Future Of Music

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.

It’s a new era for the music business. The music industry is rapidly changing, the traditional gatekeepers are evolving (or disappearing), and new distribution outlets, marketing techniques, and business models are popping up all the time. For those that are educated on these changes, there is more opportunity in the “new” music business than ever. Get The Handbook Now!

Berkleemusic’s Music Business Handbook collects some of the essential knowledge from our instructors in one easy-to-navigate guide. The music industry of the future will be driven by educated, focused, entrepreneurship-minded individuals, and this handbook will prove to be a starting point in your lifelong music business education.

Topics Include:

Guest Post by MC Lars

Back in 2005, my former manager at Nettwerk, Tom Gates, gave me a copy of Kusek’s “Future of Music” book.

“Read it,” Gates said.  “It might be interesting to you.”

I read the whole book in a weekend and was inspired to write a song detailing the changes Kusek proposed, many of which have come true.  It seemed crazy then.  Five years later, there has been an ideological shift made very apparent by the new generation of artists and consumers; music isn’t really a physical product anymore, it’s a service that artists provide that they are then paid for (if the service they provide has cultural and/or emotional value).

The song I wrote was called “Download This Song“, and it charted in Australia where I did TRL on MTV.  The YouTube video received a half a million plays and the single was given press in the NME, the UK’s biggest music magazine.  Afterwards, a girl in Texas who was being sued by the RIAA heard the song and contacted me.  I forwarded it to Gates.  Gates sent it to Terry McBride.  Nettwerk paid for her legal fees because one of the songs in her collection was by an artist they managed.  Clearly the ideas in the book and my song had reached a large audience.

It’s honestly somewhat eerie how much of what Kusek predicted came true.  Gone is the ineffectual A&R I described in songs like “Signing Emo” who races to find “the next hit” to get their band on the radio through payola and a $200,000 video that only recoups 10% of the time.  WTF? Gone is the idea that record labels are necessary or even always helpful.  Gone too is MTV’s agency as a music network, platinum albums, and commercial music retailers like Tower Records and Circuit City.

It might seem very bleak to the common music fan, but from an artist’s perfective, things have never been better.  In the independent hip-hop community, thousands and thousands of regional pockets of talented artists working hard to perfect and distribute their material have all popped up across America and the world.  No longer do artists aim to get $1,000,000 advances, a ridiculous and usually unrecoupable amount, but find themselves as part of an emerging middle-class that Kusek predicted would come to be.

Rap crews like Twiztid and the Psychopathic collective have used their underground and independent acumen to build empires and continue to bring tens of thousands of kids to their annual midwest hip-hop festival.  Upstate New York’s Weerd Science have become a credible and influential voice in the hip-hop underground on the strength of their 2005 debut – an impressive feet for a group with no strong label backing or touring history.   Records and regional tours have directly translated to lucrative career music for some of these artists.

The Peter Principal states that in the workplace, “each employee tends to rise to his level of incompetence”.  Basically this means that you will keep getting promoted and promoted until you are unable to do the next job and that there is a subjectively manifested glass ceiling based on one’s ability to do their job.  This is reflected in the music scene because artists now get to become as famous as they care to be or deserve.  If the music is good, it sticks with people.

And this meritocracy is the future Kusek predicted – catalyzed, in part, by the broadband technological improvements made in the last few years.  HD YouTube videos are a click away, downloading speeds have increased and you can get any artist’s discography for free within a  few clicks.  I listen to most of my new albums on Rhapsody because it’s easier than keeping track of the stacks hard drives full of mp3s I’ve collected over the years.  There’s a Zen to music consumption now, one of the new simplicity of it all.

And for the record, I’m living proof that downloading doesn’t hurt artists.  Without the advent of torrents, kids can quickly get any of my albums for free at any time from basically anywhere.  And that’s awesome!  Kids have my albums, even the rare out-of-print ones, because they’ve found them for free online.  Some of them decide to help support me in other ways by buying t-shirts or getting the occasional track from iTunes, which adds up if the net is wide enough.  I then pay my bills with digital sales, college gigs, and international touring.

I can’t buy a mansion in Hollywood, but that was never the goal.  I get by comfortably and will keep making music until I die.  High five!  What more could I ask for?  The 14 year old version of myself would be very proud of how I turned out at 27.

“Music was a product, now it is a service”.

Check out a new favorite crew of mine from South Africa, Die Antwoord, luminaries in the Johannesburg “zef-rap” scene.  In a truly viral word-of-mouth fashion, another artist I’d worked with (Tina Root from Switchblade Symphony) sent me the YouTube link.

“You’ll like this,” she said. “It’s different.”  She was right.

I checked out their “Enter the Ninja” video – the raps were tight, the chorus was very catchy, the visuals were unique, and the editing was dope!  I then researched zef-rap and learned that it is an international postmodern culture that takes every regional hip-hop tradition I could imagine and amalgamates it into one thing.  It’s hip-hop of the future that I had found by the web from a colleague.

