You’re sitting at Starbucks and a friend who just swiped his credit
card into the store’s music kiosk to download a brand-new mixtape onto
his MP3 player tells you about a rare My Chemical Romance track he
heard last night, which you proceed to download with a few clicks on
your cell phone.

Or maybe you discover a hot new underground MC and pay $20 to
join his fan club, which allows you to rhyme alongside his "Second
Life" avatar whenever you want, suggest songs for him to play at an
upcoming show in your town, or maybe even contribute some ideas to the
lyrics he can add to a song he’s writing with a group of fellow
fan-club members.

Fan Clubs With A Personal Touch

If you’re going to give away free downloads, make sure you get
something equally valuable in return. That’s the message from Dave
Kusek, author of "The Future of Music Book: Manifesto for the Digital Music Revolution."
"You don’t want to give your music away," he said. "You want to trade
it for an e-mail address or a referral to a friend: something that has
value to you but low perceived value to the customer."

In Kusek’s near future, artists will trade songs for e-mails,
entering fans into contests for backstage passes and creating an e-mail
database that could rival any potential fanbase built by constant
touring. He also foresees a not-distant time in which artists — most
likely emerging ones or less established acts — charge fans $5-$20 a
month to gain access to an exclusive area where they can ask the artist
questions or suggest songs for them to play at their upcoming concerts.

In this private world, you will be able to "attend" exclusive
living room shows, participate in songwriting contests or gain access
to a monthlong suite of music created just for the club that tells a
coherent musical story, perhaps with input from club members. "It can
be personalized and individualized to the fan level, so that the music
can have a much longer lifespan than an hour or one song," said Kusek.

Read the whole article by Gil Kaufman here from MTV NEWS.

Mark Cuban is a smart guy.   He dashed off a couple of ideas here that make a lot of sense.  I completely agree with him that the big copyright holders (labels and publishers) can act as "networks" and bring their music to market.  It is interesting that none of them are thinking this way at the moment, and the old way of thinking is guiding the day.  Namely, why do they need aggregators like Apple’s iTunes to replace the failing Tower Records of the past?  Why can’t the labels go direct to the customer with their product.

I have often said that when Napster 1.0 first emerged, the labels realized that they actually had customers.  And those weren’t Wall Mart and Target, but people like you and me.  And instead of embracing these consumers, communicating with them, drawing ’em into the fold, marketing to them – they decided to sue the people.  The legal people overran the marketing folks, and the chance for creating a direct to consumer business slipped through their lawyers hands.

It has taken a while to grasp the totality of all this, but perhaps someday soon, a large music content company will decide to get into the business of marketing to consumers, and creating an infrastructure to support and make it happen in the digital age.  Can’t wait to see that happen.

Here is an useful list for success in the immediate future:

–    Utilize MySpace and other
websites to its full potential and don’t be afraid to “give your music
away for free”. If one million people listen to your songs online,
don’t see it as you just lost 1 million dollars in potential sales. See
it as you just got radioplay in 100 markets.

–    You have to
learn new ways of viral marketing, including widgets and blog search
engines and don’t be afraid to experiment with putting your music in
new places and contexts.

–    Look at what the most progressive record labels are doing with their artists, like Canadian Nettwerk and Barenaked Ladies and try to copy it.

– 
If you play a live gig, make sure people know about it. It may seem
like a no-brainer, but it isn’t always. I don’t know how many good
shows I have missed just because I didn’t know about it. Do all you can
to get in Flavorpill and other online publications. Send emails to
everyone you know and make sure everyone that shows up signs your email
list.

–    Press vinyl copies. This might be the last thing you
think about doing, but DJs love vinyl and so do music lovers. Press a
few copies and distribute them to your favorite DJs, clubs and critics.

– 
Don’t sign a record deal. This may seem like a weird suggestion, but
stay indie as long as possible. You want to make sure the odds are in
your favor when you finally sign with a big label or it can be a
blessing in disguise.

More here from Digital Media Wire

Little by little news emerges as different artists and companies try new approaches to music and the music business.  Not all succeed, but some do, and they point the way towards the future of music.  For example:

Samsons, a Jakarta based band have sold over 2 million ringback tones in Indonesia and Malaysia.

Ok Go made history with their homemade video for "Here it Goes Again" on YouTube with over 10 million views – with over 1 million in the first week.

It won’t be long before artists can successfully leverage word of mouth, by uploading their music or videos
to Web sites and by building their own bottom-up franchise and customer base, without the help of the old guard label infrastructure.

Here is an article on the subject and an interesting read.

ArtistsHouseMusic is a free, comprehensive, and interactive online community for musicians and music business enthusiasts.

ArtistsHouse provides expert advice from some of the most successful music entrepreneurs and educators in the country. Songwriting basics, how to book and promote gigs, the ins and outs of copyrighting and contracts, how to audition successfully, and how to become an effective music educator are just a few of the myriad subjects covered on the site. The site’s conception and funding for its development comes from The Herb Alpert Foundation.

Named after the 1960s SoHo performance space founded by legendary saxophonist and 2007 Pulitzer Prize winner Ornette Coleman, ArtistsHouseMusic.org builds on Coleman’s original vision of a communal and collaborative approach to creating music. The Artists House site captures the same spirit as its SoHo incarnation, in a version fit for the online world.

“When I was a young musician in 1950s Los Angeles, there were very few places to turn to for advice or knowledge on how to break into the music business,” said world-renowned trumpet player and music icon Herb Alpert. “ArtistsHouseMusic.org fills a giant void in the online music education community. For the first time, expert information on building a career in music is accessible to everyone through the ease of the internet. This information would have been invaluable to me early on in my career."

As the music business continues to evolve, artists are increasingly taking their careers into their own hands. ArtistsHouseMusic.org is unique for its cutting edge technology, appeal to musicians of all genres, and for addressing an extensive array of careers in music.

Said veteran producer, founder and Artists House president John Snyder, “Today, it’s more important than ever for artists and music business entrepreneurs to take control of their own careers by educating themselves on the emerging technologies, techniques, and music business trends that are driving the future of music. ArtistsHouseMusic.org is Music Education 2.0—a vast, interactive online resource center providing professionals and beginners with free, expert, and in-depth information to build a career in the music business.”

Check it out here.

The major record labels made two massive errors that will ultimately lead to their demise.  The first error was releasing their entire catalog in unprotected perfect digital format, i.e. the CD.  As many have said, the current debate over DRM (digital rights management) is ludicrous as they labels have already released all of their music without any DRM whatsoever.  These unprotected CDs are the source of nearly 100% of the files being shared on Limewire and other file sharing networks.  Why they are trying to force consumers into purchasing DRM wrapped files on iTunes, Napster, Rhapsody simply makes no sense.  They already took that option off the table with the CD.

The second error, and the one that will drag them all over the cliff in relatively short order, is that they consolidated their retail distribution into the hands of a small number of "big-box" retailers, i.e. Wal-Mart, Target, Best Buy.  These retailers became the 1,000 pound gorilla, responsible for nearly 80% of all sales of CDs over the past 10 years or so.  The labels are totally dependent on these retailers for sales.  The irony of it all is that music sales at these retailers represents less than 1% of the retailers overall sales volume.  So the mistake was, lets get completely dependent on a retail sales channel that in fact, does not need our business.

A recent WSJ article (and others) describe the beginning of the end of this relationship, where the big-box retailers are beginning to acknowledge that they indeed don’t need to sell CDs any longer, as there are more profitable offerings (DVDs, video games) that can occupy the same shelf space.  The reality is that if these retailers do indeed cut the number of titles that they stock by any significant amount, the major lables will lose whatever remaining oxygen supply that may be sustaining them, and drop like stones into the abyss.

Read the story here.

Given the global nature of the internet, how long will it be before copyright owners who have enjoyed certain territorial rights established in the industrial age, are forced to come to terms with the reality of a global marketplace?  Recent events in the E.U. make it apparent that the rules that have long governed the way the musical pie was split may very soon be challenged.  Nothing lasts forever, and it may very well be that the acane business practices that have determined the way music is priced, made available for sale (or not) and consumed by people may be up for renegotiation or perhaps legislative determination.  This can only be good for consumers and music fans.

A European antitrust probe into the pricing of the iTunes music store could force the music industry to
unravel the complex web of intellectual property agreements which allow
music to be sold across the world.

This could impact the existing catalogs of labels and publishers and could ultimately alter the balance of power in music.  Read more here.

