Claim: nightclubs closing due to new Millenial social patterns

The number of nightclubs in the UK has declined in the last decade and here is one possible reason why:

Even famous London dance-music clubs such as Turnmills, Bagley’s and The End have succumbed to a process that has seen the UK’s total portfolio of nightclubs shrink by almost half from 3,144 in 2005 to 1,733 a decade later.

The statistic from the Association of Licensed Multiple Retailers (ALMR) is a signal not just of the effect of the smoking ban and the imposition of student loans but of a fundamental shift in the way a new generation chooses to spend its entertainment budget…

A night out at a pop-up restaurant or a secret cinema feels more adventurous than yet another club night, which will only drain finances needed for that ambitious summer holiday trip. According to Yakob, nightclubbing has become for many young people a “couple of times a year” experience, hearing the best DJs on the best sound systems…

Twice a year punters aren’t going to pay a nightclub’s bills. But even for some dedicated music fans, the lure of a night of House music could be reduced by their long hours of listening to playlists on a premium streaming service during daily commutes. The UK is among Spotify’s strongest markets. Felim McGrath, analyst at market research company GlobalWebIndex, says: “In years gone by you would go to a nightclub at the weekend to discover music played by a top DJ. Now you can do that online via a curated playlist.”

While this isn’t good news for the nightclub economy, the social ramifications are interesting. For pre-teens to young adults, music is often an essential part of the social experience. It is part of creating an identity, burn off steam and/or transgress boundaries, and unite with other people. All of this can be done with music online – it just takes different forms. For example, instead of going to nightclubs or as many concerts, users can post in forums and comment sections about their favorite artists. Instead of interacting with strangers (who may share the same music interests) at venues, the music is now more privatized as users can select what they want wherever they want. Like many experiences with the web, users get more choice in more places but lose embodied experiences with others.

At the worst, in the future no one will emerge from their headphones and personalized experiences. At the best, perhaps the music listened to and discussed online can lead to new kinds of unique experiences outside of the typical nightclub and concert experiences.

A musician who argues he can make more money by giving music away for free

Musician Derek Webb argues that he can make more money in the long run by giving away his music than selling albums or tracks on iTunes and providing his music to streaming services like Spotify:

For example, I am paid $0.00029 per stream of a song on Spotify, and even this amount depends on whether the song is being streamed by a paid user or someone using the service for free.  This means it will take upwards of 3,500 streams of a single song on Spotify to earn $1.00 versus that same revenue for one iTunes song purchase (not to mention the fact that Spotify refuses to pay the same amount to independent artists as they pay major labels, unlike iTunes)…

If someone buys my music on iTunes, Amazon, or in a record store (remember those?), let alone streams it on Spotify, it’s all short-term money.  That might be the last interaction I have with that particular fan.  But if I give that fan the same record for free in exchange for a connection (an e-mail and a zip code), I can make that same money, if not double or triple that amount, over time.  And “over time” is key, since the ultimate career success is sustainability.  Longevity.  See, the reality is that out of a $10 iTunes album sale, I probably net around a dollar.  So if I give that record away, and as a result am able to get that fan out to a concert (I can use their zip code to specifically promote my shows in their area), I make approximately $10 back, and twice that if they visit the merch table.  I can sell them an older/newer album and make approximately $10 back.  The point is, if I can find some organic way to creatively engage them in a paid follow-up transaction, I increase my revenue 10 times on any one of these interactions.

This is all an equation of scale. I might be able to outright sell 20,000 albums for $10 each (again, netting around $1 each).  Or I can remove any barrier from someone hearing about or discovering my music by giving it away, which will result in an order of magnitude more albums distributed, maybe around 100,000.  If I can then convert 20% of those free downloads into paid transactions of any kind over time, I have probably well over doubled or tripled my money.  And I can do this repeatedly as I continue to grow, and learn more about and invest in my tribe, to whom I now have a direct connection (rather than having to go through Facebook, Twitter, or Lord forbid, MySpace to access them).

