A Stream of Music, Not Revenue

Description:  When Spotify, the digital music company of the moment, announced this week an exclusive deal with Led Zeppelin and free access on mobile devices, it also reported impressive numbers. Its listeners have streamed 4.5 billion hours of music this year, and it has paid more than $1 billion in music royalties since its founding.

Source: NYTimes.com

Date: Dec. 12, 2013

music-services-100000136-orig

Yet even as they have grown, streaming companies have encountered a stubborn problem: Music lovers will consume large amounts of music as long as it is free, but getting them to pay a monthly subscription has proved much more difficult.

Pandora, the only publicly traded streaming company, delivers about 1.5 billion hours of music each month to more than 70 million users, but only about three million of them pay. The rest listen free but must endure advertising. Even though it has a market value of $5 billion, Pandora has yet to turn an annual profit.

“There is this irrational resistance for people to actually plunk down their credit card for streaming services,” said Ted Cohen, a digital music consultant with the firm TAG Strategic. “We’re 13 years into the Napster phenomenon of ‘music is free,’ and it’s hard to get people back into the idea that music is at least worth the value of a cup of Starbucks coffee a week.” READ REST OF STORY

Questions for discussion:
1. What are the various business models to revenue from online music?

2.  Which business model has the best chance for success? Why?

Advertisements

34 thoughts on “A Stream of Music, Not Revenue

  1. Anderson Ebhomielen

    The business model to revenue to online music are limited and some of the sources of revenue are streaming services, downloads, and subscription.
    Streaming services is changing the online music industry as it has begun to affect the way hit songs are made and because of the revenue, competition in streaming music is about to intensify. Furthermore, the prevailing opinion is that the streaming service is young and has a lot of potentials. In 2012 for example, the revenue was over $1 billion and that is over 59% increase from last year. However, there is room for improvement and it has been projected that streaming growth is expected to continue at a faster pace in 2014.
    Download is another source of revenue to online music. Downloads had several decades of growth and it was a major source of revenue because customers preferred digital downloads as a means of accessing online music. In 2012, downloads contributed $5.6m as revenue to the online music industry.
    Subscription is a monthly payment by customers in order to have access to online music. Therefore, the more customers the more the revenue generated however, getting customers to pay monthly subscription has proved to be difficult. Online music can have as many even millions of subscribers which is a source of revenue.
    Streaming service has the best chance for success among the three sources of revenue. Downloads has had decades of growth and subscription is a third option in revenue generation. Streaming is the new focus of online music as consumers prefer buying music on demand from streaming service. Young artist are gaining much of popularity and momentum from streaming platforms. The market is young with great potentials and the growth of streaming is expected to continue over the years. There is increasing number of paid streaming customers.

    Reply
  2. Donggu Kang

    There are various businesses to generate revenue from online music market such as iTunes where a customer pays-per download, or pays for entire album, or pays for streaming without having to watch advertisements.
    In my opinion, companies who let people stream songs will have the best chance to success and make the most revenue and there are several reasons for that. First is that if you buy an album off-line, you have to have a device which lets you listen to songs for example CD players, iPods and MP3 players. But these days, if you own a smartphone which many people do, you do not have to worry about getting other devices and this is why people own smartphones, almost every gadget is included in smartphones. Second is that if you just pay for a song, you cannot listen to other songs that you want to listen other than what you paid. For example, if you only paid for Led Zeppelin’s Since I’ve been loving you, you only have to listen to that. You have no choice to listen to only one song and people want varieties. Third is that streaming is very easy and convenient. If you want to listen to a song, you just have to type the song’s title and search for it and click it. You do not have to worry about download and putting in to your devices such as iPod. For these reasons, I think, streaming music industry will make the most revenue than any other music industries.

    Reply
  3. Mark(Xiangyuan Ma)

    It kind of surprise me when I see people actually pay for music after I came to Canada. I relize that copy right is really important in North America. Some of my Canadian even asked me that how do I get my music. Pirated music is really popular in China. It is kind of hard to forbid billions of people to stop use pirated music. Honestly, I still do not know how those company get profit by providing free music. For example, I am using a software called “kuwo”. it is totally free and only takes you about 2 minutes to download it. There are millions of songs that you can listen online or download, and they are completely free. I know that most of the young Canadian and American are using Itune to buy the music that they want. However, I can tell you that the most of the songs on Itune also can be found in “Kuwo”. The difference is that this “Kuwo” is free. Furthermore, you can even see the billboard list on this software and listen all of the songs on the list. There are serveral Chinese software just like “Kuwo”. Unfortuanetly, those software do not have English virsion. If you can understand a little bit Chinese, I strongly suggest you to try this software out.

    Reply
  4. Britney Anderson

    There are many different business models used to generate revenue on the online music industry. The most common revenue model is the pay-per download model, such as iTunes, where consumers pay for each individual song or album that they download. With the increasing popularity of streaming music, some companies are starting to charge people for the mere act of listening to music. Some streaming services offer free service, but customers are subject to several advertisements, which are used to generate revenue. On the other hand, other streaming services are offered for a small monthly fee, but offer customers perks such as better sound quality and no advertisements. Also, some companies use a “subsidy” revenue model, where music sales are used to support another product or business activity with higher margins, as Apple has successfully done.

    With more and more music free music available online, it is becoming harder to generate revenue through music sales and music subscriptions. Consumer buying habits are also beginning to change. More people are choosing to buy music through streaming services, instead of buying physical CDs or digital downloads of songs. Although music streaming is expected to grow in future years, these companies are likely going to encounter problems collecting revenues and generating profits. Many people are not willing to pay a monthly subscription fee for streaming services. And these companies will likely not generate enough advertising revenue to be profitable. Unless the music streaming industry becomes somewhat standardized overtime, it will be very difficult to generate paying subscribers. As long a few streaming companies offer free services or access to users, such as Spotify, then many consumers will opt for these “free” services. However, if all steaming service providers were to charge a monthly subscription fee, it would make the industry more profitable. Many people subscribe to Netflix for a monthly fee, to stream a variety of movies and TV shows. So, I see some potential for the music streaming industry. However, it is too early to tell if music streaming will end up being a profitable industry.

