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.