Future Of Music

The current issue of Rolling Stone includes some interviews with artists on the future of music. Here are some excepts:

Adam Levine - Maroon 5
How do you think the music business will change in the next decade?

It’s a very greedy, artist-exploiting business, and I think it will fall hard so it can rebuild itself with a better business model that is slightly more fair to everybody involved. But, yes, I do think that right now the music business is crumbling. Artists are starting to take back control from the labels, which is great. We have record labels to thank for a lot, but we also have them to blame for a lot. The major labels are scrambling right now and trying reactionary measures. Like, if you sign a record deal now, they take a percentage of your touring revenue. Bands are getting grabbed by the balls before they even sign a record deal and the grip on their balls is even tighter than it used to be. I think it’s only a matter of time before everyone is on an indie label. Because music isn’t going anywhere and the business is being forced to take a look at itself. It needs to go through this phase: Eventually, the scale will calibrate and the business part will ultimately survive, but I think artists will end up in a better position than they’ve ever been.

John Legend
Are you optimistic about the future of the music business?

I don’t really care that much about the overall business. What I care about is, “Am I creating something great for the fans, something that they want to pay for?” Fans might not buy as many albums as they used to, but as long as you make something special, they’re going to keep coming back to you. There are ways to succeed outside of just selling actual units. There’s touring and merchandise and corporate partnerships and all kinds of other ways to make money. I think I’ll be fine, as long as I’m making music people want to buy.

Jack Johnson
What advice do you give to young musicians?

It seems like a really good time to get into music, as far as trying to get your music heard. You don’t really need to have the backing of a major label anymore, you can do it, get your music on the Internet, and that word of mouth thing can happen. That was a huge part for me before I even had a record out. People started trading our stuff online. Once we had a record, people would have me sign a burned copy and say, “Sorry it’s burned,” and I didn’t really care. If people were getting the music, I was cool. I thought technology was helping spread it around. I always hear people say the music industry is in trouble, and it probably is, but as far as getting your music heard, it seems easier nowadays.

Wyclef Jean
What changes do you see coming in music?

I feel like we’re going into a very eclectic mode now, where the strong will survive. Kids can create beats now through their computer in two hours, so to last in the long form, you have to bring a musicianship to it. If you’re hearing the track I did on the CD with me and Serj from System of a Down, you hear how the movement is syncopated, then I stop the record at two minutes, screw it up, then I pick it back up with a classical part, go back into the groove. A kid goes, “Damn, how did he do that? I can’t really do that on my computer. On these Fruity Loops [software], I’ve got to keep it a certain way.” I think this will inspire kids to say, “Man, I’ve got to learn more music and put more arrangements in the music.” People are making music and they’re getting it out there, but we’re losing a sense of the live elements inside their music.

It used to cost a lot of money to record and promote new music. Artists struggled like hell to find a patron to support them (i.e. a label). Everything was controlled and only a few artists became stars. That was the major label system. Most artists learned quickly when the recording advance money ran out that they needed other sources of income like performing, songwriting and the sales of merchandise to survive. The new artist model says anybody can make and distribute a recording. It is much less expensive to make a record today and recorded music is only going to become less valuable to everyone over time. The real hard part is promotion. The true nemesis of the artist is obscurity. There is a glut of music out there and the situation is only going to get worse. This is the reality of the future of music, abundance and saturation.

Record companies alone cannot afford to invest in the future of artists. They are like the Detroit auto makers of the mid 1980’s. The business model that drove the music industry for the last 70 years is almost dead. Unfortunately, the economics of today’s popular digital music splits (iTunes) do not make any sense for artists. Why make $0.06 off an iTunes download, when you can make $0.80 doing it yourself? If you don’t own your masters then you have nothing.

Personal connection with a fan base is the hallmark of the masterful entertainer. Truly great artists engage their audience while playing shows by working the room. Today artists can establish meaningful virtual relationships directly with their audience by building an online fan base and answering online posts and comments and taking the time to interact with their fans. The reach of a live show can be magnified with the orbit and power of a networked online community.  To be sure, it is a lot of work to monitor the boards and keep up with the postings, but it is a lot easier than touring 250 nights a year, and the payoff can be massive.