    Although the volume of CD purchases and digital downloads is expected to decline in future years, I believe the “pay-per-download” model, used by iTunes, will still prove to be the most successful model. Streaming music allows an individual to listen to music. However, an individual still has to pay to own a digital copy of a song or album, and would likely do so using a service such as iTunes. I believe that there will still be enough consumers that desire to purchase their own copies of songs and albums, which will keep iTunes and its competitors profitable in future years.

    Reply
  5. Guewon,Kim(GRACE)

    I think online music industries are not be defined because it is very huge and large these days. There are varieties types of online music as downloaded, streaming platform and iTunes so on. Moreover, there is free music downloading methods that make a profit by advertising products before play music. Online music is very easy to be had, everyone can download and play music with several clicks. This situation has very good opportunities for every online music industries.
    However, I think affordable album (iTunes) has the great opportunity to be successful in the online music industry. In a current society, everybody has portable music player as smart phone, iPod, mp3 player, iPad and even portable radio. Therefore, lots of people want to have easy way to get music. In this situation, affordable album can offer easy and comfortable way to download music. Especially, the “Apple” is being popular, almost every persons have mobile music player like iPhone. In this reason, I think affordable album has great chance for success in the online music industry. And Also, I think online free music website like youtube or Pandora also can have great chance for success. That has similar reason why affordable album can be successes. Thanks to development of portable music player, whenever and wherever people can access to internet and get into internet and websites. In this situation, people can give huge opportunities free music websites. Therefore, the free online music play websites can make money from both ways that advertising and accessing music.

    Reply
  6. Emmanuel Makoni

    Business models vary from streaming music with advertisements, having an option for better sound quality to even streaming music without advertisements. The best music model at this point in time seems to be YouTube but iTunes has proved to be almost as widely used. One thing I have noticed is that people do not have to necessarily buy music anymore. As many songs are uploaded in the forms of video on platforms like YouTube, there is software that has been created to download a YouTube video and then extract the audio. That way the listener can have all the music they want at absolutely no cost. Another disadvantage of streaming is the fact that most people will be okay with the listening to music that has advertisements if they don’t have to pay. This means that the revenue is not in alignment with the music streams or downloads. Although streaming has its disadvantages, this line of business is going to grow exponentially: “It took many years for digital downloads to become mainstream along with CDs, and in time, subscriptions will be a widely adopted third option,” (Anthony Bay, chief executive of Rdio). Streaming and subscriptions have a long way to go but it is possible that they will soon be the reason for the decline of CD sales and digital downloads. As we keep progressing, technologically, I wonder what the next phenomenon will be after subscription/streaming. For now, companies need to look for ways that will best serve the artists being played to make sure that they are well compensated for their hard work and the streaming companies must also end up with profits annually. Putting this into consideration, listeners must be able to pay low costs for the access of the streaming.

    Reply
  7. Nothando Ngwenya

    “Music is an accompaniment, to ad to your jog, your workday, your prep in the kitchen…But it’s not something you’re eager to pay for if you don’t have to.” In this statement, McQuivey described the society that has been created and the solution to the problem of people listening to free music and the solution that could come with it. As our world had more technological advancements and life was made easier for all, free music came as part of the bargain, but music companies are suffering now and there really is no way to turn back what has been done to go back to the time when people had no choice but to pay for cassettes, CD’s and whatever other form music came in. At this point, all that can be done is for music companies to figure out a manner in which consumers may have to pay, at least a small token for the music they are able to listen to online and on whatever device they prefer to use. Firstly, all the recent online music companies that have emerged into the market would need to leave the market and this would need to be a monopolistic business, or at least one with a maximum of between 6 to 10 companies that would be able to gather ALL the music that is spread amongst all the different companies that exist now. When these companies establish themselves, it would be wise for them to be accessible in no other way but for people to have to pay a small subscription fee, as they have been doing now, to be able to access some music. Should they want to download it or do something of that nature, it would be advisable for the companies to have a requirement such as that of certain retail shops, for the consumers to have to pay a small fee of about 20 to 30 dollars each year in order for them to be able to listen to and download music at their will. There is a very large number of people who listen to music and therefore this would make large profits, especially if there is a small number of companies that caters for ALL kinds of music. This leads to another issue with such companies that YouTube seems to be one of the very few to avoid. These companies only cater to a certain kind of music and so consumers who are willing to pay for the genre of music they prefer decide not to pay for the music that they do find as their absolute favourite cannot be found on the sites, which defeats the purpose of payment for them. Another issue that needs to be dealt with is that of the information that online websites ask for when people sign onto them. Consumers may be uncomfortable with entering personal information, notably that which they feel has nothing to do with the activities that they are taking part in. The last manner in which these companies could benefit has nothing to do with the consumers, but with the selling of music itself. The companies could make sure that they are able to get some commission for CDs and DVDs that are sold as it is most likely that the people who buy the CDs would have heard the songs online. I believe that, these solutions, after much planning, and many others could solve the problem of music being listened to with no benefit for those who provide the music.