If it happens and they are able to negotiate reasonable licenses for all involved, then perhaps there may be a future for recorded music as a source of income.  I am doubtful, but very interested in what happens.

Limewire, the P2P program that is installed on 18.71% of all computers
worldwide (according to a Digital Music News Research Group study),
is in talks with various indie labels and label distributors about
creating a digital music store.  Like other file sharing programs,
Limewire has faced its share of legal trouble, but hasn’t had to close up shop, to some extent because (from DMN)

"Lime Group chief executive Mark Gorton
has been preparing for a fight for years, and a more secure defense
could emerge.  One source close to the organization also noted that
there were ‘no internal emails’ and ‘no paper trail’ indicating that
the group knowingly encouraged copyright infringement, a critical
component of the inducement test for the courts."

A source close to the situation tells me that despite ongoing
litigation with the major labels, other labels — including larger
distributors such as DMGi, IODA, and The Orchard — have expressed interest in signing up with Limewire, which plans to

"leverage [its] large user-base while avoiding the huge mistake of killing it a la iMesh, Napster, etc."

An observer close to one of these deals was sceptical, equating
Limewire’s current P2P offering to "a rocket ship" and the upcoming
digital music store to "a train."  But sometimes, before you can move
forwards, you need to take a step back first… maybe Limewire will be
able to start selling music without alienating its audience, using the
lessons of iMesh and Napster as its guide.

From Wired News

A terrible thing is happening to the recorded music business as we know it.  It is literally going away.  For years now many of us have been predicting the demise of the record labels, falling CD sales, the erosion of radio as a promotional channel, lack of barriers to entry into music making – and all the rest.  Well now it seems like the worst possible future is happening right before our eyes.

CD sales are falling off a cliff as we speak.  Sales of CDs in the US were down over 20% in the first quarter of 2007 according to Soundscan, yes folks, down 20% – and we have 9 months left to go.  The same report shows sales of digital downloads up 52%, but that is not nearly enough to offset the free-fall in CD sales.  More telling is the fact that the increase in paid digital downloads is slowing from the unsustainable rates of the last couple of years (87% for the first quarter of 2006).  While all this is happening, illegal downloading of songs and albums and the wholesale trading of files continues to skyrocket.  It will soon be impossible to make a significant profit from the sales of recorded music.

The brain trust that represents the recorded music industry has successfully lobbied the Copyright Royalty Board in the US to effectively strangle Internet Radio, the last hope for the marketing machine that once was the record label combine.  If these new regulations stand, not only will it be nearly impossible to make a profit selling CDS, it will be nearly impossible to promote new music or run a fledling online streaming service.  See this excellent article from Salon on the subject.

Just last week, the mini-major label EMI agreed to release unprotected, DRM free music from it’s catalog via the Apple iTunes store.  This is scheduled to happen soon, at a premium price of $1.29 vs $.99 for the chastity belt wrapped files.  Do you see anything wrong with that pricing model?  Charge more for the unprotected file when you can get them for free practically everywhere else?  Who is in charge here?

As we have been saying for years, it is quickly coming to a time when being a musician means finding ways to make money that do not include the sales of recordings.  This has never been more true in the last 50 years than today, and will become more true with the passing of each week as we move forward.

CBS is showing a unique ability to adapt to changing circumstances and opportunities:

Television has
proven to be a powerful marketing tool for young artists — most
famously Death Cab for Cutie, an indie band with a cult-size following
until featured placement in Fox’s "The O.C." catapulted the group to
mainstream stardom.

Now CBS is parlaying the powerfully symbiotic
relationship between television and music into a new record company. In
January the CBS corporation relaunched the long-dormant CBS Records
label, which will break artists by integrating their songs into the CBS
and CW television lineup and release music, at least initially,
exclusively as digital downloads on iTunes. If digital sales and other
online indicators (like blog activity and MySpace page hits) warrant
it, CBS Records will issue its artists’ music as physical CDs.

From
a business standpoint, CBS’s new label model makes all kinds of sense.
Music licensing costs are on the rise; digital downloads are cheap and
easy. The label is keeping overhead low, with a skeletal staff on-site
and tasks such as publicity, online marketing, and website design being
outsourced. Without the pressing demand to see a quick return on a
significant investment (major labels typically spend more than $1
million on an album project), CBS Records can function more like an
independent label — but with the clout of a large corporation behind
it.

"We wanted to be revolutionary, not just in how we break and
sell artists but also in being artist-friendly," says Larry Jenkins, a
23-year industry veteran who was brought on by CBS last August as a
consultant and has been operating as the label’s de facto head. "We’re
not investing millions. We’ve removed ourselves from the game of having
to have a first big week. We’re not beholden to the same restraints the
majors are held to. This is a marathon, not a sprint. The types of
artists we’re signing could take years to break and I don’t want to
rush it."

Thanks to a well-placed fan — former Bostonian Jeff
Sellinger is head of CBS Mobile — two of CBS Records’ first four
signings are Boston artists: singer-songwriter Will Dailey, who
performs tomorrow night at the Paradise, and power-popsters Señor
Happy, who play April 21 at the Abbey Lounge. Alt-rock auteur P.J.
Olsson and husband-and-wife duo Wilshire have also inked deals with CBS.

Dailey
was apprehensive at first. Contributing to the soundtrack of "The Young
and the Restless" was not, to say the least, high among the Malden
native’s planned career moves. (Two of Dailey’s songs, "Boom Boom" and
"Rise," have been used on the daytime soap.) Neither did Dailey, who
waxes poetic about the lost art of the album, envision releasing his
songs as digital tracks. But he’s changed his tune — in part because a
bout of appendicitis left Dailey $50,000 in debt. But he’s also
adjusted his attitude to accommodate the reality of a rapidly changing
music business.

"I’ve embraced the challenge of the new paradigm,"
says Dailey, whose "Grand Opening" was a jukebox selection in the Nov.
29 episode of "Jericho." The song is from Dailey’s 2006 indie album
"Backflipping Forward," which CBS is re-releasing. "If someone
downloads one song and they blast it in their car and come to my show,
then I have the chance to show them everything. Also, if I have a new
song I don’t have to wait 10 months to put it out." Dailey’s also come
to terms with the idea of his lovingly crafted folk-pop songs being
pared down to snippets and used as background music.

"Bob Dylan," he points out, "works for Victoria’s Secret."

CBS
bought Señor Happy’s last album, 2004’s "I’m Sorry," from Boston’s Q
Division Records and is re-releasing it with one additional track: "How
Many Ways," the theme from the new David Spade sitcom "Rules of
Engagement," which the network commissioned from the band after it was
signed to the fledgling label last year. Tired of toughing it out in
the local trenches, Señor Happy was actually on hiatus when the call
came from Jenkins. But the band’s guitarist, singer, and songwriter,
Derek Schanche, felt no ambivalence about abandoning the new batch of
songs he was working on and diving headlong into a new opportunity.

"We
were ecstatic," he says. "Once this interest started on a record we
loved, it was time to regroup and start doing shows. It’s like winning
the lottery."

Señor Happy’s "Get Up and Go Out" has been in heavy
rotation on "Survivor: Fiji," and "Love If You’re Real" was featured in
December on "The Ghost Whisperer." The band’s drummer and coproducer,
Tom Polce (who also produced Dailey’s album), is impressed not just
with how aggressively CBS is pushing their music, but how thoughtfully.

"They
used a minute or so of the song and dropped the lyric in at perfect
spots, really married the lyrics to the emotions," Polce says of "The
Ghost Whisperer." "Then they put our name up and our MySpace hits went
up astronomically."

While no one wants to talk dollars and cents,
Polce describes Señor Happy’s contract as "very, very fair, better than
a standard major label deal." He says that the profit split is more on
a par with what a band would get at an indie label, and without a lot
of the strings attached to a major-label contract. "Nobody knows how
this will go down, but they’re creative and they want to give it a real
try."

Jenkins is equally pumped, and just as circumspect, about trying to forge a new path in the music industry’s shifting landscape.

"Look,
we know that no matter how well we’ve thought this out, it won’t always
work," says Jenkins. "But if things don’t work out, I think our artists
will still walk away feeling like they had a shot, which is something
that hasn’t been happening much lately."

