Future Of Music

Last month I had the pleasure of traveling to Austin, TX and working with the fine folks there – brainstorming on the future of music and in particular, the future of the live music business.   Here is an updated version of my Global Music Business presentation that I gave at their incredible new City Hall.

“Live Music” is what Austin is all about.  Austin actually has an official Division of the City of Austin dedicated to developing the music industry in town, effectively led by “music officers” Don Pitts and David Murry.  They are devoting significant resources to seeing that the city’s future along with the future of all the musicians who live and work there are aligned with successful practices in the overall music business.

Here is my picture of their official music office “squad car”.  All they need now is a flashing light like Steve McGarrett.  I’m gonna bring them one the next time I visit. “Pull over Ma’am, is that Emo we hear…?”

How cool is that?  Does your city have an official Music Division?

My friend Roger McNamee, a founding Partner and Managing Director of Elevation Partners has been getting some great press lately on his thoughts on the new music business, investing in technology, Apple, Google, Facebook and much more.  Here is the transcript of a speech he gave at NARM earlier this summer, a must read.

“Our band – Moonalice – is inventing new opportunities in music. We would like you all to join us.

I have been a working musician for more than 30 years, and a technology investor for 29 years. I have played about 1000 concerts over the past 15 years, which means I have personally experienced everything in Spinal Tap except the exploding drummers. I also spent three years helping the Grateful Dead with technology and many more advising other bands, most notably U2.

My band is called Moonalice. We play 100 shows a year in clubs and small theaters, mostly on the coasts. Moonalice was the first band broken on social networks. What broke us was 845,000 downloads – and counting – of the single “It’s 4:20 Somewhere.” We’re the band that Mooncasts every show live, via satellite to thousands of fans on iPads, cell phones, and computers. We’re the band that has a unique psychedelic poster for every show. After four years, Moonalice has 371 poster images from the likes of Stanley Mouse, Wes Wilson, and David Singer. Licensing those images will eventually a big business for us. We’re the band that offers the EP of the Month for $5. And we’re the band that uses the latest technology to radically improve both the production cost and commercial value of the content we produce. Now I’m looking for people who want get on this bandwagon with me.

The first question I hope you ask is “Why now?” The world of technology is beginning a period of disruptive change. The old guard – represented in this case by Microsoft Windows and Google search – is under assault and hundreds of billions of dollars may become available for new and better ideas. I hope that gets your attention!!!

The biggest beneficiaries of this disruption should be the people who got the short end of Google’s business model, especially creators of differentiated content. For the past twelve years the technology of the internet has been static. Every tool commoditized content by eliminating differentiation. The most successful companies monetized content created by others. Google was king.

I believe Microsoft and Google are about to get a taste of what the music industry has been dealing with for a decade. Their world is going to change and they won’t be able to stop it. Not so long ago Microsoft’s Windows monopoly gave it control of 96% of internet connected devices. Thanks to smartphones and tables – especially the iPhone and iPad — Windows’ share of internet connected devices has fallen below 50% … and it will fall much further in the years ahead.

Consumers are abandoning Windows as fast as they can. I expect businesses to follow suit.

This is a HUGE deal. Businesses whose employees use smart phones and iPads instead of PCs will save up to $1000 per employee per year in support costs.If corporations buy fewer PCs, they will save tens, if not hundreds of billions per year.

This is happening because today’s strategic applications – email, Facebook, Twitter, LinkedIn, YouTube and other internet applications – don’t need a PC . . . in fact, they are far more useful on a phone.

Microsoft has been in trouble since it first missed the web in 1994. Then it was unable to prevent Google from taking charge in 1998. When Google showed up, the World Wide Web was a wild environment. No one was in charge. The prevailing philosophy was “open source” . . . and free software.

Google had a plan for organizing the web’s information that treated every piece of information as if all were equally valuable. To create order, Google ranked every page based on how many people linked to it.

What we all missed at the time is that by treating every piece of information the same, Google enforced a standard that permitted no differentiation. Every word on every Google page is in the same typeface. No brand images appear other than Google’s. This action essentially neutered the production values of every high end content creator. The Long Tail took off and the music industry got its ass kicked.