If this is true for middling to struggling artists, what does this mean for the music industry in the long term? Will many artists follow Webb’s example and can they if they aren’t already established artists? I assume the low compensation for artists from streaming services has to do with the services making money.

I wonder if this is just about the money or if this is also about certain artists wanting to truly connect with fans as opposed to simply selling them music. Webb suggests there has to be a more meaningful relationship between artist and consumer for the whole industry to thrive:

Music does have monetary value.  But more than its monetary value is its emotional value, its relational value, its artistic value, even its spiritual value.  When you make meaningful connections with people based on artistic self-expression, I think you’re actually increasing the value of that art based on the many ways it’s valued.

How many musicians see it this way?

A side note: I haven’t yet tried Spotify but I have been tempted, particularly since my Facebook feed has been full of messages noting the songs my friends have heard through the service. If you think I should really jump on board, let me know. Webb’s opinion wouldn’t necessarily stop me from trying the service but I would now think more than before about joining.

Netflix’s distribution problems

Netflix has had a lot of bad press in the last few months.  First, they decided to split their online-only streaming service from their mailed disc service, substantially increasing their customer’s prices.  Second, word came that they are losing their Starz distribution agreement, which will severely curtail the availability of (genuinely) recent movies on their streaming service.

Now, here comes a potential supply shock on the physical distribution side:

The United States Postal Service has long lived on the financial edge, but it has never been as close to the precipice as it is today: the agency is so low on cash that it will not be able to make a $5.5 billion payment due this month and may have to shut down entirely this winter unless Congress takes emergency action to stabilize its finances….

Missing the $5.5 billion payment due on Sept. 30, intended to finance retirees’ future health care, won’t cause immediate disaster. But sometime early next year, the agency will run out of money to pay its employees and gas up its trucks, officials warn, forcing it to stop delivering the roughly three billion pieces of mail it handles weekly.

To be sure, a long-term interruption in mail service would be an economic catastrophe extending well beyond Netflix.  Nonetheless, viewing this problem from Netflix’s perspective shows just how dependent even web-savvy companies are on physical infrastructure and distribution systems.  There will be a lot of collateral damage if businesses can no longer count on a robust and dependable USPS.

Seizing the spotlight

One of the items highlighted in Monday’s Intellectual Property Enforcement Coordinator (IPEC) report (92 page PDF–see here for my previous post) was government seizures of various domain names allegedly associated with infringing comment.  Bruce Lidi over at ZeroPaid makes a compelling argument that the publicity associated with such tactics is counter-productive at best:

As nearly every analysis of the recent ICE action has noted, by seizing the US registered domain names of foreign-owned and operated sites, the authorities have propelled the sites to set up on domains not under US control, and to do so within days, if not hours, of the seizures….It would appear that aside from a very momentary interruption, the practical effect of the seizures will be negligible, except to make any future actions by rights holders that much more difficult, since the targeted sites will be farther from US jurisdiction.

Additionally, and even more importantly, the recent ICE domain seizures that focused on sports streaming sites has had, and will continue to have, the effect of generating more publicity for this kind of infringing.  Consistent with the concept of the “Streisand Effect,” attempts to suppress troublesome information online result invariably in that information becoming even more widely distributed.  While impossible to quantify with any certainty, the seizures by ICE surely increased awareness of the existence of rojadirecta and atdhe, and even more, of the ease in which viewers can access live streaming of sporting events online.  As we so often see in articles about “cord-cutting,” or dropping cable in favor of purely internet video delivery, many people are stymied by the lack of live sports online, yet now, because of the actions of ICE, millions more viewers have just been instructed that it is actually quite simple to get live footage of every soccer match or football game.

Lidi’s analysis reminded me of countless debates I’ve read about U.S. military policy.  Some people favor a “shock and awe” approach while others think that “winning over hearts and minds” is the way to go.  Unfortunately for the content industry, I’m not sure that they’re ever going to win people over completely to their way of thinking.  Anyone who claims that, as a practical matter, people don’t have the right to rip their owned CD into Mp3’s (article from 2008 but still true–see the RIAA’s current website) has completely lost touch with reality.