Corp Unc & Philos

How business models collapse : the case of music

Nearly a year ago, Pascal Nègre, the CEO of Universal Music France, declared: "The public has never listened to music so much as today while paying so little for it."

To solve the problem : "We are currently looking for alternative sales models that are more adapted to the latest technological innovations."

In other words, a business model is dying. Technology is being blamed. Suddenly, it has taken the professionals by surprise. The debate on what is called illegal downloading always concerns payments and sales, never the music itself. New business models are explored when it comes to the sales transaction while the evolution of the product over the past years is totally ignored.

Since the radio developped on a large scale, nearly a century ago, music has actually been free. We are so used to it that no one cares to mention the fact anymore. What the consumer pays for when buying a record is not the music itself but the capacity to control its consumption by reproducing it at any time.

Constantly on the air, music can also be heard in elevators, lounges or shops, and it is most often related to advertising. It has become a background noise which is part of the scenery of the merchant environment. Through a low but steady process the function of music has become less and less esthetical and more and more pragmatical.

"The shift of affects towards the use value creates a situation where nothing is expected from music anymore. " This was written by Theodore Adorno in 1937 !  Anticipating the future, he added : "The listeners behave like children. They repeatedly request the same recipe that has already been served to them." This is an accurate description of the present situation.

By selling music to the broadcasting companies, the producers  have contributed to turn it into a free product, at least for the consumers who in the meantime have become addicted to it.

The development of digital music, therefore, is not the real cause for the downfall of the classical business model.  It is only a strong revealing factor of a situation that has developped throughout the 20th century.

This example is an opportunity to point out that a business model is not a pure transaction device. It always develops around a supply to the public which is unconscious and likely to change as society evolves.  The purpose of strategic innovation is to anticipate this kind of evolution before  things change suddenly out of control.

The unconscious meaning of a business model

In a recent post, Jonathan Schwartz, the CEO of Sun, points out an important trend among mobile phone users. They spend more time processing data on their screen than actually speaking on the phone. Conclusion : mobile phones will increasingly be used to surf on the net.

This is a highly probable future for this product as regards its utilization. The question which is not clearly mentionned in this post, but which comes next, is : will writing replace speaking through the handset, or will it be an additional function ?

As a business consultant, I have worked over the past years with handset manufacturers. Though the approach may differ from one to the other, I have come to the conclusion that the meaning with their product is not as simple as one thinks. It is widely accepted that a mobile phone facilitates and therefore develops communications between persons. My observation tend to indicate the contrary. Why ?

After nearly ten years of existence, Internet has proved to be a substitute to verbal communication. This is obvious within the firm, where an infllation of e-mails replaces verbal communication. But it is also true privately. There is evidence that a lot of teen-agers spend more time chatting with one another through the net than talking on the phone, let alone meeting physically.

The same is happening with mobile phones. One tends to forget that when it becomes possible to reach someone anytime, the necessity to meet physically decreases. Not only that, it is striking to see how the handset developpers devote efforts to data management and storing for their product. One realizes that memorisation is as important as transferring the actual voice signal in real-time. In other words, if the handset is a communication tool in real-time, it is also a means to select and postpone exchanges ; it is a filter and as such, a protection device against real-time and physical "here and now" confrontation.

The web and mobile applications are exploding, giving the impression that communications are also globally developping. It is true but under certain conditions, namely the possibility to avoid direct contact with persons. On the whole, communications multiply in the same proportion as the possibility to avoid direct contact.

This paradox is a perfect example of what a business model stands for.  It is a response to three questions : what is offered (classically called a product), to who is it offered (classically refferred to as the client) and how does this happen (organisation and management) ?

Most of the time the "offer" is an oversimplification of what it really means, if not a way to hide it. The development of mobile communications is the latest illustration of this rule.  A business model is not an idea ; it is an intention, which is the reason why it means something. As always the meaning of what is actually said or done is far more complex and richer than what it is believed to be.