Future Of Music

If you look at how people are getting their music these days you see that the companies fighting for the people who pay for music are battling over an ever-smaller piece of the pie.

NPD Market Research’s annual survey of Internet users, which is some 80 percent of the population these days, found that 10 percent of the music they acquired last year came from paid downloads. That is a big increase from 7 percent in 2006. But since the number of physical CDs they bought plummeted, the overall share of music they paid for fell to 42 percent from 48 percent.

Most people are getting music from their friends — either burning CDs or ripping digital files. And despite the record industry’s crackdown, there is no reduction in the number of people of peer-to-peer file sharing service.

“The number of people who do peer to peer in 2007 versus 2006 has been stable,” said Russ Crupnick, who runs NPD’s music service. “The number of files taken per users has increased significantly.” This is because of the shift of many users from Limewire to BitTorrent, which makes it easier to download whole albums.

Quite surprising is the continued strength of AM/FM radio. People listen to music on the radio more times per week than any other method. Listening to music on a computer has the third largest number of people, followed by listening on a portable device like an iPod.

The music labels will look at this data and say, “If we just stick with the CD and the Apple model we are in deeper trouble,” Mr. Crupnick said. Yes indeed.

Read more from the New York Times.

Music2.0 is a hard-hitting, provocative and inspiring collection of essays and blog posts on the future of the music industry from my co-author Gerd Leonhard. The book continues and expands on the ideas and models presented in our book “The Future of Music”, which has become a must-read work within the music industry, worldwide, available in English, German, Spanish and Italian.

Music2.0 describes what the next generation of music companies will look like and the new principles that will define the next iteration of the music business.

Music2.0 presents the best of Gerd’s writings from the past four years. As you move from 2003 to 2007 in the book, the evolution of various ideas and expressions can clearly be observed.

Check out Music2.0 here!

I heard this song again and had to post about it one more time.

This is a blast from the past (2006) written and performed by MC Lars and inspired by the “Future of Music” book. It is interesting that the point of view represented in the song seems almost like a mainstream idea at this point. Not to say that the financial side of things is working yet, but a lot has happened in the past two years. The future is becoming clearer.

Download this Song - MC Lars

It’s 2006, the consumer’s still pissed
Won’t take it anymore so I’m writing a list
Don’t try to resist this paradigm shift
The music revolution cannot be dismissed
$18.98 Iggy Pop CD?
What if I can get it from my sister for free?
It’s all about marketing Clive Davis, see?
If fans buy the shirt then they get the mp3
Music was a product now it is a service
Major record labels why are you trying to hurt us?
Epic’s up in my face like, “Don’t steal our songs Lars,”
While Sony sells the burners that are burning CD-R’s
So Warner, EMI, hear me clearly
Universal Music, update your circuitry
They sue little kids downloading hit songs
They think that makes sense
When they know that it’s wrong!
CHORUS
Hey Mr. Record Man
The joke’s on you
Running your label
Like it was 1992
Hey Mr. Record Man,
Your system can’t compete
It’s the New Artist Model
File transfer complete
Download this song!
Download this song!
Download this song!
I know I’m rhyming fast, but the message is clear
You don’t need a million dollars to launch a career
If your style is unique and you practice what you preach
Minor Threat and Jello both have things to teach!
I’ve got G5 production, concept videos
Touring with a laptop, rocking packed shows
The old-school major deal? It makes no sense
Indentured servitude, the costs are too immense!
Their finger’s in the dam but the crack keeps on growing
Can’t sell bottled water when it’s freely flowing
Record sales slipping, down 8 percent
Increased download sales, you can’t prevent
Satellite radio and video games
Changed the terrain, it will never be same
Did you know in ten years labels won’t exist?
Goodbye DVD’s, and compact disks!
REPEAT CHORUS
You know, we just wanted a level playing field.
You’ve overcharged us for music for years, and now we’re
Just trying to find a fair balance. I hate to say it, but…
Welcome to the future.
REPEAT CHORUS

Here is what I wrote in ‘06.

Check out Lars site.