    Reply
  8. Devin Gerstenbuhler

    1) Some of the various business models include: streaming with advertisement, paying for streaming without advertisement, paying small amounts for individual songs or affordable albums (iTunes), or even paying a standard rate to download a certain amount of songs (Napster), to name a few.
    2) Lately the best performing business model, according to the article, has been YouTube; however, in recent years, iTunes has been the highest grossing music provider with their easily accessible iTunes online store, their fast downloads and their surplus of songs. The article is suggesting that the industry that stands the best chance in the online music marketplace is that which can provide the highest quality music with the lowest amount of advertisements at the lowest cost (if there is a cost at all). The recent trend amongst companies is to offer additional services like no advertisements or better quality music for a small fee; however, younger audiences are consistently willing to put of with a few advertisements at the result of an array of free music. Though companies like iTunes are able to offer individual songs at a low rate, as companies like YouTube expand and continually offer free services, I can only imagine apple will be forced to change the outlay of their iTunes store, or integrate into the market of streaming. Companies like Spotify increase their chances when they offer events like their free Led Zeppelin period of their free access on mobile devices. On a whole at this leg in the race it is too hard to tell who will come out on top. With the increasing intensity of competition a sustainable competitive advantage is seemingly unrealistic.

    Reply
  9. Jessica Bermel

    There are a variety of business models in the online music industry and each business tries to create their own to bring in profit. There is a pay per download, such as iTunes, unlimited subscription for a radio service, Pandora, some are free and rely on people to click on the ads to turn a profit, while others offer music as a free service and rely on other products or service to bring in a profit to create brand loyalty, CBC Music Online. Still, people are smart and have found if they want music they can find it free. If you want to hear the new album from Lady Gaga, just wait a day, and at least one person will have uploaded it onto Youtube.
    A lot of people stream their music through their smartphones through various apps. The best thing about apps is that the majority are free as long as you don’t mind the ads. It seems like a fair trade off especially since when you’re listening to music, you’re not looking at the screen unless you’re switching the song. The best model for success would, in my opinion be the one that creates the brand loyalty by using music as a service. These companies realizes that music has become in the public eye, free. Thus, they give people the free music and have the listeners by in on other products and services they offer, or they give the listener the service for free for a limited time to build the loyalty. Many new cars are coming installed with Sirius Satellite Radio, the first month is free and the second month you have to pay. By this time, many owners have found a station they like and become accustomed to, so paying the annual free doesn’t end up being so bad for them.

    Reply
  10. Onyinyechi Dikeocha

    The music industry is a constantly evolving and dynamic market. It is both a domestic and global industry with the presence of many players, new entrants and popular competitors such as Spotify, Pandora and Apple’s iTunes. They provide services that let customers listen to a large catalog of songs on line, either free or through monthly subscriptions. The music streaming market is currently one of the most dynamic music market. As download sales begin to decline after a decade of growth, streaming is making its way to becoming one of the most utilized model for gaining revenue as it charges for the very act of listening. It also gains revenue through patriotism of advertising companies. Another model of revenue for the on line music industry is through the payment of royalties every time someone clicks to hear a track. Rather than the purchase of records or downloads, music lovers and consumers are starting to prefer buying music on demand from streaming services.
    Subscription service is another potential source of revenue making its way into the market although it is quite difficult to get consumers to sign up for any sort of subscription due to the availability of free music download and streaming on line. One way to gain consumer’s dedication and loyalty from subscription is through exclusive deals with popular musical acts.
    I believe subscription will grow at an even faster pace due to the growing technological world we live in and the threat of viruses when streaming or downloading for free. Due to the integration of music streaming in auto mobile radios and other digital content and mobile service providers, it will probably stay successful.

    Reply
    1. Delaney Showers

      In our day and age, there are various amounts of websites and and other external types of technology which allow users to listen or download music for free. These sites then allow users to use their services without having to pay any money or monthly subscriptions, making it more viable for users to utilize their services continuously for example, video-mp3 downloading from YouTube, 8 tracks, or songza. Although iTunes is still very popular, it creates the division because who would pay for songs when they can just listen and download them for free. Thus having a domino effect on the musicians and record labels not making they money because people are downloading music illegally.
      Personally I am one of those people who will use songza or download off of YouTube to access free music. If you look at iTunes a $1.29 per song can add up to be a lot of money if you are the type of person who needs to have all the new hit songs and albums. And since there are a lot of resources out on the web or satellite radios which enable someone to download and listen this music to free, I will take advantage of that. And I know I am not the lonely one who does either. Although iTunes is easy to use and makes it easier to access music right away, I would take that extra time to not have to pay a cent. So I think that the sites that make it free for users are the ones who will have the most success because they are the ones taking the business away from their competitors who make them either pay per song, album or subscription.

      Reply
  11. Loraine M-Moses

    There are many models which generate revenue from online music such as digital downloads, satellite radio and streaming music; and it seems that the current means is for companies to stream music. These companies has to deal with all the ways that free music is available to the listeners, especially with the people who do will not want to pay for the music or cannot afford to pay for online music. Youtube is a great way to listen to music and watch concerts, even if there are some advertisements at the beginning, and the user can skip the advertisements. There are people who will purchase the ITunes cards for the price of $10 to $50, and have the music downloaded to their iphones, and ipads.
    The article seems to suggest that this company Spotify, and other companies believe that streaming services has a good chance of success. This success will depend on their marketing strategy, such as no advertisements, great quality music and exclusive presentations of popular bands and artists music. The greatest challenge that these companies face is how to get customers who will pay for this streaming services when the listeners feel that they are entitled to obtain free digital music and have access to websites such as Youtube where they can download the music for free.

