Future Of Music

My co-author and friend Gerd Leonhard was recently interviewed by Carter Smith of Rollo & Grady. Here is the interview:

R&G: How did you become interested in writing about the future of music?

Gerd: I was involved in various online ventures during the Internet years, in the late 90s. I was trying to reinvent the music industry, so from 1998 through 2001 I ran a company called licensemusic.com. It was a real dotcom venture. Because of the work I had done, I saw what was going on. While I was recuperating from the dotcom craziness, I figured that since I had looked at it so deeply that I might as well write about it. I wrote “The Future of Music” from 2003 to 2004, and it was published in 2005. Ever since then I’ve written and blogged about the future of music, the media business and the content business in general.

R&G: In the book, you focus on the concept of music being like water. Can you describe that?

Gerd: I had a co-writer, Dave Kusek, who you might know. He teaches at Berklee College in Boston. The concept of Music Like Water wasn’t entirely ours. David Bowie once said in an interview with The New York Times that music would become like water, flowing freely. That stuck with us and we built this whole theme around it, saying that digital music needs to be as available as water. In other words, there has to be a licensed pipeline, just like licensed connections for water or electricity. Everybody pays for electricity and water, but nobody feels it’s a big effort to do so. Of course, people are up-sold with Evian, Pellegrino, or filling the swimming pool. It is very much the same logic. You have a license to use. You’re all in. Then you do an up-sell towards other variations. The principle fits pretty well with the idea of content distribution on digital networks. It’s a blanket deal – a big deal rather than a unit sale.

R&G: Is that similar to the labels backing Choruss? [Note: Choruss is a proposed plan that would build a small music-royalty fee into university tuition payments, allowing students to legally access and share music.]

Gerd: Yes, totally. A friend of mine, Jim Griffin, is doing that. Jim and I have talked about this for the last ten years, pretty much since Napster came to light. It’s a very similar idea, even though they’re thinking of this as more of a “covenant not to sue.” I don’t think that is taking it far enough. One has to be realistic. I think that the major labels are reluctant to give up control of the ecosystem in a flat out strike, so they will probably take a bit longer to get used to this.

R&G: If I understand this correctly, it’s a university tuition tax?

Gerd: It’s not so much a tax as a way for universities to say, “Whatever people do here, we can legalize it.” It’s fighting against the criminalization of sharing, which is great. And for the students it’s not a tangible expense. It’s wrapped into their tuition. It’s like 911 calling on your phone bill; nobody is going to complain about it. Then, I think a completely new ecosystem could pop up that would essentially be part of the way to access and up-sell to people. I would be against any such tax, levy, or any of those things, but if it can be made to feel like it’s free, which is what it is, I think that is an ideal solution that gets the ball rolling.

R&G: Once a digital network customer pays a fee, how are funds distributed to the artists?

Gerd: It’s very much like traditional radio. Every action on a digital network is monitored. Whether it should be is a different question, and, of course, there are privacy issues. But whatever action people are doing on the network, it’s captured in some anonymous way and then the revenues are paid pro rata. When you click on a song and share or download it, whatever network you’re on can say, “Okay, this was downloaded. This was streamed.” Artists are paid out strictly by popularity. So if your band is busy doing lots of gigs, you’re very popular and you get 100,000 people following you on Twitter, they will click on the song, download it, and you get more money. It’s just like radio.

R&G: Can the labels regain the trust of “people formerly known as consumers?”

Gerd: They may not be able to, and this is the Number One problem. I think it’s a very tough road. The only chance they have – and that goes for everyone, not just the majors, but also the indies – is to drastically open up, put their cards on the table and start doing business like everybody else. This means being transparent, sharing, putting deals on the table and making them public. They need to create real value rather than pretend to do so.

R&G: You’ve previously mentioned that music blogs are the new record labels.

Gerd: Yes. Music blogs have enormous power because people trust the blogs not to pitch them stuff that they’ve been paid to pitch. If they can keep it up, they will be the next BBC. When you look at mechanisms like Twitter or Facebook or FriendFeed, these people become the default recommenders for us. They are the ones who say, “You should pay attention to this band, to this artist.” That’s what radio used to do.

R&G: Serving as filters.

Gerd: Yeah. You have to keep in mind that the biggest problem we are having is not that music isn’t available, because even though it’s not legal it is available. The biggest problem is that once the legal issues are solved, everything will become available. Our problem will be that we have to pick, and nobody has time to pick through 62 million songs. That’s the total universe of currently published music, and it’s going to increase. We don’t really need to solve the distribution problem. We have to solve the attention problem. That’s what Amazon does for books.

R&G: You’ve talked about how the record industry should adopt Twitter. Can you elaborate?

