Thursday, March 19, 2009

Choice Overload and Radio

I just finished reading an excellent interview by Kyle Bylin, Associate Editor of Bylin interviewed Barry Schwartz, who is the Dorwin Cartwright Professor of Social Theory and Social Action at Swarthmore College and author of the book The Paradox of Choice: Why More Is Less. In this interview, Bylin probes into the impact of the paradox of choice on the music industry. Professor Schwartz explains in the interview that when people are given overwhelming options (i.e., choice overload), such as in today's music culture, if they do make a decision they tend to take one of two courses of action: (1) they rely on habit to make decisions or (2) they rely on filters to tell them what to choose.

The second course of action is very interesting to me in light of our previous discussions of the most recent version of the Performance Rights Act. Let's take my prior argument as true, that Radio hinders the sale of music overall (again, I'm not saying radio hinders individual albums, artists, or songs; I'm saying all music). Could radio still be benefiting the labels and some artists, by acting as a filter in our choice overloaded society?

From an economic standpoint this could make sense. For years (I'm talking 50 or more) record labels have operated a generally static business model. They payout advances to bands, the bands record an album, the album is shipped out into the world and marketed, the band goes on tour to further market the album, singles are released into the world via radio, and 90% fail. Yes, that's right, 90% fail to ever make a profit. The other 10% make the labels back their money and a profit. Consider the failures to be R&D. The problem in the last 8 or 9 years is that the other 10% are not selling that many albums either because of the file-sharing problem ushered in by digital technology.

It has been clear for years that record labels have to change their business model. First, they need to find other streams of revenue to stay viable--hence the Performance Rights Act and the push for 360 deals. Second, they need to increase the number of acts that actually turn a profit. Gone are the days when 10% can sell enough units to carry the other 90% and generate a healthy profit for the label.

Could the power of Radio be harnessed by the labels, in this choice overloaded society, to improve their current 10% success rate? In other words could the labels use radio as a filter to improve their sales of individually selected acts? Some say that is what radio has been doing all along, and manipulation of that system (ever heard of payola?) also has a longstanding tradition. But that still only resulted in a 10 or 20% success rate at best.

I'm talking about a more efficient business model. One that takes into account the current realities of of exceedingly large numbers of individual songs on the Internet. One that abandons payola and where labels no longer package 8 bad songs with 2 good ones so that they can charge $15 per album to turn a profit. I don't know what this business model would look like yet, but it is an interesting thought.

One last thought: if they could harness the power of radio in such a way, would that violate antitrust law?