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The Future of Music Book and Podcast

The Future of Music – by Dave Kusek and Gerd Leonhard

The Future of Music book is available in various forms.

future of music

 

You can buy the book on Amazon.

 

You can purchase the audiobook from Audible.

 

You can listen to the book on iTunes as a podcast for free. Go to the iTunes store and search “Future of Music” podcasts and subscribe.

Here are a few of the reviews.

Publishers Weekly
Two innovators in music technology take a fascinating look at the impact of the digital revolution on the music business and predict “a future in which music will be like water: ubiquitous and free-flowing.” Kusek and Leonhard foresee the disappearance of CDs and record stores as we know them in the next decade; consumers will have access to more products than ever, though, through a vast range of digital radio channels, person-to-person Internet file sharing and a host of subscription services. The authors are especially good at describing how the way current record companies operate – as both owners and distributors of music, with artists making less than executives – will also drastically change: individual CD sales, for example, will be replaced by “a very potent ‘liquid’ pricing system that incorporates subscriptions, bundles of various media types, multi-access deals, and added-value services.” While the authors often shift from analysts into cheerleaders for the über-wired future they predict – “Let’s replace inefficient content-protection schemes with effective means of sharing-control and superdistribution!” – their clearly written and groundbreaking book is the first major statement of what may be “the new digital reality” of the music business in the future.

5.0 out of 5 stars THE FUTURE OF MUSIC IS NOW
Gian Fiero (Hollywood, California)
This book is so brilliant that it makes the vast majority of music industry books that are being published seem irrelevant. It discusses in detail, the reasons why the future of the music industry is headed into the digital/mobile entertainment era. It also provides statistical information that professionals, marketers, entrepreneurs, and educators can use constructively. Both Dave and Gerd (the books co-author), have their fingers firmly planted on current music industry activities and trends. They also possess and display a clairvoyant eye toward the future that offers beneficial insight and foresight to those who may not be aware of what this whole digital (i.e. independent) revolution is about, and most importantly, what it will entail to prosper in it. The book is easy to read, easy to understand and simply brilliant. If you buy just one industry book this year, this should be THE one. Buy it now!

5.0 out of 5 stars Indispensible
Stephen Hill “Producer, Hearts of Space” (San Rafael, CA USA)
A stunningly candid source of concentrated, up to date insight about the music business and its turbulent transition into the digital era. This book tells it straight and will make the dinosaurs of the music industry very unhappy.

Like Martin Luther’s ’95 Theses’ nailed to the door of Wittenberg Cathedral, Kusek and Leonard drive nail after nail into the sclerotic heart of the old-fashioned music business. Their rational vision of the future of music rests on the idea of unshackling music from the hardcopy product business in a yet-to-be-realized era of open content licensing, facilitating sharing and communication among users, and growing the business to its full potential.

It provides as clear a vision of the future of the music industry as you will find, from two writers with a rare combination: a solid grounding in the traditional practices of the music business, an up-to-the-minute knowledge of the new technologies that are changing it, and the ability to think through the consequences.

I’ve dreamed about a book like this, but thought it would be impossible in today’s hyperdynamic environment where every week seems to bring a breakthrough technology, device, or service. But by digging out the underlying trends and principles Kusek and Leonard get under the news and illuminate it. Along the way they provide a brilliantly concise history of the evolution of digital media.

I can’t think of any book more important for artists to get the full re-orientation they need to survive and prosper in the digital era. It’s no less critical for members of the music and broadcasting industries who need to consolidate their thinking into a coherent roadmap for the future. In a word: indispensible.

Other things to do from here:

We have a wide variety of blog posts and articles on the music business and the future of music. Please click on any of these links to read more.

How to Promote Your Music

How to License Your Music

How to get your Music on Spotify Playlists

How to book bigger and better Gigs.

Instagram for Musicians

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49 Ways to Get Free Music Promotion

There are tons of ways to promote your music today with various apps, websites, and services. There are also many things you can do for FREE to help raise awareness for you, your music, and your live shows. To get a better idea of some of the things you can be doing to promote your music, check out this list from Music Think Tank of 49 free promotional tools and methods:

#6 Upload your music to Soundcloud

Soundcloud is arguably one of the best sites to host your music on, especially now that they’ve announced heavy integration with many of Google’s services. If you haven’t already, upload your music on Soundcloud, tag it well, and encourage fans to leave comments on the tracks.

#13 Reward your fans & raise money using Pledge Music

Pledge Music is a great service for simultaneously raising money for your release (or tour, or video) while developing loyalty with your existing fan base, by offering them cool experiences and gifts for ‘pledging’ on your campaign.

#18 Write a guest blog post on a high profile music blog

There are a handful of artists who I only know because they blog heavily on music industry websites. Tommy Darker, Brian Hazard, and Simon Tam are all musicians who I probably wouldn’t have connected with if it weren’t for their participation on blogs like Music Think Tank. If you enjoy writing and have some constructive criticism or ideas on improving the way in which the music industry functions, why not put a post together on one of these sites?