Gerd: Twitter is a mechanism of micro communication, like RSS feeds. Therefore, it becomes something that is completely owned by the people who are doing it, rather than by the people who are making or receiving it. It’s a completely viable mechanism that is cost-neutral, at least to us. It becomes a very powerful mechanism for peer response and viral connections. That is the principle of what music is all about. It’s word of mouth, connecting, forwarding and sharing. A musical version of Twitter would be a goldmine. It already exists to some degree in blip.fm, but the music industry should use that mechanism to broadcast directly to fans. They’re starting to do that, but the problem is that many music companies perceive their primary mission as gatekeeper for the artists rather than getting the music out. That is a big problem today, when you’re in an economy where everybody wants a snack before buying a sandwich.

R&G: What other technologies do you think are necessary for the do-it-yourself artists and managers of the new music world?

Gerd: Widgets and syndication have made YouTube the world’s leader in video. 60% of videos are not played on YouTube.com but on blogs and other people’s sites. Music has completely overlooked that very powerful tool. That is this whole idea of syndication – getting people to transmit music to each other and then reaping the attention on the other end.

R&G: Many of the kids who grew up with Napster are now in college. They’ve never owned a physical CD and only know how to click and download music. They think music is supposed to be free.

Gerd: Yeah, and it can be free in the sense that it’s not as painful as paying per action. The question is not so much about the payment or the fact that people may not be willing to pay right away. It’s about controlling the marketplace. Who gets to listen to what, where, when and how much money do I get? We have to get back on the same page we were on a hundred years ago. We’re all on the same boat. Everyone wants an audience. Until we have that, we have nothing.

R&G: When do you foresee the end of the CD?

Gerd: I think we have another 18 months maximum for CDs to become a Step Two rather than a Step One. They have a 25% decline for 2008 pretty much around the world. How much steeper can they drop? In 18 months, the CD isn’t going to be the cherished moneymaker anymore. And this year people in the music business are going to be forced to say, “Okay, what is the next model? Do we have to loosen up to actually participate in this, or are we standing in our own way?”

R&G: Are you saying they need to recognize any revenue stream they can generate from their content? Sell CDs, subscriptions, etc.?

Gerd: The flat rate is the next CD. Its simple mathematics. If you charge or indirectly earn one dollar from each user of a network, that dollar can be ad-supported. It can be supported by bundling, so the user won’t feel it, so to speak. If you look at the total number of people who are active on digital networks, which is somewhere in the neighborhood of 3 ½ billion people, they’re not all going to pay a dollar because they’re in different countries. But the money that comes in from such a flat rate is humongous.

R&G: You are currently working on a new book, “End of Control.” When is it coming out?

Gerd: I’m working on it right now, and it’s kind of a painful process because it’s always changing. The first couple of chapters have already been published at endofcontrol.com, and people can download those. It’s a free book, so I’m working on various ways to make that more powerful. The control issue is key. It used to mean that if you had more control you would make more money, especially in the music business. You control distribution, radio stations, marketing, everything. Now all that is completely falling apart. Artists are going direct. Radio becomes useless to some degree. It’s all on the web now. People are doing their own thing. Control is a thing of the past. The question is, “What is the next business model?” That’s what I’m working on.

R&G: Who are the current music business visionaries?

Gerd: This is one of the most unfortunate things. There aren’t very many. I always say we need an Obama of the music business, or at least a Steve Jobs, even though Steve is kind of egomaniacal, but brilliant. I see a couple of people, like Terry McBride from Network Records in Canada. I firmly believe, however, that the biggest innovation will come from people who are not in the music business.

R&G: Is this the year we will see considerable change within the music industry?

Gerd: I thought it was going to be 2008, so I’m quite disappointed. I think we’ll see new things emerge in 2009 that will be completely disruptive, like the iPhone and mobile applications of music, new kinds of broadcasting, people sharing stuff through mobile networks and high-speed, broadband, wireless Internet. I think 2009 will be a key year because the current economic crisis will make it worse. People will stop buying content the old-fashioned way.

Read more great interviews here at Rollo & Grady

I was recently interviewed by Carter Smith of Rollo & Grady on The Future of Music.

R&G: What was the reason behind writing “The Future of Music?”

