Future Of Music

The music business of the past was driven by a relatively small number of people who controlled the distribution channels, the marketing channels (radio) and the financing available to artists and writers.  If you knew one of these mavens or could network your way to them, then you had a shot at success.  It was the dream of every artist to “get signed” by a major label and plug into the “star maker machinery”.

The Internet changed all of that in a matter of 10 years or less.  This disruptive force broke down the concentration of power from the hands of a few, to the hands of many.  These days music distribution is a commodity that one can have access to quite simply via CDBaby, Tunecore or a variety of other options.  Terrestrial radio, the marketing channel that broke all major artists of the last 60 years is no longer effective, and has been replaced by literally thousands of touch points available online including tastemakers like Pitchfork, sites like MySpace and Yahoo, social networking outlets like Twitter and Facebook, the search monster Google and countless websites, blogs and online media.

Today it is more important What You Know, than Who You Know.  This is a Major shift in strategy from the past and is the name of the game for achieving success in the future.

Here are two examples of the kinds of things you need to know.  One from the point of view of a structured approach to developing the skills and knowledge to help you succeed, and the other a real-world example of innovation at work in the hands of a savvy artist.

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From Celia Hirschman with On the Beat for station KCRW:

Today’s music business is not just about hustle, music knowledge and who you know.  Today, it’s also about digital prowess, online inventiveness and a fast Internet connection.

I worked my way up through the industry, learning as I went. I took numerous jobs in the business, each one teaching me more than I had known before.

My school of hard knocks earned me a lot of opportunity. But the lessons of today’s music business are not taught in the nightclubs, the record stores or the board rooms. Today’s music business actually requires hitting the books, academically. Many active music buyers are online. Reaching them requires sophisticated online marketing knowledge.

No better way to learn than from the professionals. The prestigious Berklee College of Music has built an online extension program. Their BerkleeMusic.com offers a number of interesting classes online to fill in experiential gaps.

A useful course is titled “Online Music Marketing with Topspin.” Topspin is the leading digital-music marketing and sales company. In this course, Berklee’s Michael King and Topspin’s CEO Ian Rogers have deconstructed the marketing matrix, providing a hands-on education in digital record marketing. Students learn how to build digital touch-points, optimize site visits, develop fan integration and build brands. It is a first class education in online music marketing.

It doesn’t hurt that the whole course studies the TopSpin platform, similar to how a course might focus on PhotoShop or Excel. Topspin has developed a robust program to maximize online visibility and sell through. Musicians and music companies around the world can participate and socialize in a private trusted community.

Listen to the KCRW radio show here.

Cudos to @atomzooey for developing a great course.

Read more on Direct to Fan Marketing at Mike King’s Blog.

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The Duo of Jack Conte and Natalie Dawn are the band Pomplamoose and they are generating huge YouTube interest and views with their VideoSong format. They got tens of millions of views in a very short time with this number increasing while you read this. The VideoSong format these two produce is very inviting and addictive, providing a glimpse into the process of recording and creating music.  The have combined a unique video format, with creative versions of popular cover songs and online distribution to reach tens of millions of people without any label support or significant marketing budget.  They have found a way to make music their full time career without performing live, by leveraging social media.

Listen to an audio interview with Jack Conte from CDBaby

http://cdbabypodcast.com/?p=877

Over the past year I interviewed many successful people from all walks of the music business.  They talk about what is working for them, their artists and writers and how to get ahead in the music business today.

These are music producers, label A&R executives, music publishers, video gamers, music supervisors, entrepreneurs, entertainment attorneys, artist managers, music distributors, marketing executives, and music educators from Electronic Arts, Topspin, CD Baby, Nettwerk, Primary Wave, Newbury Comics, Berklee College of Music and NBC/Universal and many more. Learn from Ian Rogers, Ariel Hyatt, Terry McBride, Jill Sobule, Phil Ramone, Kelly Cha, Mike Dreese, Derek Sivers and others.  Enjoy.

See more at Music Power Network

Last week host of Networking Musician Radio, David Vignola interviewed me about Music Power Network and the Future of Music.  Here is the audio interview along with a link to David’s site.  Great resource for indie artists.