From Joan Anderman – Boston Globe

There is really so much happening in this space right now, it is challenging to keep up.  While the well known pioneers of music recommendation (like Pandora, LastFM) continue to make headway, new entrants are continuing to redefine how it all works.  Extremely interesting developments almost on a daily basis.

Here are two I recently came across that take MP3 blogging to the next level.  Peel is an MP3 Blog reader and player rolled into one (actually both of these are).  You subscribe to various blogs and easily traverse the music leading you to things you never knew existed.  Songbird is a media browser that takes over your iTunes collection and integrates it into the rest of the online music world.  Truly amazing.  Check em out and have fun!  You never know what you are going to find next.

Despite the millions of dollars that record labels spend on
advertising, it may be folks like Robert Burke who determine the future
of music marketing.

Burke, a South Carolina software tester, operates a popular series of Web sites called Scopecreep.com,
where he’s posted thousands of digital music playlists, from "Best
songs of 1989" to "Palindrome songs," that can be played by any Yahoo
or RealNetworks Rhapsody music service subscriber.

On one level, this is little different than the age-old
practice of making mixed music cassette tapes for a friend. But as
online music retailers look for ways to guide listeners through
catalogs of millions of songs, this latter-day mix-making
is drawing renewed attention, particularly from subscription services
that see people like Burke as key allies in their fight against Apple
Computer’s popular iTunes.

Last week, Yahoo announced it had hired the creator of Webjay,
a site for posting playlists. Yahoo is getting in on what could be a
major part of the online music business: A recent joint study from
Harvard University and the Gartner Group predicted that by 2010, 25
percent of online music sales will be sparked by consumers recommending
songs to one another.

"We fit in between traditional media and word of mouth media,"
Burke said, explaining the appeal of sites like his. "We’re that
in-between world that’s the best of both worlds."

To date, the playlist-swapping boomlet represented by Burke, the newly
Yahoo-owned Webjay and others has been more of a grassroots phenomenon
than an effective weapon in the digital music wars. But ambitious
subscription music services see music-sharing tools playing an
important role in their futures.

A key feature of subscription services is that they give their users
the ability to listen to unlimited amounts of music. As long as two
people trading song recommendations have both paid the service’s
subscription fee, they can legally listen to thousands of songs, or
swap dozens of playlists without any additional fee.

"The people who get this are those who are more engaged," said Evan
Krasts, director of product management for RealNetworks’ Rhapsody
service. "If you’ve got someone who understands what this is about,
you’re going to get someone who’s going to be a good customer."

iTunes itself is also a haven for playlist makers. Indeed, its iMix
section, with more than 330,000 playlists contributed by individuals,
is one of the biggest repositories of music recommendations online.

But at 99 cents per song, a 10-song iTunes playlist costs $10 to
download, which limits the amount of songs that people can actually
listen to, subscription service executives say.

Still, that argument hasn’t exactly triggered a mass rush to subscription services. Carried on the back of the phenomenal success of the iPod,
Apple’s iTunes remains far and away the most dominant force in the
digital music business. Apple executives have said that consumers want
to own their music, rather than "rent" it through subscription
services.
Analysts say that subscription services need to spend far more time
explaining their version of legal music swapping to the public before
the approach will become a significant draw.

"I think (playlists) will be an important feature that many
people will eventually use," said Jupiter Research analyst David Card.
"But it will have to be promoted to death."

Read the rest here:

From John Borland CNET NEWS

Over the past four years, Berkleemusic the online extension school of Berklee College of
Music has helped over
11,000 students from around the world study music and music business online and will teach another 6,000 this year alone,
making it the world’s largest online music school. In addition,
Berkleemusic has over 100,000 registered members involved in its online
community of active music makers.

Berkleemusic’s online curriculum boasts over 85
award-winning accredited online courses and certificate programs taught
by 120 of the college’s world-renowned faculty in music recording, remixing and production,
guitar, music theory, ear training and harmony, music business, composition and songwriting.

Among the many online students studying with Berkleemusic this year are Scott Underwood, from the Grammy award winning band Train, Barry
Kerch from Shinedown, Danny Weinkauf from They
Might Be Giants, and Kristen Henderson from Antigone Rising. “The
Berkleemusic online courses went above and beyond my expectations,”
says Ms. Henderson.

Berkleemusic will also be offering online
scholarships named after Phil Ramone, Paul Simon, Juan Luis Guerra,
Herbie Hancock, Bill Cosby, Gloria Estefan, Gary Burton, Michel Camilo,
Steve Vai, Alf Clausen, Tom Snow, Patty Larkin, BT, and Mark
Mothersbough.

Berkleemusic is focused on providing real-world education to people actively involved in the music business and is a tremendous resource for those seeking to reinvent the music industry.

The music industry flocked to Midem in Cannes, France in January, and event organizers reported attendance levels of nearly 10,000 according to Digital Music News.  That is an impressive crowd, though a critical component of the business was also well represented at the annual NAMM Show in Anaheim, CA, staged the week prior. The National Association of Music Merchandisers, which represents the global instrument industry, pulled a record tally of 84,695 attendees at its 105th event, according to numbers published January 23rd.  Both events fit snugly within the umbrella of music, though the represented sectors are being tugged by different market forces.  Major labels are being dragged by internet piracy and a migration away from CDs, while instrument manufacturers are booming from an increased appetite for performance and creativity.

The numbers tell an interesting and divergent tale.  Recorded music revenues dipped 23 percent between 2000 and 2005, according to figures published by global trade group IFPI.  But the numbers are quickly ramping in the other direction within the musical instrument category.  According to NAMM, global instruments sales have recently surged to $17 billion, and the percentage of those playing has also jumped.  A recent Los Angeles Times article, citing a NAMM-contracted Gallup Poll, noted that the number of instrument players between the ages of 18 to 34 grew from 24% in 1997 to 32% in 2006.  That signals a greater interest in jamming and self-expression, though a wave new digital recording and publishing technologies are also propelling the trend.  The result is an increasingly democratized process of musical creation and distribution, and a growing class of "do-it-yourself" artists.

Whether this trend continues or not will depend on the nature of the business opportunities available to the DIY crowd.  Will music flourish as simply a hobby in the future or will there be new and inspired ways of coming to market with new music and creating experiences and interactions between artists and fans that create value beyond a free MP3.

Jason Herskowitz and Paul Lamere have begun to compile a directory of Music 2.0 sites and businesses that you definately want to check out.  See the Music 2.0 Directory/Wiki

What is a Music 2.0 site?

Yeah, I don’t really know what "Music 2.0" is supposed to mean
either, but I’ve compiled a list of companies that I’ve come across the
are doing something interesting with music online. Some are
subscription services with APIs that make syndication easy, others are
informational sites, a handful are social networks (some arguably not
really music-centric), a few are search engines, and some are
recommendation engines…. and at least a couple, I’m guessing, are
probably not legal.

Music 2.0 sites fall into a number of camps:

Music Services – places like iTunes and Rhapsody where you can
purchase or subscribe to music

Music Discovery – places that help you
find music – these fall generally into 3 subcategories: Social – wisdom
of the crowds sites like last.fm, iLike. Goombah and Qloud
Content-based – recommendations based on the music content – Pandora,
SoundFlavor, MusicIP Expert based – Music recommendations from people –
music blogs, irateradio.com

Music Experience Augmentation – sites to
make your music listening experience more enjoyable – music dashboards
like sleevenotez or Snapp Radio Playlist Sharing – this includes
playlisting sites like MusicMobs, fiql and Webjay

Music Metadata – add
to the data surrounding the music – MusicBrainz, All Music Guide,
Gracenote

Here is another great resource for digital music from Jason Herskowitz.  His site is off the hook!

We wrote about it in our book, and it is wonderful to see music discovery services and recomendation engines getting well established in the marketplace.   From the big digital music distributors like AOL, Rhapsody and iTunes and eMusic, to the stand-alone discovery platforms and technologies like Last.fm, Pandora and Qloud, to the playlist and mashup generators like Tunefee and Musicmobs – all of these digital services help you find music.  That is going to become the name of the game in the future.

A teriffic resource on music discovery comes from Paul Lamere who seems to have harnessed the Sun’s energy (sorry) with his relentless pursuit of the subject.  Check it out.

All signs are pointing to the eventual dominance of the MP3 format for paid digital music in the near future.  Last fall there were lots of signals that 2007 would be the year where the labels and publishers would be forced to face a future where MP3 become the latest legitimate format for digital music, and where Digital Rights Management begins to lose it’s grip on the main action in paid digital downloads. 