Google captured about 80% of the index search business, which gave it a huge percentage of total web advertising. Google’s success eventually filled the web with crap, so consumers began using other products to search: Wikipedia for facts, Facebook for matters of taste, time or money, Twitter for news, Yelp for restaurants, Realtor.com for places to live, LinkedIn for jobs. Over the past three years, these alternatives have gone from 10% of search volume to about half.

As if all this competition wasn’t bad enough for Google, then along came Apple with the iPhone and App Store. Apple offers a fundamentally different vision of the internet than Google. Google is about the long tail, open source, and free, but also had to remove 64 apps from the Android app store for stealing confidential information. Apple is about trusted brands, authority, security, copyright and the like. In Apple’s world, the web is just another app; it is called Safari.

People who have iPhones and iPads do far fewer Google searches than people on PCs. The reason is that Apple has branded, trustworthy apps for everything. If they want news, Apple customers use apps from the New York Times or Wall Street Journal. If they want to know which camera to buy, they ask friends on Facebook. If they want to go to dinner, they use the Yelp app. These searches have economic value and its not going to Google, even on Android.

When Apple and the app model win, Google’s search business loses. Like Microsoft, Google has plenty of business opportunities, but the era of Google controlling all content is over. Consumers compared Google’s open source web to Apple’s app model and they overwhelmingly prefer Apple’s model. Software development and innovation has shifted from “web first” to “iPad first” . . . which is a monster long term advantage. Get this: Apple may sell nearly 100 million internet connected devices this year!

Apple’s strength can be seen best in the iPhone vs. Android competition. There are many Android vendors. Together they sell more phones than Apple does. But Apple gets around $750 wholesale for an iPhone. The other guys get between $300 and $450. This means Apple’s gross margin on the iPhone is nearly as big as its competitors’ gross revenues. Game over.

The other thing that makes Apple amazing is the iPad. No electronic product in history – not even the DVD player – can match the adoption rate of the iPad. Apple may sell another 30 million this year. At this point, the competing products have not put a dent in the iPad. Image what happens if Apple’s share of the tablet market remains closer to the iPod (at 80%) than to the iPhone (20%)?

This sounds like, “Game Over, Apple wins” . . . but it’s not . . . at least, not yet. The open source World Wide Web has finally responded to Apple. A new programming language has come to market called HTML 5. HTML is the foundation of the World Wide Web. For the past decade, HTML has been static, which allowed Google to dominate.

HTML 5 is a new generation of HTML and it changes the game fundamentally. It allows web developers replicate the iPhone experience, but with many extra bells and whistles … and no App Store. One reason HTML 5 matters is because it eliminates Adobe Flash, which has been an inadvertent barrier to creativity

Creativity enables differentiation. Differentiation can be monetized. Huge differentiation can be monetized hugely. With HTML 5, creative people can now use the entire web page as a single canvas. For the first time in a dozen years, web pages will be limited only by the creativity of the people making them. They can create experiences that will be more engaging to consumers and more profitable for advertisers than network television.

New forms of entertainment will emerge. New forms of business. Companies the size of Facebook and Google will develop in categories I can’t guess at. Companies as important as Amazon, iTunes, and Netflix will emerge to support what new content comes to market.

Whether you view Apple as friend or foe, HTML 5 offers real opportunity. Why?

Because you can deliver a better experience than an app . . . without an app. HTML 5 is cheaper to build, cheaper to support, no 30% fee . . . oh, and the apps perform better, too.

I believe Apple’s best response would be to focus on selling hardware and accept that consumers will demand products that happen to bypass the app store. Based on the argument with Amazon, I sense Apple is not ready to concede the point. That’s ironic, because the only way Apple can get hurt would be if they try to force all commerce through the App Store. The would create a real reason for customers to buy a tablet other than iPad.

Let me review my key points so far:

Google and Microsoft will remain huge, but their influence is evaporating, which means we can ignore them

Apple is winning big, which means we have to support their platforms first

For people who make content, Apple is a better monopolist to deal with than Google.

HTML 5 will give you a better product than the Apple app model at a lower cost and with more value.

Now let’s figure out what we can do together. My band Moonalice exists because T Bone Burnett wanted to produce an album of new and original hippie music in the old school San Francisco style. We put together an all-star band with in late 2006 and recorded the album. T Bone was about to win the GRAMMY for the Alison Krauss/Robert Plant album, Raising Sand, so we thought we were made.