This is just like employing street teams to build buzz and selling CDs out of the back of the tour van, both of which are proven tactics to build audience and create direct relationships between artists and fans. Only now the street teams are virtual and the van is open for business in every city across the globe all the time. The name of the game for bands is to know who your audience is and what they like and where they are coming from. You cater to that and you might just have a chance at a career in the new music economy.

Artists, songwriters and producers of the future need to find ways to break through the noise and stand out without significant recording revenue. That model is no longer going to work. Artists of the future are going to need musician businesses built around them that attract audience without relying on recordings to finance the machine. We have already seen how this is possible today, and it is going to become more commonplace over time.

The recording has lost much of its perceived value and musicians are going to have to struggle with that new reality. Sales of records and CDs will never again be the cash cow the major labels got fat and happy on. But recorded music can play a major part in the promotional strategy of new musician businesses and even make some money.

The future of music distribution is going to be mobile and oriented toward mobile devices. Think Nokia. The culture of payment that exists in the mobile space will support transactional and subscription models for music that will capture people’s attention. It is going to become more about having access to music than actually owning it.

Sales of CDs are falling off a cliff as people find it easier and easier to get music digitally. The value of recorded music is plummeting and not even Apple can make money off of it. About iTunes, Steve Jobs says “Most of the money goes to the music companies, we would like to break even/make a little bit of money but it’s not a money maker.” It has just kept Apple out of court with the labels.

The packaging and sales of recorded music is being ripped apart with full albums and CDs being cannibalized by the new digital single track downloads. New bands are going to have to try new formats for recorded music to extract any real recording related profits in the future.

The broadband Internet, 3G mobile phones and MP3 players have fundamentally shifted the balance of power in the music industry forever, especially for the young. Owning CDs is so last century.

The big money for artists has always come from live performance, sales of merchandise, DVDs, personal appearances, publishing and alternative revenue streams – all promoted and supported by the free and nearly free distribution of recorded music. Live performances and t-shirts cannot be digitized at least at the moment, and the experience of being at a live event is going to have to get more appealing, for many bands to survive in the coming years.

New Artist Model

In reality, this is the way is has been for most artists for the past 50 years. Only now the tide has turned, and the shifting sands of the music business will form around an entirely new promotional model that puts we, the music fans, at the very center of the circle. It’s going to be entertaining to be sure.

Let’s face it.  Even though Steve Jobs and Apple almost single handedly led the major labels into the digital age of music, the numbers just don’t make sense, for anyone but Apple.  With the licenses for the music that Apple sells on iTunes coming up for renewal, it is time for the music industry to take a cold, hard look at the reality of the deal that it made, and consider their options.

According to research firm Fulcrum Global Partners, while the installed base of iPods will quadruple from 2004 to 2005, the average number of paid downloads per iPod fell by nearly 50%, from 31 to 16.  All of those iPods are almost entirely filled with ripped, copied or pirated music.

Here are the numbers as of Summer 2005:

While CD revenues have declined by some $1.7 Billion dollars on an annual basis,
iPod revenues are predicted to total over $4 Billion dollars in 2005.
At the same time, iTunes gross revenues for music downloads are about $200 million annually, with the labels taking home approximately $130 Million.

Do the math:  CD revenues down $1.7 Billion.  Download revenues up $130 Million.  That leaves a shortfall of $1.57 Billion for the music labels.   At the same time, Apple makes $4 Billion off of the iPod this year alone.  Surely the labels cannot be happy with this.  As a major label shareholder I would be outraged.

Those precious music licenses are up for renewal soon.  The future of music is at stake.  What does the smart money say the labels should do?

The music company of the future will be based around the combination of artists and artist management, publishing, touring, merchandising, and recordings. The  artist’s brands will drive the business, and the economics will make the financial risk more tolerable and the return on investment more predictable.  Instead of betting on a traditional 10-to-1 recording model that requires the huge success of CDs sales for a few artists to work, the New Century business model can work on much lower volumes by spreading the risk across multiple revenue streams.