This is how it “zef” a uniquely postmodern hip-hop form: In one video, a rapper named Jack Parow “ghostrides” his car, dancing along side of it.  This is a hip-hop tradition that was popularized in the Bay Area in the last decade, a reflection of the car culture being so integral to “hyphy” rappers like E-40 and Mac Dre.  Zef-rap incorporates many regional hip-hop movements into one genre, which is why I’m so in love with it these days!  Would I have heard of this genre otherwise?  Probably not.  It’s all because of this viral video my friend sent.  Now I can’t stop talking about them.

When kids ask me how I got into music, I always tell them this; if you want to have a career in indie hip-hop or any other genre of music these days, you need to be dedicated, come original, and work on building your brand as something real and human that people can relate to.  Don’t expect to make money on albums, labels are essentially just banks that help promote artists as brands, with CDs being their main promotional tool.

Kusek gave me hope when I was starting out that the playing field would be leveled if you believe in your art.  The punk rock ethics that I grew up with as a teenager in the late 90s are very conducive to the new culture of music listening and consumption.

I’d also like to thank Dave for his support through the years and also for getting me into classes at the Berklee College of Music in 2007 – I’ve learned a lot from him and trust you all can too.

Much respect to anyone working to make a career in music – the Music Power Network is a great place to start.

Welcome to the future!

MC Lars

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I was hanging out with my friend Charlie McEnerney last night and asked him about his interview with Larry Lessig.  Here is his post and a link to the complete interview from Well Rounded Radio.  Check it out.

In many music and entertainment circles, the name Lawrence Lessig needs no introduction, but for those who don’t know his work, here’s some background.

Lessig is a lawyer and activist whose interests are mostly in intellectual property, copyright, technology, and political reform. He’s has written five influential books, including Code and Other Laws of Cyberspace (2000), The Future of Ideas (2001), Free Culture (2004), Code: Version 2.0 (2006), and Remix: Making Art and Commerce Thrive in the Hybrid Economy (2008).

Remix was just published in paperback in October 2009.

Over the past 10 years, Lessig has worked for both Harvard Law School and Stanford Law School. He is currently a lawyer at Harvard Law School and director of the Edmond J. Safra Foundation Center for Ethics at Harvard University.

Lessig is a founding board member of Creative Commons. In 2008, Lessig launched the Change Congress campaign, now called Fix Congress First.

Lessig talks about Creative Commons during the interview, but in a nutshell it’s an organization with copyright tools that allows content creators to give various levels of freedom to others for them to remix and build upon the original work.

The idea behind remix culture is how an artist can take a work that a pervious artist has produced and build upon it to create something new. The term has become more commonplace in the last decade, but in fact the concept has been in use for decades, most notably in rap music starting 30 years ago.

Growing up in Queens, New York, I was lucky enough to hear the rap bands of the first era pretty early on (granted, thanks to bands like Blondie and The Clash and college radio putting Grandmaster Flash, The Sugar Hill Gang, Kurtis Blow, and Afrika Bambaattaa on my radar) which usually utilized sampling techniques when creating their music.

I have long been a fan of the groups who fine tuned the ideas behind audio sampling to perfection, in Long Island’s Public Enemy and De La Soul. I’ve always thought both groups pushed the ideas behind sampling in ways that few others did before or since, albeit in very different directions.

With Public Enemy’s 1988 album It Takes a Nation of Millions to Hold Us Back and De La Soul’s 1989 album 3 Feet High and Rising, at the moment it seemed like the idea of what music “is” was being reinvented.

But, after a series of lawsuits for a variety of musicians and labels, the art of sampling and remixing was largely hobbled, in either using others work with or without their consent.

Twenty years later, it is still mostly the domain of those willing to tread in dangerous waters or for artists who want to engage their own fans by allowing them to remix work as part of the growing participatory culture community. For remix artists who might be looking to push their ideas further, it’s unlikely they can put their work into the public without a sizable budget.

Having read all of Lessig’s work and seen two recent documentaries about the remix culture (Brett Gaylor’s RIP: A Remix Manifesto and Benjamin Franzen’s Copyright Criminals), I wanted to speak with Lessig about how current musicians could utilize Creative Commons and share with their own audience as well as look at how we music fans can better understand this era of shared creativity, which dramatically changes the idea of those performers vs. us in the audience.

In addition to these films and Lessig’s Remix book, some good reads on the subject include DJ Spooky’s book Sound Unbound (2008) and Matt Mason’s The Pirate’s Dilemma: How Youth Culture is Reinventing Capitalism (2009).

The show includes music from the earlier era of sampling as well as some recent examples of mainstream musicians offering up their work for remixing, including David Byrne and Brian Eno, Nine Inch Nails, Radiohead, and Bjork.

