Thursday, October 23, 2008

The Rock Band Effect and the Historical Value of Musical Performance

IMAGE: My friend Alexis Ohanian performing with his band Breadpig (a band that only plays with Rock Band controllers) at San Francisco's Pier 39.

I read three interesting things this week: an old essay by Ooga Labs founder, James Currier, and a brand-new slide presentation by LoudCrowd founder Nabeel Hyatt, and a news item from Digital Media Wire. Taken together, they've lead me to some interesting thoughts about how music is emerging as a powerful virtual good.

First, the news which I call the Rock Band effect: 3.8 million music downloads for music games per month sold on Xbox Live, which according to Microsoft is 80% of all music downloads for music games.

Second, Nabeel's presentation suggests that the declining value of recorded music is due, not to piracy, but because it's a passive media in a world of active media. I think he's wrong, particularly since he's suggesting live performance is active media, which I don't buy. However, his overall point about digital media being a virtual good is one that you should all take to heart. In the presentation is a graph showing recorded music sales (passive media) declined by 10% as concert ticket sales increased by 15% in 2007.

James' essay is about the economics of creativity, specifically how the value of any creative endeavor changes according to a society's perception of that value. He uses the history of musical performance to demonstrate his point, specifically how the value of live virtuoso performance dropped in status once recorded music emerges, at which point society rewarded the talent of recording music. He's the relevant part of the essay:

People who played in the orchestra were rock stars of their day, and the conductor too. Even the conductor’s son was part of the creative elite. Royalty lavished big bucks on musicians and, I guess sometimes, fell in love with them. That was the technology of the day, and it happened to favor the particular bundle of talents my great great great grandfather had.

Fast forward to 1925 when my grandfather was trying to make it as a cellist in Boston. He got paid for playing his cello at dinner at the Chatam Inn on Cape Cod but he could barely support himself and his bride. When the kids came, he became a machinist and a fork lift driver at a brewery. His creative endeavor no longer paid the bills because radio was availble and the transition was underway in the 20’s from rewarding live music to rewarding recorded music. Later in his life, my grandfather would practice and play the cello for free.

Forward to the 1940’s when my grandfather’s sister, Florence, 20 years younger than my grandfather, loved to sing from the time she was three years old. It was in her nature and she would do it for free. She recorded 8 albums in the 1950’s which were distributed on vinyl and played on radio stations around the U.S. She’s loaded! The technology available to distribute creative endeavors richly rewarded the talent for recording music.

Forward to the 1990’s, when a friend from college who won the Julliard Prize for playing piano, tried to make it as a concert pianist. She was much more talented than my grandfather, but by the 1990’s, the economics of live music had deteriorated to $50 stipend for an hour performance. And it takes her 80 hours to prepare for that hour. She still performs every chance she gets. She’s willing to do it for free today, while my ancestor got to marry royalty 150 years ago for a similar talent.

And now, according to Nabeel's graph, the value of recorded music is dropping as the value of live performance rises (provided it's performed by someone who's talented at recording music).

The news article suggests that music downloads for music games is an incredibly success new vector of music sales.

It's seems that the value music that can be performed by others is on the rise. I'm sure Nabeel would agree, his newest project, LoudCrowd is a music-based game world (Rock Band meets Habbo Hotel).

New musical artists should be thinking about how to optimize their music to be played in a music games. According to my reading of James' analysis, then that's where the new music royalty is going to emerge.

But does this affect social games.... It doesn't directly. Though as Nabeel suggests, music is a highly valuable virtual good. Now, consider that the music one listens to is one of the key differentiator between social groups. I'm guessing a few of you can come up with a creative way to apply these insights and make some decent money. I know I have some ideas...

BTW, if you want to know if you fit into my social group or Fred Wilson's, check this old post of mine (and the comment from Fred).