Music Power Network provides a wide variety of music business education, tools, interviews and lots of resources for the D.I.Y. musician. The site also offers an equal wealth of information / education for producers, managers or publishers.

Guest Post by MC Lars

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Welcome to the future!

MC Lars

mclars.tv
mclars.com
comics.mclars.com

“The best way to predict the future is to invent it.”  This is a great quote from Alan Kay, one of the creative geniuses behind the laptop computer and the mouse.  Musician can apply this thinking to their own careers by planning for success in a dedicated and systematic way.

I came across this great guest post by Kevin English on Creative Deconstruction that talks about the “Lower Class Musician” and suggestions for how to lift yourself out of that class into a middle or upper class status through controlling your overhead, aligning your expectations, creating a plan, getting a good and current education and diversifying your product offering.  These are all things that I have blogged about in great detail in the past and agree with completely.

Here in an excerpt from Kevin’s post:

“Learn to structure yourself like any other startup and formulate a strategy on paper that will sustain you for three to five years. You’ll soon find out that overspending on manufacturing, marketing, promotion and distribution is very difficult to recoup.

Adjust Your Expectations

For some of us, music is a hobby and that is okay. However, if you plan on feeding your children by touring the Chitlin’ circuit, that’s another thing entirely. When I realized that writing songs for Columbia Records and recording demos with The Fugees wasn’t going to sustain me forever, I had to adjust my expectations. These gigs were few and far in between and often times didn’t pay half as much as you would expect them to.

I studied profitable ideas, people, and businesses to find a common denominator. I learned that nine out of ten successful startups had a business plan. Not just any old plan, but one that was standard across all industries. Financial planning, marketing, and the management of people and products/services cannot be done on the fly. If all you want is for people to hear your music that is fine. But again, you can’t necessarily expect to make a decent living.

Accelerate Your Learning

Hundreds of books have been written on the subject of business plans, yet no one in the music business seems to think they need one — until, of course, they run out of cash. I spent years in my local SBA in Newark, NJ looking at sample plans, meeting with retired CEOs of successful companies, and learning how basic businesses operate.

If you do the same you’ll realize that most startups have more similarities than you’d expect. However, it is important to point out that no two plans are alike. You will still need to write a plan specifically based around your music-related products and services. My first plan was a disaster. I asked my uncle for $75K with a promise to return 20% of the loan over the next five years. He had a good laugh over that one, but at least he knew I was serious about my dreams.”

For a toolset that offers exactly what Kevin is talking about look here.

To read his full post look here.

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

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

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

Remix was just published in paperback in October 2009.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Get the audio interview here.

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

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

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

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

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

Check it out here.

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

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

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

1) Rampant Piracy Continues

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

2) Strategy of Major Labels

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

3) Legal Complexity

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

4) The End of DRM

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

5) Mobile Strategy is Critical

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

6) Dominance and Importance of the iPhone

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

7) Importance of Wireless Broadband

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

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

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

9) Convergence of Models

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

Comments anyone?

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

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

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

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

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

Join MPN and get immediate access to:

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

Here’s what people are saying:

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

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

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

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

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

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

See for yourself how Music Power Network can help you.

We posted last December about Corey Smith, a clever artist who is blazing a new trail through the music business using entirely new ways of thinking. Corey’s whole business model is based on giving away lots of music for free and building relationships with his fans.  He does it primarily through touring and developing seriously close relationship with his fans. And it was this giving away of the music that was Corey Smith’s tour support. They didn’t have any label support, but grew their fan base. Because once people heard Corey’s music, they had to see him live. Which they did. In 2007, Corey Smith grossed $1.7 million. Last year Corey’s gross $4 million. Free music built the base.

Corey Smith made headlines when his independent music career slowly grew into a multi-million dollar business, selling out large venues normally reserved for those with chart topping hits. Corey toured diligently and worked hard to make honest connections with his audience. As his fan base grew, he stayed focused on building that connection and being intentional with his business decisions.

Get more at Music Power Network.

