The Future of the Music Business: Farewell to Free (UPDATED)

Last week, two of the biggest names in music shocked their fans with bold moves through digital media: Long-time digital music holdouts Led Zeppelin announced that they would finally release their catalogue to the masses via Spotify, while Beyoncé, without warning, unleashed her 14-song, 17-video self-titled album on iTunes. One of these events represents the future of music as a business, while the other retreads an already-broken model.

The Spotify/Led Zeppelin deal, unfortunately, represents the latter. Spotify, like Pandora, is still attempting to substantiate a business model that gives music away for free to a vast majority of its listeners. While each service has some small percentage of paid subscribers, their entire business model has so far relied on advertisers to underwrite a majority of their costs. Telling every Spotify user in the world that they will now be able to access the entire catalogue of one of the most popular music acts in history for free is only reinforcing this discredited model; once you train consumers that your product is free, it is very hard, if not impossible, to convert them to a paid model.

Artists are getting frustrated that the free option is not optimizing the enormous popularity of music and has jeopardized the royalty base that they count on to live and to create. Beyoncé and iTunes, fortunately, may have found exactly the model to move the music industry as a whole back into the black, as their revolutionary album release illustrates how to work the ever-changing landscape of the record business to create different pricing and distribution models, capturing sales.

What Beyoncé did, in short, was what every other artist and label should be doing: find new ways to surprise and delight the consumer, offer value, and they will pay.

This is the future. She created an album on which a music video, replete with footage from old home movies, accompanies each song, appealing to the fan who wants more than just a hit song — they want an album experience. In an age of fungible, singles-driven sales — Beyonce’s business approach was also an artistic statement harkening back to time when artists made and consumers’ appreciated, full album projects.

The genius of the idea, of course, was in the waiting, allowing consumers to want the album, even as she toured, and then very casually releasing it off-cycle using social media as her marketing plan. People stormed to buy the album so as not to be left out. Beyoncé turned Twitter and Facebook into one massive word-of-mouth campaign with a built-in sales-lead mechanism and recommendation engine – our inherent social narcissism to be “in-the-know” and “the one you heard from first” as a catalyst for others to get the album immediately.

In light of new creative methods to release albums such as Jay-Z’s release of Magna Carta Holy Grail to one million users on Samsung Galaxy mobile devices and Justin Timberlake’s decision to launch two albums in one year (a year during which he also launched his single Suit & Tie with both Target and Bud Light at the Grammy's).

It is perhaps ironic that Led Zepplin is just now getting into the digital age, while Beyonce is showing the music business the future by borrowing some tricks from the analog past. And through Beyoncé’s ambush launch, we are again reminded that the music business can still thrive if the artist and record companies infuse value back into the music that they produce and promote; and if they collectively bring vision and innovation to their marketing and distribution plans.

By turning away from disposable music from a price and a quality standpoint and turning toward excitement, surprise, and maximizing fan value the future may look a lot more like the pre-digital past when musicians actually made albums for their fans.

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UPDATE: After this post when live, Target announced that it would not sell Beyonce's album. A spokeswoman told Billboard: "At Target we focus on offering our guests a wide assortment of physical CDs, and when a new album is available digitally before it is available physically, it impacts demand and sales projections." Talk about antiquated...

Photo: WireImage / Getty Images and Spotify Logo