Wired has some great articles on music in the current issue. Mike King already posted on David Byrne’s music models, ground that has been covered here and in the Future of Music book.

But Byrne also did an interview with Thom Yorke from Radiohead about the In Rainbows experiment and his views on the music biz. Here’s an excerpt:

“Byrne: What about bands that are just getting started?

Yorke: Well, first and foremost, you don’t sign a huge record contract that strips you of all your digital rights, so that when you do sell something on iTunes you get absolutely zero. That would be the first priority. If you’re an emerging artist, it must be frightening at the moment. Then again, I don’t see a downside at all to big record companies not having access to new artists, because they have no idea what to do with them now anyway.

Byrne: Are you making money on the download of In Rainbows?

Yorke: In terms of digital income, we’ve made more money out of this record than out of all the other Radiohead albums put together, forever — in terms of anything on the Net. And that’s nuts. It’s partly due to the fact that EMI wasn’t giving us any money for digital sales. All the contracts signed in a certain era have none of that stuff.”

Pretty interesting interview.

Watch a fascinating social commentary on the state of affairs in copyright and the internet.

See the whole hour long movie here.

A terrible thing is happening to the recorded music business as we know it.  It is literally going away.  For years now many of us have been predicting the demise of the record labels, falling CD sales, the erosion of radio as a promotional channel, lack of barriers to entry into music making - and all the rest.  Well now it seems like the worst possible future is happening right before our eyes.

CD sales are falling off a cliff as we speak.  Sales of CDs in the US were down over 20% in the first quarter of 2007 according to Soundscan, yes folks, down 20% - and we have 9 months left to go.  The same report shows sales of digital downloads up 52%, but that is not nearly enough to offset the free-fall in CD sales.  More telling is the fact that the increase in paid digital downloads is slowing from the unsustainable rates of the last couple of years (87% for the first quarter of 2006).  While all this is happening, illegal downloading of songs and albums and the wholesale trading of files continues to skyrocket.  It will soon be impossible to make a significant profit from the sales of recorded music.

The brain trust that represents the recorded music industry has successfully lobbied the Copyright Royalty Board in the US to effectively strangle Internet Radio, the last hope for the marketing machine that once was the record label combine.  If these new regulations stand, not only will it be nearly impossible to make a profit selling CDS, it will be nearly impossible to promote new music or run a fledling online streaming service.  See this excellent article from Salon on the subject.

Just last week, the mini-major label EMI agreed to release unprotected, DRM free music from it’s catalog via the Apple iTunes store.  This is scheduled to happen soon, at a premium price of $1.29 vs $.99 for the chastity belt wrapped files.  Do you see anything wrong with that pricing model?  Charge more for the unprotected file when you can get them for free practically everywhere else?  Who is in charge here?

As we have been saying for years, it is quickly coming to a time when being a musician means finding ways to make money that do not include the sales of recordings.  This has never been more true in the last 50 years than today, and will become more true with the passing of each week as we move forward.

The Recording Academy, the organization that brings us the Grammy awards, has spent the last two years on a project to "create a dialogue between music makers and music fans to help shape an exciting digital music future".  This is some amazing work and the academy should be recognized for their grass roots efforts to connect the fans and the artists.  Here are some excerpts from their report.

In the 50 years since commercial rock ‘n’ roll was born, everything about music has changed, from the way it’s made to what it sounds like to how it’s marketed and sold. The most dramatic difference, however, has perhaps come in the last decade. Spurred by the introduction of the Internet, the act of discovering music and, subsequently, sharing it, have evolved in ways artists, record companies and listeners never imagined. Gone are the days of walking over to a friend’s house with a stack of vinyl long-playing records under your arm—a deeply personal, one-on-one experience that, often, ended in generating a future sale. Today, connecting with music happens in an instant, involves an incomprehensible number of people, and a method that’s nearly impossible to trace.