Dave: Gerd [Leonhard; co-author] and I became friends at Berklee. He did a few projects with the music business department, which is how we got to know each other. We started talking and found that we had a lot of common ideas about what was happening in the music business. I ran Berklee Press, so I had a way to publish the book. We just started putting ideas down on paper. There wasn’t as much blog action then as there is today. It was probably 2002 or 2003 when we really started to write the book, so we figured, ‘Okay, we’ll publish it in book form.’ Our motivation was, ‘How can we help people understand what we think is going to happen?’ Both Gerd and I had done lots of panels and music shows – South by Southwest, all the digital music ones, Billboard and many gigs like that. We thought, ‘How can we pick some of these ideas and package them in a form that would be digestible and widely available to people at a reasonable price point?’ That was the genesis of it all. Honestly, it all happened so quickly that I kind of wish we could do it all over again. It was fun. It was a very condensed period of time. There were a lot of things that obviously were changing and happening, and there were a lot of things that weren’t so obvious. For example, I don’t think there was an iPod when we first wrote the book. That happened during the publishing and editing process. There was no iTunes music store, no MP3 blogs to speak of and no Amazon.com selling downloads. eMusic might have been there. It was all so early. Everything was happening so rapidly. We just tried to gather up as much as we could that was obvious and make some stabs as to what might happen.

R&G: Can you discuss the process of writing the book?

Dave: I learned a lot from Gerd during the process. I was more on the ground with the musicians. My whole career has been helping musicians and artists create their art, take their art to market and most recently teaching them about it. Gerd was more in the consulting end of things, talking to the likes of Nokia, Apple and Sony. I learned a lot about what was going on in the corporate world that I hadn’t been exposed to. I think we pushed each other because I would often argue that, ‘Man, we’ve got to talk to the artists and writers and managers, not to your consulting clients, because most of these people aren’t going to understand what the hell you’re talking about.’

R&G: “Music Like Water” the David Bowie quote meaning music becoming a utility. Do you still believe in that?

Dave: I think it’s inevitable. Music has always been free. It started off as a live performance. You’d go to a party, to a friend’s house, to a show, to the theatre or an event and music would be there. You’d be dancing and laughing and happy and singing. There was no idea of a business other than maybe the performers wanting to get paid. Throughout the technological phase of the last seventy or eighty years, there was always a free form of music, such as radio. The single most influential technological phenomenon in music was radio. It brought music to everybody, and it was free. Now we have gone through this pre-packaged, packaged phase of music, with vinyl, cassettes and CDs. That was a way for labels to control distribution and squeeze profits out of people wanting copies of the stuff they heard on radio. But once that leapt into the Internet, music became free again.

R&G: By free, do you mean file-sharing and uploading CDs onto your computer hard drives?

Dave: Both. People have been trading files for years. It started out on Usenet, which predated Napster. You remember Apple’s “Rip, Mix, Burn” campaign? It was really all about enabling the digitalization of music and unlocking it from the plastic that it was bound to. I don’t see it as a big deal that music is free again and in a higher quality format that is randomly accessible to the file-sharing networks or the services that we have now, some of which are “legitimate” and some aren’t. It’s not a very big deal to me. It just seems normal. The utility idea already exists on your TV. I have Comcast service here on the East Coast. We have Music Choice, which is essentially digital radio on your TV. There are 30 or 50 channels of music that are programmed and streamed to my house constantly that I pay for on my cable bill every month. I’ve been doing that for fifteen years. I have no choice about it. I just do it. It comes with HBO and the basic cable service. So there already is a music utility that millions of consumers in the U.S. have paid for many years. Why can’t that service just get a little bit better? If you add a random access mechanism where I can select what I listen to at a finer level than just picking the channel that Music Choice gives me, the service becomes better. I think it’s inevitable. I don’t understand what all the teeth gnashing is about. That’s a personal opinion.

R&G: What role will labels play in the future business models?

Dave: The major labels are going to be able to sign new artists, so they will have influence. But I think the indie labels and the no-labels that artists are forming – their personal labels – are going to be just as influential. If you get a super-hot band that decides they’re going to help pioneer a new format or a new distribution vehicle, and people love the band, they’re going to pick that up. They’re going to inherit that into their life. If enough new bands do that and connect with their fans, that will matter way more than what the four big record labels do. Eventually, they’re going to come around and say, ‘Oh man, we’ve got to get on this bandwagon,’ as opposed to doing it deliberately. You can see in the last four or five years, and particularly in the last two years, that labels are willing to abandon DRM, experiment and take a little bit more of a risk in how their music is put out there, which they absolutely, categorically refused to do four or five years ago. The rest of the music world is pulling them along. The fans and the new music are pulling the bigger labels into the future, as opposed to the big labels setting the pace. I think those days are over.

R&G: The majority of people I talk to feel that the next killer app is a filter that will enable users to find music they enjoy.