The major labels began to experiment with MP3 format releases with some high-profile acts, including Nora Jones, Jessica Simpson and others.  This shift in strategy has allowed the labels to play with variable price points, something they have been wanting to do with iTunes and other platforms.

Companies are lining up to capitalize on this inevitability including Amazon, MySpace, Yahoo, eMusic, Limewire and many others. 

Eliot Van Buskirk from Wired News sums up the situation pretty well with his seven reasons why MP3 is the future of the music industry:

1. The labels don’t have a choice

2. Apple might be forced into interoperability

3. Thomson has endorsed selling watermarked MP3s

4. Amazon is rumored to start selling MP3s by April

5. Sony: "DRMs are going to become less important"

6. People love AllofMP3.com

7. MP3 has future options

The Recording Academy, the organization that brings us the Grammy awards, has spent the last two years on a project to "create a dialogue between music makers and music fans to help shape an exciting digital music future".  This is some amazing work and the academy should be recognized for their grass roots efforts to connect the fans and the artists.  Here are some excerpts from their report.

In the 50 years since commercial rock ‘n’ roll was born, everything about music has changed, from the way it’s made to what it sounds like to how it’s marketed and sold. The most dramatic difference, however, has perhaps come in the last decade. Spurred by the introduction of the Internet, the act of discovering music and, subsequently, sharing it, have evolved in ways artists, record companies and listeners never imagined. Gone are the days of walking over to a friend’s house with a stack of vinyl long-playing records under your arm—a deeply personal, one-on-one experience that, often, ended in generating a future sale. Today, connecting with music happens in an instant, involves an incomprehensible number of people, and a method that’s nearly impossible to trace.

Like many times before in its history, the music industry is at a crossroads. Faced with declining album sales and a public that lives—but doesn’t always buy—online, the traditional brick and mortar model, which has weathered its share of technological innovations (from 8-tracks to tapes to compact discs), can no longer function as it was designed; at least not for profit. At the same time, consumers are battling music providers with issues centered on perception (the perceived greed of record companies and the perceived wealth of popular artists) and one undeniable reality: that acquiring music is easy and, depending on where you are getting it, free. While the conscience may debate the act of illegal downloading, is it enough to steer the listener towards a legitimate purchase or is a legal threat necessary? If you are willing to pay, will you be able to own the music or will copy-protection software ostensibly mean you’re renting it?

These are some of the many questions that this report tackles. It was compiled by a 12-member panel of 18 to 24-year-old music fans from every walk of life that have spent the better part of two years collecting viewpoints and opinions through interviews and roundtable discussions with artists, producers, songwriters, executives and peers. The What’s The Download® Music Survival Guide is an unedited look at today’s state of music and a genuine attempt to decipher what’s working, what’s not, and where we go from here.

7 Music Survival Tips – (from the Guide)

#1: Educate to Eradicate Piracy
“Unaware of the large number of people who collaborate to make a record, many consumers have turned to illegal file sharing as a response to the high price of music, believing that they are not hurting all of the ‘rich’ musicians. They simply do not understand the ramifications of their actions.”

#2: Make Music Retail Therapy
“Sometimes when you go to a record store, you bump into a record. You bump into people that may hip you up to records. It’s a whole other experience. And we need that journey. It’s important that as artists we take time to dig, to see the roots of where everything is coming from so that we can offer it to the fans, and they all can offer it to the next generation.”

#3: Declare a Music/Tech Truce
“Simply put, the industry does not make it easy for consumers to purchase and use digital music online legally, while piracy delivers what companies hold back. Digital music is a vital force in the industry and technology needs to be properly embraced to provide ease of use to consumers.”

#4: Commit to Artist Development
“If the music industry wants to win back the financial loyalty of fans lost to illegal means of obtaining music, the major labels should work with artists to cultivate their talent, rather than casting an artist aside after a commercially unsuccessful release.”

#5: Embrace New Music Avenues
“If the music industry hopes to survive, it must embrace the new face of musical community to reach out to potentially dedicated fans. Labels as well as artists should take the time to interact online with their fans in the interest of developing an artist-fan relationship that will entice fans to support artists monetarily as well.”

#6: Offer What Piracy Doesn’t
“So how can companies drive illegal file sharers to legal Web sites? This is something many are struggling to figure out, and there is not one clear answer or solution. However, if legitimate Web sites and online companies want to continue to grow, they must offer what piracy cannot.”

#7: Make Music a Priority
“More people are discovering more new music–and a greater variety of music–than ever before. There are tremendous challenges facing traditional music businesses, but for artists and fans this is an incredibly exciting time. One day, we will look back on this period in music history as a kind of Internet adolescence—a confusing, sometimes awkward transition that in the end leaves us stronger, smarter…and a little less innocent.”

Get a copy of the complete guide here and check out their very informative site "Whats the Download"

(CelebrityAccess MediaWire) — Barenaked Ladies grossed $978,127.99 in revenue from intellectual property in its first week music sales from their new album, Barenaked Ladies Are Free (Desperation Records/Nettwerk Music Group). Understanding this sales figure requires looking beyond the numbers on the charts, according to Terry McBride, band manager and CEO of the Nettwerk Music. McBride notes BNL released their album on their own artist-run label, Desperation Records, in multiple formats, from physical CDs to digital albums, deluxe editions, USB flash drives, ring tones, multi-tracks for remixing, streams, etc.

Not only is revenue generated from all of these outlets, but also the percentage the band actually sees is significantly higher since they own their Intellectual Property. Additionally, when the digital sales of Barenaked Ladies Are Me and Barenaked Ladies Are Me Deluxe Edition are combined, BNL actually hit as the #4 digital seller in the US and #3 in Canada. Barenaked Ladies Are Me, the first original album in three years from BNL, charted at #17 in the US with 36,811 albums sold and #7 in Canada with 8,008 albums sold.

In addition to a physical album, the band found it important to make their songs available to fans in a wide variety of ways…from digital albums to a 27-song deluxe edition (physical in Canada/digital in US), individual tracks, USB flash drives and even vinyl.

"Nettwerk and BNL are trying to get people to see beyond the physical number," says McBride "Generating revenue, especially in the artist-run model, is about selling music in various mediums, selling concert tickets, licensing music to TV, ring tones, packed USB drives, etc. That is how success is measured, not by the physical album sales." McBride notes that missing from the regular sales charts are individual digital track sales, digital albums purchased directly from the BNL, Nettwerk and MySpace websites, the combined sales of the standard album and Deluxe Edition, USB flash drive sales, ring tone sales, stem sales from their remixing contest and more.

"Additionally, you won’t see the difference in revenue that a band generates from an artist-run label as opposed to a band on a major label; an artist-run label can earn as much as $5 per album," he explains; "once all of these missing entities are factored together, a difference close to 30% of North American sales is missing from the chart equation. "The artist-run model is the future. If we can break bands using this model, the industry will be forever changed," McBride continues. "We are making a music company, not a record label." –Bob Grossweiner and Jane Cohen   

"There has never been a more exciting time to work in the music
business. Digitalisation gives customers more music in more formats,
whenever they want it, wherever they want it, presenting an enormous
business opportunity for the music and entertainment industries as a
whole." – Event director for Music Matters, Jasper Donat

A significant number of north Asians are already embracing digital technology, especially the young.

The study indicated that 42% chose digital devices like iPods, MP3
players, mobile phones and PCs as their primary mode or device for
listening to music.

"If young people are the future of music, that future is a digital
one," Lee said, noting that 43% of them expect all their music in
digital formats in five years’ time and a further 37% saying they might
be, too," he said.

"The numbers were much higher for the under 25s where about 87% chose
digital devices. About 44% of those aged between 25 and 39 chose
digital while only 12% of those aged 40 and above did so. This shows
the trend will only get stronger as the young people increase in age
and spending power," he added.

Read more

LOS ANGELES/NASHVILLE (Billboard) – It’s 9 p.m. at The Gig
in Hollywood and a crowd of L.A. hipsters is trickling in to
catch the evening’s act.

The bar itself is just one of several live music venues
scattered throughout the city that caters to emerging artists
hungry for a stage — however small — to hone their skills and
attract a following. Attendance tonight is sparse, maybe 30
patrons hang on the bar or linger on the beer-stained
dancefloor.

