Chris Anderson’s Long Tail blog has a thought provoking article where he puts forward the proposition that many bands may be better off giving their music away (via downloads) and making their money from live appearances.
Anderson starts off by reminding readers that the marginal costs of production and distribution are close to zero for music, something which Anderson has termed the economics of abundance. Revenues from legal downloads are growing, but they are not compensating for the drop in CD sales. By contrast the prices of tickets for live performances have been growing. Anderson quotes the average US major gig ticket in 2006 as $61, up 8% on the year before.
Anderson collects various other stats to back up his argument. For example, the share of music revenue accounted by live performances in North America was at an all time high in 2006, at 16% of the total or $3.6 billion.
Anderson also pointed out that 92% of the Rolling Stones revenue comes from touring, not from record sales.
So, live music might be part of the answer for bands, with downloaded music, at marginal prices or even free, becomes a method for creating the demand for live music. One group of people do not care for this vision of the future. Generally, the labels make their money from record sales not from live performances.
Things may not turn out as Anderson predicts, but his article does ask questions that need answering, and highlights the need for marketers to keep re-evaluating what is the market (just as manufacturers of computer printers changed the profit stream from the printer to the consumables).