Thursday, December 14, 2006

Can David Letterman save the music industry from itself?

As the P2P file-sharing version of Napster fell to its death, crushed by the weight of a steady stream of RIAA-backed lawsuits at the first of the decade, an incredibly significant event occurred that all but validated the model of increasing sales by giving away music. And it was all but ignored by the very people it would have benefited the most.

Several high-profile artists such as Metallica, Dr. Dre and Madonna pursued legal means of stopping their music from being shared on the wildly-popular P2P service, especially singles that were leaked to Napster prior to being released commercially. Many artists claimed that making their music available on the service took money from their pockets, and this was of course a stance that the RIAA was more than happy to support vehemently.

But in 2000, as the service was already entering its lawsuit-enduced downward spiral, a funny thing happened. In October, Radiohead saw their Kid A album debut at the top of Billboard's Top 200 chart. This was surprising for two reasons; first, the album had no singles and almost non-existant radio-play prior to release, and second, the band had never had an album crack Top 20 in the U.S.

But what the band had going for them, was Napster. Months prior to the album's late-fall release, Kid A was leaked to the file-sharing network, and millions of users that had never heard of the band were suddenly exposed to its music, and they loved it. So an alternative band that had previously enjoyed modest sales at best, was suddenly a mainstream hit. This seemed to validate Napster as a channel for increasing music sales, not destroying the industry, as the RIAA and some artists had all but claimed. But again, this wasn't what the industry wanted to hear, so they ignored the significance of Radiohead's sudden success, and less than a year later, the service was shutdown by a court injunction, and would never return as a P2p file-sharing network.

But today, TV networks are discovering for themselves that making their product available for free on the internet, can lead to mo money. In October, CBS created a brand channel on YouTube, and began seeding it with video clips from the network's shows. The deal also came with an interesting twist; CBS would allow its clips to be downloadable, if YouTube would grant the network the right to remove any existing copyrighted material, or let it stand and share in the ad revenue the clip generates.

So far, the experiment has been a wild success. CBS has uploaded over 300 clips to the channel, which have been viewed over 30 million times, and the channel has over 35,000 subscribers.

And the network's move to freely distribute its content via YouTube, has been a shot in the arm for CBS' shows, as Late Night with David Letterman, and The Late Late Show, among others, both saw their audiences spike after having video clips from the shows seeded on YouTube. And it couldn't have come at a better time for the network, since November was a "sweeps" month, where networks use ratings and audience share to set advertising rates for the coming months. The end result was that CBS finished November's sweeps as the most-watched network.

And here's the money quote from Chris Taylor, Business 2.0 Magazine editor:
The Nielsen ratings did more than give CBS a lift. It provided key evidence in the war between copyright owners and freeloaders. Music buffs, for instance, have long argued that the free sharing of songs drives CD and other music sales. The problem is, they've never had the statistics to prove it.

But video-sharing proponents do. The CBS deal shows that a direct connection can be made when it comes to free-for-all TV downloads. Networks now have both YouTube figures and Nielsen numbers at their disposal.

As a result, other networks are seeing the success that CBS is having with their brand channel, and you'll likely see similar offerings from FOX, NBC, and others in the near future.

But will we finally see the music industry learning from the lessons that Napster users tried to teach it years ago? They now have the model in play to see that giving away content can actually boost the bottom-line. This is why I devote so much time to the measures that Nettwerk takes to empower their music fans to trade and market their artists' music. It's why I post constantly about The Donnas' model based on increasing sales by giving their music away through Because these guys are ahead of the curve. They are already operating in the space that the rest of the industry will eventually discover, even if it's against their own will.

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