I sat down with Lessig at his office at Harvard Law School to discuss:
* why it’s unlikely the current copyright system will change
* why Greg Gillis, also known as Girl Talk, has not been sued
* how Creative Commons works and how musicians can use it to engage their fans even more

Songs included in the interview include:
1) Public Enemy: Welcome to the Terrordome (Welcome to the Terrordome) (in preview)
2) Grandmaster Flash: The Adventures of Grandmaster Flash on the Wheels of Steel
3) De La Soul: Me Myself and I (3 Feet High and Rising)
4) Public Enemy: Night of the Living Baseheads
5) DJ Moule: Black Sabotage remix of Beastie Boys’s Sabotage
6) Radiohead: Reckoner (In Rainbows)
7) Nick Olivetti: Nasty Fish remix of Radiohead’s Reckoner
David Byrne + Brian Eno: Help Me Somebody (My Life in the Bush of Ghosts)
9) Owl Garden: Secret Somebody remix of David Byrne + Brian Eno’s Help Me Somebody
10) Mr. Briggs Hit me somebody remix of David Byrne + Brian Eno’s Help Me Somebody
11) Girl Talk: No Pause (Feed the Animals)
12) Girl Talk: In Step (Feed the Animals)
13) Danger Mouse: Encore (The Gray Album)
14) The Album Leaf’s remix of Nina Simone’s Lilac Wine from Verve Remixed
15) Vind’s remix of Bjork’s Venus as a Boy
16) Fatboy Slim: Praise You (You’ve Come a Long Way, Baby)
17) Amplive’s remix of Radiohead’s Weird Fishes

Get the audio interview here.

From a fascinating article just published in the Atlantic. “The Grateful Dead’s influence on the business world may turn out to be a significant part of its legacy. Without intending to—while intending, in fact, to do just the opposite—the band pioneered ideas and practices that were subsequently embraced by corporate America. One was to focus intensely on its most loyal fans. It established a telephone hotline to alert them to its touring schedule ahead of any public announcement, reserved for them some of the best seats in the house, and capped the price of tickets, which the band distributed through its own mail-order house. If you lived in New York and wanted to see a show in Seattle, you didn’t have to travel there to get tickets—and you could get really good tickets, without even camping out. “The Dead were masters of creating and delivering superior customer value,” Barry Barnes, a business professor at the H. Wayne Huizenga School of Business and Entrepreneurship at Nova Southeastern University, in Florida, told me. Treating customers well may sound like common sense. But it represented a break from the top-down ethos of many organizations in the 1960s and ’70s. Only in the 1980s, faced with competition from Japan, did American CEOs and management theorists widely adopt a customer-first orientation.

As Barnes and other scholars note, the musicians who constituted the Dead were anything but naive about their business. They incorporated early on, and established a board of directors (with a rotating CEO position) consisting of the band, road crew, and other members of the Dead organization. They founded a profitable merchandising division and, peace and love notwithstanding, did not hesitate to sue those who violated their copyrights. But they weren’t greedy, and they adapted well. They famously permitted fans to tape their shows, ceding a major revenue source in potential record sales. According to Barnes, the decision was not entirely selfless: it reflected a shrewd assessment that tape sharing would widen their audience, a ban would be unenforceable, and anyone inclined to tape a show would probably spend money elsewhere, such as on merchandise or tickets. The Dead became one of the most profitable bands of all time.

It’s precisely this flexibility that Barnes believes holds the greatest lessons for business—he calls it “strategic improvisation.” It isn’t hard to spot a few of its recent applications. Giving something away and earning money on the periphery is the same idea proffered by Wired editor Chris Anderson in his recent best-selling book, Free: The Future of a Radical Price. Voluntarily or otherwise, it is becoming the blueprint for more and more companies doing business on the Internet. Today, everybody is intensely interested in understanding how communities form across distances, because that’s what happens online. Far from being a subject of controversy, Rebecca Adams’s next book on Deadhead sociology has publishers lining up.

Much of the talk about “Internet business models” presupposes that they are blindingly new and different. But the connection between the Internet and the Dead’s business model was made 15 years ago by the band’s lyricist, John Perry Barlow, who became an Internet guru. Writing in Wired in 1994, Barlow posited that in the information economy, “the best way to raise demand for your product is to give it away.” As Barlow explained to me: “What people today are beginning to realize is what became obvious to us back then—the important correlation is the one between familiarity and value, not scarcity and value. Adam Smith taught that the scarcer you make something, the more valuable it becomes. In the physical world, that works beautifully. But we couldn’t regulate [taping at] our shows, and you can’t online. The Internet doesn’t behave that way. But here’s the thing: if I give my song away to 20 people, and they give it to 20 people, pretty soon everybody knows me, and my value as a creator is dramatically enhanced. That was the value proposition with the Dead.” The Dead thrived for decades, in good times and bad. In a recession, Barnes says, strategic improvisation is more important then ever. “If you’re going to survive this economic downturn, you better be able to turn on a dime,” he says. “The Dead were exemplars.” It can be only a matter of time until Management Secrets of the Grateful Dead or some similar title is flying off the shelves of airport bookstores everywhere.”

Read more at the Atlantic.

On my way to the TED conference last week, I devoured Jay Frank’s book Futurehit.dna on the plane.  Jay has some great insights into the past, present and future of songwriting and hit making that we can all learn from.  This is a must read if you are composing for the digital age and trying to gain an edge and find exposure opportunities for listeners.