The New Century business model combines the functions of a record label, management company, publisher, and merchandiser into a single entity. The company signs artists to deals in which the artists own the masters and license them to the company for a limited time. Artists create their own recordings and the company takes this music to market in digital and hard formats, creates merchandise to sell, and provides management and tour support for live performances. The company also acts as the publisher for all songs written while under contract.

The New Century model increases the potential return on investment for each artist signed by aligning the interests of the artist, manager, label, and publisher into a single entity that splits all revenue sources. This model is based on lowering the cost of production, distribution, and promotion for all parties to minimize the risk of financing a new act.

The New Century model is not unlike what bands like Phish and String Cheese Incident are already doing within their own companies, and similar to the model of an independent record label with a publishing arm.  You can also see this model taking shape with companies such as Nettwerk and Sanctuary.  The major change is the integration of management and touring into the business mix in a shared manner. That way the company can take an integrated and synchronized marketing approach across all the revenue possibilities and try and maximize income and opportunity. This model is particularly interesting in light of the negative effects of free music distribution via P2P networks on recording and mechanical income. By maximizing the revenue potential by including touring, publishing, and merchandising in the mix, the company can try new creative marketing approaches that leverage freely distributed music to drive other income streams.

Record companys today

are trying to scoop up rights that go beyond the traditional recording income, such as has been recently reported in an LA times story..  EMI has apparently offered the band Korn an estimated $15 million upfront — more than twice what the band might expect from a traditional recording contract in exchange for at least 25% of the band’s publishing, merchandising and touring revenue as well as profit from the group’s albums.

A&M/Interscope recently signed the band Pussycat Dolls to a deal that incorporates promoting the group’s cosmetic line in exchange for sharing in all revenue the band collects, including profit from a Las Vegas nightclub the band owns.

When Warner Bros. Records signed My Chemical Romance in 2003, Warner got both recording and merchandising rights. Label executives said information gathered from merchandise retailers helped them persuade radio stations and MTV to play the band’s songs and videos.

The big problem with this approach is that the labels have to do a lot more than just negotiate hard for these rights.  They have to actually develop merchandising, publishing and touring capabilities within their own organizations.  Without that, the band is simply just giving up future income in order to get a record deal and a bigger advance - and the unhealthy pattern of the relationship between artist and label simply continues.

New entities need to be established to make these new models work.  Artists and their managers have to be very careful that they do not mortgage their futures for a record deal today.  The New Century Model requires a completely different way of thinking about marketing and artist managment than has traditionally been done before.  It is not as simple as bowing to pressure from the label to get that fat check.

Independent labels use networks as a way to reach consumers, not necessarily make money.

"…To many independent labels, the main goal is simply to introduce music fans around the globe to little-known artists who have no chance of being played on commercial radio stations. The payoff they hope for in the long term is greater CD sales; any downloads they sell on the networks are icing on the cake.

"It is small, but everything starts small," Chief Executive Daniel Glass of Artemis Records said of his company’s revenue from Kazaa and other popular file-sharing networks. "To not be part of it is insane."

Read the whole article from the LA Times here

New York - WFUV Presents - If the new world of mp3 blogs, mash-ups, downloads and ringtones boggles your mind, tune in to Let’s Get Digital as host Jen Guerra takes a musical look at all things online.  The New Yorker Pop Music Critic Sasha Frere-Jones, CDBaby.com Founder Derek Sivers, Berklee College of Music Vice President David Kusek, Creative Commons Executive Director Glenn Otis Brown, Analyst Phil Leigh and others join Guerra for an hour-long program examining how the race to get online affects not only musicians, but music fans and the music business in general. 

Let’s Get Digital can be heard on WFUV (90.7 FM) www.wfuv.org and streaming online.

"The latest CD sales numbers are part of an increasingly bleak picture, with the first half of 2005 likely to be a big disappointment. Disc sales have been declining for years, that is nothing new, but now it appears that the bottom could be a long ways away. A quick and dirty analysis points to a format transition, with music consumers gradually moving away from the physical (CDs) towards the digital (downloads, subscription services, etc.) That is how disruptive market shifts work. But somehow, the reality is a bit more complicated. After all, the U.S. market is still estimated to be more than a $10 billion business, and people are still buying CDs from artists they love. Most of these consumers have easy access to free or paid downloads, subscription services, and other options like satellite radio. Perhaps it is in our consumer genes, the need to touch and own something tangible in exchange for our hard earned dollars. Whatever it is, the CD market has not been decimated, and it is not going away tomorrow.