We had a budget
We had an A-list PR guy
We had a really fine manager
We had custom label deal with a nice budget
T Bone’s innovative sound technology would make the album cutting edge

Old school music is good. Old school marketing wasn’t going to work for us. About four months before release, I reviewed the media plan with our PR guy. He said, “Sorry, man, but nobody cares.”

A few moments of somber reflection followed. Then, with great regret, I let our manager go. I let our publicist go. I let our label go. For all intents and purposes, we wrote off an album everyone was extremely proud of and which accounted for half of T. Bone’s portfolio the following year when he was nominated for Producer of the Year.

But I freed up most of our operating budget. Real money. And I focused it all on Twitter and Facebook. Our goal was to build an audience of dedicated fans around a Moonalice lifestyle. Three years later, we have 57,000 fans on Facebook and 75,000 on Twitter. We learned a great truth: as hard as it is to get people to spend money, it is much harder to persuade them to spend enough time listening to you to become a long term fan. We traded our music for their time. We discovered we could build an audience by giving away stuff that costs nothing to produce and distribute. These are serious fans who engage with us dozens and often hundreds of times a year.

The first thing we invented was the Twittercast. Before us, no one had ever done a concert over Twitter. Now we have done 103. Our marginal cost is exactly zero. Next we created Moonalice Radio, which has broadcast one song every hour on Twitter for the past two years. Then our drum tech bought a video camera and started recording the shows. Then he bought more cameras, put them on mic stands and started doing live video mixes. About a year ago, he figured out how to mooncast our concerts over the net for free.

Nearly all of our past 100 shows have been mooncast live on MoonaliceTV and then archived. Because we play mostly late shows on the west coast, only 10% of the audience watches in real time. But approximately 3,000 people watch EVERY show on a time shifted basis. Fans like the Moonalice Couch tour because they can chat, make friends, and do things that are not permitted at a live venue. They even buy Couch Tour tee shirts. And they are helping us create a new ecosystem where most of the music is free, because Moonalice art and life style products have huge economic value.

Thanks to HTML 5 and a satellite dish, Mooncasts can now be viewed on a smart phone without an app. Our video quality competes favorably with the best you have seen on an iPhone, and the technology to do all this costs the equivalent of six months of our former manager. He was a really good guy, but a satellite-based tv network is more valuable.

I want to finish up by recommending a course of action for you

Step 1: Remember that HTML 5 is just getting started, but the learning curve is less expensive and more profitable for those who commit to it from the beginning. The new business is going to emerge over a few years, not overnight

Step 2: Don’t wait for the labels to figure this out. Labels are not organized to get this right, which leaves a big hole in the new music market where labels used to be.

Step 3: Don’t wait for major artists to figure it out. The great new stuff is going to come from artists who have nothing to lose. Artists who come out of nowhere will create huge value for next to no cost.

Step 4: Make sure you are successful addressing the needs of next generation content creators … not just listeners. There are WAY more of content creators than you may realize. Thanks to Moore’s Law, Karl Marx is right at last: the means of production are in the hands of the proletariat. At the peak, there were 8 million bands registered on Myspace. They weren’t playing gigs, they were creating stuff, mostly for their own entertainment. Those people spent a lot more money creating the content they posted on Myspace than they did on recorded music. Thanks to Apple’s Garageband, the population of people capable of mixing something is now measured in tens of millions. Making these people successful is the key to creating new markets and new music products.

Step 5: Do everything in your power to encourage new product ideas and new forms of content. HTML 5 is a blank canvas and there is no telling what people will do with it. For all I know, HTML 5 may produce five or even ten amazing categories of product.

Contests, prizes and publicity will give you an opportunity to associate yourself with whoever creates the cool new stuff. If you have local stores, do local events. Think Alan Freed.

Step 6: Near term, focus your platform strategy on Apple.

Step 7: Long term, focus on HTML 5. The sooner you commit to HTML 5, the more likely you will produce something of economic value.

Step 8: Remember that HTML 5 will produce companies as important as Amazon, iTunes, and Netflix. It costs musicians practically nothing to create good digital video and fantastic audio, but they need distribution systems optimized for their content.

