Future Of Music

Sometimes it takes a while for ideas to spread and become perceived as good ones. The “Music Like Water” metaphor where for a low monthly fee, people would have access to all the music they want in a kind-of music utility is one such idea.

In a variety of recent announcements, the once mighty major labels have begun to accept the idea that maybe, the old way of squeezing cash out of consumers for music - might need to be replaced with another model.

Emusic has been pioneering a hybrid subscription/download models for many years and is currently the #2 supplier of “paid for” digital music behind iTunes. Now both Sony/BMG and Warner Music are speaking publicly about subscription and utility models that they intend to explore.

Warner has gone so far as to hire Jim Griffin to head up development of a new business to bundle a monthly fee into consumers’ Internet service bills for unlimited access to music. Whoa!

The plan—the boldest move yet to keep the wounded music industry giants afloat—is simple: Consumers will pay a monthly fee, bundled into an internet service bill in exchange for unfettered access to a database of all known music.

Bronfman’s decision to hire Griffin, a respected industry critic, demonstrates the desperation of the recording industry. It has shrunk to a $10 billion business from $15 billion in almost a decade. Compact disc sales are plummeting as online music downloads skyrocket.

“Today, it has become purely voluntary to pay for music,” Griffin told Portfolio.com in an exclusive sitdown this week. “If I tell you to go listen to this band, you could pay, or you might not. It’s pretty much up to you. So the music business has become a big tip jar.”

Nothing provokes sheer terror in the recording industry more than the rise of peer-to-peer file sharing networks. For years, digital music seers have argued the rise of such networks has made copyright law obsolete and free music distribution universal.

Bronfman has asked Griffin, formerly Geffen Music’s digital chief, to develop a model that would create a pool of money from user fees to be distributed to artists and copyright holders. Warner has given Griffin a three-year contract to form a new organization to spearhead the plan.

Griffin says he hopes to move beyond the years of acrimonious record industry litigation against illegal file-swappers, college students in particular.

“We’re still clinging to the vine of music as a product,” Griffin says, calling the industry’s plight “Tarzan” economics.

“But we’re swinging toward the vine of music as a service. We need to get ready to let go and grab the next vine, which is a pool of money and a fair way to split it up, rather than controlling the quantity and destiny of sound recordings.”

Read more from Portfolio here.

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.

Do you think Edgar Allan Poe could have made money if he sold The Raven separately from 30 other poems?

This is a question posed in the U.K. Register article examining the “value gap”, or the amount that sound recording revenue has fallen since 2004. The report suggests that Apple (and others) should take the blame for the woes of the music industry (British) for unbundling the song from the album format.

“The Value Recognition Strategy working group was created last summer - largely at the impetus of the indie labels and collection societies, but backed by all sectors of the industry - to examine alternative revenue opportunities for digital music. The growth of MP3 has seen large hardware manufacturers such as Apple and media companies such as News Corp’s MySpace prosper from music, but returning little or nothing to composers, songwriters, and sound recordings owners.

It’s what economist Will Page, of the MCPS-PRS Alliance, calls a “broken supply chain”. Revenues from telecoms companies and service providers dwarf the revenues from the beleaguered music business.

The conclusion that unbundling is the chief factor is richly ironic. When Apple launched the iTunes Music Store in 2003, it did so with the backing of all four major labels. The labels had failed to see digital music as an opportunity, and launched only small scale and piecemeal commercial offerings. At iTunes, consumers chose one or two songs from a performer’s repetoire for 99 cents a song, rather than pay $9.99 for the CD.”

Since that time Apple has reaped tens of billions in sales of iPods, while the labels have lost tens of billion in sales of CDs. It has almost been a complete one-to-one swap of revenue from the label’s, writer’s and artist’s pockets - into Apple’s. See an analysis I did of this a while back here.

Read the whole Register article here.

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

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

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

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

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

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

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

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

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

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

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

New Artist Model

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