#19 Create a list of relevant bloggers & befriend them

In most genres there is still a collection of music bloggers who influence the listening decisions of many people. This is most certainly the case in the R’n’B and hiphop World. Use sites like Hypem to create a list of potential bloggers, and then begin communicating with them (but don’t jump straight to promoting your music).

#25 Set up a mailing list on Mailchimp

If you don’t have a mailing list set up, fix that. Now.

#39 Tag your fans in photos on Facebook

The image below is of a genius marketing campaign by DJ Tiesto. He put up a banner of himself in the entrance to one of his shows, and his fans got photos taken in front of it. Afterwards, he uploaded all of these photos to Facebook for fans to tag themselves in. This is so effective, because the friends of the fans who were tagged would have then been exposed to DJ Tiesto. Another easy, free, powerful tactic.

To see more, check out the full post on Music Think Tank.

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Words of Wisdom from Roger McNamee

My friend Roger McNamee, a founding Partner and Managing Director of Elevation Partners has been getting some great press lately on his thoughts on the new music business, investing in technology, Apple, Google, Facebook and much more.  Here is the transcript of a speech he gave at NARM earlier this summer, a must read.

“Our band – Moonalice – is inventing new opportunities in music. We would like you all to join us.

I have been a working musician for more than 30 years, and a technology investor for 29 years. I have played about 1000 concerts over the past 15 years, which means I have personally experienced everything in Spinal Tap except the exploding drummers. I also spent three years helping the Grateful Dead with technology and many more advising other bands, most notably U2.

My band is called Moonalice. We play 100 shows a year in clubs and small theaters, mostly on the coasts. Moonalice was the first band broken on social networks. What broke us was 845,000 downloads – and counting – of the single “It’s 4:20 Somewhere.” We’re the band that Mooncasts every show live, via satellite to thousands of fans on iPads, cell phones, and computers. We’re the band that has a unique psychedelic poster for every show. After four years, Moonalice has 371 poster images from the likes of Stanley Mouse, Wes Wilson, and David Singer. Licensing those images will eventually a big business for us. We’re the band that offers the EP of the Month for $5. And we’re the band that uses the latest technology to radically improve both the production cost and commercial value of the content we produce. Now I’m looking for people who want get on this bandwagon with me.

The first question I hope you ask is “Why now?” The world of technology is beginning a period of disruptive change. The old guard – represented in this case by Microsoft Windows and Google search – is under assault and hundreds of billions of dollars may become available for new and better ideas. I hope that gets your attention!!!

The biggest beneficiaries of this disruption should be the people who got the short end of Google’s business model, especially creators of differentiated content. For the past twelve years the technology of the internet has been static. Every tool commoditized content by eliminating differentiation. The most successful companies monetized content created by others. Google was king.

I believe Microsoft and Google are about to get a taste of what the music industry has been dealing with for a decade. Their world is going to change and they won’t be able to stop it. Not so long ago Microsoft’s Windows monopoly gave it control of 96% of internet connected devices. Thanks to smartphones and tables – especially the iPhone and iPad — Windows’ share of internet connected devices has fallen below 50% … and it will fall much further in the years ahead.

Consumers are abandoning Windows as fast as they can. I expect businesses to follow suit.

This is a HUGE deal. Businesses whose employees use smart phones and iPads instead of PCs will save up to $1000 per employee per year in support costs.If corporations buy fewer PCs, they will save tens, if not hundreds of billions per year.

This is happening because today’s strategic applications – email, Facebook, Twitter, LinkedIn, YouTube and other internet applications – don’t need a PC . . . in fact, they are far more useful on a phone.

Microsoft has been in trouble since it first missed the web in 1994. Then it was unable to prevent Google from taking charge in 1998. When Google showed up, the World Wide Web was a wild environment. No one was in charge. The prevailing philosophy was “open source” . . . and free software.

Google had a plan for organizing the web’s information that treated every piece of information as if all were equally valuable. To create order, Google ranked every page based on how many people linked to it.

What we all missed at the time is that by treating every piece of information the same, Google enforced a standard that permitted no differentiation. Every word on every Google page is in the same typeface. No brand images appear other than Google’s. This action essentially neutered the production values of every high end content creator. The Long Tail took off and the music industry got its ass kicked.

Google captured about 80% of the index search business, which gave it a huge percentage of total web advertising. Google’s success eventually filled the web with crap, so consumers began using other products to search: Wikipedia for facts, Facebook for matters of taste, time or money, Twitter for news, Yelp for restaurants, Realtor.com for places to live, LinkedIn for jobs. Over the past three years, these alternatives have gone from 10% of search volume to about half.

As if all this competition wasn’t bad enough for Google, then along came Apple with the iPhone and App Store. Apple offers a fundamentally different vision of the internet than Google. Google is about the long tail, open source, and free, but also had to remove 64 apps from the Android app store for stealing confidential information. Apple is about trusted brands, authority, security, copyright and the like. In Apple’s world, the web is just another app; it is called Safari.

People who have iPhones and iPads do far fewer Google searches than people on PCs. The reason is that Apple has branded, trustworthy apps for everything. If they want news, Apple customers use apps from the New York Times or Wall Street Journal. If they want to know which camera to buy, they ask friends on Facebook. If they want to go to dinner, they use the Yelp app. These searches have economic value and its not going to Google, even on Android.

