the brutish and short life of a commodified complement

On-demand subscription services don’t earn a profit for their owners. All the money goes to other parts of the ecosystem. The subscriber fees are passed to the labels. Electronics used for listening make a profit for the manufacturers.

Think of iPods. Most of the money for buying tracks goes to the labels. Apple keeps the money from selling iPods. There is no independent “music store.”

So how to interpret the news that Beats, which is owned by HTC, is buying MOG? Beats and HTC are device companies. They make good money by selling equipment on which to listen to music. In addition, Beats is affiliated with Universal Music Group, the biggest label.

MOG makes little money. In that sense it’s no different than other online music distributors, including Pandora and Spotify. However such companies do make money for device makers and labels. The content, equipment, and distributors are complementary goods. HTC, and sorta kinda UMG, are buying a complement in order to enhance the value of their primary line of business.

This move is ultimately good for the internet music industry, because it puts the industry on healthier footing. MOG’s product makes more sense as part of a larger service which makes a net profit than it does as a standalone which breaks even at best. The underlying economics are getting better.

2 thoughts on “the brutish and short life of a commodified complement

  1. “This move is ultimately good for the internet music industry, because it puts the industry on healthier footing.”

    Couldn’t disagree more.

    The removal of an independent party, complementary to whatever it may be, means more centralized control somewhere. Human greed is infinite. I may already be 10,000 richer than you, but can still easily come up with very many very good reasons why out of the next dollar we make ‘together’, 90 cents go to me, and 10 to you. Minus some fees I will deduct ‘for you’ :-)

    As a consumer, I couldn’t care less about distribution companies let alone device makers. Distribution companies are a complete anachronism, the promise and daily reality of the Internet is democratized and global distribution ability for everyone, at near zero cost. Device manufacturers should hold no power or control whatsoever over creators. A singer picks the microphone that suits her best, a dancer picks the camera that records her best, and so on.

    As a consumer, I want my full attention, care and resources go towards creators. I want to enjoy what they created for the world, I want to be able to express my satisfaction back in monetary and non-monetary ways. For this relationship I only need myself and the creator. Single points of control, let alone the grossly over-sized ones we have today in the form of giant corporations, are an abnomaly that we all can do better without.

    Bottom line: MOG loosing their independence is a symptom of a problem. Whether the net total somewhere is now more than before I don’t know, but surely it won’t be in the hands of creators.

  2. Wolfgang, I posted my reply as a full blog entry, but I wanted to add one thing – I think that you’re seriously underestimating the importance of distributors.

    Pandora for example is in some ways a more important brand than the acts it connects people to. People don’t feel like they’re listening to Miles Davis or whatever, they feel they’re listening to Pandora.

    Distributors have personalities that can charm you or turn you off. The best can sell you a good experience based on music you’ve never heard before and will never hear again. For example Shuffler.fm delivers a good time around bands which appear and disappear almost instantly.

    Consumers *think* they have a direct connection to the artist, but it is a pure illusion. By the time the fan connects to the artist very many intermediaries have been involved. The intermediaries hide their fingerprints because they don’t want to be seen. The fan is in a cloud and knows no better. But culture is heavily manufactured whether or not the machinery is visible.

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