Dave: I think that’s certainly a critical element of whatever system of music delivery we evolve into. Findability, discovery are going to be critical features. I don’t know that there’s going to be a technological solution to that problem. Again, various forms of word-of-mouth have driven the popularity of all music through the years. So, to the extent that we can supercharge that word-of-mouth that’s happening in blogs like yours and services like Last.fm and Pandora that are kind of aggregating the opinions of others, uncovering and making those available, I think that’s going to be very important. But again, I don’t see how that’s any different than my telling friends in 1963 that I heard this cool band on the Ed Sullivan Show. It’s the same thing.

R&G: What do you think of blog aggregators such as The Hype Machine and Elbows?

Dave: I frequent The Hype Machine. Elbows, I’ve looked at a couple times. I think it’s a great thing. The more somebody can make it easier for people to find music they’re going to like, the more value that entity will gather. I don’t know that a computer-based search is going to be the ultimate winner. I tend to doubt it. I think it’s going to be more in the mobile space. It still blows my mind that people sit in front of their computers and listen to music on these absolutely shitty little speakers. They’re listening to crappy files in an uncomfortable chair. When I grew up, having a killer stereo was all that mattered, other than a car and a girlfriend. The stereo/audio business has completely gone away and been replaced by shitty ear-buds from Apple and MP3 files. It blows my mind that people tolerate that. I think it’s impacted the experience of listening to music, how you listen to it, how you enjoy it. So I’m not sure that a computer-based model is going to get enough traction to supplant other ways of acquiring, listening to and finding out about music. I think it needs to be easier, better sounding, portable and more integrated into your life. It needs to get outside of your bedroom or den.

R&G: I read on your blog that Douglas Merrill, President of EMI Digital, said he agreed with data that suggested file-sharing is good for the music industry. I found that interesting, but he also came from Google and didn’t have any experience in the music business. Do you see a trend in technology guys coming to the labels and figuring out how they can make this work; a technology guy versus the old-school music guy?

Dave: Not necessarily. I think the great labels of the past were run by music people who understood what the artists were all about and how to create great product, great songs and how to put great people together. I don’t think we can wave a wand and put a bunch of techies in the driver’s seat, and everything will suddenly be good. You need educated people that understand the technology, the music, the creative process, the marketing and the relationships with fans. As those skill sets get implanted in the people running the companies that matter – not just labels, but publishers, touring companies, marketing companies and distribution companies – then things will get better. I’m pretty confident of that, but I don’t see technology solving the music industry’s problem.

Read more great interviews here at Rollo & Grady

Our book is available in various forms.

You can listen to the book on iTunes as a podcast for free. Go to the iTunes store and search “Future of Music” podcasts and subscribe.

You can buy the book on Amazon for $11.53 or less.

You can purchase the audiobook from Audible for $7.49.

Here are a few of the reviews.

Publishers Weekly
Two innovators in music technology take a fascinating look at the impact of the digital revolution on the music business and predict “a future in which music will be like water: ubiquitous and free-flowing.” Kusek and Leonhard foresee the disappearance of CDs and record stores as we know them in the next decade; consumers will have access to more products than ever, though, through a vast range of digital radio channels, person-to-person Internet file sharing and a host of subscription services. The authors are especially good at describing how the way current record companies operate - as both owners and distributors of music, with artists making less than executives - will also drastically change: individual CD sales, for example, will be replaced by “a very potent ‘liquid’ pricing system that incorporates subscriptions, bundles of various media types, multi-access deals, and added-value services.” While the authors often shift from analysts into cheerleaders for the über-wired future they predict - “Let’s replace inefficient content-protection schemes with effective means of sharing-control and superdistribution!” - their clearly written and groundbreaking book is the first major statement of what may be “the new digital reality” of the music business in the future.

5.0 out of 5 stars THE FUTURE OF MUSIC IS NOW
Gian Fiero (Hollywood, California)
This book is so brilliant that it makes the vast majority of music industry books that are being published seem irrelevant. It discusses in detail, the reasons why the future of the music industry is headed into the digital/mobile entertainment era. It also provides statistical information that professionals, marketers, entrepreneurs, and educators can use constructively. Both Dave and Gerd (the books co-author), have their fingers firmly planted on current music industry activities and trends. They also possess and display a clairvoyant eye toward the future that offers beneficial insight and foresight to those who may not be aware of what this whole digital (i.e. independent) revolution is about, and most importantly, what it will entail to prosper in it. The book is easy to read, easy to understand and simply brilliant. If you buy just one industry book this year, this should be THE one. Buy it now!

5.0 out of 5 stars Indispensible
Stephen Hill “Producer, Hearts of Space” (San Rafael, CA USA)
A stunningly candid source of concentrated, up to date insight about the music business and its turbulent transition into the digital era. This book tells it straight and will make the dinosaurs of the music industry very unhappy.

