I reprint the free portion of this Substack post by Ted Gioia. Emphasis in bold and my comments in red. The reliance on physical products reflects the market economics of controlling the supply and thus the price and profit margins. This is what the branding industry has flourished on. Digital content (music, blogs, books, videos) are given away virtually free in order to build an audience (peer network) that one can then sell higher margin goods and services to.
This makes perfect sense, given the economics of the digital world and how it augments the physical world. This is what Google and Facebook and LinkedIn and Apple and Amazon all do. The question then is how does the individual creator build, own, control, service, and monetize their peer networks? It’s kind of like a very valuable Rolodex file.
tuka is designed exactly for this need for users to create and monetize digital data value. It’s all about the data networks and the value they represent. The online world is slowly moving in tuka‘s direction, but to decentralize value creation will still require a blockchain platform.
Half the people buying vinyl albums don’t own record players. They treat their albums like holy relics—too precious to use and merely for display among other true believers. [Yes, but that’s collecting, not listening.]
Readers were shocked when I recently reported that statistic. I was a little stunned myself. But those are the facts.
Of course, there’s a lot about the vinyl revival that defies logic. What other business relies on a 60-year-old storage technology? That would be like running my writing career with a teletype unit and mimeograph machine.
And it’s not just vinyl. Cassette tapes—a cursed format that always unraveled at the worst possible time—are hot again. Even 8-track tapes, a longtime target of ridicule and abuse, are selling for thousands of dollars.
Why are people buying this stuff?
A new research report from Andrew Thompson at Components, released earlier today, helps us understand the bigger picture. Thompson analyzed 47,703,022 Bandcamp sales—involving almost five million items. And what he learned was startling.
Success in the music business is all about selling physical objects.
The Internet supposedly killed physical music media more than two decades ago. After iTunes was launched in 2001, there was no looking back. At first the music industry pivoted to digital downloads, and then everybody in the business jumped on the streaming bandwagon.
But it’s now 2023, and streaming platforms still aren’t profitable. [They never will be unless they can find a way to monetize those user networks.] However, Bandcamp is—and now we know why.
It’s all about tangible items.
Consider this chart—which looks at the correlation between revenues on Bandcamp and an artist’s reliance on physical merchandise.
Vinyl helps drive this. But it is only just part of a larger story. Artists can sell everything from clothing to compact discs on Bandcamp. And, of course, they can sell digital tracks too.
But the numbers make clear that physical merchandise is the smart business model.
According to Andrew Thompson:
Why is Bandcamp profitable and Spotify not? The answer we arrived at was that Bandcamp provides a simple platform for complex transactions, while Spotify is a technically complicated platform for facilitating a single transaction in the form of the one-size-fits-all subscription.