Future Of Music

The music industry is being reinvented before our very eyes. Learn how it is developing from today’s entrepreneurs including Ian Rogers from TopSpin, Steve Schnur from EA, and Derek Sivers and how you can capitalize on the changing opportunities.

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Learn 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…

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.”

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

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

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

Listen to this episode of “With A Voice Like This” where I am speaking with Jim Goodrich about the future of music.

It’s been four years since The Future of Music book came out and this radio interview starts with what has changed and what has stayed the same since the book was published. But there’s a twist. At the beginning of the show Jim asked that we not focus on the technology itself, since the book had so much more to offer than just a discussion of technology. Among other things we talk about what’s going on in China currently, the Universal Mobile Device (UMD) and of course, the Music like Water concept.

Listen to the interview here.

Download the MP3 file here.

Hot off the Midem press:

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.

New Formats

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

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

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

Music Commerce

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

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

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

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

Investing in the Future

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

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

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

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

Read the complete interview here at Manifest Technology.

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

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

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

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

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

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

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

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

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

More info here.

The Digital Age and The Future of Music.

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

Listen to the Interview (Real)

Held back by fear, you are.

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

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

Read the second part of the interview here.