Jay breaks it down for us on the impact of technology on songwriting and how hits of the past have been carefully crafted to fit into radio airplay on to the iPod, Pandora and streaming era.  His insights into how song form, intros, chord changes, repeats, hooks and other techniques connect a good song with a listener are invaluable.

With today’s digital music is it crucial to catch your listeners attention in the first seven seconds of the song.  After that, repeats are key as well as how the complexity of the song changes over time.  Some of this is old news, but the way he relates it to the technology platforms is interesting and valuable.

How you release music and in what form will determine your chances that your songs will be listened to and remembered enough to make an impact.

Technical, detailed, clear and concise Futurehit.dna will get you thinking about how to create a competitive advantage for you and your music in the days ahead.  Highly recommended food for though.

Check it out here.

Here’s a great post by Mike Masnick.

“As you look through all of these, some patterns emerge. They’re not about getting a fee on every transaction or every listen or every stream. They’re not about licensing. They’re not about DRM or lawsuits or copyright. They’re about better connecting with the fans and then offering them a real, scarce, unique reason to buy — such that in the end, everyone is happy. Fans get what they want at a price they want, and the musicians and labels make money as well. It’s about recognizing that the music itself can enhance the value of everything else, whether it’s shows, access or merchandise, and that letting fans share music can help increase the market and create more fans willing to buy compelling offerings. It’s about recognizing that even when the music is shared freely, there are business models that work wonders, without copyright or licensing issues even coming into play.

Adding in new licensing schemes only serves to distort this kind of market. Fans and artists are connecting directly and doing so in a way that works and makes money. Putting in place middlemen only takes a cut away from the musicians and serves to make the markets less efficient. They need to deal with overhead and bureaucracy. They need to deal with collections and allocation. They make it less likely for fans to support bands directly, because the money is going elsewhere. Even when licensing fees are officially paid further up the line, those costs are passed on to the end users, and the money might not actually go to supporting the music they really like.

Instead, let’s let the magic of the market continue to work. New technologies are making it easier than ever for musicians to create, distribute and promote music — and also to make money doing so. In the past, the music business was a “lottery,” where only a very small number made any money at all. With these models, more musicians than ever before are making money today, and they’re not doing it by worrying about copyright or licensing. They’re embracing what the tools allow. A recent study from Harvard showed how much more music is being produced today than at any time in history, and the overall music ecosystem — the amount of money paid in support of music — is at an all time high, even if less and less of it is going to the purchase of plastic discs.

This is a business model that’s working now and it will work better and better in the future as more people understand the mechanisms and improve on them. Worrying about new copyright laws or new licensing schemes or new DRM or new lawsuits or new ways to shut down file sharing is counterproductive, unnecessary and dangerous. Focusing on what’s working and encouraging more of that is the way to go. It’s a model that works for musicians, works for enablers and works for fans. It is the future and we should be thrilled with what it’s producing.”

Read a lot more here.

The music industry is being reinvented before our very eyes. Learn how it is developing from today’s entrepreneurs including Ian Rogers from TopSpin, Steve Schnur from EA, and Derek Sivers and how you can capitalize on the changing opportunities.

MPN is my latest project and an online service for music business people and music and artist managers creating the future of the industry. MPN provides online music business lessons, exclusive video interviews and advice, career and business planning tools and thousands of specially selected resources designed to help you achieve success in this ever changing industry. MPN gives you the tools, expertise and guidance to help you get organized and take your music career to the next level. Learn from industry experts, set your goals and realize your vision.

Learn more at Music Power Network.

Here is a list of 9 trends and challenges that were recently published as part of an overall report on Digital Music by Redwood Capital.  You can download the entire report here.  What I find most bothersome about all of this is that it is a very backward looking, rationalization and justification about the collapse of the recorded music business and the fantasizing about protection of the label’s assets and proliferation of the traditional business model.  While it may be a good snapshot of some of the major issues the industry has faced and a good way for people to orient themselves, this is hardly the way to think about the future.  No wonder the investments made in music startups over the past decade or so by the VCs and Investment Bankers have not panned out.  If this is the way VCs and investors look at the world of music, I got to tell you, we are all in a lot of trouble.

I have pitched and have had many deep discussions with investors over the years about the music industry and have learned one thing that is holding the entire industry back.  Investors say they care about the music business, but when it comes right down to it, they don’t care about the musicians.  Not one of them would bet on a new label or artist driven business model.  They all wanted to back technology or distribution, but not musicians.  Pathetic.

I have taken the liberty of annotating some of these “treneds and challenges” below:

1) Rampant Piracy Continues

Despite a decade of aggressive attempts by the industry to reduce illegal downloads and peer-to-peer file sharing and preserve what remained of the old model, the biggest challenge facing the industry is still the fact that consumer attitudes towards paying for music have been forever changed, especially amongst the ever-important younger demographic. This places tremendous pressure on industry players to provide the consumer with an experience that exceeds that which can be achieved illegally and for free. The solution likely lies in packaging music with other products and services that consumers expect to pay for, such as mobile phone service, Internet connections, ringtones, concerts, merchandise, etc., and taking advantage of improvements in broadband speed and access to provide a service that can’t be replicated for free. - Certainly this is true for recorded music and something that we predicted nearly 8 years ago in our book on the Future of Music. However you cannot expect a healthy market when you have to “package” what you are trying to sell with something else as the primary means of distribution.  New forms of music experiences would certainly trump “bundles”.