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

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

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

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

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

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

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

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

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

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

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

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

Stay tuned for more info…

A friend just sent over this post on how the newly elected Chairman of the Entertainment Retailers Association,  said that illegal P2P filesharing is the greatest challenge facing entertainment retailers and urged members to lobby Government for a crackdown on a problem he said “is bleeding our industry dry”.

Speaking at the association’s annual general meeting, Quirk said, “Too often the debate over illegal filesharing is portrayed as an ideological battle, but for us this is a commercial matter. Illegal filesharing is damaging our businesses, both physical and digital, on a daily basis, and the Government needs to tackle it swiftly and decisively in order to protect jobs, businesses and investment.

“First the filesharers targeted the music business and the Government did nothing. Now the filesharers have come again for TV and movies. Unless action is taken the filesharers will come for computer games, books, in fact anything which can be digitised and what will be at stake will be not just the entertainment industry but huge swathes of the UK economy. We need action now.”

Read more of this insanity here at Mi2N

Well now…

I was visiting with my Dad last weekend and thought of an interesting parallel between digital music and encyclopedias.

When I was a kid, my father had a summer job going door to door selling Comptons Encyclopedias.  He would carry a couple of these huge books under his arms and try and get the husband or wife to buy the complete Comptons collection for the kids.  This was big business and my dad made a healthy living during the summer.

Well, over the years the encyclopedia book business began to dry up.  To start it all off, Comptons put their entire encyclopedia library on a CD-ROM and sold it via a new company they formed, called Comptons New Media.  They put the CD-ROM in a chipboard box and sold it at Comp-USA,  Software Etc and other retailers for $200-$300.  It became big business for a while in the early 1990’s, and Comptons New Media flourished and was eventually purchased by the Tribune Co for a lot of dough.

It didn’t take long before some hackers cracked the CD-ROM and then pirated versions of the whole enchilada began making their way into stores and online outlets.  By now, of course, the multi-volume Comptons Encyclopedia Book business had gone the way of the dinosaur, and countless pavement pounding salespeople were no longer going door to door selling encyclopedias – and the entire book business basically went away.  Gone in a matter of a few years.  I think they still sell some to schools somewhere.

The same thing soon happened to Comptons New Media as digital competitors emerged, from Microsoft “Encarta” and others, and soon price competition and the internet gave way to this information moving online for free.

Now we have something called “Wikipedia”.

–

The information contained in the encyclopedias is still being researched and published and edited by now, tens of thousands of people who put it online in a living, dynamic format.  By and large, no one is getting directly paid to do this work, yet no-one can dispute the fact that society in general is benefiting from Wikipedia and other community-based information resources.  You might even notice that there is a lot more information being produced and updated and cross referenced than ever before.  This is all without the infrastructure of the past (ie Comptons) being in-place anymore, and almost no money changing hands.

Just like Comptons, the record industry digitized all of its assets and put the entire thing out there for the public to enjoy.  And just like Comptons the record industry in now suffering from price erosion, shifting formats and piracy.  They can try and hang in there and bash the problem away with legislation, or they could seriously consider other methods of delivery and renumeration, or they could sell off their remaining assets and shut down.  No matter what, the game they have played is over, caput.  Time to face the music and change.

There are no guarantees in business that things will remain the same.  Indeed, the only real constant is change and businesses that try and hold onto the past will be crushed by their own weight and failure to adapt, or in some cases, to just shut down.  Nothing is forever except change.  People should stop complaining about it and start working on creating a future that benefits us all.

Do I know exactly what that future is going to be?  Of course not.  I wish I could say with certainty but I can’t – for now.  But I think it will look a lot more like wikipedia than comptons encyclopedia sets.

I did a radio show yesterday on NPR on the Future of Music along with Jeff Price from Tunecore and Tim Westergren from Pandora. You can listen to the show online here or download an MP3 of the show.