But the band on the dinner-table-sized stage plays to a
much larger audience. Practically unnoticed to all but the
performers are four domed, Vegas-style security cameras hanging
from different areas of the ceiling capturing their every move.
The Gig films all performances — three a night, seven nights a
week — and broadcasts them the next day from its Web site,
http://www.liveatthegig.com.

The Gig is riding a tide of revolution in the concert
business. The ongoing explosion of high-speed, broadband
Internet penetration in the United States has sparked a growing
need for quality, exclusive multimedia content. Live
performances fit this bill perfectly, and everyone from small
clubs to major media companies are getting hip to this fact.

The huge success of AOL’s delivery of the Live 8 concerts
last summer made it clear that both consumer demand and the
potential to offer compelling product exist. For Gig owner
Peter O’Fallon — a film and TV director — recording and
broadcasting shows is a way to not only marry his twin passions
of video and music, but also an attempt to develop new revenue
streams made possible by the Internet.

For the acts that pass through his doors, it’s free online
exposure that rivals any multicity tour, allowing them to post
links to their performances on MySpace or send to friends, fans
and promoters.

For the industry, it’s a rapidly growing business model
that is changing the dynamics among artist, label, venue and
digital music services.

The world’s largest promoters, AEG Live, Live Nation and
House of Blues, which Live Nation acquired just weeks ago, have
all bought into this concept, some more aggressively than
others. HOB was the pioneer with live webcasts from its clubs
dating back to 1995.

"We first focused on live digital delivery of shows because
nobody else was doing it," says Jim Cannella, national director
of corporate partnerships for HOB. "The whole world was
mesmerized by the infinite opportunity the Web represented,
there were widely accepted technology standards to put your
arms around and a market of hungry consumers which was doubling
in size every few months."

Today Live Nation, also the world’s largest venue operator
with its 40-plus amphitheaters, is making a "substantial
commitment" to wire 120 venues and festival sites throughout
North America and Europe with the ability to capture and
repurpose thousands of live concerts. Live Nation currently has
36 wired venues in the States and broadcasted more than 350
concerts from around the world last year.

And Live Nation has been creative in the outlets for these
concerts, including TV, mobile phone carriers, terrestrial and
satellite radio, online and other digital music distribution
avenues. "There’s no end to the uses once (the content is)
captured," says Bruce Eskowitz, president of global venues and
sponsorship for Live Nation. "It opens up tremendous
opportunities with 3G, SDTV, HDTV, live ringtones, etc. The
problem up to now has been the ability to capture it cost
effectively."

Eskowitz says his company’s current digital initiative is
about extending Live Nation’s relationship with its customers.
"An important new way to expand this relationship is through
the recording and distribution of the live concert," he says.

A CONCERT CASH COW?

Although neither the Gig nor Rehearsals.com has started
doing so, both companies plan to sell advertising on their
sites to recoup their investments.

"Ultimately, the idea is to monetize it," O’Fallon says.
"At the moment, there’s not a tremendous amount of money to be
made until there’s tens of thousands of people visiting the
site."

Live music is "definitely" a revenue producer for AOL,
according to Flannigan, with such heavyweights as Intel,
Nissan, Chevy, Lexus and Absolut onboard as advertisers.

"There is certainly a large collection of advertisers out
there who want to associate their brands with live
performance," he says. "Some of the biggest consumer-product
advertisers in the world are starting to feel like digital live
music is a fantastic showcase for their brand."

AOL has a ready-made "billboard" of sorts on each computer
screen where advertisers can reach consumers. Flannigan thinks
live webcasts could also be an "enormous" ancillary revenue
stream for artists, "especially artists like Pearl Jam or Bruce
Springsteen that are mixing up their shows every night," he
says. "There really are 10,000-15,000, even 20,000, people who
are interested in what’s happening at every single show, and if
you add that up it could result in some very meaningful money."

"This asset that we create, this hi-def, Dolby 5.1 sound,
piece of live concert footage, is something that (the artists)
own," Grodsky says. "It’s a copyright we don’t take ownership
of, nor a master we get control of, so it’s something they can
use for live DVD, live audio CD, exclusive product for retail,
bonus content on the Web, really the things they can do with it
are endless. So you’re creating a high-quality asset for them
to leverage down the line."

Lastly there is a revenue possibility through a
revenue-share on the backside, Grodsky says. "The business
model is pretty standard as it relates to the revenue that an
artist shares in from the distribution of the exhibition of the
content," he adds. "But the ability for them to create
additional revenues through their own exploitation of the
master after the fact is unprecedented."

From Reuters/Billboard – Read More Here

For
years, old recordings have piled up in the archives at Verve Records,
including beloved jazz tracks that had no market big enough to justify
pressing new discs. But thanks to the Internet, music lovers are
rediscovering iconic titles like Ella Fitzgerald’s "Sunshine of Your
Love" and Quincy Jones’s "Body Heat" — rekindling enough popular
demand to prompt Verve to reissue them through a project called Verve
Vault.

"The demand for music has never been as big as it is
today. We get all kinds of questions from customers worldwide, looking
for a track name or an album, or asking, ‘Why haven’t you put that out
yet?’ " said Jon Vanhala, vice president of new media and strategic
marketing at Verve. So far, about 2,700 albums have been brought back
through the Vault, with more than 5,000 scheduled to follow.

Because
the Internet has changed how people discover and share music, the rules
of marketing it and the hierarchy of who determines what’s hot have
also changed. As radio-music listenership declines, the industry finds
itself spending more time courting a broader field of tastemakers who,
through Web sites, are popularizing songs that never get radio play.
The primary tool in this transition is the playlist — a sequence of
tracks posted on blogs or shared on music purchase sites such as iTunes.

"I
listen to way more music than I ever have in my life," said Robert
Burke, a North Carolina quality assurance manager by day who spends
nearly all of his free time searching through new music online, then
compiling tracks in playlists with various themes, like rock songs that
include a tuba, Top 20 bands from the 1980s with mullets, artists who
sample riffs from Miles Davis, and so on.

"I kind of started it
because I’ve always collected music, and I’ve become pretty obsessed
with it since then," said Burke, whose blog on Yahoo Radish,
Playlistradish.com, has published thousands of his playlists for the
consumption of others.

With legions of new bands popping up
online every day, fans need guidance just to keep up, said Oliver Wang,
founder of Soul Sides, another high-traffic music blog.

In the
online world, friends’ recommendations or an endorsement from bloggers
such as Wang and Burke, as well as podcasts such as "The Nashville
Nobody Knows" and "Accident Hash," can yield significant marketplace
results.

A duo called Gnarls Barkley, for example, found a huge
following online. The band’s songs, including "Crazy," were well
established online before getting radio play. Its songs have been
listened to on the band’s MySpace social-networking site more than 6
million times. Transatlantic online exchanges made the British band
Arctic Monkeys famous in the United States before any album came out
here.

"Word of mouth benefits [independent labels] in particular,
and we’re only starting to see the benefits," said Kevin Arnold,
founder and chief executive of the Independent Online Distribution
Alliance, which disseminates music from 2,500 labels to digital music
services.

To court the online tastemakers, the alliance last fall
launched Promonet — a system that maintains a master playlist of new
releases for reviewers, Arnold said.

Digital music services
themselves have become engines of recommendation. Music stores such as
iTunes, EMusic, and Yahoo Music give users the ability to check out
others’ playlists, so people with similar tastes can find each other
and discover new music. Additionally, services such as Rhapsody,
Napster, Livefm, Pandora, AOL and Yahoo all have Internet-radio options
with algorithms that register a person’s taste and, based on the
listeners preference, stream in similar, new music.

"I’ve found a
few bands that way," including one called the Magic Numbers, said Alex
Kilfoyle, 23, a Washington electrical engineer.

"When I started
college, I was listening to rock and classic rock, and that’s it," said
Kilfoyle, who swaps music recommendations with old college friends
through instant messaging, online chats and checking out each others’
playlists on iTunes. A program called Hamachi also allows them to
listen to music saved on each others’ computers. Because of his
friends, he said, his musical taste has evolved to "eclectic — a lot
of everything."

Ian Rogers, 33, grew up in Goshen, Ind., where there was no record store.

"I
drove five hours to Chicago to see a punk rock band," he said. He’d
pore over reviews in Maximumrocknroll magazine, then have his mother
write checks so he could send off for albums without having listened to
them, said Rogers, who is now director of product marketing for Yahoo
Music.

