Time for Change

Sony has reported this week that its profits are down 95% from last quarter. Included in the downward spiral is Sony's music division, which experienced a 41% decline in profit resulting from a 22% decrease in sales. (Source: Hypebot)

Even so, it's not time to lose our heads. In the same week, the music/tech blogosphere has been buzzing over the success story of indie artist Corey Smith. He reportedly made about $4 million in gross revenue with his DIY business model. A main component of the model? Giving his music away for free. Most of his revenue comes from concert tickets that he sells for approximately $5 per show. This, claims Mike Masniak of Techdirt, encourages fans to drag along their friends; to go to multiple shows; and to buy merchandise at shows.

The Corey Smith model contributes to a growing amount of evidence that models of "selling for free" can be profitable. Buying music today is simply too expensive, and those who give music away for free or sell cheaply tend to do better. Fans react negatively to a cd priced at $16.99. If you look at a full 120GB Ipod, how much would you value it at? If it's full of legally purchased music, it's worth $24,000 to $30,000. At that rate, it's not surprising that music fans tend to download music illegally. Even so, Corey Smith and others show that musicians can still come out on top. In order for the music industry to survive, they need to change their dramatically change their business models. At this point, experimentation is warranted.

Perhaps that's why songwriter Amanda Ghost was recently named president of Epic Records, a label owned by Sony (Source: Hypebot). Ghost is a successful pop songwriter and has penned such hits as James Blunt's "You're Beautiful." This unusual choice is a move in the right direction for Sony, which has little to lose following this quarter's losses. Perhaps the music industry should be run by musicians rather than business executives. The outdoor industry, for example, has thrived of the outdoor industry is run by skiers, climbers, and surfers. There's even a recent article at CNN Money about its unique model.

Amanda Ghost's appointment at Epic Records will hopefully bring a little bit of Corey Smith flavor to Epic. Companies are well-advised to continue appointing musicians to higher level positions within record labels. They bring a musician's sense as well as a point of view that cannot be acquired simply by earning an MBA.

Read the full story about Corey Smith over at Hypebot.