Like Martin Luther’s ‘95 Theses’ nailed to the door of Wittenberg Cathedral, Kusek and Leonard drive nail after nail into the sclerotic heart of the old-fashioned music business. Their rational vision of the future of music rests on the idea of unshackling music from the hardcopy product business in a yet-to-be-realized era of open content licensing, facilitating sharing and communication among users, and growing the business to its full potential.

It provides as clear a vision of the future of the music industry as you will find, from two writers with a rare combination: a solid grounding in the traditional practices of the music business, an up-to-the-minute knowledge of the new technologies that are changing it, and the ability to think through the consequences.

I’ve dreamed about a book like this, but thought it would be impossible in today’s hyperdynamic environment where every week seems to bring a breakthrough technology, device, or service. But by digging out the underlying trends and principles Kusek and Leonard get under the news and illuminate it. Along the way they provide a brilliantly concise history of the evolution of digital media.

I can’t think of any book more important for artists to get the full re-orientation they need to survive and prosper in the digital era. It’s no less critical for members of the music and broadcasting industries who need to consolidate their thinking into a coherent roadmap for the future. In a word: indispensible.

I recently interviewed Ian Rogers of Topspin Media for a new project I am working on the - “Future of Music Toolkit”. More to come on that later…

Ian brought me up to speed on the development of the Topspin platform for music promotion. They are creating very cool marketing software and services to help artists and their partners build businesses and brands. This is clearly part of the future. Here are some comments from Ian and a link to his presentation to The Recording Academy at the GRAMMY Northwest MusicTech Summit 2008.

“The lamenting we read in the press is not the story of the new music business. Continuing to talk about the health of the music industry on these terms is as if we’d all been crying about the dying cassette business in 1995. The difference is that when we moved from cassette to CD the winners were the same (big companies who owned access to cash, distribution, and marketing) and the definition of winning was the same (more units sold for these big companies).

Music consumption isn’t declining: iPod sales up 59% Y/Y (source: Apple), P2P filesharing volume up 35% Y/Y(source: NPD), audio streaming up 25% Y/Y (source: Accustream). And despite the endless discussions about the “pirates,” there isn’t an unwillingness to pay for music, either: 1.6B decisions to buy music in 2007, up from 1.3B in 2006 (source: Neilsen Soundscan), 40% Y/Y increase in worldwide digital music sales (source: IFPI), 8% Y/Y increase in North American concert revenue — an all-time high (source: Forbes.com), 40% paid an average of $5 in Radiohead’s pay-what-you-want model, Nine Inch Nails self-release generates $1.6M in first week sales, includes sell out of $300 box set in first 48 hours (source: NIN.com).

IMHO the only perspectives that matter, that of the artist and the fan. I see news about the health of the music industry as defined by the stock price of WMG or quarterly earnings of UMG, Sony, and EMI every day. What I don’t see, apart from a few articles on Radiohead and Nine Inch Nails, is an update on how the world is changing from the artist point of view. But I tell you, when I talk to managers and artists they feel it, they feel an ability to take their careers into their own hands, to redefine what success means for them, and that is the emergence of the new music business.

I say this with all respect to our friends in the existing music business. We all know smart people who are busting their asses trying to solve the Innovator’s Dilemma those companies are facing.

Again, there are only two players in the music business that matter at the end of the day: the artists and the fans. The rest of us either add value or get in the way. Don’t get me wrong, over the years labels have added a tremendous amount of value through financing, A&R, marketing, promotion, etc. I’m just saying that every player needs to either understand how it truly adds value or it needs to get out of the way, Topspin included. Our business does not operate on lock-in, ownership of copywritten work, or long-term contracts. We either add value today with a compelling service or we die. And I’m perfectly happy with that.”

See Ian Roger’s complete presentation here.

From the Business Innovation Factory Summit, my presentation on the Past, Present and Future of Music.

Here is the story they wrote about me for the Summit.

Back in the seventies, David Kusek walked from his freshman dorm at the University of Connecticut, down a long hill to the music department for classes several times a week. When the routine got a little stale, he began taking other routes. One detour took him past the computer science building where he quickly noted the “hot” cars in the parking lot. Naturally, he began taking computer science courses.

Great ideas are born in such serendipitous ways. When Kusek melded his deep-rooted love of music with his newfound affinity for computers, he opened up unchartered territory in the music world by inventing the electronic drum. His company, Synare, took a relatively unfamiliar technology (computers) and combined it with an indigenous musical tradition that tuned percussion to the key of the song. Kusek also knew how to start a business, develop products, and take them to market. Having the right price point added to the appeal of the electronic drum and attracted the attention of fledgling artist Donna Summers who took a chance on the new sound and propelled her career.