The effort and cost involved in buying made him feel
almost obligated to like what he could get, he said. "You end up
consuming what’s marketed to you. With the Internet, you consume
exactly what you want."

To adjust to that shift, radio stations
are experimenting with "send us your playlist," or by-request music
shows, said Mike McGuire, an analyst with the research firm Gartner Inc.
"It greatly complicates how you promote acts and content," which is why
forward-thinking labels like Warner Music Group’s all-digital label
Cordless Recordings are spending more time and promotional money on
finding bloggers, he said.

While consumers say the diversity and
availability of more content is unequivocally good, some bemoan the
lost art and distinction of having the great, comprehensive record
collection.

In the past, a music aficionado had to invest time
and money sifting through racks in the hunt for, say, a little-known
ska band. Now, entire CD racks and vinyl-record collections can fit
into several gigabytes of computer memory — and people who never
invested their resources in acquiring music can simply rip off a
playlist, or type in a search to find that same, small-time ska band.
It’s yet another blow to brick-and-mortar record stores, which with the
rise of digital music have already lost CD sales.

"The fun of
collecting is gone," said Michael Crowley, who said he spent his
childhood hunting for bootlegged copies of obscure acts in hidden-away
record shops run by edgy people with nose rings. "They’re not that fun
if you can download them with a few mouse clicks," said Crowley, a
Washington journalist who wrote about the rock snob’s demise by digital
music for the New Republic.

Crowley admits that he now relies
more on music blogs and friends’ playlists to keep up with trends in
music, making him more of a follower than a leader in the online world.
Still, he said, the ability to copy music can’t stand in for taste.
"Taste is something you have to cultivate."

Richard Carlisle toes
a harder line. The self-described vinyl-record purist has sold records
for 30 years and owns Orpheus Records in Arlington. He’s never put an
iPod to his ears and spends no time on the Internet surfing for new
music. "I have a vested interest in people not using an iPod," he said.
"I guess you could call it a sour-grapes phenomenon."

But online
trends still affect his business; a customer recently came in asking
for an album from an indie-rock band he’d never heard of — Neutral
Milk Hotel — which had become popular online. Since then, he’s sold
roughly 30 of those albums.

From Yuki Noguchi
Washington Post

NPR / Marketplace

Listen to this story

Universal
Music wants to save the compact disc. The company said today it’s
unveiling new packaging to make CDs more attractive to consumers who’ve
been lured about by digital downloads. Lisa Napoli reports.

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KAI RYSSDAL: We talk a lot on this show about digital
music and downloading. But the good ol’ compact disc still accounts for
90 percent of the music industry’s sales.

It’s getting a makeover from the world’s largest music company. In
Europe at the end of the summer, the Universal Music Group is going to
jazz up its packaging and raise the prices on the hot new releases. And
at the same time it’ll simplify packaging and cut the prices on older
offerings.

Marketplace’s Lisa Napoli says some feel that’s incredibly beside the point:


LISA NAPOLI: Dressing up the compact disc and
charging more money for it is kind of like the Emperor’s New Clothes.
So says Dave Kusek, co-author of the book, "Future of Music."

DAVE KUSEK: Packaging is not the issue.
It’s value and convenience is the issue. It’s part of a continued
denial that the music industry has a problem.

The problem isn’t that some people hate those flimsy CD jewel cases.
And the solution isn’t to make sturdier cases, or add extra tracks and
videos. Industry observer Bob Lefsetz says CDs are a dying format and
the industry just wants to maximize revenue.

BOB LEFSETZ: This is like, you now, a
complete sideshow. It’s irrelevent. It’s to what degree is it
Smith-Corona typewriters and one day you won’t be able to sell them.

Lefsetz says it all goes back to those peer-to-peer file-sharing sites where people get music for free.

LEFSETZ: More tracks are traded P-to-P in
a month than are sold in a year on physical formats. For every track
that is sold at the iTunes music store, there’s in excess of 10 that
are traded.

In other words, to make money from music will take more thinking outside the box.  Not just revamping the box.

In Los Angeles, I’m Lisa Napoli for Marketplace.

NPR / Marketplace

Listen to this story

Universal
Music wants to save the compact disc. The company said today it’s
unveiling new packaging to make CDs more attractive to consumers who’ve
been lured about by digital downloads. Lisa Napoli reports.

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}
KAI RYSSDAL: We talk a lot on this show about digital
music and downloading. But the good ol’ compact disc still accounts for
90 percent of the music industry’s sales.

It’s getting a makeover from the world’s largest music company. In
Europe at the end of the summer, the Universal Music Group is going to
jazz up its packaging and raise the prices on the hot new releases. And
at the same time it’ll simplify packaging and cut the prices on older
offerings.

Marketplace’s Lisa Napoli says some feel that’s incredibly beside the point:


LISA NAPOLI: Dressing up the compact disc and
charging more money for it is kind of like the Emperor’s New Clothes.
So says Dave Kusek, co-author of the book, "Future of Music."

DAVE KUSEK: Packaging is not the issue.
It’s value and convenience is the issue. It’s part of a continued
denial that the music industry has a problem.

The problem isn’t that some people hate those flimsy CD jewel cases.
And the solution isn’t to make sturdier cases, or add extra tracks and
videos. Industry observer Bob Lefsetz says CDs are a dying format and
the industry just wants to maximize revenue.

BOB LEFSETZ: This is like, you now, a
complete sideshow. It’s irrelevent. It’s to what degree is it
Smith-Corona typewriters and one day you won’t be able to sell them.

Lefsetz says it all goes back to those peer-to-peer file-sharing sites where people get music for free.

LEFSETZ: More tracks are traded P-to-P in
a month than are sold in a year on physical formats. For every track
that is sold at the iTunes music store, there’s in excess of 10 that
are traded.

In other words, to make money from music will take more thinking outside the box.  Not just revamping the box.

In Los Angeles, I’m Lisa Napoli for Marketplace.

After years of digital disruption, the music industry is still divided on the best strategy to move forward with.

So far, recorded music distribution has commanded most of the attention during this disruptive phase, at least in major press circles. Sales of CDs, the rise of online formats, the challenges presented by P2P networks – these are all immediate concerns and issues felt most acutely by labels. Quieter aspects of the business include the live concert industry, brand sponsorships, merchandising, and publishing royalties, areas that labels rarely reap direct revenues from. And wedged in-between are mobile formats, led by the explosive ringtone phenomenon, which now benefits both labels and publishers alike.

The distinctions are important, and so are the widely-divergent opinions on where this business is going. In one camp, there is a strong belief that disruptive technologies like P2P file-sharing can be controlled and contained, that music fans can be retrained, while formats like paid downloads and even CDs can power a long-term revenue stream. Others point to massive shifts in the way consumers are discovering, receiving, and ultimately listening to music, and question any attempt to fundamentally alter P2P networks as they exist today. One suggested solution is a licensed P2P architecture, not with filtering or controlled selection, but through broad-based methods like ISP monthly surcharges. Still, another group disavows any attempt to harness P2P at all, and instead focuses on a far broader revenue outlook for artists – an approach that could include free file-sharing for promotional effect, and paid concert revenues from core listeners, for example.

In between, endless variations exist. But a key question is whether the skies can be tamed on digital distribution. Continued efforts by the RIAA reflect a belief that they can indeed be reclaimed. "A vibrant, online marketplace is taking root," said RIAA chairman Mitch Bainwol and MPAA chief Dan Glickman in a recent Wall Street Journal opinion, while noting that "file-sharing networks like iMesh and BitTorrent are showing that the technology can be used legally." The pair also pointed to surging paid download levels, and ongoing legal action against illegal services.

The piece has a more-than-healthy bit of spin, and the opinion was timed with the one-year anniversary of MGM v. Grokster. Certainly, some positive developments are happening for the industry since that decision, particularly in the paid download realm. But that game is still early, and a-la-carte purchases still present a dangerous change in bundling practices – despite jumps in total revenue. Meanwhile, most music fans are still grabbing files en masse from applications like eDonkey and LimeWire, and earlier claims that file-sharing volumes are being "contained" are thinly supported. Elsewhere, attempts to offer a filtered, paid file-sharing platform have been either non-existent or unsuccessful. Companies like Mashboxx have yet to see the light of day, SnoCap never emerged as a legitimate P2P backend power-player, iMesh has made little noise after its inception, and a recent deal with BitTorrent was largely superficial. Meanwhile, according to figures from BigChampagne, there are more than ten  million active file-sharers online at any given moment, a figure that continues to increase – albeit at a slower rate over the past year.