Step 9: Make music fun again”

–

And if that isn’t enough, Roger was kind enough to share with me his thoughts on investing in technology related businesses.  TechInvestingHypotheses

Well, we finally have it. Music like water raining down from the sky. iCloud.

For slightly more than $2/mo everybody will soon have access to all the music they can find, steal, share, rip, produce, morph or buy using iTunes Match. Is this amnesty for all the music pirates? I hope so.

As we predicted in The Future of Music, the future is about access to music rather than ownership. With Apple iCloud and iTunes Match, Apple has once again set the bar for all music distributors, while again lining up all the major record labels for yet another lunch. The twist to all of this is – does iCloud grant you immunity from prosecution for copyright infringement for sharing or downloading music however you wish to? We shall see.

Fantasize with me as we did in 2005…

It’s the year 2015 and you wake to a familiar tune playing softly. It gets you out of bed and makes you feel good. As you walk into the bathroom, your Personal Media Minder activates the video display in the mirror, and you watch a bit of personalized news while you get ready for the day. You step into the shower and your personalized music program is ready for you, cued up with a new live version of a track that you downloaded the other day. It is even better than the original recording, so while you dress, you tell your “TasteMate” program to include the new track in your playlist rotation.

You put on your new eyeglasses, which contain a networked audio headset, letting tiny earbuds slip into your ears. You switch on the power, and the mix that your friend made for you starts to play. Music pours into your consciousness. It becomes yours.

During the day, your headset and other wireless devices help you communicate across the network, with your friends, associates, network buddies, and “digital peers.” The headset also keeps you connected to that hard rock collection that you really love to listen to. Meanwhile, a variety of new songs, new versions, and remixes of tracks you truly dig, along with your old favorites, continues to come your way. Using TasteMate, you access and trade playlists, and recommend a couple of songs to your friend in Seattle, and they get added to his rotation. Music propels you throughout the day.

This is the future of music– a future in which music will be like water: ubiquitous and free flowing. In this future, music will be ubiquitous, mobile, shareable, and as pervasive and diverse as the human cultures that create it. Many of the already ill-fitting definitions of copyright and intellectual property and patent laws will be adapted to fit the “music like water” model that we propose–in a way that ensures the enjoyment and benefit of society as a whole, and that allows all involved parties to prosper.

David Bowie encapsulated the current state of affairs in a June 2002 New York Times article:
“The absolute transformation of everything that we ever thought about music will take place within ten years, and nothing is going to be able to stop it. I see absolutely no point in pretending that it’s not going to happen. I’m fully confident that copyright, for instance, will no longer exist in ten years, and authorship and intellectual property is in for such a bashing. Music itself is going to become like running water or electricity. [ . . . ] So it’s like, just take advantage of these last few years because none of this is ever going to happen again. You’d better be prepared for doing a lot of touring because that’s really the only unique situation that’s going to be left. It’s terribly exciting. But on the other hand it doesn’t matter if you think it’s exciting or not; it’s what’s going to happen . . .”

Let’s run the numbers. As I outlined in Forbes, with hundreds of millions of people connected to digital networks, the potential annual revenue stream for this is enormous. At $25 per person, if 200 million people opted in for iTunes Match, the service would gross $5 billion a year just for the ability to provide access to any song on any device, and let you pirate all the music you want to at will. Add to that the money from new songs you purchase, premium access, increased storage, exclusive concerts and the recording industry may see a bottom to its revenue decline, and could begin to rebuild from there. Seem counter intuitive? The record business will never be the same again, but maybe (just maybe) it will not go extinct.

And it remains to be seen if iTunes Match will grant you complete immunity from prosecution for copyright infringement. Kind of like AppleCare for pirates.  There are lots of moving parts to this story.

Welcome to the future.

This piece originally appeared in the Huffington Post.

Here is an excerpt from a great piece from Wyndham Wallace of The Quietus on how the music industry is killing music and blaming the fans. This rather dark opinion is spot on in so many ways and raises some very difficult questions about the future of the music business that most people do not want to talk about.

“All the time the industry talks of money: money it’s lost, money it’s owed. It rarely talks about the effects upon artists, and even less about how music itself might suffer. But no one cares about the suits and their bank accounts except shareholders and bankers. People care about their own money, and the industry not only wanted too much of it but also failed to take care of those who had earned it for them: the musicians. And it’s the latter that people care about. Because People Still Want Good Music.”