    Reply
  12. Tory Albers

    There are two approaches offered by Internet based music/ streaming platforms evident. First is iTunes approach, which can be seen as a economic business strategy with easy access to songs and the high quality you get vs. streaming or downloading. ITunes approach can be a seen as a modern approach to the longevity of music with their approach to selling music for profit. And second is You Tube, which offers a different service then iTunes, which can be seen as a strategic approach because they recognize that people don’t want to pay so they give them poor quality services for free, for example pop up adds, and those who want a better experience have to pay. On the one hand, You Tube takes a more laid back approach to their target market, and on the other hand, iTunes is economically driven collecting money for songs with no way to listen to a lower quality.
    Businesses need to have long-term economic sustainability and a steady cash flow. Therefore, the iTunes model is going to be more successful. On the one hand, ITunes makes it easy for consumers to pay for downloads and pays royalties where due, ensuring the continuation of the music industry. On the other hand, You Tube’s strategic approach doesn’t appear to have the economic stability to carry on the future of music because they offer too much for free.

    Reply
  13. Chelsea Minor

    Some of the various business models to generate revenue are services that allow you to pay per download, to pay a monthly fee, or to download music for free. With many services such as spotify, pandora and itunes it makes it easy and affordable to download music online. However, with the technology of today, the major issue for the music industry and companies such as these are that customers do not want to pay the money for music when they can get it for free. Each customers is provided with many options for their downloading needs. Some may feel that paying a small monthly fee for high quality music and no advertisements is the better for them while others may feel that a free download is more structured to their needs.
    It is hard to decided which business model has the best chance of survival because each business model suit the needs for certain listeners. For myself the business model that best suits me is the free downloads. Technology has made it easy and quick for me to convert music from Youtube which downloads straight into my itunes for me to easily put on my phone. Some songs are lower quality, and have some advertisements at the beginning of the song but being a poor university student this is the better choice for me. These free downloads may take over the music industry unless they are able to shut down ways to get free music on the internet.

    Reply
  14. Megan Plummer

    The big problem with this industry? Illegal downloading and “ripping “music being easier than cooking for most people with basic computer knowledge and a device that has internet that’s capable of downloading a file. This, as well as Youtube where you can just listen to the music for free rather than paying for it are adding to the problems. Personally unless I have an Itunes gift card I don’t purchase music, I will listen to my free version of Songza that can be used on any technology with applications, it is up to date, relatively low ads and it has current and up to date music.
    The industry contains a few models that companies can base their organization around. There is the approach where users can listen to music for free but they listen to a lower quality of the music ( I personally can’t hear a difference unless it’s a user uploaded/made video) and advertisements that are generally 15 seconds long . Youtube is an organization that uses this model and it seems very effective for them, users don’t seem to mind the small inconvenience of ads for free music. The second model is what Itunes has based themselves on; they charge customers on a per song basis or for the full cd, the best quality of music and no advertisements. This approach is successful for people who like certain artists, genres ect or even those who always want their favorites at their fingertips. Thirdly there is the basic model in which consumers pay money for each album they download for a better quality, this can also go back towards the traditional cd store (HMV.).
    For me personally I still enjoy buying a good, hard cd when it’s an artist or band I love. If I am inpatient and want it right away I will use Itunes. In my opinion it will be the first model that I discussed that will make it , with things like YouTube and Songza why would one pay for a cd when they can have so many types at their disposal in moments as long as they have internet or wifi.

    Reply
    1. Hayden Rintoul

      I personally do not know if this industry will ever take off because of all the other ways of getting music without having to pay for it. There is ways of downloading it off the internet using certain programs like napster, limewire that all usually get shut down after a while. Now you can download songs off youtube and transfer them onto your iphone or ipad. Even with all this being said there are the other applications such as songza and eight tracks where you can listen to popular music or even set which type of music you would like to listen to or even what mood you are in. These are all possibilities for university students and high school students that don’t have much extra income to spend on things like music. I have about 5000 songs on my ipad so it wouldn’t be very possible for me to afford all those songs if I had boughten them from an online store such as itunes. As I am one of these university students with no extra income to spend I would rather have a more poor quality music or have to listen to an advertisement than pay for a song or an album. I don’t think there will be a change in the industry for a long time unless they can shut down all the ways to attain free music because I don’t think companies will ever be able to compete with the ability that the internet has in free music.

      Reply
  15. sophia burgess

    With todays technologies i find it very rare that I ever find myself paying for my music.On the rare occasion I will, but only if I am given an Itunes gift card. With the internet anyone can easily download their favorite songs, without having to buy it. Sure there are songs you run into which have awful quality and don’t sound as good as the paid for songs it is worth it in the long run. Like Courtney mentioned, I don’t have a lot of money as a university student so paying for each song would be quite the expense. Ina previous ethics class I was in we discussed whether it was ethical or not to illegally download music. When everyones doing it , it seems as though people don’t see it as being unethical. One of my classmates argued that it is unfair to the artist because that is how they are making a living. This may be true for up and coming artists but I think that the “hollywood” artists probably don’t take quite a huge hit from people not buying their albums. 

I think that the business model with the best success would be sites which have commercials with their music. Although it may be a nuisance, it is still free and easy to access. I believe there wont be a change in this for a long time because people already have the mindset that music is free. Its crazy to think we once paid for music!


    Reply
  16. prashant malik

    I think the main problem for the music industry these days is that music lovers are downloading all their albums for free. The music industry contains a few different business models that each company can choose to use. The first model is more traditional in which each customer pays money for each song or album they download and in return they get better quality music. The second model is one in which music companies do not charge their customers a fee but instead they receive lower quality music and have to watch long, boring and repetitive advertisements. Obviously there are strengths and weaknesses for each model, however as a customer I normally buy the songs of the apple store for a very less price being paid for each song. The 3rd model where companies like iTunes come in and charge customers for individual songs because they are of higher quality and no advertisements involved. I think that YouTube model to be the best chance for success. Even though they play the music for free you able to access this website though applications and other means while connected to the internet.

