an adjustment when the supply exceeds demand and then an eventual settling into some form of balance or equilibrium. This equilibrium will become the model for determining the balance of supply and demand of services as well as the eventual basis to model and predict sales.

So, I submit that the equilibrium of sales distribution will eventually look more like a wedge in terms of percentage and frequency of sales. The notch will eventually be filled by folks who are willing to offer assistance to others at terms that are in direct proportion to the risk/reward. This sales distribution will try to match the naturally occurring quality distribution.

What about niche markets? I believe that some niche markets will become viable, but others will be lost in obscurity. I submit that pure silence might be considered a niche market if we consider a ridiculous spectrum of styles and tastes. That is, some people prefer to hear nothing, but will they pay for it? I think not. This absurd idea is presented only to offer an argument that only certain styles and tastes will be worthy of public interest. That is, the supply and demand element of economics will still apply to the availability of music. We will still see pockets of interest develop for those styles and tastes that are sufficient to sustain the underlying musical infrastructure required to produce the music. Stated in terms of the absurd, there will be no demand for silence. Of course, I believed there would be no demand for bottled water.

Among all of the available services offered at this writing, I see two glaring voids. One is the availability of money to help artists obtain services and the other is organization.

While I may be wrong, I don’t believe there is much funding available to artists in the middle of the spectrum. Otherwise, there is only bartering for services, which is not necessarily bad, but it is extremely inefficient as it requires a mutually beneficial, or symbiotic relationship to exist. For anyone who has ever struggled to find a new band member or collaborator, it should be clear that it is not easy. Many social networks are becoming available and they are in part, designed to help people find other people. This is a good thing, but it is still a difficult process that frequently does not produce quick results or any results at all.

This brings us back to the money element. The availability of money can help produce results that are much more efficient which is why there is currently a disparity between the haves and the have-nots in the music industry.

While bartering for services is a wonderful thing, there is also an absence of organization. The new social networks provide a forum, but I don’t see much in the way of organization. There is a need for people who will help bring others together. In a bartering system, as with a band, there are human dynamics that can be quite productive but can also be quite counterproductive. It becomes counterproductive when the inevitable power struggles do not always turn out in a positive way. This is the nature of having bands and I believe it is the nature of creating collaborations. There is a need for moderation and organization that must either be inherent to the members or provided by a capable individual either within the band or on the outside. Of those who are currently successful in their attempt to break out, I would argue that it would not require much analysis to determine that one deserving person was the driving force behind the success. This is often times a member of the band, but it is a crap shoot because the right person must have the necessary skills, drive, and personality to make it all happen.

Again, the good news is that these services will hopefully become available for others to use. The problem becomes compensation for services.

This is a very touchy subject, but I believe that it has two answers. The first answer is flat fees paid up front. There are many services offered today that require your money before you can participate. There is nothing wrong with this model, if the services provided are worthy of the cost. The second answer is the promise of fees paid upon the success of a client. While there are many examples of how artists have been exploited, I believe that a new generation of pay-based-on-performance type organizations will help fill the notch. These organizations will operate with much less overhead and be willing to accept less in the way of percentages for their assistance.

I believe these new opportunities will result in the emergence of two new careers in the music business. First, there will be a demand for a new generation of independent business managers who will help to fill the current void that I refer to as the notch. The more capable managers will have a unique skill set to include an understanding of music, the music business, project management, human dynamics, sales, marketing, negotiation, contracts, recording, distribution, etc. Second, there will be a demand for money that may come from endowments as well as independent investments. I believe that funds will be available to deserving artists who have demonstrated their commitment and have reasonable music collateral. Given the current state of the economy and the uncertainty among more traditional investment strategies, there are fewer alternatives for investing. While it is not for everyone, there are some who might consider investing in the careers of artists.

In closing, this is all speculative at best. However, it does have historical significance as it mirrors the development of niche services in other segments of our economy. The emergence of services for the computer industry would be a very good example. While I don’t know with 100% certainty, I am hopeful that a reasonable model will emerge that will help to provide more work for deserving artists.