Magnatune – the opensource approach to music – Is there a revenue model?

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The background for this article is based on the article ‘Hear no evil’ from the special technology quarterly of the economist (www.economist.com) – Sep 17 2005.

The music industry, like many others, are feeling the full impact of new revenue models brought about by the Internet. The ipod and others have created a new distribution model. The next logical step is to reduce the power of the record labels by giving artists more power over their own work.

This is the goal of a company called magnatune(www.magnatune.com)

In a nutshell

a) Music is streamed free but to download it or to burn it on a CD, you have to pay

b) How much you pay – depends on what you decide – anything from $5 to $18

c) You can copy the music ie. There are no DRM restrictions. The overall idea being, people will not rip off artists they like

d) Artists are not contractually obligated to magnatune on an exclusive basis. They can sell their work elsewhere

e) Artists get half the revenue. In contrast other labels give 10%

All this sounds good ..

But ..

Because it’s a small company, it can’t afford to spend money on radio and TV advertising(which pushes sales). Thus, although the artist gets 50% – it’s not a lot of money because the total sales could be low

Worse .. if any of the artists get a contract from a ‘major’ they could jump ship!

So, the question is – will this model ever work? On first glance it sounds to be very interesting and disruptive but does it have within it the seeds of it’s own demise?

Finally, I think in an ironic twist, if the majors come along and pick the best artists, it would work in magnatune’s favour

Thus, the whole model may well work on holding a large number of titles each making a small number of sales

what are your thoughts?

Image source: http://www.mcpasd.k12.wi.us/~kms/Web_Clip_Art/images/MUSIC.jpg