Like many times before in its history, the music industry is at a crossroads. Faced with declining album sales and a public that lives—but doesn’t always buy—online, the traditional brick and mortar model, which has weathered its share of technological innovations (from 8-tracks to tapes to compact discs), can no longer function as it was designed; at least not for profit. At the same time, consumers are battling music providers with issues centered on perception (the perceived greed of record companies and the perceived wealth of popular artists) and one undeniable reality: that acquiring music is easy and, depending on where you are getting it, free. While the conscience may debate the act of illegal downloading, is it enough to steer the listener towards a legitimate purchase or is a legal threat necessary? If you are willing to pay, will you be able to own the music or will copy-protection software ostensibly mean you’re renting it?

These are some of the many questions that this report tackles. It was compiled by a 12-member panel of 18 to 24-year-old music fans from every walk of life that have spent the better part of two years collecting viewpoints and opinions through interviews and roundtable discussions with artists, producers, songwriters, executives and peers. The What’s The Download® Music Survival Guide is an unedited look at today’s state of music and a genuine attempt to decipher what’s working, what’s not, and where we go from here.

7 Music Survival Tips - (from the Guide)

#1: Educate to Eradicate Piracy
“Unaware of the large number of people who collaborate to make a record, many consumers have turned to illegal file sharing as a response to the high price of music, believing that they are not hurting all of the ‘rich’ musicians. They simply do not understand the ramifications of their actions.”

#2: Make Music Retail Therapy
“Sometimes when you go to a record store, you bump into a record. You bump into people that may hip you up to records. It’s a whole other experience. And we need that journey. It’s important that as artists we take time to dig, to see the roots of where everything is coming from so that we can offer it to the fans, and they all can offer it to the next generation.”

#3: Declare a Music/Tech Truce
“Simply put, the industry does not make it easy for consumers to purchase and use digital music online legally, while piracy delivers what companies hold back. Digital music is a vital force in the industry and technology needs to be properly embraced to provide ease of use to consumers.”

#4: Commit to Artist Development
“If the music industry wants to win back the financial loyalty of fans lost to illegal means of obtaining music, the major labels should work with artists to cultivate their talent, rather than casting an artist aside after a commercially unsuccessful release.”

#5: Embrace New Music Avenues
“If the music industry hopes to survive, it must embrace the new face of musical community to reach out to potentially dedicated fans. Labels as well as artists should take the time to interact online with their fans in the interest of developing an artist-fan relationship that will entice fans to support artists monetarily as well.”

#6: Offer What Piracy Doesn’t
“So how can companies drive illegal file sharers to legal Web sites? This is something many are struggling to figure out, and there is not one clear answer or solution. However, if legitimate Web sites and online companies want to continue to grow, they must offer what piracy cannot.”

#7: Make Music a Priority
“More people are discovering more new music–and a greater variety of music–than ever before. There are tremendous challenges facing traditional music businesses, but for artists and fans this is an incredibly exciting time. One day, we will look back on this period in music history as a kind of Internet adolescence—a confusing, sometimes awkward transition that in the end leaves us stronger, smarter…and a little less innocent.”

Get a copy of the complete guide here and check out their very informative site "Whats the Download"

Fascinating reading in this month’s Stereophile.

"In the Supreme Court’s decision in MGM vs Grokster.
Justice David Souter wrote: "We hold that one who distributes a device
with the object of promoting its use to infringe copyright, as shown by
clear expression or other affirmative steps taken to foster
infringement, is liable for the resulting acts of infringement by third
parties."

I’m not a Constitutional scholar, so I can’t weigh in on
whether or not the Supremes were acting according to the Founding
Fathers’ intentions on this one, but it certainly seems to me that this
decision could have far-reaching effects on new inventions—not to
mention opening a whole can of worms for existing ones.

Apparently I’m not the only one troubled by this. "The
President believes that the manufacturer of a legal product should not
be held liable for the criminal misuse of that product by others," said
White House spokesman Scott McClellan. That seems clear enough—so that
makes it a bad decision, right?