“In March this year, for instance, the RIAA – the Recording Industry Association of America – and a group of thirteen record labels went to court in New York in pursuit of a case filed against Limewire in 2006 for copyright infringement. The money owed to them – the labels involved included Sony, Warner Brothers and BMG Music – could be, they argued, as much as $75 trillion. With the world’s GDP in 2011 expected to be around $65 trillion – $10 trillion less – this absurd figure was, quite rightly, laughed out of court by the judge. The RIAA finally announced in mid May that an out of court settlement for the considerably lower sum of $105 million had been agreed with Limewire’s founder.”

What is questionable about all of this is exactly how much of the settlement of $105 million will flow to the musicians, songwriters and producers whose work was the subject of the infringement to begin with. In previous settlements including Napster ($270 million), Bolt ($30 million), Kazaa ($130 million) and MP3.com ($100 million) it is unclear how much, if any, of the money received by the labels ever reached the pockets of the artists. I have yet to see an accounting of this and many managers I have spoken with have simply laughed when I asked the question if they ever received any payment from these settlements. I suppose that proceeds from litigation may be considered recoupable costs.

“But if the industry wants to talk money, let’s talk money, albeit the ways that developing musicians are encouraged to make up the loss of sales income in order to ply their trade. Someone’s got to bring this up, because it’s not a pretty picture. Consider, first, direct-to-fan marketing and social networking, said to involve fans so that they’re more inclined to attend shows, invest in ‘product’, and help market it. In practise this is a time-consuming affair that reaps rewards for only the few. Even the simple act of posting updates on Facebook, tweeting and whatever else is hip this week requires time, effort and imagination, and while any sales margins subsequently provoked might initially seem higher, the ratio of exertion to remuneration remains low for most. It’s also an illusion that such sales cut out the middlemen, thereby increasing income, except at the very lowest rung of the ladder: the moment that sales start to pick up, middlemen start to encroach upon the artist’s territory, if in new disguises. People are needed to provide the structure through which such activities can function, and few will work for free – and nor should they – even though musicians are now expected to.”

“Still, if an act can find time to do these things, or has the necessary capital to allow others to take care of them on their behalf, then they can hit the road. Touring’s where the money is, the mantra goes, and that’s the best way to sell merchandise too. But this is a similarly hollow promise. For starters, the sheer volume of artists now touring has saturated the market. Ticket prices have gone through the roof for established acts, while those starting out are competing for shows, splitting audiences spoilt for choice, driving down fees paid by promoters nervous about attendance figures. There’s also a finite amount of money that can be spent by most music fans, so if they’re coughing up huge wads of cash for stadium acts then that’s less money available to spend on developing artists. And for every extra show that a reputable artist takes on in order to make up his losses, that’s one show less that a new name might have won.”

“Touring is also expensive. That’s why record labels offered new artists financial backing, albeit in the form of a glorified loan known as ‘tour support’. Transport needs to be paid for, as do fuel, accommodation, food, equipment, tour managers and sound engineers. These costs can mount up very fast, and if each night you’re being paid a small guarantee, or in fact only a cut of the door, then losses incurred can be vast, rarely compensated for by merchandising sales. Again, financial backing of some sort is vital, but these days labels are struggling to provide it. In the past, income from record sales could be offset against these debts, but with that increasingly impossible, new artists will soon find it very hard to tour. Everyone’s a loser, baby.”

From Beck’s ‘Loser’

Forces of evil in a bozo nightmare
Banned all the music with a phony gas chamber
‘Cause one’s got a weasel and the other’s got a flag
One’s got on the pole shove the other in a bag
With the rerun shows and the cocaine nose job
The daytime crap of a folksinger slob
He hung himself with a guitar string

Soy un perdidor
I’m a loser baby, so why don’t you kill me?
(Know what I’m sayin?)

