This is a repost of an old blog, with old ideas (musictourmanager.com ) from 2014, and updated in 2017 and again in 2021.
The two types of digital music offerings are Non-Interactive and Interactive (think Pandora vs. Spotify). A non-interactive service is exactly that (somewhat passive and with little interactions, you turn it on and let it go). All of these recommendations are sorted with algorithms, and the sorting is being done by god-knows-who. Are they musical? Does it matter?
In an interactive service you want musical people.
The interactive area is where superfans / enthusiasts hang out, and it is also the area which drives top down discussions about music. Following the actions, we see that the audience in an interactive service activates the music and the non-interactive disseminates it. The Interactive market is the most lucrative, but also the most misunderstood.
In a non-interactive service, the user is not allowed to rewind the bass-line lick in Gino Vannelli's 'Feel Like Flying', but an interactive service gives the user/fan a more granular choice (play, rewind, search, etc.)
For investors this breaks down the 80/20 rule as such. Eighty percent of listeners are interested in non-interactive services, twenty percent are interested in interactive services. The 20% are the strategic piece which will help the computer separate quality from quantity.
Interactive music services want to develop artists for the new interactive market, but to everyone's chagrin they consult with non-interactive players. This incongruence in operations is why investors of interactive services should proceed with caution. (or, a warning to those investing in Spotify).
Aligning your business with the record label and radio model puts you in line with non-interactive business practices.
The radio (bullseye) model depends on the rare event of someone purchasing an album, it has nothing to do with who is listening, when and where. It was never granular. A lot of people buy albums but the model can't tell us “who” is making the purchase, if they were gifting the sale to someone, what songs were being played and how many x's, and/or what songs were never played.
UPDATE 2017: Three years later Spotify is even heavier in bed with the labels. They are not poised to break NEW sounds with this model. The labels have no product to sell, yet have returned to revenue from the CD model days (the selling of a material product is what gave record labels a margin for business) There is fraud afoot.
UPDATE 2021: As of today we still have academia and computer people deciding what music gets through the interactive services. Musicians drop-out and their work is being analyzed by people with good grades. Spotify has interactive qualities but no history with interactive transactions. Which means there will be a technology on the rise to handle interactive transactions, relegating Spotify to a non-interactive entity.
Continuation: Further, if these technologies are going to claim an interactive position in music they will have to rebuild their business to support the side of music that has always been interactive, that of touring/live shows. A music technology calling itself "interactive" is a tell they will have to become more like touring. Right now we have two non-interactive entities in music calling themselves interactive. They want everyone to believe they have history with the audience, when in actuality they have little to no idea who the fans are.