    Reply
  17. Jared Arsenault

    1. What are the various business models to revenue from online music?
    -Streaming services and satellite radio which seem to make a small contribution with, “$1 billion in revenue to the recording industry, a 59 percent increase from the year before.”
    – Physical sales and downloads capture more of the market with, “$5.6 billion” in sales last year. Predictions indicate however that there will be an increase in online streaming services as physical sales and downloads decrease in 2014.
    Just as CDs and internet downloads took a while to catch on it expected that subscriptions to stream music will gain strength in the coming years. New companies have noticed this trend though, and it is expected that we will see more competition in the months to come.
    – Companies like Apple have used their low-margin music and video sales to promote the sale of their physical products. They have been able to distinguish their brand within the current market and have a devout group of followers that purchase every new phone or software update available. By including the less profitable music sales in their business model they can capture more of the market.
    I don’t think I’d invest in companies that choose to stream music to turn a profit. As a consumer I would never consider subscribing to a website that makes you pay to listen to music. Any video you want to watch can be easily searched on youtube and if I like the album enough I would just buy it. I can’t see myself using this product and would be nervous to fund a company like this.

    Reply
  18. Shane Grant

    What are the various business models to revenue from online music?
    There are several ways to generate revenue with online music, youtube for example gives music for free and they make their revenue through ads that are present before your music actually start. There is the iTunes model where you pay for one song or a whole album that you can then download onto your computer. There is also streaming online websites like pandora and songza where you can pay a fee and get uninterrupted music that can be streamed at any moment but if you do not pay the fee you will have to deal with advertisements. There are other means of downloading for free but those are in other words illegal.
    2. Which business model has the best chance for success? Why?
    I believe youtubes model to be the best chance for success. Even though they play the music for free you able to access this website though applications and other means while connected to the internet. You can personalize a play list and everything for free and I feel this method appeals to most people. The way they generate majority of their money through advertisement and how they present the ad before the song starts is a good way for people to focus on the ad before getting the free services they came to the website for. They also provide a skip advertisement button on the ad but you have to wait 5 seconds before doing so, It helps when the ads get aggravating and repetitive.

    Reply
  19. Brenda Norn

    There are several ways to download and listen to music in today’s technologically advanced society. The problem is that because technology has made downloading music so easy and accessible it has been difficult to charge people because they can download music for free or for a small fee on some sites, they can listen to music or watch videos on youtube for free. or they can go on itunes and pay for music to put on their ipods or mp3 players. Even the way hit songs have been made and advertised have changed because no one buys a CD anymore but they just wait to download the song on their device to listen to only the hit song rather then the entire CD. Why would people pay for a CD or DVD when they can download it for free or watch it once on video streaming and never watch it again. The problem also arises from the artists themself. They are now relying heavily on the sale of concert tickets rather then the purchase of CD’s for their royalties. Well I will say that I have not downloaded a single song or movie from a free site but I have listened to the radio on satellite TV. Times have and are going to continue to change as our technology gets more and more advance and we are going to have to come up with some new ways of charging people for the music and CD’s in order to make a profit.

    Reply
  20. Kelly Bateman

    Various business models; pay as download, pay a fee for streaming music daily/monthly/yearly, streaming online for no price at all such as youtube…which doesn’t get downloaded to your device, or such applications that allow illegal downloading.
    I think the model with the most success would be streaming online, such as YouTube- allows many options to the users and takes up no storage on the device; Or, a pay for what you download- such as iTunes, which is fairly cheap for those few songs you really want to be stored. I like iTunes and YouTube, because iTunes, i can listen to a piece of the song before i download it and than when i do, it is stored on my computer until i choose so to delete it. YouTube is also very handy for me because sometimes i just like to listen to a song once or twice, just to hear it. The music world is quite an advanced technology aspect with tons of variations in websites, download sites, streaming sites etc.

    Reply
  21. Josh MacNevin

    I feel that we, in general tend to think very linearly, searching for instant gratification and because of this we tend to make short sighted decisions. These companies that are making music, movies, all entertainment more accessible are examples of how far things have come in the technology world. If you think back a few years before napster and before Netflix and all of this media distribution technology, we had blockbuster and other retail or rental stores, that we had to drive to and physically walk down isle after isle of videos or CD’s searching for a specific movie/artist or one that caught our eye and looked interesting… Possibly. Now, we can do all of this from the comfort of our homes, watching or listening to samples of each and every video or song or artist available. And yet for all of these advantages we are unwilling to pay a nominal monthly fee of approximately what it would cost to rent one or two movies from blockbuster. If we don’t start remembering what things could get back to if these companies are unable to make their companies profitable we will pay the price eventually.

    Reply
  22. Anton Golubin

    There have been imminence advances in technology in most aspects of people lives in recent years so now increasing number of people all over the world throw away their old CD’s in order to get an access to their favorite music even if they not near PC in other words online access. At the first glance it seems like they have vast variants of choices and to some extent it is true but after month of using all of these services it becomes obvious that you either download high quality music and pay money for it or you can listen to music on line for free but without any chance to download it on your PC along with tons of commercial which accompany free-to-listen music almost everywhere.
    Of course there is an option that makes enable removing all ads from pages but it is also not for free. Hence at this moment people can choose only from that three options.
    But which one of them is the best? In my opinion all of them are almost equally bad. At first I want to point out that free-for-use option (with comm.) does not work because many people at the moment know how to use their browsers properly so they can download an app. for blocking advertisement and enjoy the quality of services as though as they pay for it. It is obvious that in this circumstances companies hardly can expect that many people will pay for their online free-of-add streaming while they have excellent opportunity to remove all add. for free. Two options were eliminated. The last one have a big disadvantage – you have to pay, and you have to pay a lot while you have an opportunity listen all music for free. Maybe elder people will pay for music but in my opinion youngsters will prefer free services.
    In this circumstances i would like to suggest that the best option for everybody would be if some of mobile carriers offer this service (online music stream) for free. Well, it is not so obvious for gaining revenue as selling add. on the Internet pages but as I said above sooner or later many people will not pay for music at all. However if one of mobile carriers (maybe even in Canada) will offer music stream just for free (or maybe just for 1 or 2 $) it can help them draw much more attention and attract new customers. Furthermore, it would not cost them too much because they already have a lot of applications for customers so development of another one would not be so expensive and by streaming music they also would increase data traffic (and gain all revenue only from data traffic sales!).
    In conclusion, for me digital music companies will not be able to gain as much revenue as they hope to gain due to a lot of opportunities listen to music for free without any advertisement at all. Stream music would work if this service will be include in a bundle of other services ( like mobile connections and data) but even in this case companies can not rely on a big revenues from it.

