Rollo & Grady Interview // Chris Anderson

Rollo & Grady Interview // Chris Anderson

Chris Anderson is the Editor-in-Chief of Wired magazine and the new chairman of Booktour.com. He’s had an amazing and diverse career that has included work as a researcher at Los Alamos and launching The Economist’s coverage of the Internet. In 2007 he was named one of Time magazine’s Time 100, an annual list of people whose power, talent or moral example is transforming the world.

Anderson is best known for his 2006 New York Times bestseller The Long Tail: Why the Future of Business is Selling Less of More. The book is an expansion of a theory he first wrote about in the October 2004 issue of Wired. Anderson wrote: “Our culture and economy is increasingly shifting away from a focus on a relatively small number of ‘hits’ (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail. Narrowly-targeted goods and services can be as economically attractive as mainstream fare.”

Some critics disputed Anderson’s Long Tail theory. But last week, eMusic published new data stating that 75% of the tracks on their site sold at least once in 2008. This finding supports Anderson’s research and contradicts a November 2008 study released by British licensing body MCPS-PRS, which claimed that of the 13 million songs on the Internet, ten million did not sell a single copy.

Anderson is currently working on Free, a book based on his February 2008 article for Wired titled Free! Why $0.00 is The Future of Business, which examines the rise of pricing models that give products and services to customers for free. The book will be released July 6th, 2009.

R&G: Can you discuss the concept of The Long Tail and the role it plays in the music business?

Chris: My research started in the music business, and it largely reflected the fact that when I was first doing the work in 2004 or so the dominant way of buying music was in stores. Wal-Mart was the canonical example. This was in stark contrast to the emerging way of buying music or consuming music online, particularly in terms of the variety available. Wal-Mart has about 50,000 tracks available, which is about three or four thousand albums, versus roughly ten million tracks available online. You can see what an injustice traditional retail distribution had done to the true richness and variety of the music industry and how blinded we’ve been to the reality and diversity of music production and taste, simply because of the constraints of traditional bricks-and-mortar distribution.

R&G: When you wrote the article in Wired, MySpace was around, but did you anticipate the growth and popularity of the other online social networking music sites like imeem, Last.FM and MOG?

Chris: Not specifically. It was glaringly obvious that there was latent demand for variety, that there was a lot of music out there that was being failed by the traditional distribution model. When I wrote the article, my examples were things like Rhapsody and iTunes, but we didn’t have concrete data from iTunes. Nobody has data from them. This was, obviously, many years after Napster, many years after peer-to-peer. Every year there’s some new manifestation of how people buy new music and consume new music, and the ones you describe are just the latest ones. There will be more in the future.

R&G: So you think social networks will play a major role in the future of the music business?

Chris: Yes. I mean, the two elements necessary for a functioning Long Tail marketplace are availability and findability. Availability is solved simply by digital distribution, so ‘check,’ that’s done. Findability remains an unsolved problem. The ability and tools with which to discover new music that you’ll like is an ongoing project that we will be working on for the rest of my life. We started with simple things like recommendations, playlist sharing, Top 10s and Top 40s in micro genres, etc. But social media is yet another discovery tool to help you find music that’s right for you.

R&G: What are your thoughts on The Hype Machine and Elbows, the blog aggregators?

Chris: I don’t use them. I know people that love them, but I’m just not familiar with those sites.

R&G: Can you discuss the idea of ‘free’ as it relates to the music industry?

Chris: To the extent that music is a digital product, all digital products trend towards zero, and then their cost – because of the marginal cost of distributing them – is zero. So once music became digital, free became not just an option but an inevitable price point. This is not to say that it’s the only price point, but all music is free in one form or another and always will be free. Music is also available in forms that are not free, like concerts and licensing on soundtracks and ads. People may choose to pay for music, for convenience or because they want to give something back to the artists or, as I do, they like a service that makes the music available only in paid form. One of the things I focus on in the book is how it’s not only possible but often desirable to use free to build an audience, from which you can later make money when you’re not making money directly from the product. The point is that the 20th Century music model was building business around music as a product. The 21st Century model is that the product form of music is largely free marketing for other forms of music. Free music is a good way to create celebrity, and monetizing celebrity is a problem we should all have.

R&G: How does free work in the economic downturn that we’re currently experiencing?

Chris:
When people don’t have money, free is a good price. More and more companies will be incentivized to offer a form of their product as a free form, in a free version. It’s a way to continue to engage with customers even when their wallets are closed. This best applies, of course, to digital products. But typically what you do is offer a free version to the majority and offer a paid version to the minority who have money or value the service higher than the others. Music is a classic example. It costs an artist nothing to have their music distributed for free, and that creates an audience that will see their concerts, buy their merchandise and become fans who will later become a market.

R&G: What’s your opinion on U2’s manager Paul McGuinness’ suggestion that ISPs share revenues with the record industry?

Chris: I think that’s unworkable.

R&G: Do you believe P2P piracy is primarily responsible for declining CD sales?

Chris: No, I don’t. I don’t think people want CDs; they are an inferior form of the product for most people in terms of convenience. Most people want their music to be portable, which means you have to rip it off the CD. Most people want their music immediately, which is not possible with the physical form. Many people don’t want all the songs either, they just want some of them. I think it’s just an inferior form of distributing music, and the marketplace has spoken.

R&G: Do you see YouTube as the new MTV?

Chris: I do, kind of. But there isn’t just one avenue. YouTube is one source of music videos. MTV itself is another. So is MySpace. So are sites like Rhapsody. The day when you could have a MTV – the place – is gone. There will be many places, and I think the presumption is that every music video should be out there somewhere instantaneously available when you want it. YouTube is a big part of that, but it’s not the only part.

R&G: Are you surprised that Apple still charges $.99 per track, and do you think that’s a fair price? [Interview conducted prior to Apple announcing new pricing model of $.69, $.99 and $1.29 per track]

Chris: I understand why Apple charges $.99 a track. I never use the word ‘fair’. I think the marketplace decides what a price should be. The $.99 price is obviously fine for some people.

R&G: It keeps up with the offline retailers. I understand why they’re doing it, but when you wrote the article four years ago it was $.99. It’s interesting that they haven’t tiered track prices.

Chris: iTunes is, ironically, quite a conservative site. They’ve done amazing work in breaking the logjam that the shift to digital music created; fantastic work in making it sort of simple and almost thoughtlessly easy to consume digital music. The cost of doing that, the cost of simplicity, is that you end up with one-price-fits-all. You end up with a relatively minimal feature set. I think that because of their scale and quest to make it seamlessly integrated with their iPods, they’ve ended up with a very simple, stripped down one-size-fits-all marketplace. I think there’s an important place for that in a marketplace, but obviously it’s not the only way. I don’t use iTunes. I don’t actually like iTunes. I don’t use iPods. I choose other forms of finding music, consuming music and playing music. I’m still a big Rhapsody fan, so I don’t pay anything. I like the subscription model. If iTunes were a monopoly and it was the only way to get music, then I would worry about the one-size-fits-all pricing. Because it’s not, I don’t have any worries whatsoever. It’s their choice. It makes sense for them. If you don’t like it, there are other places you can go.

R&G: Are you seeing any new technologies at Wired that could benefit the music industry?

Chris: There are no new technologies out there. We’re still digesting technologies from the 1990’s. It’s not really a technology driven thing. What we’re looking for are new forms of consumer behavior, new business models, new cultural phenomenon to take off. It’s not a technological issue. The last technology we invented in music was peer-to-peer in ‘99.

To purchase The Long Tail: Why the Future of Business is Selling Less of More (Click Here)

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Bob Lefsetz (Click Here)