When Apple and the app model win, Google’s search business loses. Like Microsoft, Google has plenty of business opportunities, but the era of Google controlling all content is over. Consumers compared Google’s open source web to Apple’s app model and they overwhelmingly prefer Apple’s model. Software development and innovation has shifted from “web first” to “iPad first” . . . which is a monster long term advantage. Get this: Apple may sell nearly 100 million internet connected devices this year!

Apple’s strength can be seen best in the iPhone vs. Android competition. There are many Android vendors. Together they sell more phones than Apple does. But Apple gets around $750 wholesale for an iPhone. The other guys get between $300 and $450. This means Apple’s gross margin on the iPhone is nearly as big as its competitors’ gross revenues. Game over.

The other thing that makes Apple amazing is the iPad. No electronic product in history – not even the DVD player – can match the adoption rate of the iPad. Apple may sell another 30 million this year. At this point, the competing products have not put a dent in the iPad. Image what happens if Apple’s share of the tablet market remains closer to the iPod (at 80%) than to the iPhone (20%)?

This sounds like, “Game Over, Apple wins” . . . but it’s not . . . at least, not yet. The open source World Wide Web has finally responded to Apple. A new programming language has come to market called HTML 5. HTML is the foundation of the World Wide Web. For the past decade, HTML has been static, which allowed Google to dominate.

HTML 5 is a new generation of HTML and it changes the game fundamentally. It allows web developers replicate the iPhone experience, but with many extra bells and whistles … and no App Store. One reason HTML 5 matters is because it eliminates Adobe Flash, which has been an inadvertent barrier to creativity

Creativity enables differentiation. Differentiation can be monetized. Huge differentiation can be monetized hugely. With HTML 5, creative people can now use the entire web page as a single canvas. For the first time in a dozen years, web pages will be limited only by the creativity of the people making them. They can create experiences that will be more engaging to consumers and more profitable for advertisers than network television.

New forms of entertainment will emerge. New forms of business. Companies the size of Facebook and Google will develop in categories I can’t guess at. Companies as important as Amazon, iTunes, and Netflix will emerge to support what new content comes to market.

Whether you view Apple as friend or foe, HTML 5 offers real opportunity. Why?

Because you can deliver a better experience than an app . . . without an app. HTML 5 is cheaper to build, cheaper to support, no 30% fee . . . oh, and the apps perform better, too.

I believe Apple’s best response would be to focus on selling hardware and accept that consumers will demand products that happen to bypass the app store. Based on the argument with Amazon, I sense Apple is not ready to concede the point. That’s ironic, because the only way Apple can get hurt would be if they try to force all commerce through the App Store. The would create a real reason for customers to buy a tablet other than iPad.

Let me review my key points so far:

Google and Microsoft will remain huge, but their influence is evaporating, which means we can ignore them

Apple is winning big, which means we have to support their platforms first

For people who make content, Apple is a better monopolist to deal with than Google.

HTML 5 will give you a better product than the Apple app model at a lower cost and with more value.

Now let’s figure out what we can do together. My band Moonalice exists because T Bone Burnett wanted to produce an album of new and original hippie music in the old school San Francisco style. We put together an all-star band with in late 2006 and recorded the album. T Bone was about to win the GRAMMY for the Alison Krauss/Robert Plant album, Raising Sand, so we thought we were made.

We had a budget
We had an A-list PR guy
We had a really fine manager
We had custom label deal with a nice budget
T Bone’s innovative sound technology would make the album cutting edge

Old school music is good. Old school marketing wasn’t going to work for us. About four months before release, I reviewed the media plan with our PR guy. He said, “Sorry, man, but nobody cares.”

A few moments of somber reflection followed. Then, with great regret, I let our manager go. I let our publicist go. I let our label go. For all intents and purposes, we wrote off an album everyone was extremely proud of and which accounted for half of T. Bone’s portfolio the following year when he was nominated for Producer of the Year.

But I freed up most of our operating budget. Real money. And I focused it all on Twitter and Facebook. Our goal was to build an audience of dedicated fans around a Moonalice lifestyle. Three years later, we have 57,000 fans on Facebook and 75,000 on Twitter. We learned a great truth: as hard as it is to get people to spend money, it is much harder to persuade them to spend enough time listening to you to become a long term fan. We traded our music for their time. We discovered we could build an audience by giving away stuff that costs nothing to produce and distribute. These are serious fans who engage with us dozens and often hundreds of times a year.

The first thing we invented was the Twittercast. Before us, no one had ever done a concert over Twitter. Now we have done 103. Our marginal cost is exactly zero. Next we created Moonalice Radio, which has broadcast one song every hour on Twitter for the past two years. Then our drum tech bought a video camera and started recording the shows. Then he bought more cameras, put them on mic stands and started doing live video mixes. About a year ago, he figured out how to mooncast our concerts over the net for free.