Not so fast. President Bush wasn’t talking about digital copying, but about a different industry altogether. MGM vs Grokster is, apparently, a good decision when it keeps evil hackers from copying CDs or DVDs. It’s apparently a bad
decision when it can be used against the manufacturers of firearms,
legal products that are frequently used by third parties in "acts of
infringement." Just before the Senate slunk out of town for the August
recess, it voted 65–31 for S397, "The Protection of Lawful Commerce in
Arms Act," which shields firearms manufacturers and dealers from
lawsuits resulting from gun-related crimes.

I’m not arguing that Grokster is good and guns are bad.
I’m merely saying that I fail to see why one invention should be
treated differently from the other. I think everyone ought to play by
the same rules—or at least on the same field.

It would, I’m sure, be politically naïve of me to point out—as
many others have—that the gun lobby gave close to $2 million in
political donations in 2004, while the combined record and movie
industries ponied up a whopping $32 million ($32,016,389, to be
precise, according to the Center for Responsive Politics).

No, I don’t think all that money bought those decisions—I think
all that money bought access to the decision makers. Buying access is
something the recording industry knows more than a little bit about, as
Sony BMG Entertainment’s settlement in New York State Attorney General
Elliot Spitzer’s payola investigation
illustrates. In case you missed that, Sony BMG confessed to paying DJs
and radio-station programmers in exchange for their playing or
"charting" Sony records on their broadcasts. How does this hurt anyone?
Basically, it gives an advantage to the players who have the most
money."

Read the whole thing here.

Watch this week’s Nightly Business Report on NPR and Public Television to see a special series on the Music Business, featuring Dave Kusek and Gerd Leonard.

"On December 6th, 1877, Thomas
Edison shouted a nursery rhyme into his new talking machine. The recording
industry was born.

Over more than a century, the technology evolved from wax cylinder to
shellac platter to long-playing vinyl to cassette tape to compact disc.

But the business model remained the same: The artist recorded to the
label`s satisfaction, the label did the manufacturing and handled the
distribution, and the consumer could take it or leave it.

That changed in the mid-1990s, when personal computers got the ability
to make digital compact discs. Unlike analog, digital recordings are
simply computer data files, and the tools need to create, capture and
manipulate digital music are inexpensive, high quality and widely
available.

Now, consumers can use the recording industry`s compact disc to create
their own compilations, re-edit to produce derivative products, and yes,
make perfect copies.

When the cost of the blank needed for a copy fell to pennies, the
industry`s business model fell apart.

If the ability to easily copy compact discs was a problem for
the recording industry, Napster and other file-sharing systems were a
disaster. Created in 1999, Napster let consumers freely trade the computer
files of songs with others over the Internet. The artists, publishers and
recording companies never saw a dime.

Nearly 40 million people were said to be using Napster when
it shut down. And for every Napster that was shut down, another method to
share files sprang up.
The industry`s trade association sued thousands of people, mostly
college students, to stop the practice. The lawsuits, tens of thousands by
some counts, continue today."

More info here.

"There is an art to this sh*t. You know that. It’s the corporate
bosses that forget that fact. But it’s not just music - we have this
problem plaguing every aspect of our culture.  Yes content needs
work, yes marketing needs work, but it is the sales teams that need to
be re-educated and motivated and inspired and creative. And it’s not
happening because they are being led by business oversight guys.
Content guys should be running companies, marketing guys should be
running companies, who put business oversight guys in charge?  Wall Street that’s who. Wall
Street continues to love and reward and worship short term success for
some reason. As the culture and the economy and all our fathers’ and
grandfathers’ and hundreds of years of hard work get trashed in a
generation or two. The tail is wagging the dog. Wall Street should not be calling the shots. When did Wall Street ever write a song? Paint a picture? Make a movie? Play a song on the radio that changed somebody’s life?  Where are the music people?  I see lawyers, accountants, test marketers running the world. Where is the emotional connection?  Where
is the passion? This ain’t about JACK or BOB or Moe or Larry or Curly.
It’s about you. Everybody in this room. You are here because you are
connected emotionally.  This ain’t Harvard Business School. It’s f*cking Rock and Roll!"

Little Steven Rants on state of radio