I recently read an article on Paid Content about the future of music on the Internet. It was an interesting post that suggests that consumers are getting very comfortable not paying for music, and this trend will probably persist in the foreseeable future. The author makes the point that if consumers can have access to all the music they need to consume for free, why would they pay for it. I agree with this and feel that all the players in the industry need to come together to find out a way to monetize the business - they need to do this collaboratively.
In the past, record companies generated revenue by the units of physical albums they sold. With the advent of the Internet, record companies need to find ways to generate revenues from consumption. For this to actually work, record companies, internet service providers as well as entrepreneurs need to work together to come up with a solution that is a win-win for all involved.
The author suggests a tiered pricing model, which seems to make sense and probably would work. Companies should have a premium offering that allows unlimited consumption for a monthly subscription fee. The next tier should not be as robust and the music fees should be subsidized by the internet service provider. And finally, there should be the last tier which is supported entirely by ads. I think that if this model is properly set up, it gives a chance to train consumers on how to consume content. The goal would be to gradually convert users to higher ARPU tiers over time. At the very least, you are limiting the amount of content illegally downloaded by providing consumers a way to legally consume content.
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