I like lis­ten­ing to music, and I like the fact that I can now obtain most music in a mat­ter of sec­onds. Dig­i­tal­ly. Colum­bia Pro­fes­sor Rita McGrath shared a great deal of insights about the cur­rent music indus­try in her recent post on billboard.com. Titled “The Next Music Busi­ness”, she makes it clear that she has lit­tle sym­pa­thy for the old-time record store (or CD-cen­tred music publisher):

In fact, the music indus­try is enjoy­ing a peri­od of explo­sive growth, exper­i­men­ta­tion and new oppor­tu­ni­ty that nev­er would have been pos­si­ble under the old mod­el. It’s a lit­tle like the air­lines before they were de-reg­u­lat­ed, the phone com­pa­ny when it was still Ma Bell or com­put­ers when a few big com­pa­nies were the only game in town. Incum­bents don’t like inno­va­tions that dis­turb the sta­tus quo. But the sta­tus quo is no more, and amaz­ing oppor­tu­ni­ties are open­ing up that were nev­er before pos­si­ble or economical.

After not­ing that “half the rev­enue in the indus­try stems from dig­i­tal sources”, she cheers the end of those days when — if you want­ed a great song by an artist — you had to buy all the oth­ers on the album. Now, you can pick whom you want to hear, how much of their work, and down­load it immediately.

How so? Well, there are the big dig­i­tal music stores whose sales in 2012 were jaw-drop­ping. Accord­ing to Investors.com, “Apple’s (AAPL) iTunes, Amazon.com (AMZN), Google (GOOG) Play and oth­er Web stores sold 1 bil­lion dig­i­tal tracks through August.…” But more sources of dig­i­tal music will inevitably arise. And, of course, many artists are sell­ing their sounds direct­ly, with­out any com­pa­ny sign­ing them to a con­tract. Just check the post on Linn Forums, from “War­ren”: “http://www.bandcamp.com allows artists to sell music and merch with­out need­ing a record com­pa­ny. Cur­rent­ly 750,000 albums, includ­ing clas­si­cal as a genre.”

bigstock-A-goodlooking-trendy-young-gu-35574203My sense is that you already know (or have intu­it­ed) most of this.

As I not­ed in my first e-book, the music indus­try was short­sight­ed (to say the least) when it first tried to clamp down on the digi­ti­sa­tion of music. And the lessons from all this are numer­ous, increas­ing and worth remem­ber­ing. Rita McGrath, in her arti­cle, offers this for starters: “As incum­bents in oth­er indus­tries have painful­ly learned, once a sea change in busi­ness mod­el is upon you, try­ing to throw up the bar­ri­ers and pre­tend it’s not hap­pen­ing is only wast­ing valu­able time.”

She also shows that — via lis­ten-any­time – but-don’t-buy ser­vices such as Pan­do­ra and Spo­ti­fy, or via appli­ca­tions to help one search for music (cre­at­ed by any num­ber of soft­ware com­pa­nies), or via appli­ca­tions to use music as a way to design one’s own choice of ring­tones — many firms have found ways to use dig­i­tal music as a spring­board for new rev­enues with­out being only music stores.

Please allow me to add my own note here: when it comes to mov­ing from now to next, an orig­i­nal dis­rup­tion is often fol­lowed by floods of new oppor­tu­ni­ties as the “out with the old and in with the new” gets trac­tion and the incum­bents (usu­al­ly larg­er and slow­er) stum­ble for­ward. When val­ue cre­ation in the music indus­try shift­ed its cen­ter of grav­i­ty — say, from own­ing and pro­duc­ing con­tent to hav­ing the access mod­el that cus­tomers crave — small­er play­ers eas­i­ly found their way into the mar­ket­place mix, and, often, found them­selves soon on the way to becom­ing big players.

The get­ting-giv­ing-and-shar­ing mod­el that is at the heart of dig­i­tal music world is here to stay. Should you be one of those store own­ers who has been bemoan­ing the fact that the turnover rate for your vast inven­to­ry of com­pact discs is, well, abysmal, all I can say is live and learn. Only when the suc­cess­ful incum­bent in any indus­try gets out in front of com­pet­i­tive dis­rup­tion does it have the chance to keep its dom­i­nance. That requires oppor­tu­ni­ty fore­sense, the skill to not only sense the winds of change but to also gen­er­ate them.

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