Future Of Music

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

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

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

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

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

Jack Johnson
What advice do you give to young musicians?

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

Wyclef Jean
What changes do you see coming in music?

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

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

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

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

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

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

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

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

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

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

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

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

New Artist Model

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

The last few weeks have heralded some great news for the music industry. Radiohead’s experiment with user-based pricing, Madonna’s new deal and the formation of ArtistNation, a “360″ model for music where the artist and the company partner on numerous levels including recordings, touring, merchandise, etc., and Apple’s repricing of DRM free tracks to $.99. These are all very positive moves that continue to point toward a healthy future of music.

Madonna left Warner Music for a newly formed ArtistNation designed to optimize the revenue potential and investment strategy by combining multiple revenue streams into a package deal. “Madonna is the first step to making Live Nation into the next-generation music company,” Live Nation CEO Michael Rapino said during an investor conference call. “We believe it should help attract additional artists.” Let’s hope so for them.

Read more about this deal here.

The Irish Independent published a great commentary on the state of the music industry this past week. “Madonna – the most successful female artist of all time – is the latest high-profile artist to turn her back on the music majors, ending a 25-year relationship with Warner Music in favour of a lucrative deal with Live Nation. The deal follows the recent excitement around Radiohead’s decision to ditch EMI and offer their new album for download with the consumer choosing what to pay – a move set to be echoed by The Charlatans.

Earlier this year, Prince gave away his new album to readers of The Mail on Sunday. Meanwhile, a slew of yesteryear’s superstars, including Paul McCartney and Joni Mitchell, have signed record deals with Hear Music, which is owned by the coffee chain Starbucks.

It appears that artists of all calibres are forsaking the traditional route to fame and fortune – making a hit record with a household-name label – in favour of giving music away and making money off the back of touring and T-shirts. Arguably it reflects the way that consumer attitudes have changed toward music over the past decade, with today’s consumers happy to pay vast sums to see a band but unwilling to pay for songs they can download for free. Many of today’s music fans – and artists – hold a very dim view of the music majors, arguing that they have charged too much for CDs for too long and that the dinosaurs of the industry – namely Universal Music, EMI, Warner Music and Sony BMG – were too slow to harness the power of the internet and the way the industry has changed.”

This potentially is great news for established artists seeking to renegotiate their contracts or establish new deals with more forward thinking companies willing to write the big check. However, it has yet to be seen how this model will benefit emerging artists looking for marketing muscle to help them break through the noise level. Can a LiveNation afford to break acts now in order to develop the revenue streams it will need in the future? If not them, then who?

With the widespread sharing of files online moving into the end of its first decade, and the rapid disintegration of the old-school record business clearly in sight, what exactly will the future hold? Will these new models make it easier to find new music? Will the new 360 companies garner the trust of the consumer and make it possible to grow the music business again? Will it be more convenient for the music lover to get all their Madonna stuff from one source, or will the widespread choices available online keep pulling control away from the center and distributing it out to the edges of the equation, namely in the hands of the consumer. Interesting times to be sure.

Great to see a band of this stature make a bold move like this.  Radiohead has released their latest album "In Rainbows" online and for free, if you want it.  They will also accept whatever amount you wish to pay for the songs.  Brilliant!

Bertis Downs, manager of R.E.M., says "This is the sort of model that people have been talking about doing,
but this is the first time an act of this stature has stepped up and
done it. . . . They were a band that could go off the grid, and they
did it."

Just watch what happens when they launch their tour!  Tickets, t-shirts, hats, box sets, other goods - watch the cash register ring.  KA-CHING

LA Times reported the story on Sunday.

New Formats

In a recent interview with Doug Dixon, David Kusek argues that the industry needs to develop new formats for music
distributed in physical formats. "Dual Disc is certainly a pointer in the
right direction," he says. "You need to create something that has
great value in order to continue to compete."

For example, in the movie A Clockwork Orange, says Kusek, "even
before CDs were out, they played music on a disk that was a little bigger than a
silver dollar. It reminds me of the idea that perhaps there are other formats
that could be developed, nontraditional formats, from what we have seen so far.
If you had a recordable format that was more convenient than CD, and held more
data, and was faster to record, then perhaps you could have a system where the
recording could be inside the stream of commerce."

The other critical trend, he says, is that "the price of these physical
products needs to come down. I’m encouraged that Dual Disc seems to be priced
around $18 to $20, and discouraged that CDs continue to hover in the $15 to $18
range. I don’t know how much control the manufacturers have over this, but to
the extent they can encourage their customers to be more realistic about pricing
CDs, the longer they will be able to stay in business. I really do believe the
price point for an audio CD is south of $10 at retail."