“For better or worse, we had our part in the disco age,” Kusek says. “We helped to define the sound of the era.”

Taking another detour for curiosity’s sake led Kusek to study animal communication in California with noted biologist John Lilly. They were trying to use sound to communicate with dolphins when the Apple II computer came to market.

Kusek was already synthesizing the sounds that dolphins make, so he devised a way to do the same with musical instruments, to “put the Apple II between the instruments.” He explains that his new company, Passport Designs, “broke music down into a language of expression, which we mapped to simple computer code and connected it to the instruments. We created a computer language for music.” Witness the birth of Musical Instrument Digital Interface (MIDI), developed by a group of companies including Passport, which has left an indelible mark on the music industry by becoming the prototype for all music interface software.

If only they had patented it.

Kusek, along with Dave Smith and the other people responsible for creating MIDI could have made millions with MIDI, but he remains philosophical about this missed opportunity. “Maybe the reason why it took off was that it was absolutely free,” he says. “It was a compact way of representing music in a simple and cheap format.”

Kusek has learned to appreciate and even extol the benefits of free and open access to music. He helped create musical notation software and was instrumental in developing enhanced CDs for the commercial market. He supports the creation of a music utility to “monetize” the immense wave of file-sharing that has become standard operating procedure in the industry. He reasons that Internet users already pay for access to a network that supplies the music, so why not add a nominal fee to the ISP bill and allow for legal trading? With approximately 80 million households using the Internet, a monthly music utility fee of $3 would generate almost $3 billion in annual music sales from households alone.

“If you tracked what was downloaded,” Kusek says, “you could create a system where the money flows exactly to the people who are listening. It could be a 30 to 40 billion dollar business again, as it was in the nineties.”

Admittedly, this system would spread those billions among a larger base of artists, establishing an unfamiliar sense of parity in the music industry. But Kusek says that the megastar is gone, anyway: “In the last four to five years, new artists coming to market are not making anywhere near what artists like Madonna made. I think that happens because of file-sharing, but also because the music industry was taking its eye off what was important. In the mid-nineties, the record companies thought their customers were WalMart and Target. They had no connection to their audience at all.”

File-sharing may have killed the megastar, but not the art, Kusek insists. “I think it’s a great time to be an artist,” he says. New performers may have smaller audiences, but they also have a more efficient way of finding that audience and staying connected to it through online chats, newsletters, and blogs. And instead of the record industry’s marketing machine pushing music at fans with an $18 plastic CD case and the elaborate promotion attached to it, word of mouth is shaping the musical tastes of the rising generation.

As it should, according to Kusek. He has brought technological innovations to the music industry by accepting such change and using it to open up the possibilities of sound. He envisions music flowing in a clean stream wherever people communicate, allowing artists and fans to express themselves freely.

I recently did a presentation for the Business Innovation Factory on music. When they post the video I will provide a link. In the meantime, here is the presentation:

This is a story about the past, present and future of music.

There is a lot of discussion these days about free music and the decline of the power and influence of the major record labels. However, I would argue that music has always been free in one form or another, throughout history and that the relationship between the artists and their fans - the artists and their patrons is what really matters.

Record labels are a relatively recent phenomenon in the history of music. Perhaps they have seen their useful life as a component of the music business, perhaps not. They have been helpful in injecting capital into the marketplace and promoting artists on a scale never before seen. They have provided a vehicle for artists to go to market that was quite effective in its day.

But music at it’s core is entertainment and a form of creative expression that transcends language and cultural barriers and always will. If we focus on music as a cultural phenomenon, perhaps we can find some answers to the questions about the future.

The Artists

The music business essentially began with the live performance of music at the symphony, opera or chamber ensembles for wealthy patrons of the arts. People experienced music directly with the artists in the room with them.

Music is a social art form, and artists were driven by their passion to make music and connect with people who would enjoy it. It’s a lot of fun to make music, but the greatest joy comes from delivering it to other people who appreciate what you have created.

For many artists, making music is all they know how to do.

But like many aspects of modern life, music has been profoundly impacted by changes in society and by the rise of technology - indeed music has been driven by technology.

Radio

The music industry began back in the early 1900’s with the invention of amplification and radio. With radio people could listen to and enjoy music together in the comfort of their homes. It transformed time and space and made it possible for huge numbers of people to enjoy music that they might never have heard otherwise. Huddled together were our grandparents and parents, listening to music over the airwaves - together, enjoying it all.

And the greatest part about it - IT WAS FREE.