“Whether the industry likes it or not, music is now like water: it streams into homes, it pours forth in cafés, it trickles past in the street as it leaks from shops and restaurants. Unlike water, music isn’t a basic human right, but the public is now accustomed to its almost universal presence and accessibility. Yet the public is asked to pay for every track consumed, while the use of water tends to be charged at a fixed rate rather than drop by drop: exactly how much is consumed is less important than the fact that customers contribute to its provision. Telling people that profit margins are at stake doesn’t speak to the average music fan, but explaining how the quality of the music they enjoy is going to deteriorate, just as water would become muddy and undrinkable if no one invested in it, might encourage them to participate in the funding of its future. So since downloading music is now as easy as turning on a tap, charging for it in a similar fashion seems like a realistic, wide-reaching solution. And just as some people choose to invest in high-end water products, insisting on fancy packaging, better quality product and an enhanced experience, so some will continue to purchase a more enduring musical package. Others will settle for mp3s just as they settle for tap water. Calculating how rights holders should be accurately paid for such use of music is obviously complicated but far from impossible, and current accounting methods – which anyone who has been involved with record labels can tell you aren’t exactly failsafe – are clearly failing to bring in the cash.”

“The problem is, it’s not really the industry that is being cheated. It’s the artists and their fans. People get what they pay for, but – whatever the industry claims – most fans know that. They just don’t want to hear the businessmen fiddle while the musicians are being burnt. Revenues are unlikely ever again to reach the levels of the business’ formerly lucrative glory days, but in its stubborn refusal to recognise that both the playing field and the rules themselves have been irreversibly redefined without their permission, the industry is holding out for something that is no longer viable. Lower income is better than no income, and the industry has surely watched the money dwindling for long enough. Musicians, meanwhile, are being asked to make more and more compromises as they’re forced to put money ahead of their art on a previously unprecedented scale.”

Read the whole ugly story here at The Quietus.

The comments alone tell the sad story of the state of affairs in the music industry today.

Our dynamic industry continues to evolve at a rapid pace, and Rethink Music will give you access to critical thinkers looking to explore problems and find solutions for tomorrow’s music industry.

Presented by Berklee College of Music and MIDEM, in association with Harvard University’s Berkman Center for Internet & Society and Harvard Business School.

Rethink Music will examine the business and rights challenges facing the music industry in the digital era and will formulate solutions to promote the creation and distribution of new music and other creative works. The conference will bring music industry stakeholders together with legal, business and academic experts to discuss business models for the future. Rethink Music will also examine potential changes to existing government policy and legislation in order to help the creation and distribution of musical works.

“Berklee is focused on inspiring the creation of new musical and business ideas,” says Roger Brown, Berklee College of Music President. “Part of that equation needs to be innovative models of commerce and policy that work in the 21st century era of immediately available digital information. How we accomplish these goals will have much to do with the quality of innovation we inspire. Like Berklee, Rethink Music is designed to incubate ideas that lead to breakthroughs for supporting a music industry even more vibrant, astonishing and creative than last century’s.”

“We are particularly excited to help organize the conversation around legal and policy changes to promote the interests of music creators, fans, and other stakeholders” comments Terry Fisher, Faculty Director of the Berkman Center for Internet & Society. “Technological disruption often creates room for new business models, new ways to capture value,” says Felix Oberholzer-Gee, Professor at Harvard Business School. “The conference is an important opportunity to think about ways to harness the new creativity and build novel business models that put it on a sound financial footing.”

As part of Rethink Music, the conference will solicit white papers from educators, students and the public, dealing with the economic systems and business models for music copyright and copyright policy. Berklee College of Music will award $50,000 to the best business model, with the runner-up receiving a $5,000 prize. Simultaneously, the Berkman Center will manage a call for papers seeking policy proposals that recommend changes to existing U.S. law to help those who create and distribute music cope with the challenges facing the industry.

Program
Fostering art in a world of technology
Amanda Palmer
Ben Folds
Damian Kulash, OK Go
New Big Sound
RootMusic
Licensing
Global Registry Database
Microfunding
Access and “in the cloud”
Future of Music case studies
Conversation with Joe Kennedy, Pandora
Conversation with Metric and Matt Drouin
Artists and managers
The next generation record label
The current state of copyright law
Alternative compensation schemes
Live and in your face
The future of copyright law
DIY and ancillary revenue streams
Creating a middle class of artists
U2 Manager – Paul McGuinness
Conversation with Lyor Cohen, Warner Music
Business model competition
Songwriting and Publishing
Technology, data, and music
Concerts and more

Find out more about Rethink Music :

http://www.rethink-music.com

http://www.twitter.com/rethink_music

http://www.facebook.com/pages/Rethink-Music/171541336212505

In this presentation I take a look at the music business from the perspective of the creative people working in it, the artists, songwriters and producers and how it works for them.  After all that is where music comes from.  I also highlight some case studies of what is working in alternative business models and approaches to commerce and where the areas of innovation are for the years ahead.