In a 2002 New York Times article, David Bowie said that “music itself is going to become like running water or electricity….it doesn’t matter if you think it’s exciting or not; it’s what is going to happen.” Now, seven years later, the music industry has continued its rapid metamorphosis. Often referred to as an industry in crisis, coming up Where We Live, we’ll be talking with writers and innovators who say the business of making music has never been better. Ignore the closed up Virgin MegaStore in cities across the country—listening to and making music is still big business. David Kusek, author of The Future of Music: Manifestor for the Digital Music Revolution joins us to talk about the new truths that govern the music world. Also, The founders of Pandora and TuneCore chime in and we’ll be joined in-studio by WNPR’s own Anthony Fantano. From the Connecticut Public Broadcasting Network.

I ran into Jim Griffin this weekend and as usual, he got me thinking about music and it’s future. We talked a little bit about Chorus, the new controversial Warner Music backed company trying to create a music utility service for colleges. I’ll tell you the guy is like a bolt of lightning and his fever can leave you doubting what you know yet somehow I always come away with something new to think about and ponder. I listened to him speak briefly and then found a transcription of a similar speech he gave at Midem last year which I wanted to share with you. The complete speech is here: Jim Griffin Speech and a brief excerpt is below. Enjoy!

“It sort of struck me once, I was reading Marshall McLuhan, and I recommend Marshall McLuhan to everyone here who has not already read some of McLuhan’s work. McLuhan is a terribly influential person in media in the 1960’s, so much so that if you’ve seen the movie Annie Hall you may recall that he appears in that movie with Woody Allen in a line outside of a movie theater, and he’s very well known for having said that the medium is the message. I always wondered what that meant. And now that we live in a time of MP3, I think all of us can acknowledge that McLuhan had it right, that in some ways it’s more about what format something comes in these days than it is even the music itself.

But McLuhan said something else that escaped my notice until say five years ago. He indeed said that you will never understand the media of your time. He said that the media of your time is like the air that you breath. You’re unconscious of it. It’s like the water in which a fish swims. He said that you would only understand your media through the rearview mirror of history. And so it is that it led me back to the library to look through microfiches and so forth from the 1920’s and around that time period, because it was around that time period that electricity started to spread around the world. Before electricity spread around the world, for the most part, it could be said that an artist was in complete control of their art. Especially in the sense that, you know, they controlled it with their feet because if they weren’t in the room you couldn’t see them or hear them. Then in rapid succession over several decades we have the spread of electricity around the world, and loudspeaker systems evolve that make the crowd bigger than you can count. And then very very quickly radio broadcast, and now sounds are traveling many thousands of miles beyond their source. Then television is proven out in 1928. And so now your sound and your image can travel thousands of miles. Now, look, I get how we feel special living in this time that we do of the net. We think, wow, we are beset with change unlike we have ever seen. But I would say that that is absolutely untrue. The 1920’s, the spread of electricity, this was a far more savage time to be an artist. This was a far more difficult time.

Our changes, that we are seeing, are merely a gradation of change by comparison to what happened when electricity spread around the world. And so we have something to rely upon that they did not. We have something to look to, which is: what was their experience; how did they handle this dramatic change. I think that without question the way we handled this dramatic change was with collective licensing. In other words, loudspeaker systems, hotels, restaurants, wherever there are performances of music that are so powerful, we have a collecting society that would like to monetize this, and can and does, monetize the anarchy of music moving through say loudspeakers. And equally true of radio, and television broadcast, and cable, and satellite, and as recently as this past decade, we now monetize webcasting over the net in America in just this same way. And so I don’t think it is a great stretch, or that you have to think too far into the future to realize that it would truly be an anomaly if collective licensing did not extend itself further. It does not require a crystal ball to figure this out.

I think it is just about looking back into history and realizing that the way we have dealt with the loss of control, the loss of actual control, has been with the introduction of actuarial economics. And I know actuarial is a big word, you know, but it’s really simple. It’s just a pool of money and a fair way of splitting it up: a pool of money, a fair way of splitting it up. And that is how we have dealt with the loss of control in the past and I suggest to you it is likely that that will be the way we deal with loss of control now and into the future.”

Terry McBride gave a lecture at Berklee College of Music earlier this month. Here is a synopsis from Ariel Publicity.