    Reply
  23. Mia Angelica Alcantara

    1. What is AWS (Amazon Web Services and why is it important?
    Amazon Web Service is a collection of hosted services offered by Amazon through the internet that was designed to provide a scalable, low cost infrastructure, application hosting and software solutions to their users. Through Cloud Computing, it is able to offer 6 Service Types:
    a. Application hosting,
    b. Backup and Storage,
    c. Content Delivery,
    d. Web Hosting,
    e. Enterprise IT and
    f. Databases

    Cloud computing is basically making either/and infrastructure, software, platforms available to a variety of end users at any particular time through the web without the need for each of the end users to set up their own servers and develop their own applications (which can be the same as those existing applications). It is making the IT component a commodity and offering it as a service to its end users.

    I think that AWS is important because it is revolutionizing the availability of IT infrastructure and applications/software to common users. It has virtually levelled the common IT barrier (cost) for any business. For example, a start-up company, in order to compete with current established companies within their industry, will need to have software in almost all of their processes (benefits include increasing efficiency and productivity and enhance decision making as discussed during previous lectures). However, it will be hard for a start-up company to invest heavily on big servers, networks to support these applications. An application hosting service offered by AWS on the other hand will lower the cost needed to make the company up and running. They will not need to purchase software and new hardware for these applications. AWS has made it easily available for them and charging them only for what they use including upgrades in functionality. In a sense, AWS/Cloud computing has made IT affordable. Through clients sharing resources, it has lowered the cost of setting up and maintaining infrastructures and software. This allows companies to focus on building, growing and differentiating their businesses instead of setting up and maintaining their own IT infrastructures. It is also available instantly and allows immediate deployment or use.
    2. What potential applications do you see for AWS and in what industries will this add the greatest value?
    I think this will add the greatest value to the healthcare industry. Hospitals and clinics are not supposedly IT-focused, they focus on patient care. However, most hospitals and clinics rely heavily on real time and accurate information to make life-or-death decisions, which can be made easier through information systems (IS). It will take hospitals and clinics millions of dollars to set up and maintain a complex set of software and hardware for a comprehensive and complex Healthcare Information System. However, if there is a web service, solely focused on clinical applications, servers, patient security, etc., then there might be a lot more clinics and hospitals that would be able to afford these services and use these services to improve care delivery. Hospitals will not need to maintain IT departments. Maintenance and support can be included in the web service and cost can be minimal.
    1. What is Big Data and why is it important?
    Big Data is the result of the advancements in collection and encoding of data. We know have large volumes of data coming in from a variety of inputs collected over time (3Vs: volume, variety and velocity). As this data is accumulated, some companies are now concerned on how to organize, store and make use of the streaming data to analyze and get relevant information from it.
    I think Big Data is important only in as much as we are able to properly organize, classify and store this data. Many transactional data are still dirty. A lot of information we get are raw and needs to be processed. But once these are standardized then the real task of making use of big data becomes necessary and analyzing that data more efficient and accurate. In advanced countries, those that have already ensured measures that only clean data is collected, new technologies like that of Hadoop is valuable as it extends the value of the data collected to actual decision support systems through analysis of data collected. As more data is collected, more information can be obtained increasing knowledge of things in a bigger and wider context (how the world thinks and works). All of these technologies, big data, cloud, etc are in a sense there to make our world better, efficient.
    2. What potential applications do you see for Big Data and in what industries will this add the greatest value?
    I would again prioritize healthcare, as that is my background. The more data we are able to analyze, the more information we can get as to the best treatment, best approach but least expensive care management. We can use big data to forecast which treatment yields better results for different diagnoses. We can use big data to analyze which care facilities need specific medications at specific dates/months. I think it would also be beneficial for preventive care, which can decrease healthcare spending for chronic diseases.
    Definitely big data will greatly affect businesses. The decision support for various departments in a company would prove invaluable to them. It will lead increase productivity, efficiency but also increase the quality of life of its employees by taking away the burden of manually analysing their day-to-day processes and give them clear guidelines to increase productivity and effectively do their day-to-day jobs.

    1. What are the various business models to revenue from online music?
    a. Transactional – More like the traditional business model of purchasing content. Consumers are able to purchase access to a specific content. They may either pay-per-use (rental) or purchase the content (iTunes). This model is easier for providers to cover the distribution costs for content and to acquire distribution rights from content creators. However, this is not appealing to all target markets.
    b. Subscription based – Consumers pay access to the content for a certain time period. It is easier for users who have multiple devices since they will be able to access the content at any of their registered devices at the given time period. Also, this is the most flexible and economical for those users that want new and popular content. It allows user access to premium content at relatively lower cost.
    c. Ad-supported – Online streaming is free but ad inventories are well within the sight of the consumer. This is used primarily to increase advertising revenues and increase traffic of the site. These usually have revenue sharing arrangements with the content publishers. This provides very little revenue (which is then divided between the content publisher and the network/site). This model proves to be a challenge as the site needs to be known for content publishers to even consider making arrangements with them and most do not see streaming ad inventory as valuable.
    d. Partnerships/Bundled Services – Content comes with hardware or services. Not yet popular and known.
    2. Which business model has the best chance for success? Why?
    I think with the advancement of mobile devices, broadband connections, a combination of a subscription based and ad-supported business model will be successful. Subscription base model is designed to distribute the cost of the content without sacrificing the quality of the content. It solves the problem of many users wanting to get the content as fast and as easy as they can even with numerous devices. This can be supplemented with Ad supported “free” content available for limited time. Subscriptions can also be flexible with different “plans” depending on the amount paid of the consumer. Eg. Content A can only be accessed by User A (paying xx amount) while User B (paying x amount) will not be able to access it. Subscription allows flexibility that the other business models do not.