Your comments are welcome.

Last Friday I was interviewed by Dr. Amy Vanderbilt @DrAmyVanderbilt from the Trend POV Show where we discussed the changing distribution in the music industry and what it means for businesses everywhere.  Here you go:

Check out lots of great interviews on trends in business at Trend POV.

Former Pink Floyd and T Rex manager Peter Jenner, now emeritus president of the International Music Managers’ Forum, talks online music, copyright and the future of the music industry.  It is very satisfying to see the ideas expressed in our Future of Music book becoming mainstream concepts in the industry.

>As physical sales decrease, how should the music industry be monetising its content?

Record companies believe that music is about selling bits of stuff to people in a retail environment. They always looked on the internet as a potentially huge retail environment and it’s actually a service environment. The record companies should be working out what services they can provide.

They should also be talking to ISPs instead of fighting them. The key thing is people are going to want music as part of what they get on their digital connections. The ISPs are going to have to invest more and more to develop better services, and in that context they will have to start charging for content, whether they charge for content directly with a meter or whether they bundle it or use advertising or sponsorship.

Another way to go would be to look at statutory licensing for different types of usage. It would be incredibly bureaucratic but it would be one way. So let people access whatever music they like and pay a set rate. The same with commercial businesses.

>Do record labels still have a role to play in the music industry?

Yes absolutely, particularly for investment and promotion and marketing. And they could become very good at licensing, at helping artists to develop their website. But they have to get away from this idea of control and instead become partners of the artists. Many of the record and film companies are very enamoured with the idea of control because it’s how their model has always worked, with in-house lawyers and copyright advisors. There is huge inertia in the way the industry licenses and administers content. We have to fight this.

>How have the sources of revenue in the music industry changed?

Until the CD came along I think artists overall got a better deal and more control and a better bite of the money. After they invented the CD the record companies increasingly fought back, decreasing artists’ revenue share and increasing their control. That’s just got worse with the advent of the internet because there is less money available. You used to be able to sell 5,000 albums, now that is incredibly hard so the industry has to look at digital options, but a lot of web services don’t pay properly. Google will pay you a share of the revenue you generate for them, but if you don’t make them money you don’t get money.

>Has social media changed the way bands are marketed and content is discovered?

Yes, but it has huge potential to do more. At the moment, because it isn’t licensable, it isn’t doing the job that it ought to be doing. But what it can do is alter the value chain. With less money available in the music business we have to instead look at what we do have. And what we have is lots of data on music fans. Marketing has always traditionally been more expensive than recording but we can cut these costs by using social sites and viral links. And maybe we can cut out advertising costs because acts can just directly email their fans.

>Can music-streaming services support the music industry?

They are good, but they don’t have all the music. I manage Billy Bragg and there are a hundred versions of his tracks online. I can get a recorded version but a lot of the times on these services there are no live versions. And globally there are billions of tracks so the problem remains of how people find a particular piece of music or if they like something how they find similar bands. People aren’t just looking to buy the music, they are looking to buy a service which is personal and recommends music and enables discovery and which saves them time. I’m not sure anyone is really offering this yet.

>Is there a future for physical music?

Yes, but its role in the industry will become less. Probably physical music, like CDs, will become very expensive and luxurious and they will be like hardback coffee table books and people will only buy maybe one or two a year. The music industry’s job is to make as much money as it can from a track or album, and that includes physical sales alongside digital sales, access services and anything else they can come up with.

>What do you think the music industry will look like in 10 years?

Probably very similar. But what we might look on as broadcasting income will hugely increase. Most revenues will come from users paying to access the content. You won’t notice that you are paying for recorded music so much.

I think the artists ought to be much more powerful, whether they will get it together is another matter. There will be record labels, but whether they will be labels that own content or just be agents I don’t know. They might be more like the Performing Rights Society and less like Universal.