2) Strategy of Major Labels

Despite numerous attempts to cut out the labels as middlemen, and the potential damage they have done to their relationships with the public after years of suing their customers, the major labels still have tremendous clout in determining the fate of the various new distribution models and emerging companies. While backing by the major labels by no means guarantees any degree of success, opposition from the labels is an obstacle that is extremely difficult to overcome. That being said, many of the larger players today began without the blessing of the labels, but once they became too big to ignore the labels were willing to make a deal. – Again I would argue this perspective assumes that the existing music, the existing catalog is more important than the new music, or the music yet to be created.  Tens of millions of dollars have been wasted and countless hours of negotiation sunk into trying to secure licenses to existing major label content by many companies trying to recreate the distribution model for an asset class in severe decline.  I will go out on a limb here and say that the new music matters far more in the future than the existing music, and that licenses from the major labels are far less valuable than the labels think they are.  Perhaps an order of magnitude less.

3) Legal Complexity

Many US copyright laws were written when the only form of music distribution was printed sheet music and as such, obtaining the proper licenses from all relevant content owners is extremely complex. Given the relative youth of the digital music industry, the law is being written and applied haphazardly and has been difficult to interpret. International differences make it difficult to offer consistent products on a global basis. For example, currently Pandora is legal in the US, but illegal in the U.K, and vice versa for Spotify. Developing a business plan in this environment is extraordinarily difficult. – Of course this is true if you are building a business based on catalog.  New labels and music companies that are forming to support new artists can completely eliminate this issue by creating licenses for their content that bundle all the rights in one global license that can be easily acquired.  By using this strategy, new content businesses can outrun old content business and begin to take over the landscape.

4) The End of DRM

The recent decisions by the labels to finally eliminate digital rights management for many applications should represent a landmark change for emerging growth companies in the music space. This greatly reduces a longstanding barrier by allowing compatibility of content and devices across platforms. By decoupling content and devices, consumers can now download a song from their choice of providers and listen to that song on their choice of devices. - Excuse me but the labels had nothing to do with the elimination of digital rights management.  That was eliminated long ago when people began trading MP3 files while all the attempts to distribute “legitimate” digital music failed. This is just the labels saying uncle.

5) Mobile Strategy is Critical

Whereas it has been extremely challenging for content owners across all digital media sectors to monetize online content, consumers do not expect mobile content to be free to the same degree because they have been conditioned to pay for such services. Therefore, we believe that online models that don’t have credible mobile strategies will continue to struggle, and killer mobile apps will prosper. We believe that one of the primary reasons for MySpace’s acquisition of Imeem was Imeem’s mobile capabilities. - Here I agree with the basic premise that a mobile strategy is critical, although have yet to see one that works.  Do people really want to listen to music on their phone?  Is that the killer app?  I expect that something far better is around the corner, more integrated into your life at the moments where you can and want to listen to music.  The damage being done to people’s hearing by the “Ear Buds” sold with the iPod and nearly every other mobile listening device is limiting the experience and holding back the growth of mobile music more than anything.  MP3 sound like crap.  Ear Buds are destroying people’s hearing.  No wonder hardly anyone wants to pay for digital music.  Anyone who focuses on improving the sound quality of mobile listening will find a explosive opportunity.

6) Dominance and Importance of the iPhone

With iTunes’ almost 70% US share in digital downloads, and the iPhone quickly taking market share in the smartphone category, alliances with Apple and/ or apps on the iPhone have become critical to success. Rhapsody, Spotify and Sirius have all launched iPhone apps in the past few months, and MOG’s is expected shortly, and this should give each an important boost in marketing their products. Without the iPhone app, customers would have had to spring for another device to use those services. With customers hesitant to even pay monthly service fees, adding a hardware requirement would have been an insurmountable obstacle in reaching a large customer base. We believe that Apple has been smart in its willingness to approve apps even from services that compete with iTunes. – I love my iPhone, I think it is the coolest thing ever invented.  But I also know that worldwide, the iPhone is just a speck on the landscape of mobile phones.  Will Apple really dominate this space over time?  I doubt it very much.  The vast majority of people cannot afford to buy Apple products.