VINYL

In the 1950’s Vinyl LPs were introduced into the marketplace and along with radio - crystalized an industry. Vinyl records changed the very nature of how music was enjoyed. Recordings fixed a musical performance in time and stamped it onto a piece of plastic. They made it possible to shift both time and space for people, so we could now enjoy music anytime and anywhere.

They also fundamentally changed the way music was delivered - no longer was a piece of music played live, with different players and interpretations every night making the music more dynamic. Instead, the songs were played exactly the same - over and over again - turning music into a product instead of an experience.

This was a profound shift in the way people experienced music.

Elvis

Television was the next technology to impact the music scene in the mid 1950’s. In 1956 Elvis appeared on the Dorsey Bros “Stage Show” and became an nationwide sensation. This was the beginning of music marketing to the masses.

The Beatles

In 1964, a new band called the Beatles appeared on the “Ed Sullivan” show - and from then on, the music business would never be the same. Like many kids my age, when I saw the Beatles on TV - I knew that I wanted to be a Rock Star.

The Music Industry

Business structures were formed and expanded to address the booming opportunities in the music industry.

Record Labels - brought recorded music to market and became the engine that drove the entire music industry.

Publishing Companies - found ways to exploit the “song” through licensing.

Radio Stations were finally forced by congress to pay a Performance royalty to the publishers for playing the songs over the airwaves -

The songwriters got paid, but not the labels. The legislature argued that radio airplay was in effect massive free promotion for the record.

Music started to become a very big business for the companies involved. Music was marketed to young people and the growth was fueled by new artists and new songs.

Technology continued to march on.

The Audio Cassette made music more portable. The Sony Walkman became the best selling consumer electronics products of its time.

Synthesizers changed the way music was produced, adding a lot of new sounds to the palette. At the same time synthesizers put a lot of traditional orchestral instrument players out of work.

And then the Personal Computer raged into the marketplace.

I can tell you that Apple had its eyes on the music industry from the very start because I was there. They were actually forced to stay out of the music business for a while, by the Beatles record label “Apple Records” - over a conflict with the name “Apple”. This was a healthy foreshadowing of things to come.

Compact Disc

In 1982 Sony and Phillips introduced the Compact Disc. The CD was the first digital format to hit the marketplace. CDs were intended to deliver pure digital sound quality. CDs were originally marketed as “Perfect Sound Forever”. The labels wanted the public to go out and repurchase their vinyl music collections all over again on CDs and make billions more dollars in the process. It worked. Sales soared for over a decade.

However the record companies failed to realize that they had digitized their entire catalog and put perfect digital copies into the hands of the public - at $18.95 a disc. Before long the computer companies were offering devices that could copy CDs in seconds. This failure to understand technology would come back to haunt the labels in a big way.

MIDI

In the early 80’s I got involved in a project with Dave Smith and others to encode music in a compact digital form. The idea was to make music easier to store and edit, and network instruments together. We worked with a bunch of different companies including Sequential Circuits, Yamaha, Roland, Korg, Casio and Passport Designs to create something called MIDI - the Musical Instrument Digital Interface. We created an open and free standard that anyone could use - royalty free.

As a result of MIDI many new music companies were formed, thrived and exploded in the 1980’s. There was a profound transformation in the way music was produced, mixed and distributed - and millions of people got involved in recording and creating music at a very high level. MIDI was a revolution in music making.

Ironically, MIDI is in every cell phone you have - and the reason we have ring tones.

World Wide Web

Here is something that I want you to think about for a minute.

The World Wide Web came to market in 1990 - just 18 years ago. The web made it possible for anyone to create a home page for whatever they wanted to say or market. If you are under 25 years old in the US, it is hard to imagine life without a digital network. And this just happens to be the target age group of the record companies.

In 1998, MP3 files were developed to send music over a telephone line. MP3s made it possible to compress the digital music files on a CD into a small file that could be easily copied. The Internet made it possible to transmit these files around the world in seconds.

Technology made taking music even easier that making music.

Napster and the iPod

It was the combination of the Internet and the MP3 file that sparked a young college student named Shawn Fanning to invent the first Napster software that allowed people to trade and share song files. Almost overnight, kids around the world were tapping into Napster and trading songs and discovering new music using the Net. A huge community formed.

This was followed shortly by the invention of the MP3 player and the iPod in 2001 by Apple - which would soon dwarf the sales of the Sony Walkman and become a multi-billion dollar business.

Trading files online became an instant success and the MP3 became the new format for music delivery - mandated by the consumer.

Something very different began to happen to the music industry. The power began to shift from the record companies to the tech companies and the music fans.

Record Companies - Orgy of Success

The record labels enjoyed an orgy of success with the CD.

