Future Of Music

Good reporting from the NYT, as usual. 

Some of my favorite morsels are below, plus my comments.

Link: Music Labels - EMI - New York Times.

NYT:
"Despite costly efforts to build buzz around new talent and thwart
piracy, CD sales have plunged more than 20 percent this year, far
outweighing any gains made by digital sales at iTunes and similar
services. Aram Sinnreich, a media industry consultant at Radar Research
in Los Angeles, said the CD format, introduced in the United States 24
years ago, is in its death throes. “Everyone in the industry thinks of
this Christmas as the last big holiday season for CD sales,” Mr.
Sinnreich said, “and then everything goes kaput…”

Gerd says: guess there IS hope: once the pain is big enough, changing
seems like a real option, all of a sudden - that is what we are seeing
now. Maybe this ship really has to be steered into the cliffs first,
after all?  Call me an optimist but I used to think there were
other options ;). My 2 cents: if you have the guts CHANGE NOW, you can
still own a good chunk of the market, and prosper.  But: band-aids are
over - it’s time for real, hard-core changes. Drop copy-protection (at
least for now - until something can be used that is of super-value to
the USER!), tell the users, fans & artists that you screwed up, go
for flexible pricing and bundles, package music into other media, offer
agency-type deals to artists, become completely transparent and drop
the ’secret sauce’ antics, and start using syndication as the prime
vehicle of promotion, marketing and distribution. It’s not the COPY - it’s the ACCESS. It’s not Prevention - it’s Participation.

NYT: "For the companies that choose to plow ahead, the question is how to
weather the worsening storm. One answer: diversify into businesses that
do not rely directly on CD sales or downloads. The biggest one is music
publishing, which represents songwriters (who may or may not also be
performers) and earns money when their songs are used in TV
commercials, video games or other media…"

Gerd says: ok, now, I have talked about this until the cows came
home, but here is again: switch to music as a service. Again: never
mind the copies - the next big thing is offering ACCESS. Brands.
Experiences. Added Values. Stuff that only you can provide - together
with the artists. Values and experiences can’t just be downloaded.

NYT: "But very few albums have gained traction. And that is compounded by the
industry’s core structural problem: Its main product is widely
available free. More than half of all music acquired by fans last year
came from unpaid sources including Internet file sharing and CD
burning, according to the market research company NPD Group. The
“social” ripping and burning of CDs among friends — which takes place
offline and almost entirely out of reach of industry policing efforts —
accounted for 37 percent of all music consumption, more than
file-sharing, NPD said…."

Gerd says: sounds like an obvious problem - it’s all out there for
free so they stopped buying. But the thing is that this is not the real
problem. ‘Free distribution’ is a blessing not a curse, and P2P /
Super-Dustribution will emerge as the main mechanism for digital
distribution in the next 3 years (and not just for music). Rather, it
is - still seriously counter-assumptive, and beyond grasp of
most of the incumbents of ‘music1.0′ - the unfailing desire to, at any
cost (including self-destruction), want to control the ecosystem that
the large music companies must keep in check - and then we can understand and monetize what people actually do
with technology. They are doing this because they like the music and
the artists, not because they want to  do as much damage as they can -
YOU simply have not given them good enough options to act differently.

If the model of uber-control over music distribution isn’t working
any longer, wouldn’t it make sense to try to come up with a new model?
Lesser control does not mean zero revenues. There is life after selling
expensive copies of plastic, or indeed of 0s and 1s. Trust me.

You’re sitting at Starbucks and a friend who just swiped his credit
card into the store’s music kiosk to download a brand-new mixtape onto
his MP3 player tells you about a rare My Chemical Romance track he
heard last night, which you proceed to download with a few clicks on
your cell phone.

Or maybe you discover a hot new underground MC and pay $20 to
join his fan club, which allows you to rhyme alongside his "Second
Life" avatar whenever you want, suggest songs for him to play at an
upcoming show in your town, or maybe even contribute some ideas to the
lyrics he can add to a song he’s writing with a group of fellow
fan-club members.

Fan Clubs With A Personal Touch

If you’re going to give away free downloads, make sure you get
something equally valuable in return. That’s the message from Dave
Kusek, author of "The Future of Music Book: Manifesto for the Digital Music Revolution."
"You don’t want to give your music away," he said. "You want to trade
it for an e-mail address or a referral to a friend: something that has
value to you but low perceived value to the customer."