7) Importance of Wireless Broadband

The widespread availability of broadband in the home and the office in the past decade has enabled computer-based downloading and streaming to develop entirely new methods of discovering, purchasing and listening to music. Many of the previously mentioned business models revolve around this experience. However, the next frontier for the developing models is to take the experience mobile without frustrating consumers. Now that consumers have accepted that cell phones are also music players, the market for mobile music has dramatically expanded, given that 139 million smartphones were sold worldwide in 2008 (Source: Gartner). To date, while streaming services such as Rhapsody and Pandora are a great way to listen to music at one’s desk, the experience on a mobile phone is mediocre at best, given dead spots and dropouts, and in the case of Rhapsody, low bitrate streaming. We suspect that many early adopters have tried these mobile services, only to get frustrated and go back to listening to MP3s on their iPods. Spotify’s and Slacker’s ability to cache playlists may prove to be a good workaround until wireless broadband availability and quality catches up. – I am a firm believer that you do not have to worry about storage and bandwidth, that they will always expand faster than you think they will.  Agreed.

8 ) Consumers Remain Willing to Pay for Exciting New Technologies and Products

Consumers have proven that they are indeed willing to pay for new products and technologies that enhance the music experience or provide new uses for music. The tremendous initial growth of the ringtone market is one example. US ringtone sales grew from almost zero in 2002 to a peak of $714 million in 2007, before dropping 24% in 2008 (Source: SNL Kagan) as consumers ultimately figured out how to create ringtones on their own for free. iTunes has created new value added products that sell at a premium, such as iTunes Pass, which automatically delivers all new product, including exclusive extras, from a specific band to its fans, and iTunes LP, which adds album art, videos, and other extras to an album purchase. Shazam is another good example. Shazam is the second most popular music app on the iPhone and claims 50 million users. Shazam is a unique technology that enables users to use their mobile phone to identify and tag any song they hear in public or on the radio and immediately purchase the song. The app is so popular that Shazam is now charging customers $5 for the premium app, and is limiting free users to five tags per month, and its usage is accelerating. - Completely agree.  This is in line with my basic premise that the new stuff matters far more than the old stuff, and if you can deliver a unique experience to a fan, especially one that is fun and sounds incredibly great, they will eat it up.

9) Convergence of Models

Most streaming services also offer the ability to purchase tracks either with their own ecommerce model or with links to others, most often iTunes and Amazon. To date, most ecommerce models have not offered streaming services, likely out of fear of cannibalization as well as licensing requirements. We believe that as streaming catches on with a broader audience, the e-commerce players will have to offer both. Apple is now more likely to move in this direction with its purchase of Lala, and increases our level of confidence that the streaming model is the wave of the future. - I believe as we wrote about in the Future of Music, that a utility model is the only way to make money with recorded music in the future.  Until music become always on and always available and feels like it is free to you, the market will continue to decline.  It is not so much the convergence of models but the ascendance of a model that will work.  The broadband mobile carriers are the ones that can make this happen.  It is a winner take all business strategy for the company with the balls and commitment to bake paid media distribution into their basic business model.

Comments anyone?

Here is a great info-graphic from the New York Times showing the relative performance of various music formats over the past 37 years.  Unfortunately it does not show the impact of free music online.  That would be an interesting addition to see how big file sharing and torrent downloads really are, relative to the physical formats of the past and the new “paid” digital formats.

Musicians of the future need to know the reality of the business today and seek the tools of tomorrow that will enable them to participate and prosper in the creative industries and carve out a niche and an audience that can sustain them.  These are the underpinnings of the Music Power Network and what we hope to accomplish by helping to guide musicians, songwriters, managers, producers and business people seeking careers in the music industry.

Music Power Network is a new online information service that I started for independent musicians, songwriters, producers, artist managers, and people starting new music companies.  It is a framework with which you can plan your future in the music industry. MPN provides online lessons, exclusive video interviews and advice, career and business planning tools and thousands of hand-picked resources designed to help you achieve success in the new music industry.

Here is an sampling of some of the in-depth video interviews I did over the past year with industry luminaries including Terry McBride, Derek Sivers, Mike King, Phil Ramone, Kelly Cha and many others leading the way.  More interviews are being collected and added as I seek out the people who are helping to transform the music business and light the way into the future of music.

As a result of publishing The Future of Music, many people have asked me to help them with their careers. MPN is the system that I developed to help people get organized and make money in the new music industry. With MPN you can learn from industry experts, set your goals and realize your vision.

The successful artists and writers of the future will start independent and stay independent. They will create businesses around themselves to suit their ambitions, personality, and style. They will connect directly with their fans and control their own destiny.  MPN can show you how to do it.  Make a 360 degree deal with yourself and find ways to generate revenue from your writing, performing, brand, name, activities, and interests that suit you and what you stand for.

Join MPN and get immediate access to:

• Online music lessons that will help you understand the new music industry.
• Exclusive video interviews with industry experts on the latest strategies.
• Custom business planning tools to help organize and guide your career.
• Thousands of hand picked career and market resources to help you build your team.

Here’s what people are saying:

Terry McBride / Nettwerk CEO – “Dave Kusek has an amazing grasp of where today’s music business resides, where its been and where its going. He has a unique ability with factual analysis to cut through the hype and buzz and give us all a clear picture of what is actually taking place in today’s environment.”

Corey Smith / Artist – “It is safe to say  that the “Future of Music” was very much the catalyst we needed to quantify our intentions instead of it being assumptions and guess work.  I thought hey, this is possible. And that, alone, made a huge difference. It’s amazing what you can do once you realize that something is possible.”