Nearly all of our past 100 shows have been mooncast live on MoonaliceTV and then archived. Because we play mostly late shows on the west coast, only 10% of the audience watches in real time. But approximately 3,000 people watch EVERY show on a time shifted basis. Fans like the Moonalice Couch tour because they can chat, make friends, and do things that are not permitted at a live venue. They even buy Couch Tour tee shirts. And they are helping us create a new ecosystem where most of the music is free, because Moonalice art and life style products have huge economic value.

Thanks to HTML 5 and a satellite dish, Mooncasts can now be viewed on a smart phone without an app. Our video quality competes favorably with the best you have seen on an iPhone, and the technology to do all this costs the equivalent of six months of our former manager. He was a really good guy, but a satellite-based tv network is more valuable.

I want to finish up by recommending a course of action for you

Step 1: Remember that HTML 5 is just getting started, but the learning curve is less expensive and more profitable for those who commit to it from the beginning. The new business is going to emerge over a few years, not overnight

Step 2: Don’t wait for the labels to figure this out. Labels are not organized to get this right, which leaves a big hole in the new music market where labels used to be.

Step 3: Don’t wait for major artists to figure it out. The great new stuff is going to come from artists who have nothing to lose. Artists who come out of nowhere will create huge value for next to no cost.

Step 4: Make sure you are successful addressing the needs of next generation content creators … not just listeners. There are WAY more of content creators than you may realize. Thanks to Moore’s Law, Karl Marx is right at last: the means of production are in the hands of the proletariat. At the peak, there were 8 million bands registered on Myspace. They weren’t playing gigs, they were creating stuff, mostly for their own entertainment. Those people spent a lot more money creating the content they posted on Myspace than they did on recorded music. Thanks to Apple’s Garageband, the population of people capable of mixing something is now measured in tens of millions. Making these people successful is the key to creating new markets and new music products.

Step 5: Do everything in your power to encourage new product ideas and new forms of content. HTML 5 is a blank canvas and there is no telling what people will do with it. For all I know, HTML 5 may produce five or even ten amazing categories of product.

Contests, prizes and publicity will give you an opportunity to associate yourself with whoever creates the cool new stuff. If you have local stores, do local events. Think Alan Freed.

Step 6: Near term, focus your platform strategy on Apple.

Step 7: Long term, focus on HTML 5. The sooner you commit to HTML 5, the more likely you will produce something of economic value.

Step 8: Remember that HTML 5 will produce companies as important as Amazon, iTunes, and Netflix. It costs musicians practically nothing to create good digital video and fantastic audio, but they need distribution systems optimized for their content.

Step 9: Make music fun again”

—

And if that isn’t enough, Roger was kind enough to share with me his thoughts on investing in technology related businesses.  TechInvestingHypotheses

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Cracking the Code to Online Success

Photo credit: http://bit.ly/I1xJV7

Photo credit: http://bit.ly/I1xJV7

I did some interviews recently with Jacob Templin from Time Magazine about the realities of the music business today and what is working for some bands.

Here is one of the videos.  Unfortunately you have to endure a 15 second ad before viewing the story.

With hit songs like Code Monkey, the software developer turned musician turned internet superstar Jonathan Coulton has figured out how to market his music online. His strategy: Give music away and let people play with it.

http://c.brightcove.com/services/viewer/federated_f9?isVid=1

There are two other videos on the Time.com website.  Enjoy.

1) Progressive rock band Umphrey’s McGee gives fans a chance to take part in its live shows. All they need is a cell phone and an idea.
2) The New Orleans trombone rock band Bonerama is playing a private show for Julia Lunetta’s thirtieth birthday. It’s part of a program that offers fans unique experiences with the band at premium rates
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Management Secrets of the Grateful Dead

From a fascinating article just published in the Atlantic. “The Grateful Dead’s influence on the business world may turn out to be a significant part of its legacy. Without intending to—while intending, in fact, to do just the opposite—the band pioneered ideas and practices that were subsequently embraced by corporate America. One was to focus intensely on its most loyal fans. It established a telephone hotline to alert them to its touring schedule ahead of any public announcement, reserved for them some of the best seats in the house, and capped the price of tickets, which the band distributed through its own mail-order house. If you lived in New York and wanted to see a show in Seattle, you didn’t have to travel there to get tickets—and you could get really good tickets, without even camping out. “The Dead were masters of creating and delivering superior customer value,” Barry Barnes, a business professor at the H. Wayne Huizenga School of Business and Entrepreneurship at Nova Southeastern University, in Florida, told me. Treating customers well may sound like common sense. But it represented a break from the top-down ethos of many organizations in the 1960s and ’70s. Only in the 1980s, faced with competition from Japan, did American CEOs and management theorists widely adopt a customer-first orientation.

As Barnes and other scholars note, the musicians who constituted the Dead were anything but naive about their business. They incorporated early on, and established a board of directors (with a rotating CEO position) consisting of the band, road crew, and other members of the Dead organization. They founded a profitable merchandising division and, peace and love notwithstanding, did not hesitate to sue those who violated their copyrights. But they weren’t greedy, and they adapted well. They famously permitted fans to tape their shows, ceding a major revenue source in potential record sales. According to Barnes, the decision was not entirely selfless: it reflected a shrewd assessment that tape sharing would widen their audience, a ban would be unenforceable, and anyone inclined to tape a show would probably spend money elsewhere, such as on merchandise or tickets. The Dead became one of the most profitable bands of all time.

