Analyst: Recording industry needs even newer business models

JupiterResearch analysts are pointing to the music industry's need to revolutionize its business model even further, as social networking sites, Internet radio stations, and legit P2P services are taking command of the market.

As music steps more and more toward online distribution, it will become increasingly important for the entertainment industry to find new business models along with new device paradigms, according to analysts at JupiterResearch.

Although the CD business is fading, downloadable singles are out there on the Web, along with Internet radio stations.

For players in the music business, one of the biggest challenges ahead is to find new devices to compete with Apple's iPod. But the industry also needs to come up with ad supported business models or other new ways of selling musical content and services to run on these devices, said JupiterResearch VP and research director Michael Gartenberg in a written statement released today.

Consumers, on the other hand, are benefiting, since their exposure to music is not longer limited to terrestrial radio and MTV, according to Gartenberg.

Meanwhile, at last week's Digital Music Forum in New York City, sponsored by a company called Digital Media Wire, Inc., signs of these kinds of changes were everywhere. Two of the businesses talked up at the show -- RCRD LBL and TouchTunes -- are both advertising-supported. In fact, TouchTunes combines an ad supported business model with a digital jukebox device.

With 30,000 systems now deployed -- at sites that include the venerable Hard Rock Cafe -- TouchTunes jukeboxes allow restaurants to add their own menus as well as advertising content to the music mix.

RCRD LBL, for its part, currently carries ads from the likes of Virgin, Nokia and Nikon directly on its slick new Web site. It also gives you an easy way to add links to the site on pages in social networking venues Facebook and MySpace.

Right now, however, the musical content seems geared to a very young crowd, even though a wide range of musical genres is represented. On the site's "Classic Rock" page, for example, U2 and the Rolling Stones are the best known artists listed. But content from these two bands consists only of movie trailers from Youtube.

RCRD LBL, though, keeps quickly adding more content, according to Peter Rojas, the company's CEO and co-founder. Rojas told attendees at the Digital Music Forum that he launched a couple of "blog start-ups" before opening the free music downloads site.

Maybe the music industry has been kind of due for a shake-up, anyway. Benjamin Campbell, another speaker, strongly attacked the industry's long-time "plantation system," suggesting that the prices of CDs and other recorded music have been kept relatively high in order to maintain record companies and their associates in pricey "Fifth Avenue Manhattan real estate."

But actually, the industry has been undergoing changes for quite some time now, indicated Maria Egan-Cohen, an executive at Columbia Records. who said she entered the industry just in time for the "end of the second 'British Invasion.'" Egan-Cohen told the group that she's never witnessed much in the way of fancy limousines or other lavish spending, making it hard for her to identify when older colleagues talk about "the good old days."