Milan Kovacev / MPN Member – “MPN’s services are remarkably well suited for 21st century independent artists. As a songwriter, producer, artist, and music publisher I wear different hats every day and that requires a clear focus and goal-oriented approach to my music business endeavors. MPN’s online course, video interviews, resources and practical tools for building a business plan helped me move fearlessly and confidently in this new dawn of the music industry.”

Debbie Cavalier/ MPN Member – “MPN is the best resource for independent musicians who want to take their career to the next level. My goal for “Debbie and Friends” is to connect musically with as many families as possible via national tours, while maximizing my catalog’s potential through music publishing, licensing, distribution, merchandise, and music teaching opportunities. MPN has all of the resources I need to help me achieve my goals. It’s exactly what I have been looking for.”

Fernando Grecco / MPN Member - “Music business today is not for beginners. It is an open field where there are lots of opportunities for artists and professionals, but where there are very few right answers. MPN is the best way to go from beginner to pro in this brave new world of possibilities. Designed by Dave Kusek, who foresaw this new scenario more than 5 years ago, in his book about the Future of Music, MPN was key for me to choose and develop the 360 degree label business model for Borandá.  MPN helps turn inspiration into action for serious people who want to thrive in this new reality, regardless if you are a musician or a entrepreneur.”

Debra Latimer / MPN Member – “Terry Mcbride is a genius. He articulated some of the most dynamic and innovative concepts pertaining to the music industry that I have ever heard. This video has opened my mind to new models of thinking about producing and distributing music.  Just a wonderful and insightful video.”

See for yourself how Music Power Network can help you.

People should pay for their music the way they pay for gas or electricity.

I originally published this article in Forbes Magazine nearly 4 years ago.

“More people are consuming music today than ever before, yet very few of them are paying for it. The music recording industry blames file sharing for a downturn in CD sales and, with the publishing companies, has tried its best to litigate this behavior out of existence, rather than try to monetize the conduct of music fans. These efforts are fingers in a dike that is about to burst. Digital media are interactive, and people want music that they can burn to CDs, share and use as they wish. The music industry should instead look at turning this consumer phenomenon into a steady stream of cash–lots of it.

The industry ought to establish a “music utility” approach to the distribution and marketing of interactive digital music, modeled after the water, gas and electricity utility systems. It should be done voluntarily to work best for all parties, or it may eventually be legislated through a compulsory license provision.

Under a plan colleague Gerd Leonhard and I propose, con-sumers would pay a flat music licensing fee of $3 to $5 a month as part of a subscription to an Internet service provider, cellular network, digital cable service wireless carrier or other digital network provider. This fee would let people download and listen to as much music as they care to, from a vast library of files available across the networks.

These fees would result in a huge river of money. With approximately 200 million people connected to a digital network in the U.S., the potential annual revenue stream for a music utility model could be somewhere between $7 billion and $12 billion for the basic service. That is already comparable in size to the existing U.S. recorded music market, which in 2003 was $12 billion at retail, according to the Recording Industry Association of America. This basic service would be augmented with various opportunities, including packages of premium content, live concerts, new releases, artist channels, custom compilations and more. The revenue potential of these premium sources is enormous, too.

How would this money be divvied up? We propose that the industry voluntarily establish a “music utility license” for the interactive use of digital music. This license would compensate all rights holders, including the record labels and artists (for the master recording) as well as publishers and composers (for the underlying composition), with the license fee to be split in half between the owners of the sound recording and the owners of the composition, after deducting a percentage for the digital network providers. This license would be available to anyone willing to implement its terms. The digital network companies would be required to track and report which music had been used, by employing existing digital identification and tracking technologies.

There is already precedence for such a flat-fee system in cable television and in the utility-like models of public broadcasting in Europe. Streaming digital music is already provided in basic cable plans. Cable television itself at first resisted this model, but its economics eventually led to a larger market, providing more consumer choice and more revenue streams overall. Old media almost never die. Cable television did not replace broadcast television; instead, it expanded the market dramatically, by letting video flow like water into new revenue streams–instead of down the drain.

Certainly a music utility would be a radical and complex undertaking, and there are many important details to negotiate, such as the exact nature of the license, how the funds would be administered, the specific tracking method, what collection of technologies would be employed and others. Yet there are inventors and technologists outside the mainstream music business hard at work trying to figure out how to make this happen. It’s time for the main players in the music business today, namely the large record publishers, to cooperate with the inventors and jointly create a future for music where the money really flows and the global market for music can grow from $32 billion to as much as $100 billion.”

Read the original article from Forbes here, published in 2005.

Today this idea is closer to reality than you might think.  The major labels have seen their revenues cut nearly in half from their peak, and paid digital downloads and advertising models have not grown to contribute nearly the decline in CD sales.  The labels are in a very tough position and are looking at the utility model as perhaps their only remaining path to survival.  The pain has finally gotten too much to bear.

