• by November 29, 2007

The music business is changing faster than any other. And in many ways, it really is a microcosm of the whole new media environment. Just think, 10 years ago, there was no iPod, and more important, no iTunes. MTV could have even been considered relevant to music, and not just a place to keep up with the lives of cat-fighting 20-something Los Angelinos.

But now, Yahoo Music streams 240,000,000 music videos every month, and the younger crowd is increasingly finding new music by downloading swathes of tracks for free. And MTV's ratings have dropped as much as 30 percent (depending on how you slice the demos) in just 12 months - a decline so rapid, industry professionals didn't even see it coming.

It seems that everyone expects music to be free these days, yet Apple claims (like a digital McDonald's declaring how many billions have been served) that it has sold over 1.5 billion songs on iTunes since the service began. Even more interesting is that giveaways are often being used as a way to generate revenue.

For example, Prince just gave away his new album to all readers of a popular Sunday newspaper in the UK. While that may seem very altruistic, let's not forget that when 140,000 tickets went on sale at $62 apiece for his UK shows, they sold out in 20 minutes, crashing the electronic booking system in the process.

Emerging artists also give away music to promote their live shows, cashing in on cover charges and merchandise sales, including CDs, at the show.

Ben Harper was quoted at the Bonnaroo music festival this year wondering if musicians "even make records anymore, or just do live gigs."

Multi-day arts festivals have become central to the industry, again. They are quickly growing in popularity all over the country. Bonnaroo has only been around since 2002, yet it already attracts more than 80,000 fans every year - each one paying over $170 for a ticket.

One reason this new model is gaining traction is the rise of social
networking. Bands like Arctic Monkeys became famous when people who went to see their shows posted videos on MySpace. The band didn't even know it had a profile, but its fans sure did, and they listened to bootleg recordings in droves. It made the band famous the same way heavy radio rotation used to.

Consumers are telling advertisers a few things:

Even if we can get something for free, we will pay for it in the future if we like it (like buying CDs at live events). We are also willing to pay for services that give us the freedom to tailor products to our individual tastes and needs (like iTunes). We aren't cheap when it comes to unique experiences (seeing the band live even if its music is free online), and if we like something, we'll tell our friends about it.

Perhaps the only way to thrive in this new environment is to allow consumers to sample products for free and rely on social networking to do the promoting for you.

This could actually herald a return to the early part of the last century when the advertising giant of the day, Claude C. Hopkins, believed that a good product was its best salesperson, and that if you let consumers try a good product for free, they'll come back to pay for it later.

The best lesson for marketers in 2007 might have come from a guy who got his first advertising job in 1907.

Paul Parton is the brand-planning partner at The Brooklyn Brothers, a creative collective. (paul@thebrooklynbrothers.com)