But CD sales are only one part of a much larger picture. Sure, tremendous attention is paid to declining major labels, RIAA lawsuits, suffering retail chains, and lackluster IPOs. But that is all part of the record business, with the music business a much larger entity. Smart artists today think beyond the CD, incorporating merchandising, touring, publishing and sponsorships into a more well-rounded picture. Those other aspects of the business are not in a downward spiral, with customers often spending more than $150 in one evening for a concert ticket, parking, and a t-shirt or two. And no one has to ask those consumers twice – they are ready and willing to spend big bucks for the artists they love.

That larger picture has never been one that major labels have been able to capture. The story is a familiar one: artist signs with label, label invests and makes artist popular, artist reaps benefits of ancillary revenues without the label getting a cut. That is a scenario that has been repeated for decades, but now that non-diversification is starting to threaten the very existence of the big four. Meanwhile, movie studios have an entirely different business structure, reaping revenues from theaters, DVDs, television broadcasts, even stuffed animals and airline screenings. That, coupled with an entirely different consumer relationship, may make the digital disruption less severe in Hollywood. In the meantime, artists like Linkin Park and Coldplay could be the first of many flare-ups, with more artists starting to view themselves as small business units and not major label adjuncts."

From Paul Resnikoff, Editor Digital Music News

Lets see if they have the guts to really do it…

Linkin Park has demanded to be released from their Warner Music
Group contract on Monday, with concerns about the company’s ability
to promote and market the band. In a statement issued by their
manager, The Firm, Linkin Park stated that it "has become
increasingly concerned that WMG’s diminished resources will leave it
unable to compete intoday’s global music marketplace, resulting in a
failure to live up to WMG’sfiduciary responsibility to market and
promote Linkin Park."

The band is "weighing all of thei options" regarding ways to stay
connected to their fan base, citing groups like Phish and the Grateful
Dead as models and hinting that the act may look to de-emphasize CD
sales and focus on alternate revenue streams: touring, endorsements and
merchandise sales.

See more at

Digital Music News

MSNBC "Corporate Cacophony"

The Future Of Music - Musicians Will Create Using In-Home Studios and Market Personally Via The Internet   Article here

"A panel at the Digital Hollywood conference underscored my point that musicians are now using in-home studios and local production services to by-pass the big recording companies."

Future of Music Online Course

Take an in-depth 12-week online course at Berkleemusic with the authors.

Berkleemusic, the online extension school of Berklee College of Music offers an intensive online course in the Future of Music and the Music Business.  If you are really interested in exploring scenarios for music and what it may mean for you, check out this online class.  Interact and network with other like-minded individuals as we explore the future of music together.

This 12-week course is about discovering successful strategies for future success in the music industry. Through discussions, interactive exercises, and interviews with music industry insiders, The Future of Music online course challenges conventional thinking about the business of music, and will explore new ways of creating, promoting, and distributing it. Each week, we examine an aspect of the music industry, reflect on changes that are affecting it, and evaluate how these changes, technologies, innovation and powerful trends might directly affect your own plans. This course is essential for all artists, songwriters and music business people seeking success in the future.

The Future of Music course examines scenarios for the future from the perspective of what is working today and what will work tomorrow. The course looks into the landscape of artists, writers, managers and publishers sitting in the center of an entirely new digital enterprise.  Evaluate traditional promotion and distribution methods and the development of new ones. And, the Future of Music course takes an in depth look into what music fans really want, and how they want to receive it.

You will learn

The Top 10 Truths that will guide the music business in the future
How money is really made in the music industry
The major forces at play in the music market today and tomorrow
The way technology continuously transforms the music business
New approaches to promotion that challenge conventional thinking
New business models for the future that exploit digital distribution
Options for writers and artists seeking success in music