Choruss is a new company spearheaded by Jim Griffin, and incubated by Warner Music Group whose mission is to “build a sustainable music subscription platform providing unlimited access to music for a flat monthly fee”.  Choruss has been diligently acquiring the required licenses from all the “major labels”, independent labels including aggregators A2IM and Merlin and the National Music Publishers Association.  The company has been granted one-year licenses for up to seven universities to offer subscription services for unlimited, DRM-free downloads as a proof of concept.  This trial is set to begin in 2010.

Stay tuned for more info…

Get Busy Committee

My friend Ian Rogers, CEO of Topspin has started to co-manage the band “Get Busy Committee“.  He has begun to blog about ALL the activities that an artist manager needs to drive their band to success.  It is a fascinating read and a real world education on how to take a band to market in the new music business.  This is going to be really fun to watch as Ian lays out step by step what he is doing to break this band and “get busy” in the marketplace.

To bring a band to market in today’s indie music market is a hell of a lot of work.  You need to be an entrepreneur and you need to build a team of people to help you market, package, promote, distribute, brainstorm, license, and develop a successful artist.  Ian is taking the indie artist management route described at Music Power Network.

Here are some excerpts from his blog.  Required reading for the indie artist and manager today:

The first thing we did was define success: as I mentioned earlier, the goal is to get this music to as many people as possible, connect directly with the ones who like it, build products those people want to own, and turn a profit. Sure it would be great to make enough money that Get Busy Committee could be their primary income, but we definitely aren’t starting with the “if we don’t get a song on a radio this is a failure” mentality. We are starting at zero. The goal is to grow every single week and not lose money.

We started by putting together a release plan. I opened a Google Doc and started dropping ideas and info into it, and encouraged others to do the same. We needed a team, so we started assembling the roster of people, services, and tools which would help us get this record out the door:

Building a Team

Press Relations and Marketing
Creative Direction
Web site design and development
Digital distribution
Physical Distribution
Non-traditional physical manufacturing
Performing rights organizations
Legal

While getting the album to iTunes is the main thrust for a lot of artists, it’s only part of the story (and a very small part so far) for us. We’ve been preparing for this release for months, started selling the album in six different package two weeks ago, are selling the album for $1 on MySpace all weekend, and much more.

Web Site

The object was to make the site:

Home base. The top SEO result for “Get Busy Committee” and anything else related to the band.

Vibrant. It should update with the latest information about Get Busy Committee with very little effort, from a variety of sources. Furthermore, we weren’t going to spend time or money building any of these tools from scratch. We integrated WordPress and Twitter to make sure it was easy to update with long or short-form updates (respectively) easily.

A fan acquisition tool. The site should be sticky like fly-paper. If you visit the site you should have an incentive to leave behind your email address, follow GBC on Twitter, become a fan on Facebook, a friend on MySpace, friend on Flickr, subscriber on YouTube, or subscribe via RSS. We may only get one chance to make a connection with you. We don’t want you to bounce in and bounce out without granting us permission to reach out to you later with an update.

A tool for fans to create other fans. Every page of the site is instrumented with simple ways to share on Facebook and Twitter, and feedback for having done so either in the form of a counter or free music for having done so. We want it to not only be easy to spread the word but for you to be recognized for having done so.

A place to convert at whatever level of fan you happen to be. Never heard of Get Busy Committee? No problem, you can stream the record or download a few songs for free. Super fan? How about the T-Shirt/USB Flash Drive combo for $55? Somewhere in between? No worries. We have something for you.

Useful. If you’re a college radio DJ who needs a clean version to play on your show or a beatmeister who wants an acapella to remix that should be easy to find. If you’re a blogger writing about the band there should be, even if it’s not linked from the front page. Anything you email to people regularly should be on the site and easily linked to.

Read much, much more about marketing, pricing, making connections, creating awareness and all the things a smart artist manager needs to know.  Brilliant!

Thanks Ian.

I don’t know, I could be wrong about this, but something is not right.  Google has finally entered the music space with it’s One Box music search feature in brilliant fashion, well position to become the new radio, complete with favoritism and major label cronyism.

Google is now going to serve up links to songs from major online retailers at the top of it’s search page, whenever you search on a song name, or artist name, or lyric.  It will let you play the song once, and then take you to an option to purchase the song or subscribe to a major music service.  The other search results are pushed down the page.  Except for the ads, of course.

I was at the Google Discover Music Launch Event in October ’09 in LA.  Google’s VP of Search Products and User Experience Marissa Mayer said that “Music is one of Google’s top ten searches of all time, as is lyrics.  But it hasn’t always been easy to actually find music, which is why Google is looking to offer full song streaming directly from Google.”   What is this bullshit all about?

Does a band actually have to buy an ad now in order to be above the fold in Google search results?

Is the only way to be at the top of the page to sign a deal with a major label or online retailer?

What about a level playing field?  How about putting the fan in control?

And what is this about Vevo,  a service Google is reportedly developing with Universal, Sony and some investors from Abu Dhabi?

This all sounds very suspicious to me and I need to know more…

Read more about Google music and independent artists at Music Power Network.