So when do things change? The question for the RIAA is whether the current state-of-the-industry reflects a deeper, structural shift that is inconsistent with the philosophy of the trade group. Alternative approaches have been kicked around for years, including more diversified label business models, ISP-based blanket licensing of P2P networks, and DRM-free, cheaper paid downloads. Certainly, the weeds on those approaches are complicated, and their success is less-than-guaranteed. But the current report card for major labels is mixed at best, and sales of pre-recorded CDs are continuing to drop.

Meanwhile, the RIAA seems doggedly attached to its strategy, despite serious questions about its success possibilities. Ultimately, consumers will offer a final verdict, part of an increasing power-shift across numerous industries. If that is the case, then why is the RIAA pushing so hard with "we’re winning" opinions like the one found in the Wall Street Journal? Does a well-executed PR campaign have any effect on the underlying market? Perhaps the perception of a recovering major label could boost stocks like WMG, but will it make consumers buy more CDs, or purchase more tracks on iTunes? The answer is no, especially since the most engaged music listeners – teenagers – are mostly disengaged from mainstream media outlets. And in an increasingly fragmented media landscape, the market is likely to change on its own, regardless of what major press outlets – and anyone else besides consumers – have to say about it.

From Paul Resnikoff at Digital Music News

"Hey mister record man, the joke’s on you.
Running your label like it was 1992.
Hey mister record man, your system can’t compete,
It’s the new artist model, file transfer –  complete."
         – Download this Song – MC Lars 2006

MC Lars sits on a stool in front of his computer music system in his cramped New York loft as the sun comes up.  With his boyish good looks and talent, Lars could be a young exec on the rise at any Wall Street firm.  But instead, the 25 year old graduate of Stanford and Oxford Universities is breaking into the music business – and making money.  His style is Post Punk Laptop Rap hitting the US and the UK reaching the iGeneration, kids raised in the time of the Ninja Turtles and new wave music.

MC Lars is wired, amazingly fresh after being out all night playing at a club.  And he won’t crash until he’s finished laying down the final track for a new song.  He plays a little, tweaks the software, listens for awhile, repeats the process, then shoots the song to his fans over the internet with the push of a button – for nothing.

Giving music away, MC Lars says, makes him as much money as being on a major label.

“Well any artist wishes that ideally people are going to get their music on iTunes or something but, it’s better for them to get it for free than not to listen to the artist at all. That’s the inspiration for Download this Song,” MC Lars says.

The tide has turned.  The music we love is flowing increasingly like water around the globe – seeking its new level in the digital media economy.  Today, we can get music like MC Lars’ in MP3 downloads, ring tones, file sharing, playlists, podcasts, music blogs, iPods and more. 

Music is flowing directly into pcs, cell phones and portable digital music players of fans – running through the cupped hands of a diseased major record label system.  At the same time artists are debunking the myth that downloading will kill music sales.  MC Lars is one of many artists carving new paths through the ice fields left by the glacial major label monopolies. MC Lars is building a loyal following by touring and working his myspace and purevolume pages with a new artist model.

"It’s pretty amazing what a 22 year old kid did from a dorm room.” say Lars manager Tom Gates from Nettwerk.  “He’s going back to the UK for the 5th time in one year opening for Simple Plan and soon for his first headline tour…this all without label tour support.  We’re about 6 months from his new genre busting called "nerdcore" and he’s going to make ten times as much bank than he would have if he had signed to a major.  Then you add in the costs of what he’s spent to do this and it just all points to the future, especially when you compare it to what majors spend on developing artists.  $7,500 recording costs vs. $250k on a major label.   $400 photo shoot vs. major label $15k photo shoot.  $7,000 video vs. $50k major.  Art $0 vs. $10k major label. Recoupability takes on a whole new light."

I asked MC Lars how he felt about file sharing and free music. On Download this Song, Lars says “I wanted to figure out a way to put my experiences and the best way to make people listen is to have the catchiest kind of chorus I could think of, and so I sampled the Iggy Pop chorus, one of my favorite songs.  My manager gets annoyed that I use samples because then you have to do all the legal stuff.  But I think artists need to be compensated for sampling.  With the Iggy Pop thing, it was interesting because someone at the publisher didn’t really like the message of the song, but Iggy was able to override it after he listened to it.  He liked the message and he had the final say.”

Many artists are mashing up new music on their laptops by sampling snippets from other artists and combining that with original material.  So powerful is the software today for making music with programs like Garageband, Reason, Live and ProTools, that amazing songs can be composed and recorded in bedroom studios and with the push of a button can find their way into online distribution channels. 

What do they get paid for? How do they make music? The line between music producer and music consumer is beginning to blur.  Music fans are becoming participants in the music creation and this trend is only going to accelerate as the technology and digital infrastructure for music evolves.  All of this makes for much needed debate about copyright law and is sure to be a great business for the barristers and lawmakers in the years ahead.  There is no stopping the headlong plunge of people into making and distributing new music themselves and the flow of music is already beginning to drown the current copyright systems.

“Over there there’s broken bones
There’s only music, so that there’s new ringtones
And it doesn’t take no Sherlock Holmes
To see it’s a little different around here.”
– A Certain Romance – Artic Monkeys 2006

This fundamental shift in the power balance of the music business is great for artists, songwriters and managers who grok the implications of it.  Witness the resurgence of nimble indie music labels, who are enjoying some of their biggest successes in many years.  The stories abound of indie bands cleverly exploiting the new digital reality to break through the noise and find and develop a fan base and get people buzzing about it. 

Properly managed bands can sell-out tours before releasing a CD.  Songs are being shared online by the millions and still, the band can sell CDs.  Lots of them.  Catch the attention of a hot music website like pitchforkmedia.com and you can light your band on fire.  It is an extraordinary time to be in the music business if you have the stomach for it, and the willingness and ability to try new things.

Artic Monkeys are today’s example of the new music paradigm at work, online and offline.  The lads from Sheffield have built a huge and global fan base in a matter of months by burning their demo and giving it away at their shows –actively encouraging their fans to share the songs and tell their friends.  Mick Jagger mentioned them in a Rolling Stone interview.  How’s that for a recommendation.  The torrent began to snowball as they toured like animals and garnered the support of notoriously transigent music rags like NME, local radio, satellite and internet channels.  To be sure, these talented boys have attitude and chops.  Wicked observers of popular culture, their subtly sophisticated songs and solid stage performances combined with giving their fans “permission to steal”, catapulted them into the hearts and minds of millions of friends almost overnight.  Raw talent meets viral marketing.  Brilliant. 

Artic Monkeys have the fastest selling album in UK history and currently #3 on the U.K. charts.  Hmm, fastest selling record amid massive amounts of file sharing?  This defies major label thinking.  Somebody should tell the IFPI and RIAA, the litigious trade associations representing the recording industry worldwide and presently suing tens of thousands of file sharing music fans as I write this.  Duhh?   These Monkeys sold out the Cavern in under an hour and completely sold out two U.S. tours before ever releasing a single or an album. No major radio promotion, no MTV, no huge advertising budget, no headliner tours.  Just a good band with a clear vision about their future and the smarts to get there. Lets see if they can develop this momentum into a career.

Other examples abound.  Britain’s James Blunt soared to success this past summer with the single “You’re Beautiful” reaching #1 across the continent along with the best selling album.  By the time he was signed in the U.S. by Atlantic, his song had been downloaded there nearly a million times according to Joe Fleischer of online media measurement company Big Champaign.  “When it finally got airplay in the States, the song hit a ready audience.”  That audience has propelled Blunt to #2 on both the Billboard Pop 100 and 200 charts.

#3 on the Billboard 200, indie screamo band Hawthorne Heights have built a loyal following by developing online relationships with thousands of fans.  “When we were trying to get everything going, all of us would spend at least four hours every day just adding myspace friends,” says singer JT Woodruff in a recent Billboard interview, and all of this behind heavy touring.  Websites like myspace, purevolume, absolutepunk and others get massive traffic from rabid music fans listening to new music and checking out what other kids are listening to and savvy bands like Hawthorne Heights are taking advantage. 

As music fans we are now in the driver’s seat.  In the new music economy we have fingertip access to thousands of musical niches and the ability to search for the music that we like, pull it to us, and easily recommend things we like to our friends. We are breaking bands, not the labels.  We are the new tastemakers.