Music Commerce

But isn’t piracy destroying the industry? "There are two forms that are
currently labeled piracy," says Kusek. "You have the wholesale
replication of CDs and DVDs. To me, that’s counterfeit products and is obviously
not to be tolerated. It is certainly evil and criminal, and bad for
business."

"But the other kind of behavior that is labeled as piracy — downloading
files and trading files with your friends — I’m not sure that I would put that
in the same camp. Often there is no profit margin, there’s no distribution
network, other than yourself and a handful of people that you know. Generally,
you are not selling files to your friends."

"You can measure wholesale piracy and replication in many billions of
dollars, whereas for downloading and file sharing, it’s hard to quantify whether
it has had any negative impact at all in terms of real sales. I actually think
that is good for music, as painful as it may be for to the record
companies."

"I don’t think that file sharing and downloading of music is going to
stop," says Kusek, "until there is something easier, and better, and
cheaper, and more appealing. So as I argue in the book, why not embrace that
behavior, license and tax it, and somehow derive money from it? Make it easier
to find music, improve the quality of the files, and make it easier to record,
instead of trying to fight it. It seems a completely losing battle; People are
never going to stop doing it as long as the price of CDs is too high. So why not
go with the flow and embrace it?"

Investing in the Future

Says Kusek, "by and large the record companies are not in touch
with their customers at any significant level. They thought that their customer
was Wal-Mart. They are out of touch with their ultimate customer, and their
customer shifted away from them. They are still selling a ton of CDs, but the
whole file sharing thing was off their radar screen until someone told them
about it. So then they decided, let’s just go sue all these bastards."

"That bothers me as well," he says. "I ran the numbers, and
somewhere between 30 and 40 million dollars is being collected in the
settlements from the RIAA. But none of that money is going to the artists or
songwriters. It is going to the attorneys and the courts to process the papers,
and whatever is left is going to fund more lawsuits. It’s incredibly wasteful.
The numbers I see show file sharing growing on a monthly basis, ever since they
started the lawsuits, so it is not working. Imagine if they took $40 million and
invested it in a new way of delivering music that is attuned to the way people
want to buy."

To help people in the industry examine these options, Kusek runs an online
course on "The Future of Music and the Music Business" through the
Berkleemusic.com online extension school. "The course is for people at any
level of the music business," he says, "from artists, songwriters,
managers, record company, publisher, promoter, venue. We have had a lot of
people sign up from those areas trying to figure out what am I going to do in
the future: I own a record label, and how I get into this digital thing, or I am
a manager, and I can see that the labels are not really servicing my clients
anymore, so how can I grow my business in an appropriate way. A lot of the work
we do in the class is class projects or personal projects where you apply what
we are talking about to your situation and try to figure out what the next step
might be."

From his classes and consulting work, Kusek also sees differences in the
music business across the global economy. "One of my online students runs a
CD and DVD manufacturing company in India," he says. "They’re finding
that sales are actually quite healthy because the computer thing has not taken
off in the way it has in other parts of the world. I think there are many areas
in the global economy where there are lots of legs left to the existing physical
media, and those folks have more time to figure out alternatives."

Read the complete interview here at Manifest Technology.

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.

The Digital Age and The Future of Music.

It’s no secret that the music industry is challenged on multiple fronts. Now that we’re in the digital age, how can they change their outlook? Celia Hirschman, KCRW’s music industry commentator, speaks with Gerd Leonhard, co-author of The Future of Music: Manifesto for the Digital Music Revolution.

Listen to the Interview (Real)

Held back by fear, you are.

The music industry can’t preserve its current model of total control. Rather, it must embrace P2P and other new technologies because consumers won’t accept anything less than full freedom. In the future,preventing customers from doing things they have grown used to will equal a quickly executed death blow. For the music business, this means that any innovation that will be offered to the marketplace must be without any catches. It must be flat-out in synch with what the consumer will accept and wants, and its integration into the daily lives of the average music consumer must be unobtrusive and effortless.  In other words, keep it simple and give customers what they want.

As Yoda might say, “Held back by fear, you are. To the Dark Side, your stubbornness will lead.” It’s a
fate the music industry may want to avoid.

Read the second part of the interview here.

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

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

"Like modern  plumbing, the music industry could operate almost as a  utility—with copyright holders able to meter usage down to  how many people listened to particular songs at particular  times. In such a world, the industry could live off of micropayments flowing seamlessly back to the owners of  content rather than rely solely on the disjointed and  inefficient distribution of CDs to retailers. Artists, meanwhile, would have unprecedented access to new listeners  as their songs spread virally into vast musical networks  that fans can access literally anywhere. As the most  accessible artists find their audiences, those artists would  enjoy increased concert attendance, new forms of merchandise  and countless other opportunities to connect with fans like  never before."

Read part one of the two part interview

Part two is here