The Wall Street Journal yesterday had an interesting piece [Sub. req'd] on the value of piracy to the music industry. No, not in Tim O'Reilly's classic 'Piracy is progressive taxation' sense, but rather in figuring out what people actually want to hear.
Earlier this year, Clear Channel Communications Inc.'s Premiere Radio Networks unit began marketing data on the most popular downloads from illegal file-sharing networks to help radio stations shape their playlists. The theory is that the songs attracting the most downloads online will also win the most listeners on the radio, helping stations sell more advertising. In turn, the service may even help the record labels, because radio airplay is still the biggest factor influencing record sales....
The service has already had an impact. The Huey song "Pop, Lock and Drop It" was in light rotation in April at Power 106, a big Emmis Communications Corp.-owned hip-hop station in Los Angeles, and listeners weren't requesting it much. The station's own research on the best music mix to play indicated the song wasn't catching on with listeners. But data from BigChampagne showed the song was hot on file-sharing networks, including in Los Angeles. Emmanuel "E-man" Coquia, the station's music director, decided to stick with it. Now, three months later, "Pop, Lock and Drop It" is prominent on the station's playlist.
This is great news for the music industry, because it shows that there is all sorts of opportunity to figure out new business models (like CDs as a loss leader for live music, as Glyn points out).
I wonder if there's not an analog in the software world. If you look at the top open source projects on Sourceforge, for example, you see that stealing is big, but so is IT management (Zenoss), CRM (Adempiere), ERP (OpenBravo), and others. Maybe this is where VCs should be investing?
Or maybe proprietary vendors could float small, experimental projects on Sourceforge to gauge the interest level in new technology. I'm not sure, but if the record labels can figure out how to profit from the lobotomization of their industry, then surely software can.