    Reply
  24. Cory Hoffner

    Currently in today’s technologically advanced music industry there are three main business models to revenue from online music. These business models include pay as you download, pay a nominal fee for streaming music online, and streaming music online for free. Each business model has its pros and cons and it ultimately depends on the listener as to which model works best for him or her. The “pay as you download” model offers high quality, commercial free music which listeners can buy singles songs or whole albums. The downside to this model is that it can get quite expensive if the listener downloads large amounts of music. This specific business model will achieve revenue primarily because many customers will pay to have high quality, commercial free music. The “online streaming for a fee” model offers high quality music with commercial advertisement. The downside to this model is that the listener can experience many advertisements. The “online streaming for free” model offers low quality music with man commercial advertisements. This model is ideal for listeners who do not mind lower quality music with advertisements and no fee to listen to music.

    The streaming music industry has seen its fair share of companies come and go in this very innovative yet competitive industry. As the article stated, there are some big name companies that have yet to show a profit. So what business model has the best chance to succeed in the music industry? I agree with a few of my classmates that a business model that incorporates a mixture of all three models will have the best chance to succeed. It will require an extensive research and development stage to produce this successful business model, but I do think that customers should be paying for music. I think one of the largest obstacles in creating a successful business model in the music industry comes down to figuring out the right price and or fee for providing music to its consumers.

    Reply
  25. Vanessa Kerychuk-Matus

    In the streaming industry, marketing is the most important aspect of a successful company. The challenge is to market music as a product with an associated cost that has additional benefits other than free music found online or elsewhere. The different business models to profit from online music rely heavily on a company’s ability to market itself as a differentiation organization. In other words, what services can each company offer consumers that differ from what other companies have to offer. Each model has certain advantages and each company can leverage these advantages to build a marketable product that consumers will commit to purchasing. These models are useful but do not necessarily provide a sustainable competitive advantage as all other streaming companies can likely adopt similar strategies. That being said, streaming companies obviously foresee the potential for massive amounts of profit in the streaming industry otherwise there would not be so many new entrants to the market. What is particularly interesting is that new streaming companies are choosing to enter the market even though it has been noted that some of the biggest players have yet to turn a profit. Why then do companies continue to rely on these business models to market their services? And why are new companies emerging all the time? I believe that in order to answer these questions, we must look at just how new the streaming industry is. As an infant of technological evolution, the possibilities are endless. Companies continue to enter the market because there are countless opportunities for innovation. A company must simply come up with the next best idea in product creation or marketing and they will take the lead in a rapidly growing industry. The likelihood of it being your company that succeeds in finding the secret weapon needed to profit from the streaming industry is small but the potential rewards are outstanding. Therefore some companies may believe the risk is worth it in the end. In the meantime, the standards business models must be used while the industry waits for its big break.

    Reply
  26. Raeesa Jiwa

    The business models underlying the online music industry include ‘pay as you download,’ streaming on a subscription basis for a nominal cost and streaming for free. All of these models have their advantages including royalties for artists, inexpensive music collections for listeners and online advertising opportunities for businesses. Each of these models have their pros and cons, and essentially I believe that a combination of all three would be best. The music industry is certainly one that requires a lot of capital to maintain so I do believe that profits need to be sought somehow. Providing streaming for an extremely low cost with minimal advertising and an ‘upgrade’ offer for a larger fee with no advertising would be a good way to incorporate the needs of consumers who stream music. Lowering the cost of downloaded music might also assist in increasing its supply, or by adding features that are not available in free versions might be a way to entice music lovers and fans to purchase rather than listen for free. Also, a guarantee of good quality music, occasional bonuses and limited fees would encourage customers to pay for the service rather than seek it for free. Another idea could be to incorporate streaming fees in a phone bill (ex. $1 per month) and then give consumers an app that allows them to listen to streams. If customers are given the streaming technology and the bill is minimal, and already bundled with another bill they may not think twice!

    Reply
  27. Sara Bieniada

    There are several online music business models that companies can receive revenue from. The largest source of revenue today is still the pay-to-download option companies such as iTunes or Bandcamp offer. Increasing in prominence today, however, are streaming options. Consumers either enjoy the music for free, but endure both image and video advertisements, or they pay a small periodical fee in order to listen to a better quality, advertisement-free music stream.
    At this point in time, it is very difficult to predict which business model has the best chance for success. Ever since file-to-file sharing became prominent through the public launch of Napster, society has become accustomed to listening to music without having to pay for it. Many people in today’s age believe themselves to have a right to free music. This was not the case only a few decades ago. In order to continue making music a profitable industry to be in, something must change, either a complete societal mind shift (towards the fact that music should something to be paid for) or discovering a new way to make a profit, without actually selling the music. Although, I personally would like to see a mind shift, and a renewed recognition in the appreciation of arts, and a payment of money to reward artists, that would be a very difficult feat for one company to accomplish. Therefore, in order to make a profit, companies need to get creative with ways to make money without directly charging consumers. It is due to this that I predict free streaming options as the business model with the most chance of success. In order to make money, though, those types of company will have to be innovative in attracting high-paying advertisers, or otherwise come up with a different means of profit gain.

