With the subscription services, you've seen a decrease in price over time, first with Virgin and definitely with Yahoo. Is that disturbing to artists in that there's potentially a smaller pool of money available to them, at least from a given subscriber?
Arnold: It can be in the outset. But I think you need to take a high-level view. Getting more people into these services spending more money over the long term is an important thing to do. I think prices will come up. Certainly these companies want to earn as much money as they can. If they convert a majority of people into subscribers, they're going to do just like the cable company does, and ratchet up the prices.
The rules of the game haven't changed such that this is some magic elixir. It's still a rough game. But there are other ways to think about subscription services. When people talk about buying CDs or downloads, they're probably only spending a set amount per year. The average user buys what, five or six CDs a year? With a subscription service, at $5 a month that's more than $50 a year, which is roughly equitable. At $10 you're talking more than $100, at $15 that's $180. Overall, that's more money being put into music by fans. That's a good thing.
The other thing that's nice about a subscription service is that with the lack of a barrier to experimentation for music fans, they can try it as much as they want. That means there's no ceiling on the amount that a label might earn on a record.
With individual song downloads you're going to have a wholesale rate, and that song is that person's forever, whether they listen to it a thousand times or listen to it twice and throw it away. With regard to subscriptions, these songs can essentially earn indefinitely. It's not like when someone listens to a song a hundred times you're not going to get paid for it anymore. The next hundred times you're going to continue to earn on that stream. It's a little more of an open ended platform.
Is there an estimate, even ballpark, how much one stream is worth to a given artist?
Arnold: I'd say a fraction of a penny is a good enough guess.
Does digital distribution fundamentally change the economics of indie music at all? Or is it still fundamentally this garage-based business that's still going to have small revenue, but just happens to be coming from a different source?
Arnold: I hope it does. But I think it really remains to be seen. There's a whole bunch of change. We're taking little evolutionary baby steps right now. We're still talking about a (digital) market that's 5 percent of the overall market.
There certainly are opportunities for people to go out and take advantage of this in creative ways, and do stuff that will blow everyone away and create success stories. Then there's probably a tonne of people who will go out there expecting the world and not get it, and it will be a great disappointment for them.
The main thing to realise is that it's still very young, and the rules of the game haven't changed such that this is some magic elixir. It's still a rough game.