It’s precisely this flexibility that Barnes believes holds the greatest lessons for business—he calls it “strategic improvisation.” It isn’t hard to spot a few of its recent applications. Giving something away and earning money on the periphery is the same idea proffered by Wired editor Chris Anderson in his recent best-selling book, Free: The Future of a Radical Price. Voluntarily or otherwise, it is becoming the blueprint for more and more companies doing business on the Internet. Today, everybody is intensely interested in understanding how communities form across distances, because that’s what happens online. Far from being a subject of controversy, Rebecca Adams’s next book on Deadhead sociology has publishers lining up.

Much of the talk about “Internet business models” presupposes that they are blindingly new and different. But the connection between the Internet and the Dead’s business model was made 15 years ago by the band’s lyricist, John Perry Barlow, who became an Internet guru. Writing in Wired in 1994, Barlow posited that in the information economy, “the best way to raise demand for your product is to give it away.” As Barlow explained to me: “What people today are beginning to realize is what became obvious to us back then—the important correlation is the one between familiarity and value, not scarcity and value. Adam Smith taught that the scarcer you make something, the more valuable it becomes. In the physical world, that works beautifully. But we couldn’t regulate [taping at] our shows, and you can’t online. The Internet doesn’t behave that way. But here’s the thing: if I give my song away to 20 people, and they give it to 20 people, pretty soon everybody knows me, and my value as a creator is dramatically enhanced. That was the value proposition with the Dead.” The Dead thrived for decades, in good times and bad. In a recession, Barnes says, strategic improvisation is more important then ever. “If you’re going to survive this economic downturn, you better be able to turn on a dime,” he says. “The Dead were exemplars.” It can be only a matter of time until Management Secrets of the Grateful Dead or some similar title is flying off the shelves of airport bookstores everywhere.”

Read more at the Atlantic.

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Lessons from File Sharing

From Eliot Van Buskirk and Wired:

To hear some tell it, file sharing gutted the music industry by encouraging people to gorge themselves on free, illegal content. Indeed, unless Friday’s landmark verdict against The Pirate Bay is overturned, four Swedes will spend a year in jail and owe millions of dollars to entertainment companies for operating a file sharing network.

Nonetheless, sites like The Pirate Bay taught — and continue to teach — valuable lessons to the content industry. Even as music labels and movie studios try to sue peer-to-peer networks out of existence, these same networks have been preparing music labels and movie studios for the emerging social-media world, in which sales form only a small slice of the revenue pie, and what really matters is who likes what, and who pays attention to them.

Facebook, MySpace, imeem, YouTube and other social media sites — which the labels now recognize as a major part of their revenue streams going forward — incorporate several aspects of Napster and other early, rogue file sharing networks: buddy lists, user uploads, filtering content by user, viral marketing, ad-supported content and the potential of mining valuable data. The complete DNA of social media was right there, from the very start of P2P.

And even in the early days, the labels were intrigued by the vast pools of user data available on networks like Napster and Kazaa, although they were reticent to take advantage of it.

“It was more than just stigmatized,” recalled Eric Garland, CEO of BigChampagne, which measures the popularity of media on file sharing networks. “They feared that to even look at or inquire about what was happening in the file sharing universe would somehow compromise their unflinching stance that this was unauthorized.”

But as the initial furor over P2P died down, labels began monitoring file sharing networks through BigChampagne and other services. The data they find there continues to help them in any number of ways, from choosing which leaked song to use as the single, to where a band should tour based on the IP addresses of its fans, to figuring out which artists should perform on the same bill.

The labels beat down Napster, Kazaa, Scour and other P2P networks, and if today’s Pirate Bay verdict stands, they will have beaten four Swedes too. Meanwhile, new ways to share files continue to surface, including private and encrypted networks. And The Pirate Bay developers say mirrors exist in other countries, so no matter what happens in Sweden their site will continue to operate. Besides, The Pirate Bay is only one bit-torrent tracker site.

For some, the offense committed by an enabler like The Pirate Bay — as opposed to the people who actually do upload and share copyright material — may be difficult to grasp. You can also find torrents on several other sites — even on Google’s search engine. And YouTube hosts pirated copyright material, until and unless it is asked to remove it by the owner, because it is unable to programmatically detect which video clips are pirated.

But the difference is that Google, Yahoo and MSN aspire to catalog everything indiscriminately, while services like The Pirate Bay explicitly cater to practitioners of digital piracy — and are proud of it, to boot.

Even as the content industry celebrates another false victory over file sharing, the world is moving on, to cloud-based, on-demand streaming services — some licensed — where you can hear music and watch videos faster and in a more social way than you can with bit torrent. And as content holders look to monetize those networks, P2P networks provide the only useful template, because they share so many characteristics with today’s social-media networks.