Read the whole interview here from Sara Vizard at Strategy Eye

If you’ve ever felt grateful for the list of titles and track lengths that appear when you pop a CD into your player, David Hyman’s Gracenote is the company to thank. It enters all that data so you don’t have to. After Hyman helped expand Gracenote from a tiny metadata venture into the world’s largest database of CD titles and track lists, Sony bought the company for $250 million in 2008. That delivered nice returns for early investors, including Jones and Simon. “I showed them a good time. Then I brought them to Mog,” says Hyman.

Now Hyman has a new vision: fusing portability, social networking and unlimited music streaming at a single site. Mog will deliver this in a new music medium–the smartphone–expected to soon overtake PCs as the prime gateway to the Web. In March Hyman unveiled Mog’s mobile app at the South by Southwest music conference in Austin. With a couple of commands a phone user can segue to a screen offering access to 7 million songs spanning a century. All this to chase an elusive dream: technologically uniting a fractured music market.

His backers are betting Hyman, can succeed in a business that has ruined many a provider of capital. A decade ago a dozen labels dominated an industry drawing $40 billion in annual revenue. It is now half that. Streaming services with cryptic names like Spotify and Pandora now vie for users who listen to music not on CDs but PCs. And what happened to that $20 billion? Some of it was lost to music pirates; some of it to newcomers like iTunes, which takes in $2 billion a year.

Digital disruption of the music industry seemed to offer plenty of entree for new music distributors. Offering its own player and music store, iTunes thrived. But MTV, Yahoo and AOL all tried, then abandoned, selling music online (they now mostly stream it for free). Squeezing profits from online listeners turned out to be dicier than imagined. Smaller operators like Pandora carved out a niche following among “passive listeners.” Type the name of a song into Pandora’s search engine and it instantly produces an entire station around the track. It does this by mapping songs using 400 characteristics, from melodies to orchestration. This musical fingerprint associates one composition with another.

Hyman’s brainchild is a clever hybrid inspired by scrappy competitors. Like Pandora, Mog’s slider bar can be moved to add artists similar to ones you like, building your own playlist. Like Microsoft’s Zune player, it delivers ultrahigh fidelity. Hyman has taken a page from Twitter, too, running feeds from like-minded music fans, allowing users to find new music through “social discovery.”

Can Hyman triumph where bigger brands have failed? He has one edge: Mog’s blog network. Hyman built it by hiring the former top ad salesman at mtv.com, Alex Brough, who integrated content from other blogs with RSS feeds onto the Mog site. Hyman sold ads against this content and split the revenue with bloggers. The site now hosts 1,000 of the largest online music blogs in the U.S. Hyman will tap into this network, mostly using ad inventory, to build Mog’s brand.

To win, Mog will have to score a steep trajectory of subscriptions at $10 per month ($5 more than his PC-based subscription). Mog will also have to deliver “interoperability.” That’s the means by which music in disparate locations, say your laptop and home office, can be married and live together in Mog’s “cloud” (servers back at headquarters). “We’ll be able to add what’s on your hard drive to your Web-based library, grab your playlists and combine all of this legacy data in one place, along with new music from your Mog subscription,” he promises. The streaming service that delivers the best such interoperability should be a big selling point to music junkies.

Of course, if you stop paying, your cloud vanishes. How will that go down with music lovers? “The hard part for people to swallow will be that they won’t own the music they pay to hear,” says Kevin Burden, mobile device practice director at ABI Research. “It’s like leasing a car. You don’t have upfront costs, and you get a new model every two to three years. There’s value to that, but you don’t own it.”

Mog’s competitors think it’s worth the risk. Rhapsody, Catch Media and Spotify all have licensing agreements from music publishers for cloud-based streaming. So does digital music service Lala, bought by Apple last year. Apple recently announced plans to move every iTunes user’s music collection to Apple’s cloud this year. Death of the music download may be at hand.

One burden Hyman shares with his peers is the cost of content. The labels charge up to half a penny per stream per subscriber. European music giant Spotify, now with 320,000 paid subscribers, wants to bring its free service to the American market, but the labels want to be paid more than Spotify can likely afford. That won’t stop Mog’s coming showdown with its larger competitor. Watch for war clouds soon in Europe, as Hyman challenges Spotify on its own turf this summer.

Read more about the difficult work of creating the river of music at Forbes here.