We got some amazing software to help us find new music like Pandora and MusicStrands and way more to come.  The power of our online communities and networks are spawning word-of-mouth referrals and interactions that drive the songs and bands that become popular today. This is in stark contrast to old skool shove ‘em down their throat tactics of major label radio promotion.  We are now in charge.  We are choosing what we like and buzzing like bees when we find it.  We are the new radio.

P2P SUITS MAKE NO SENSE FOR MUSIC BUSINESS

Terry McBride, CEO of Vancouver-based record label and management company Nettwerk Music Group, offered to pay the legal bills of David Greubel, a Texas father of four who the RIAA has targeted with
a suit for illegal file sharing. McBride contends that the RIAA’s suits against music fans are "killing our future." Here, he explains why.

The passionate message of music is in the magic of the song. The more it is consumed, the more it nourishes. Music is ubiquitous; it is a utility like water. It is not a pair of pants, and as such, we need to stop treating music like a product that needs to be controlled.

My goal and my reasons for agreeing to pay the legal fees of the Greubel family are quite straightforward. The goal is to stop all litigation against music fans; the reasons are as follows:

1. The RIAA has relied on data provided by Pew
Internet & American Life research to claim that the litigation is
working to deter illegal file sharing, stating that broadband Internet
penetration is growing faster than the measurable base of peer-to-peer
file sharers. Consequently, this litigation is forcing the music fans
to use technologies that are not measurable or traceable, such as
instant messaging and BitTorrent. The latter now accounts for more than
60% of Internet traffic, according to slyck.com. So, in fact, we are
not deterring file sharing, just deterring our chances of monetizing it.

2. Millions of Americans, including the majority of
those in the music business, have shared music. This dates back to
mixing one’s own cassette tapes in the ’70s. Breaking the law has never
been about volume. Teenagers today are simply using the technology at
hand, similar to how we did when we were teens.

3. These same file sharers are great music fans and
are breaking new artists with little or no mainstream media support.
For example, Clap Your Hands Say Yeah, the Arcade Fire and Sufjan
Stevens—not to mention Arctic Monkeys in the United Kingdom—all can
thank this grass-roots community for the fact that they are selling
hundreds of thousands of albums.

4. The music market is down not because of P2P
"piracy," but for four simple reasons: a) stiff competition for the
entertainment dollar from formats like videogames and movies, both of
which have much larger marketing spends; b) the replacement cycle is
over—digital music does not scratch or wear out like past formats; c)
one now has the ability to purchase and listen only to the great songs
without filler; and d) mass-merchant retailers today carry only the
current hits, with little to no catalog.

The RIAA’s litigation policy has no upside. It is
destroying our ability to monetize the P2P market by chasing music fans
even further underground. It is hypocritical because we have shared
music for decades. It distorts the focus from the real reasons for the
decline in music sales. And, most disturbingly, it undermines the
importance of these file sharers. They represent behavioral marketing
at its best and as such should be embraced, not sued.

Litigation is destructive. We are a creative community
so this approach makes no sense at all. I cannot envision any artist
who I have the privilege of representing suing a fan for sharing his or
her music.

I applaud the efforts of the French Senate to pass a
copyright bill that encompasses all forms of digital distribution,
including P2P, as reported in the Jan. 7 issue of Billboard. Finally,
we have some politicians that have the foresight to see beyond the
powerful lobbies and into the future.

From Billboard.biz

See also previous post on this subject

SFX Entertainment founder Robert Sillerman challenged the business thinking of the traditional recording industry during a recent keynote address at the Billboard Music & Money Symposium Thursday. Sillerman criticized labels and distributors for "ignoring technology and consumer preferences," eventually creating the conditions for file-sharing pioneer Napster to thrive. But years after Napster faced its legal doomsday, Sillerman wondered if the industry had implemented the changes needed to survive. "Did the music business get the message from Napster?" Sillerman wondered, while opening the possibility that labels will ultimately bite the dust. In a dark suggestion, Sillerman quoted F. Scott Fitzgerald, who was once asked how people go bankrupt. "Gradually, then all of a sudden," he responded.

Sillerman established himself in live performance, and those stripes shined brightly during the keynote. "In all cases, there’s more money performing than recording," he said, noting that future artists may create business models that focus on free recordings and paid performances. "Can’t you imagine a millennium-born artist giving away music for free, and selling performances?" Sillerman asked, while reiterating that pre-recorded music will not be a breadwinner moving forward. "The music business does not mean selling recorded music, it means selling music," he said.

Sounds vaguely familiar…

Reported by Digital Music News

Speaking
at the Music 2.0 conference in Los Angeles on February 23, Yahoo
Music’s general manager Dave Goldberg startled listeners with a
statement probably never previously heard from the head of a for-pay
digital music service: Lay off the DRM.

"DRM is not a consumer
value proposition, it’s a consumer cost," said Goldberg. "It creates a
nice barrier of entry for the tech companies, rather than something
that’s beneficial to labels, artists, or consumers."

Most of his talk was hardly revolutionary (listen to it here),
but the part that caught our attention was his analysis of how DRM
discourages consumers from purchasing legitimate music files, since it
imposes restrictions on the use of that music that illegal alternatives
do not. In fact, Goldberg joked, when his PowerPoint presentation
repeatedly ran into difficulties, "We believe that music should be in
my car stereo, in my home, on my phone—anywhere but on my PC, where it
could crash on me."

"Record labels don’t like to hear this, but
consumers have always had access to pirated music that’s free. . . .
The way to get more money from listeners is to give them a lot more
music for their money," he said, promoting subscription-based access to
labels’ catalogs.

"Most people believe they can get enough value from what they get for free," alluding to a number of easy methods for acquiring gratis content online. That puts stores like Yahoo Music Unlimited in a tough position, especially when it comes to younger buyers. To solve the issue, Goldberg pointed to a number of strategies and innovations. That includes better playlist features, effective personal recommendations, better distribution across devices and platforms, and more seamless billing. Throughout, Goldberg drew a parallel to the successes of Evian, one of the first bottled water giants. For Goldberg, continued innovation will help to power a $30 billion digital music market ahead, which will consist mainly of transaction-based, subscription, and ad-supported content.

The pressure to create viable markets online is intense, especially as traditional sales outlets continue to lose steam. Goldberg noted that many consumers are not making repeat visits to paid music stores, deterred by aggressive price points and onerous usage restrictions. "There is a cost associated with DRM, and that is lost sales of content," Goldberg said, cutting against the prevailing major label philosophy. Goldberg called for more innovation, and encouraged the industry to experiment with more MP3-based sales plays. Citing the successes of eMusic, which offers its tracks in unprotected MP3s, Goldberg predicted that overall sales volumes would not be adversely affected by such a move.

Stereophile and Digital Music News

After selling one billion downloads on its iTunes Music Store, Apple has cause for celebration. But should record labels be joining in? According to Eric Garland, CEO of media monitoring firm BigChampagne, the economics of paid downloads are a major cause for concern. During a keynote presentation at Music 2.0 in Los Angeles, Garland compared the recent Apple accomplishment to the number of free downloads from P2P networks during the same time. Apple may sell over one million tracks per day, but P2P networks supply over one billion tracks per month. And over a nearly-three year period, that difference is quite pronounced, making iTunes a relative sideshow.

While the gulf between free and paid is glaring, Garland noted that piracy isn’t the biggest problem. Six years after the Napster revolution, consumers are overwhelmingly cherry-picking singles online, part of a larger migration away from bundled albums. "The sad fact is that given the choice online, people choose songs over albums," Garland noted. The result is that consumers are no longer forced into a bundled purchase, and per-transaction amounts plummet as a result. "Piracy is the red herring," Garland said, while pointing to successful bundling strategies across industries like cable TV and personal fitness clubs.

Meanwhile, other industries are executing bundling strategies quite successfully, including cable TV operators and fitness clubs. And while the CD is waning in influence, newer bundling concepts are emerging online. Already, eMusic is pushing a bundled download offering, which requires upfront payment for a specific number of tracks per month. Scott Cohen, co-founder of sister-company The Orchard, noted that many of the premium monthly buyers actually download the fewest tracks, pointing to an inherent tendency among consumers to buy more than they can eat. Meanwhile, labels are increasingly bundling extras like liner notes and bonus tracks into digital albums.

From Digital Music News.