Garland, who was there, says tools designed to measure user behavior on file sharing networks led directly to tools that now mine licensed networks like Facebook, imeem, MySpace and YouTube.

When it comes to “where and how people stream, download, watch, listen to, blog about or otherwise make use of or interact with music,” said Garland, “file sharing ended up being the blueprint.”

And it’s a good thing that blueprint was there, from the labels’ and studios’ perspectives, because today’s social-media networks contain even more user data than P2P networks do, and that translates to a bigger opportunity to monetize them through advertising, recommendations and, yes, the occasional sale.

In addition to teaching them how to mine social networks for user data, file sharing taught the content industry that it’s often more efficient to address networks than users. On one hand, this sort of thinking led to The Pirate Bay lawsuit. On the other, we have Choruss, Warner Music Group adviser and digital music guru Jim Griffin’s plan to license universities, then ISPs, to allow subscribers to download and upload as much music as they want for an overall, royalty-like fee.

“Asserting property rights and attempts at control have cost the sound recording industry over a decade of licensing revenue [and trading] control for compensation,” said Griffin during his Digital Music Forum East keynote. “Monetizing friction-free access to music will require swinging to the next vine, and when we make that transition we’ll uncover a bigger music service business that’s been too-long trapped in the too-small body of an old product-based business of control.”

The Choruss plan and the RIAA’s official shift away from suing individuals are acknowledgments on the part of the music industry that file sharing will always be a factor, so it could be simpler — and even beneficial — to lump licensed and unlicensed services together under one monthly fee tacked onto users’ ISP bills. (ESPN and other video networks already do something similar.) Love Choruss or hate it, Griffin would never have come up with this efficient way of addressing social-media consumption if file sharing networks had never existed.

Finally, P2P accelerated the development of products that people want to purchase when free alternatives exist. Whether music sales are competing with The Pirate Bay or imeem, the answer is the same: Sell ads against free content, and try to sell people something they can’t access through the free alternative, be it bonus materials, instant access, concert tickets or whatever. Witness Radiohead’s infamous deluxe box set, the recently launched iTunes pass (essentially an album subscription), Josh Freese’s crazy album extras, or iPhone apps that deliver an artist’s latest creations in near-real time.

File sharing networks forced an industry notoriously set in its ways to acknowledge the enormous power of the internet to distribute music through social channels — if anything, increasing its odds of thriving during the inevitable social-media era.

Lawsuits like this one against The Pirate Bay make sense on the surface. On another level, they’re a funny way of saying, “Thanks.”

From Eliot Van Buskirk and Wired:

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Terry McBride of Nettwerk interview

My friend Terry McBride was recently interviewed by Carter Smith of Rollo & Grady. Talk about the Future of Music, Nettwerk is doing it now. Here is the interview:

R&G: What made you decide to focus your business on digital products versus physical ones in 2002?

Terry: It was an intuitive thing for me. Obviously, digital had been seeping into our world for about three years and the Napster effect was apparent. Being a small company and working directly with artists, we could really hear and see what was starting to happen. It was a realization that fighting it wouldn’t work; understanding it and being able to grow it was what was going to work. It was a psychological shift for us. It took a few years to get the rest of the company and analysts focused towards that, but that was the psychological shift for me, which means that the company shifts.

R&G: About 80% of your business is from digital sales now, right?

Terry: Yes, that’s correct.

R&G: Why did you drop DRM in 2003?

Terry: I didn’t see any purpose in locking down files; it made no sense to me. People have always been sharing music. Why would I want to stop them? Why would I want to tell them what to do? The way to win was to get them to support my artists, not to force them to do it a certain way. I know I wouldn’t like anyone telling me that.

R&G: You recently spoke about cloud-based servers, mobile applications and smartphones being the future of the music business.

Terry: What’s happened in the last ten years is kind of moot. The next 18 months will determine the future of the music business. It’s a situation where the turnover on phones by the average consumer – now I’m being generous here – is every two years. It’s probably shorter. The smartphones that are starting to dominate the marketplace are specific platforms now open to applications that are being developed outside of the R&D departments of all of the various carriers. Apple, when they opened up their App Store, I think they sold, what, 150 million apps in maybe 9 months. It stunned the world, and Apple is a small player. They might be a noisy player, but they’re a small player within the mobile space. Research In Motion launches their store this month, Nokia is launching Ovi in April and Google has already launched their Android site. You’re going to see millions of applications come onto the marketplace. You’re going to see social filtering of the really good ones, and what’s going to be in there are applications that change the behavioral habits of how you consume music. The need to download music will no longer exist. If anything, it will be a hassle. You’ll have smartphones that can probably handle two to three hundred songs. That’s a gradual download; you’re actually not streaming it. It’s actually on your phone but it’s pulled from some sort of server, whether it’s your own server or a cloud server. To make all of these applications work, you have to have really good metadata, which means that business has to focus its efforts on really good metadata. Rich metadata is going to work with all of these applications. You’re going to see digital maids, digital valets. You’re going to see applications for maybe five bucks a month where you can access all the music that you want, how you want it, when you want it, imported to any device. So why would you want to download? Why would you want to go online to try to find it for free? Besides, something you find free might not work with these smartphone apps. Five bucks is no big deal to have unlimited access. That’s where everything’s going. All of the current arguments and debates are moot. I would even say that the ticker has now started on when the iPod goes away. I think Apple saw that.