In Kusek’s near future, artists will trade songs for e-mails,
entering fans into contests for backstage passes and creating an e-mail
database that could rival any potential fanbase built by constant
touring. He also foresees a not-distant time in which artists — most
likely emerging ones or less established acts — charge fans $5-$20 a
month to gain access to an exclusive area where they can ask the artist
questions or suggest songs for them to play at their upcoming concerts.

In this private world, you will be able to "attend" exclusive
living room shows, participate in songwriting contests or gain access
to a monthlong suite of music created just for the club that tells a
coherent musical story, perhaps with input from club members. "It can
be personalized and individualized to the fan level, so that the music
can have a much longer lifespan than an hour or one song," said Kusek.

Read the whole article by Gil Kaufman here from MTV NEWS.

Mark Cuban is a smart guy.   He dashed off a couple of ideas here that make a lot of sense.  I completely agree with him that the big copyright holders (labels and publishers) can act as "networks" and bring their music to market.  It is interesting that none of them are thinking this way at the moment, and the old way of thinking is guiding the day.  Namely, why do they need aggregators like Apple’s iTunes to replace the failing Tower Records of the past?  Why can’t the labels go direct to the customer with their product.

I have often said that when Napster 1.0 first emerged, the labels realized that they actually had customers.  And those weren’t Wall Mart and Target, but people like you and me.  And instead of embracing these consumers, communicating with them, drawing ‘em into the fold, marketing to them - they decided to sue the people.  The legal people overran the marketing folks, and the chance for creating a direct to consumer business slipped through their lawyers hands.

It has taken a while to grasp the totality of all this, but perhaps someday soon, a large music content company will decide to get into the business of marketing to consumers, and creating an infrastructure to support and make it happen in the digital age.  Can’t wait to see that happen.

Here is an useful list for success in the immediate future:

-    Utilize MySpace and other
websites to its full potential and don’t be afraid to “give your music
away for free”. If one million people listen to your songs online,
don’t see it as you just lost 1 million dollars in potential sales. See
it as you just got radioplay in 100 markets.

-    You have to
learn new ways of viral marketing, including widgets and blog search
engines and don’t be afraid to experiment with putting your music in
new places and contexts.

-    Look at what the most progressive record labels are doing with their artists, like Canadian Nettwerk and Barenaked Ladies and try to copy it.

- 
If you play a live gig, make sure people know about it. It may seem
like a no-brainer, but it isn’t always. I don’t know how many good
shows I have missed just because I didn’t know about it. Do all you can
to get in Flavorpill and other online publications. Send emails to
everyone you know and make sure everyone that shows up signs your email
list.

-    Press vinyl copies. This might be the last thing you
think about doing, but DJs love vinyl and so do music lovers. Press a
few copies and distribute them to your favorite DJs, clubs and critics.

- 
Don’t sign a record deal. This may seem like a weird suggestion, but
stay indie as long as possible. You want to make sure the odds are in
your favor when you finally sign with a big label or it can be a
blessing in disguise.

More here from Digital Media Wire

It seems that P2P
file-sharing networks, iTunes, and the iPod have grabbed the
sweet-spot of digital music.  Indeed the iPod is the sweet spot.

An interesting fact is that most of the files (90%+) on any given iPod were not purchased from the iTunes store - but are the result of file sharing, cd ripping and other sources.  The fact that Apple can be perceived by the labels as a good partner is mind boggling in a way.  They are one of the main enablers of piracy.

And Apple is financially eating the labels lunch, transfering the value in the marketplace from the content to the player.

Maybe the answer is to simply monetize file-sharing networks, and join the parade.  "You can’t litigate behavior anymore, you have to monetize it," said Ted Cohen, a managing partner at digital consultancy TAG Strategic during a discussion at Musexpo in West Hollywood.

Great commentary from Paul Resnikoff at Digital Music News 

Little by little news emerges as different artists and companies try new approaches to music and the music business.  Not all succeed, but some do, and they point the way towards the future of music.  For example:

Samsons, a Jakarta based band have sold over 2 million ringback tones in Indonesia and Malaysia.

Ok Go made history with their homemade video for "Here it Goes Again" on YouTube with over 10 million views - with over 1 million in the first week.