    Reply
  28. Courtney Minor

    The music industry contains a few different business models that each company can chose to use. The first model is more traditional in which each customer pays money for each song or album they download and in return they get higher quality music without the advertisements. The second model a company can chose to use is one in which they d not charge their customers a fee but instead they receive lower quality music and have to watch long, boring and repetitive advertisements. Obviously there are strengths and weaknesses for each model, however as a customer I normally download my music off of youtube and then use a youtube to mp3 converter to convert my music to my itunes. As a customer I would rather download my music from there way rather than download it off the itunes store even though the quality might not be as good. I also love listening to music therefore I have close to 6000 songs on my itunes. As a poor university student I could not afford to spend $1.00-$1.50 on every song i purchased. From a companies perspective I would find it very hard not to charge customers and only make royalties off of the advertisements because these companies “have yet to make an annual profit.” The companies that do not charge customers have complained that royalties are too low to even make a living off of it. Therefore from a company and business perspective I would charge my customers a low subscription fee like netflix and let them listen to high quality for a very cheap price.

    Reply
  29. Rachael Stagg

    There are three main business models that are used by different companies today that allow people to stream music. The first model is that which requires customers to pay (usually monthly) for higher quality music with no advertisements to endure. I believe this is good for customers that are using the digital music company on a regular basis and don’t want the hassle of advertisements popping up between songs or when they are searching for music. However it appears that this does not always benefit the company as one might have thought. If company’s are selling monthly subscriptions for as little as $3.00 a month the company really isn’t making money off having a customer subscribe for a month. The second model are where companies like iTunes and iRadio come in. They charge customers for individual songs because they are of higher quality and no advertisements involved. The third and final model is the one where the customer doesn’t pay at all for the service. Because customers aren’t paying anything to stream their music companies force them to watch various advertisements from different sponsors before they are able to listen to the song that they actually want to hear. I believe this model can actually become a great asset to the company because they are getting funding from their various advertisers that can help promote the business and in some cases lead to revenue. The music industry is an extremely hard market to enter because of the competition and in some cases lack of ability to make money. If people can get it for free (which in most cases they can very easily) then they have no interest in paying for a service even if it is as cheap as $3.00 a month.

    Reply
  30. Easton Smith

    There are different business models currently in use for users to listen to music. A few of these include paying for high quality music per song downloaded or per album, online music streaming that requires consumers to pay a monthly fee, or listening to music for free but enduring sometimes long and painfully boring advertisements. I think the business model that has the best chance of success is a system that requires customers to pay for each song or album they download, enabling them to enjoy the music at the best quality possible. This “bang for your buck” approach is one of the main reasons iTunes continues to dominate the music industry in terms of downloadable music. It is my opinion that, at least for the present, this is the best model. By not having to listen to advertisements that, to be quite blunt, most people really don’t care about, consumers can indulge in the task that they set out to do: enjoy high quality, uninterrupted music. I understand that paying for music does not tickle everyones fancy. There are many benefits to new artists for people listening to their music for free, the top one getting their name out there and music heard. But what about artists who have already worked very hard to get where they’re at? This illegal downloading and free streaming of their music hurts these artists and causes the music industry to lose millions and perhaps billions of dollars each year.
    Looking ahead to the future I agree with Dallin that an incorporation of all of these business models would be a fantastic solution. By forcing consumers who do not pay anything to listen to advertisements as well as listen to lower quality music may get them to realize that this industry spends millions of dollars perfecting their songs and it’s worth a buck or two to listen to them. An incorporation of all three models into one ‘Supermodel’ solution of music would be beneficial to all parties in the future years to come. However, getting all of these large competitors to agree on a final product and model, may be easier said than done.

    Reply
  31. Sidney Bouma

    There are several business models that are used today. Firstly, they try to get customers to pay money for higher quality music. They do this by advertising that we will enjoy the music more if we can hear it better. It may not be to big of a difference but customers will want to pay because they always want the best. Another model that they use is somewhat of a subscription. This is where people pay for a week, month or even a year and can stream music as much as they want. Customers will do this so they dont have to deal with anything when they want to stream. The third model is focused on the customers that dont want to pay any money. In order to make up for lost revenue, they force customers to watch advertisements. This can get annoying but at least its free to stream music. Advertising can be avery effective business model. By having customers watch advertisements, they may make more money than if they sold subscriptions. It all depends on where the money goes. If some money goes to musicians, this can help them create more music. That industry is extremely hard to be successful so any little bit helps. I think that a model where all three of the above are incorporated would be most beneficial. This way, all types of customers can be satisfied. It all depends on how much money they want to spend and the quality of the music they desire.

    Reply
  32. Dallin Harding

    A few of the business modules suggested and currently in use include: getting customers to pay monthly or weekly to continue to stream music online, allowing customers to stream music for free but at the cost of having to watch advertisements, and paying more money to listen to higher quality music.
    I think each strategy has its own strong and weak points. Advertising, as we know, as a huge market and lots of up and coming musicians would love to get their name out. So allowing customers to stream music for free while making a generous profit from the musicians buying ad time on the music being played doesn’t seem like a bad deal. However, companies that are currently using this strategy “have yet to make and annual profit.” They would probably make a lot more money if every customer payed a 5-10 dollar fee every month to continue using their service. The problem with that though, as shown in the article, is that the majority of customers aren’t ready for that. The solution would be to incorporate all of these different ideas. I think if all users were required to watch advertisements but those who pay a certain amount can choose to skip the advertisement and those who pay a larger amount can also listen to higher quality music. This incorporates all of the modules and taps into the needs and wants of a broader range of music consumers. In the end I think it also comes down to the need for a shift in people’s mentality. These companies that stream music won’t start making money until people think that music isn’t free.

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s