How the 99 Cent Song Saved the Music Industry and What Real Estate Can Learn

With the death of Steve Jobs, much has been written about the incredible contributions he made to the computer industry. Much less noted was the fact that he also revolutionized five other industries: animated movies, music, phones, table computing, and digital publishing.

There are so many lessons to be learned from the genius of Mr. Jobs but for now, let’s focus on just ONE of the industries he transformed by climbing into the old time machine to remember the music industry prior to iTunes.

The music industry in 2001 was at a crossroads. Consumers were restless and increasingly unwilling to continue to buy entire albums when all they (initially) wanted was a song or two. The record labels resisted the growing clamor for years, fearing that if consumers were able to buy individual songs rather than being forced to buy entire albums, their bottom line would suffer. But, as is true with all consumer needs, ignoring them doesn’t make them go away - it just sends the consumer elsewhere. The industry’s refusal to answer this need for choice only served to drive the internet-empowered consumer to ripping their own music off friends CD’s, and illegally “sharing” tracks on sites such as Kazaa, and Limewire.

This development was the worst of all worlds: with record labels rigidly refusing to change their business structure, musicians were not only deprived of the royalties due them when consumers used illegal ripping sites, but at the same time, the consumer discovered that using these sites was less than ideal: they not only introduced pesky viruses onto their computers and ripped music of a much lower quality, but many consumers were also bothered by the ethics factor: overwhelmingly, the average consumer didn’t want to deprive the artist of the royalties that they were due and would have gladly paid for the music they consumed if only they could have some choices in how they could buy it.

It took Steve Jobs to grasp the need for a simple, legal source of digital music with choices in how it was sold and his art of persuasion to talk the famously recalcitrant record labels into letting him sell their songs online all the while talking consumers into paying for what they could get (albeit with problems) for free.

The rest of the story, as they say, is history. Steve Jobs beat free by providing the consumer what they wanted. Consumers bought a million songs in the very first week and by 2008, they had purchased 5 billion of them. In fact, five years after Apple entered the music business, it became the U.S.’s largest music retailer. Even more fascinating was that contrary to the music industry’s fears, allowing consumers the option to buy songs individually ironically served to greatly increase album sales and concert tickets. The ability to buy just one song introduced the consumer to an artist and got them wanting more. In short, the 99 cent song saved the music industry.

Real estate is at a similar crossroads today. Many brokers and managers refuse to consider offering the consumer anything other than the one-size-doesn’t-fit-all package of services payable only by commission, while they watch their profits decline. When it’s suggested that the real estate professional give the consumer choices in obtaining real estate services and fiduciary counsel, they dismiss it as “discounting”. The industry is consumed with the fear that if we give the consumer options, the consumer will opt for the cheapest way out.

Those of us “renegades” who think different, who dare to offer the consumer quality, transparent choices in the services they can receive as well as how those services can be paid for, have found something quite amazing. By offering an hour or two of counsel if that’s all the consumer needs now, a flat fee for a specific service or package of services, while continuing to offer traditional commissions for those who want them, we have found that our incomes haven’t declined, but in fact have risen because we’re no longer dependent on a property selling in order to earn income.

By offering quality, transparent choices, not cheap gimmicks, we open up all kinds of new opportunities to earn revenue because we’re no longer dependent on a property selling in order to be compensated. We can be paid to help homeowners who are not necessarily buying or selling or not doing so right now and are facing decisions such whether to remodel, refinance, or seek a tax abatement. The consulting model of choices provides a way that we can be paid for what we’re now giving away for free, as well as an introduction to our services that leads to more listings and sales down the road.

Like the music industry found a decade ago, ignoring the consumer’s need for choices doesn’t make it go away, it simply drives them elsewhere. With the growth of sites such as eBay and Craig’s List, buyers and sellers are finding each other more and more and  they’re doing so without an agent. When they need help in negotiating an offer or managing and troubleshooting a transaction, they’re turning to lawyers or going it alone. They’re turning to cheap, bargain basement outfits to get functionary-type services, leaving themselves without the vital fiduciary counsel and care that a professional could provide. Real estate has forfeited a fortune over the years because we didn’t have the structure to provide services for folks that didn’t fit the mold and the consumer as well as the professional are all the worse for it.

The 99 cent song saved the music industry. And to save the real estate industry, we simply need to think out of the box. As Apple said in their 1998 ad “Think Different”:

“Here's to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. And while some may see them as crazy, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do.”