What I’m on about: Why VRM matters to the music business

I apologize for my sort of recent obsession with all things VRM. It’s actually not very recent; it takes me longer than the average bear to organize my thoughts on these types of topics, and so I mull and mull in the scary silence of my brain until things start to emerge. Once they do emerge…oh boy, stand back, because all that pent up crap in my brain starts spewing forth. These types of happy explosions of interest and connection are what I live for.

So, all that preamble behind, you, Dear Reader, will have to suffer through more of this VRM hullabaloo (or not; I would understand completely if you un-RSS me, stop following…really, it’s cool, and actually very consistent with everything I’m talking about: you the customer (though I by no means think of you in that way) have the power – not digging my scene, by all means find one you do).

I had a conversation today with one of the smarter people in the music business, Dick Huey, in which I was going over some details of a project I’m working on. Dick was correctly pointing out some issues when I rudely interrupted him and said, “All I’m trying to do is move the needle here. I just want desperately for customers to have more control over where they buy/how they interact with the music that moves them, because I believe that will benefit the artists.”

I continued, my eyes rolling slightly back in my head, “How do we defend the fact that we give credence and validity and importance to “filters,” and send traffic to them, and reward them for traffic, but then when one of these filters does their job and compels a customer to want to engage with something, we require the customer to take a series of unnecessary steps to do so.” Want to buy a book, album, whatever from a trusted source….shoot them over to Amazon/iTunes.

We go from providing the customer with tools to learn about something of importance, and even interact generally (a song sample, a sample chapter), but then don’t provide them with the choice to complete the transaction. Instead, we add in layers of transaction cost to complete the process. The percentage of people who get interested in a product, but don’t complete the transaction on a site where they can is massive (we know this because we can see people who abandon shopping carts with items in them). So consider how exponentially more massive is the percentage of people who never bother to leave a site where they’ve discovered a product, but can’t complete the transaction in order to go to another site, (potentially) enter in new CC information, complete the transaction, etc.

We’ve walled ourselves into this bad CRM world, where Amazon, eBay, or iTunes are the default. As Doc Searls says, “…customers need easy and secure means for expressing demand, with money on the table… Intermediaries can be involved, but they must be substitutable. If they’re not, we’ve just got eBay and Amazon all over again.”

The problem with these default intermediaries is they create arbitrary and capricious terms that become the de facto standard. iTunes keeps 30% of the transaction. This, therefore, becomes the default; content holders are conditioned to “OK” similar terms because they’ve been established by Apple. The problem? These terms don’t necessarily make sense. Apple themselves said for many years that they were losing money on the iTunes store. That was OK by them because they could leverage the sale of music to sell higher-margin items (iPods, iPhones, laptops, etc.). But, if you’re in the business where you’re not using music as a loss-leader, in addition to being insane, you’re probably fucked by these terms. Don’t believe me? How well are the music entities that have had to abide by the terms that Apple established as the terms doing? Not so hot.

The key to VRM is that the customers manage their vendors; the customer puts out a RFP and then selects in what manner, and with whom they’ll interact. I have no delusions that that scenario is gonna get here any time soon. It will arrive, and sooner than people think (to a degree it’s here: Kalido; Informatica).

What I think will lead use closer to there, vis-à-vis music, is for the vendors (in this case, record labels/ content holders) to see “money on the table demand.” This will motivate these content holders to help create systems that allow for the transactions to occur across a vast amount of vendors.

Right now, it’s like pulling a garage door through water. Not only do these content holders demand potentially untenable Apple-esque terms, they want the intermediary to build — at the intermediaries sole expense and risk — the mechanisms to sell the content holders’ wares. Please, for a moment, think about the insanity of this. Think about how well Coca-Cola would have done had they made it fucking impossible for vendors who wanted to sell their product to do so!

In any case, back to Dick for a minute. I finished my rant by saying something along the lines of, “This is about way more than a deal for me; it’s about opening up markets so that we can sustain this whole enterprise of creating, selling, enjoying music.”

That is the particular windmill I’ve been tilting at all my life. What’s making me spur Rocinante with ever-increasing gusto is that this time I’m pretty sure that windmill is going down. Whose with me? Sancho?

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