Physical. Digital. Does it matter?

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One of the areas where you see a lot of odd beliefs about the business of the arts is the realm of physical vs. digital product. This is true in the arts in general as well as the K-Pop industry, which has responded to the rise of digital music in its own way.

Ironically, one of the largest sources of misinformation about digitalization is industry associations. Such associations are dominated by businesses that were founded on the sale of physical objects. They often don’t respond to well to the major changes caused by new digital technologies and send out dire press release after dire press release about how the decline in industry revenues caused by digitization is going to KILL US ALL.

(No, they don’t talk about industry profits. Why would they do that?)

Granted, technological changes can wipe out enormous chunks of old-school industry–I used to work in the encyclopedia industry, so trust me, I’ve seen that first hand. But what digitization tends to take out is the middlemen, not the artists themselves and certainly not the consumers.

And consumers love digital.

Why? Simple: Digital goods are cheap.

Do artists love digital?

Here is my provocative reply: If you are an artist who is smart about business, you love digital. If you are dumb about business, you do not.

Taking novels as an example: In the United States, you as a writer can sell an e-book for $3 and make $2 in profit from it. You can also sell a $20 paper book and make $2 in profit from it.

Guess what consumers are going to buy more of?

Buuuuut . . . you can also sign with a publisher who will charge people $20 for your e-book as well as your paper book. When the e-book (shockingly!) doesn’t sell so well, they’ll cut the price–but then you’ll get almost nothing! And then you’ll write bitter, angry articles about how digitization is going to KILL US ALL.

In other word, if you sign dumb contracts and make dumb decisions, you will handle digital dumbly and lo and behold, your career and finances will suffer, because digital is where it’s at these days. Not just true for writers–true for everyone.

The Korean music industry appears to have made its peace with the notion that most consumers are going to buy digital, and musicians seem to act like you can do fine with digital nowadays.

In fact, at this point the Korean music industry aims its physical sales at one group only: Hard-core fans. This is why K-Pop CDs are so expensive and so fancy; it’s also why they come in multiple special editions (one for each member!) and contain collectibles like DOLLS. You personally may buy the CD because there’s some kind of annoying Japan-esque market/technology barrier to buying digital in your country, but you’re in the minority–most buyers are fans. And in many cases, these fans are buying the CDs specifically to gain access to fan events where they can meet the musicians.

So, what segment of the Korean music industry has a lot of hard-core fans? The K-Pop idol groups, of course!

That’s why you’ll see really weird phenomenon like idol group BAP having a #1 album but no high-ranking digital singles. Non-idol musicians will often flip that, doing well digitally but not posting that much in the way of album sales.

That’s also why you’ll see people massively exaggerate the importance of doing well digitally or physically. Obviously in a perfect world you’d sell everywhere–plus you’d have complete strangers hand you large sacks of money for no particular reason!–but if you’re doing well in one market, you’re probably not going to worry too much about the other. The whole K-Pop idol thing is divisive in Korea, though, just as teen idols are in the United States, and so the people who really like the idol system will claim that physical sales are super-important, while the people who think those people are a bunch of lamers will act like digital sales are all that matters.

Does it matter to the artists?

I’d argue–sort of? It depends on who you are and what you like to do.

The upside of physical sales is that you’re maximizing revenues from your fan base–basically selling CDs is like selling DVDs and calendars and whatnot, which typically are also sold via fan events. So, as long as you don’t push it too hard and generate a fan rebellion, you can make money and keep fans engaged without having to put out much in the way of new music.

The downside of physical sales is that they take more work. CDs are expensive to produce and have to be shipped and stored, which can also be costly. If you want to move appreciable numbers of them, you have to do all these fan events, which means you aren’t doing other things, like making new music, that you might enjoy more.

In other words, I find it kind of amusing that Zico is going to be doing fan events to promote physical sales of Gallery. Hopefully he doesn’t incinerate anyone with his terrible gaze.

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5 responses »

  1. Pingback: What is a business model? | My Other Blog

  2. Pingback: Business models and Block B; or, How important is that fan base, anyway? | My Other Blog

  3. Pingback: What is supply & demand? | My Other Blog

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