R&G: So their primary focus will be to promote the iPhone?

Terry: They’ve been pushing the iPhone more than anything, and when they opened up their App Store, their intuitions were proven right. It is the App Store that has driven iPhone sales.

R&G: Do you think the major labels will sign off on these applications?

Terry: I don’t think they have any choice in the matter. It’s really just a subscription model, but it’s the application. A subscription model has never worked to date because it’s always been a hassle. It only works on your laptop, you can’t port it between devices, and it’s always streaming and always a pain in the ass. Last.fm and Pandora have been nice, but transferring that around has been really difficult. The applications coming with these smartphones will change all that and make it a hassle not to use them. Downloading will seem like a hassle two years from now. It will be like, ‘Download something? Are you nuts? Here, I can instantly access it. Watch, I’ll just type it in and my valet will go find it for me.’

R&G: Your valet, meaning your filter?

Terry: It’s an app. You’ll program your valet to look at what your 20 closest peers are listening to and create something for you to listen to. Maybe you’re a Led Zeppelin fan and all you want to hear is Led Zeppelin today. Maybe something bad happened and you want to listen to Sarah McLachlan today. Your valet will do that for you, and your digital maid will clean up your library for you.

R&G: That will be huge. It will make music consumption easier for the end user.

Terry: I always call it the hassle factor. It’s a hassle right now to be part of a subscription model. It’s even a hassle to download. These smartphones are radically going to change that. I mean, with Shazam you go, ‘What is that song?’ and you can instantly know what it is and instantly buy it, if that’s what you want to do. Slacker is the first one that comes close to being a digital valet. It’s only going to get better. Anyone with a really good idea can actually make it happen. You’re going to see this coming out of garages and university dorms, not Apple and Blackberry campuses.

R&G: You’re a member of the RIAA. What are your thoughts of them monitoring ISP usage?

Terry: Here’s my whole view of this, and this hasn’t changed for quite a long time. Out of all of the sharing of music, who’s making an economic return? Whoever is should then share that with all the people that allowed it to happen, creating a nice alignment of interests to grow any business. A lot of the providers have viewed music as free content, while at the same time paying for the cable content to grow their networks. They’ve been making money off the backs of the artists without any compensation for the artists at all. I think that’s fundamentally wrong. I’ve also said it’s fundamentally wrong to go after the consumers that are using that opportunity. That’s not the right approach either. The phone companies and the cable providers have gotten away with murder in this whole situation.

R&G: What’s your opinion on music blogs?

Terry: I love music blogs because they’re music fans. They’re authentic and passionate about music. They’re no different than me. All they’re doing is spreading the word about stuff they like. The authentic will rise to the top, which is why I like aggregators like The Hype Machine. I think it’s brilliant. It’s a great way of seeing what music fans are talking about versus some other filter. I’d rather the filter be a social filter, and then you can go into niches. Maybe it’s a bluegrass filter or a country filter or a hard rock filter or an ambient filter. Whatever. Those people are really passionate about that music. You know what? That’s what it’s about. Songs are not copyright. Songs are emotions.

Read more great interviews at Rollo & Grady here.

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The Proof is in the Pudding – Corey Smith

Corey Smith

Bob Lefsetz posted in December about Corey Smith, a fantastic artist who is blazing a new trail through the music business using entirely new ways of thinking.

Corey’s whole business model is based on giving away lots of music for free and building relationships with his fans. Last year he grossed $4.2 million with a team of seven people. He does it primarily through touring and developing seriously close relationship with his fans.

Lefsetz said “Corey was a high school teacher. Playing gigs on the weekend. Marty Winsch (now his manager) was booking a venue. Was there any way to make headway, for Corey to support his wife and two kids playing music?

Absolutely said Marty. But first they had to release the equity in Marty’s recordings. They had to make them free on his site. To everybody.

And it was this giving away of the music that was Corey Smith’s tour support. They didn’t need a nickel from a label or a fat cat. Because once people heard Corey’s music, they had to see him live.

Which they did. In 2007, Corey Smith grossed $1.7 million. This year, not even half a decade into Marty’s management of the act, Corey’s going to gross $4.2 million. Free music built the base. Fan rabidity blew the act up.

You can buy the tracks on iTunes. They’ve sold 420,000 so far. When they experimented last summer, and took the free tracks down from Corey’s site, iTunes sales went DOWN! So, they put the free tracks back up. Actually, people e-mail Marty every day, asking for a track. AND HE JUST E-MAILS THE SONG BACK!

Not everybody’s ready to commit right up front. The free music allows people to try Corey out.

They don’t want radio play. They gave a station in a city sixty tickets to give away, but only on the condition that they DIDN’T play the songs. Marty wants people to experience Corey Smith live. That’s where it happens.

