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Home > Consumer Products > Consumer Products & Retail > Entertainment
A New Payment Model for Recorded Music
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The payment model described in this report, which is not a rental model, is based on collecting payment from consumers when they play their songs. This new approach would mean that the cash flow of a record label would more closely resemble that of a music publishing company.
Under the new model, consumers would be able to obtain digital song files for free, but they would pay each time they listened. Those who listened a lot would pay the most while occasional listeners would pay the least. Payments would be collected by retailers who would sell music service accounts on a pay-as-you-go or subscription basis.
The size of the user’s personal music collection would be unimportant and users could own as much music as they wanted. The new payment model is based on an assumption that music would be provided without DRM while consumers and third-party developers would be free to copy and share digital music without restrictions.
Central to the new pricing model is an assumption about how much consumers would be willing to pay to listen to their music for one hour. Therefore, the report begins by using three different approaches to define a viable price range for one hour of ‘listening time’.
Taking the perspective of a record label, the report then presents the results of a financial modelling exercise that identifies the differences between the new payment model and the traditional model, where consumers pay to acquire music.
Revenue, cash flow and a range of other important metrics are included in two separate financial models where all the key assumptions are clearly explained and supported using primary data sources and consumer research.
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