But they really missed the ball in identifying their customers. They thought their customers were Wal-Mart and Target and other record retailers. Instead, their customers were people like you and me who actually buy music.

When the labels realized people were trading MP3 files online, actual customers interested in music - they decided to sue them. This was not and is not a great business strategy, to sue your own customers. What were they thinking? Or maybe they weren’t thinking at all.

Future of Music Book

In 2004, I wrote a book on The Future of Music with my friend Gerd Leonhard. Unfortunately a lot of what we predicted to occur has become true. Sales of recorded music have fallen some 50% already from their peak in 2000. Thousands of bands have been dumped from their recording contracts by the labels. New artist signings have fallen to an all time low and labels are no longer investing in artist development.

And Apple has become one of the most powerful companies in the music business.

New Artist Model

The record business has never really been good for the vast majority of musicians. A dirty little secret of the music business is that 95% of artists never recouped their royalty advances. Labels have been notoriously unfair to their artists.

Artists have always had to make their money some other way - through touring and performing - from songwriting - or selling t-shirts, hats to make a living in music. Or working at Mickey D’s.

But everything is changing. Today artists and their managers sit in the middle of a musician enterprise and can make things happen on their own. This is redefining the music business.

Technology has shifted the power base from the record labels to the artists and mangers, and the music fans. Performer and patron are meeting again with direct relationships between artists and their fans enabled by technology.

Mobile Music

The Universal Mobile Device (UMD) that we wrote about in the book has already hit the market. It is called the iPhone. - providing communication, sharing, maps, music, pix, video, games, phone, text, email, web, the internet, hundreds of other applications, and connectivity. Nokia has similar devices and there are lots more coming. Digital media is invading our lives. Imagine what these devices will be like a few years from now.

Soon you are going to be wearing eyeglasses and jewelry that provide digital media to you anytime and anywhere.

Here are some MP3 sunglasses from Oakley

Artists as Brands

Artists today are more likely to get promoted by major brands than record companies. Their managers are setting this up for them.

Brands like Pepsi, Red Bull, Tag, Bacardi, and Nike are breaking new bands, and TV shows like Grey’s Anatomy, CSI, and House showcase new artists each episode. Getting on a show like this can be like winning the lottery for new artists, not unlike the old record deal.

Many new structures are forming that will help artists develop their fan bases and enable a career in music for smart people.

The New Music Business

At the center of the Future of Music are the creative people, the artists and songwriters along with their business managers. A middle class of musicians is forming where people can make a living or part of a living in music more predictably. They are pursuing a business model that puts them in the center of the equation and gives them more choice about their career path.

And as in the past, It is the New music that will fuel growth in the future. And it is the direct connection between artist and patron, that once again comes around into play in the music equation.

Music Like Water

Music is starting to flow all around us. It is available on the internet, on mobile networks, wifi, 3G and your home. Here are some examples of new ideas in music that are helping to redefine what the future will hold.

Music is going mobile
- hear a song anywhere and get it - can already do this on iphone
- personalized digital radio - just for you - pandora
- social filtering - what’s everyone else listening to?

You will have more chances to interact with artists and writers
- audience picks the set list collectively
- lyrics and songs streamed to your phone during the song
- the entire concert recording available to you after the show

Personalized Interactions
- Digital Living Room - intimate shows beamed into your home
- Interact with the artists and writers, help write a song
- Watch rehearsals and develop your relationship - MTV

Conclusion

It has never been a better time to be a musician or songwriter than it is today. You have a lot more control over your career than you ever did. The future is extremely bright and capital is starting to flow to the creative tech and new artist management companies.

So I am very positive about what is going to happen in music in the Future. We are coming full circle with free music and more intimate fan connection and participation. The patrons are coming back into play.

Doug Morris on the state of the music industry. The problem, he says, is that “there’s sympathy for the consumer, and the record industry is the Shmoo.”

Oh my God.

Wired writer Seth Mnookin interviews and skewers Universal Music Group Chief Executive Doug Morris in the latest issue, which speaks for itself. You just got to read this interview.

“There’s no one in the record company that’s a technologist,” Morris explains. “That’s a misconception writers make all the time, that the record industry missed this. They didn’t. They just didn’t know what to do. It’s like if you were suddenly asked to operate on your dog to remove his kidney. What would you do?”

Well, for one, maybe - instead of suing the technologists from Napster 1.0 - perhaps you should have considered hiring them. Just a thought…

Unbelievable. No wonder we are in the situation we are in.

Total Music. Hmm… Why do they think they have it figured out now?

For another great history lesson on how the major music labels ignored change and tried to impose their will on the masses, read this. Disturbing and painful. Great work Seth.

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.

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.