It won’t be long before artists can successfully leverage word of mouth, by uploading their music or videos
to Web sites and by building their own bottom-up franchise and customer base, without the help of the old guard label infrastructure.

Here is an article on the subject and an interesting read.

ArtistsHouseMusic is a free, comprehensive, and interactive online community for musicians and music business enthusiasts.

ArtistsHouse provides expert advice from some of the most successful music entrepreneurs and educators in the country. Songwriting basics, how to book and promote gigs, the ins and outs of copyrighting and contracts, how to audition successfully, and how to become an effective music educator are just a few of the myriad subjects covered on the site. The site’s conception and funding for its development comes from The Herb Alpert Foundation.

Named after the 1960s SoHo performance space founded by legendary saxophonist and 2007 Pulitzer Prize winner Ornette Coleman, ArtistsHouseMusic.org builds on Coleman’s original vision of a communal and collaborative approach to creating music. The Artists House site captures the same spirit as its SoHo incarnation, in a version fit for the online world.

“When I was a young musician in 1950s Los Angeles, there were very few places to turn to for advice or knowledge on how to break into the music business,” said world-renowned trumpet player and music icon Herb Alpert. “ArtistsHouseMusic.org fills a giant void in the online music education community. For the first time, expert information on building a career in music is accessible to everyone through the ease of the internet. This information would have been invaluable to me early on in my career."

As the music business continues to evolve, artists are increasingly taking their careers into their own hands. ArtistsHouseMusic.org is unique for its cutting edge technology, appeal to musicians of all genres, and for addressing an extensive array of careers in music.

Said veteran producer, founder and Artists House president John Snyder, “Today, it’s more important than ever for artists and music business entrepreneurs to take control of their own careers by educating themselves on the emerging technologies, techniques, and music business trends that are driving the future of music. ArtistsHouseMusic.org is Music Education 2.0—a vast, interactive online resource center providing professionals and beginners with free, expert, and in-depth information to build a career in the music business.”

Check it out here.

The major record labels made two massive errors that will ultimately lead to their demise.  The first error was releasing their entire catalog in unprotected perfect digital format, i.e. the CD.  As many have said, the current debate over DRM (digital rights management) is ludicrous as they labels have already released all of their music without any DRM whatsoever.  These unprotected CDs are the source of nearly 100% of the files being shared on Limewire and other file sharing networks.  Why they are trying to force consumers into purchasing DRM wrapped files on iTunes, Napster, Rhapsody simply makes no sense.  They already took that option off the table with the CD.

The second error, and the one that will drag them all over the cliff in relatively short order, is that they consolidated their retail distribution into the hands of a small number of "big-box" retailers, i.e. Wal-Mart, Target, Best Buy.  These retailers became the 1,000 pound gorilla, responsible for nearly 80% of all sales of CDs over the past 10 years or so.  The labels are totally dependent on these retailers for sales.  The irony of it all is that music sales at these retailers represents less than 1% of the retailers overall sales volume.  So the mistake was, lets get completely dependent on a retail sales channel that in fact, does not need our business.

A recent WSJ article (and others) describe the beginning of the end of this relationship, where the big-box retailers are beginning to acknowledge that they indeed don’t need to sell CDs any longer, as there are more profitable offerings (DVDs, video games) that can occupy the same shelf space.  The reality is that if these retailers do indeed cut the number of titles that they stock by any significant amount, the major lables will lose whatever remaining oxygen supply that may be sustaining them, and drop like stones into the abyss.

Read the story here.

Given the global nature of the internet, how long will it be before copyright owners who have enjoyed certain territorial rights established in the industrial age, are forced to come to terms with the reality of a global marketplace?  Recent events in the E.U. make it apparent that the rules that have long governed the way the musical pie was split may very soon be challenged.  Nothing lasts forever, and it may very well be that the acane business practices that have determined the way music is priced, made available for sale (or not) and consumed by people may be up for renegotiation or perhaps legislative determination.  This can only be good for consumers and music fans.

A European antitrust probe into the pricing of the iTunes music store could force the music industry to
unravel the complex web of intellectual property agreements which allow
music to be sold across the world.

This could impact the existing catalogs of labels and publishers and could ultimately alter the balance of power in music.  Read more here.