A song is an emotion

They stopped releasing music they thought would sell and began releasing music they loved and felt emotionally connected to. The old school music business views a song as a copyright. McBride coaches that the music business is simply “the monetization of emotions” and that copyright as we know it will soon become irrelevant. Emotions move and are transferred freely. Nettwerk practices something called “collapsed copyright”. Nettwerk encourages its artists to record under their own label. Nettwerk will represent these artists, but the bands retain ownership of all intellectual property. The bands can expect to earn considerably more money and in turn can give away more free downloads. McBride calls this “cosmic karma” as studies show that albums containing songs that were offered free sell more than those with no free downloads. The free downloads allow fans to connect with a song as well as the artist as an emotional brand and are more likely to purchase the album.

Fans connect to a particular song because it evokes a certain emotion. That emotion grows an importance and eventually becomes a bookmark in their lives. We’ve all experienced a time when we heard a song from our past that we once played over and over and over again. We built an emotional connection with that song that instantly takes us back to the summer before junior year, or whenever. It’s that emotional connection that makes you feel the need to rave to a friend about a song or drag them to a concert. The emotional connection makes Nettwerk truly believe in their artists as an emotional brand and that millions of others will love their music as much as they do. Like it or not, love is contagious.

Music is social

Gatherings used to be centered around food and music but for a while music became somewhat elitist. You had to be some musical genius that was too cool and cared about nothing but the music or a wealthy socialite who could afford all the luxuries. Video games like Guitar Hero and the growing affordability of recoding programs and equipment have made music for everyone again. Remember that friend you dragged with you to a concert to show them how amazing that band was? As it turns out they loved them too and raved to their 20 friends who raved to their 20 friends and so on. Well now with the evolution of social media thanks to sites like Facebook, Myspace, Twitter, etc., the circle of friends has grown to 200 plus and by the end of the day with just the ease of a status update thousands of people have been reached.

Digital 2.0

As music returns to its emotional and social roots, McBride predicts a rapid change as we move from what he calls the “Digital 1.0” era into the “Digital 2.0” era where the accessibility of music and social media has grown legs and is now traveling with us on the train and down the street in the form of smartphones such as the iPhone. But the iPhone is just a dieter’s slice of the pie. Different models of RIM Blackberry smartphones ranked #1, #3 and #5 in best selling phones in North America. Plus the Palm Pre and the anticipation of Dell launching a new smartphone means that mobile social networking in America will soon catch up to the estimated 12.1 million users in Western Europe.

In this “Digital 2.0” era McBride points to the success of Apple “Apps” store, which has over 15,000 original applications and over 500 million downloads.

“Apple has allowed us, [the consumers] to be the world’s largest developer and create apps based on our needs,” McBride explains, “And the explosion of imaginative apps like Shazham and Slacker has just started.”

McBride throws the idea out of a digital maid application that would clean and organize your digital library, saving you the time of having to dig through files. He also requests a digital valet that drives new music to you based on your preferences or a friend’s library and parks it in a suggested music garage. He anticipates that in the next 18 months there will be “apps to help create apps for those of us who are not programmers but have a great idea.” RIM plans to open up their app store this March to reach 150 countries and over 450 providers. Add the Google Android store, Google “Hero”, Microsoft “Skymarket” and Nokia “Opera” and you’ve got yourself a full-blown application revolution.

Context is King

McBride points us in a new direction from what was previously a “content is king” mindset to “context is king”. Meaning that our emotional connection to music is all based on the value of how we perceive something versus the actual content. The smartphone replacing the PC (or Mac if you will) is a foreseeable prophesy of McBride’s and could possibly leading to the demise of even, yes… your precious mp3 player. He explains how new apps will shift behavioral patterns of consumers in the same way CDs and online media ushered in the on-demand generation. Smartphones have already begun creating models that temporarily store the music files in the “cache” instead of the hard drive. McBride describes this process as “a gradual download, it’s not permanent because your Valet/Maid app is changing the selection based on your needs, thus helping solve issues such as memory, choppy streaming and draining of batteries.”

This means that the music business must create rich meta data behind our music files to work with apps in order to keep up with this new form of consumption. McBride highlights the opportunity to raise the value of music then, he says, “Context will be king.”