And Marty wants it to be easy. So therefore, he sells FIVE DOLLAR TICKETS! Yes, he rewards fans. Tickets are CHEAPER on the on sale date. And let me ask you, how many people are going to tell their friends they scored such a deal? And maybe drag them along with! That’s your marketing. Your fan base. It isn’t about hiring a PR firm or using Twitter. Actually, Marty pooh-poohs most technology. He says you’ve got be wary that the technology doesn’t get ahead of, doesn’t overwhelm the act. He doesn’t use Google Analytics to find out where each and every fan is. Marty goes on feel. He, and his uber agent Cass Scripps just go into a new territory, and although the first gig might be soft, the one after that never is. Because Corey delivers.

Actually, that’s important. Marty has tried releasing the equity, giving away the music of other acts. But they haven’t succeeded. Because they’re just not good enough.

If you’re truly good, you don’t need anybody else’s money, your recordings can be your tour support, they can put bodies in the seats, you can build a career.

Whenever anybody e-mails Marty and asks if they can meet Corey, Marty always says YES! He tells them when to show up for the meet and greet. This is the new paradigm. Eliminating the gulf between the act and fan. Trusting your audience. That if you’re damn good, they’ll give you all their money.

You don’t have to play by the old rules. You don’t need any money. You just need good music. And good management.”

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The Future of Music Book

Corey recently gave a lecture at a UGA Music Business class and talked about his philosophy and career. He mentioned that he has been influenced by “The Future of Music” book. Yeah Baby!

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Check out Corey’s Website here and be sure to get one of those $5 tickets to see his live show. This is the future of the music business.

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Reconciling the Value of Music

I had the good fortune of meeting Matthew Daniel of R2G in China a couple of weeks ago. He presented his thoughts on the Chinese music market and reconciling the intrinsic value of music over there. It is very interesting that Intellectual Property has had very little monetary value in China and they are struggling with a situation that the rest of the world is just beginning to learn about.

Music in China has essentially always been free. They are now just trying to put structures in place to encourage people to pay for recorded music. Access and Convenience are the keys to his strategy. Lots of lessons to be learned for sure.

“While commercial music consumption has never been more widespread in the known history of man, and with the Internet offering the most capacious vehicle the world has ever seen to disseminate the near infinite body of musical works that exists universally to the greatest number of people, the existing music industry powers-that-be have yet to formulate a system to set this music free – even 10 years after Napster showed the way technologically.

And as elements in the music industry still continue to control the amount of legally accessible music to consumers, and only feed them the acts from which it can make the most money while keeping its vast catalogs in obviously porous vaults, other companies and intermediaries have capitalized on the clarion call to set the music free in all senses of the word. But some of these very companies and intermediaries are themselves simply in the game to enrich themselves via other ancillary services and products which use the pull of music and the accompanying audience, with minimal revenues trickling back to the very creators of the music.

Whilst this tug-of-war continues, one casualty is the increasing reference to music as a commodity,which is a gross misrepresentation of what music really is. Music is food for the soul which creates an emotional attachment with the listener and where it strikes a chord, an intrinsic value in the music is realized.

The industry needs to re-focus on this value in music that many seem to have forgotten, and which others have seemed to have contributed to its devaluation.”

Here is a link to Matthew’s Blog and his presentation from the Transmission Conference I recently attended in Vancouver.

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Cycles in Music – Video

From the Business Innovation Factory Summit, my presentation on the Past, Present and Future of Music.

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Here is the story they wrote about me for the Summit.

Back in the seventies, David Kusek walked from his freshman dorm at the University of Connecticut, down a long hill to the music department for classes several times a week. When the routine got a little stale, he began taking other routes. One detour took him past the computer science building where he quickly noted the “hot” cars in the parking lot. Naturally, he began taking computer science courses.

Great ideas are born in such serendipitous ways. When Kusek melded his deep-rooted love of music with his newfound affinity for computers, he opened up unchartered territory in the music world by inventing the electronic drum. His company, Synare, took a relatively unfamiliar technology (computers) and combined it with an indigenous musical tradition that tuned percussion to the key of the song. Kusek also knew how to start a business, develop products, and take them to market. Having the right price point added to the appeal of the electronic drum and attracted the attention of fledgling artist Donna Summers who took a chance on the new sound and propelled her career.

“For better or worse, we had our part in the disco age,” Kusek says. “We helped to define the sound of the era.”

Taking another detour for curiosity’s sake led Kusek to study animal communication in California with noted biologist John Lilly. They were trying to use sound to communicate with dolphins when the Apple II computer came to market.

Kusek was already synthesizing the sounds that dolphins make, so he devised a way to do the same with musical instruments, to “put the Apple II between the instruments.” He explains that his new company, Passport Designs, “broke music down into a language of expression, which we mapped to simple computer code and connected it to the instruments. We created a computer language for music.” Witness the birth of Musical Instrument Digital Interface (MIDI), developed by a group of companies including Passport, which has left an indelible mark on the music industry by becoming the prototype for all music interface software.

If only they had patented it.

Kusek, along with Dave Smith and the other people responsible for creating MIDI could have made millions with MIDI, but he remains philosophical about this missed opportunity. “Maybe the reason why it took off was that it was absolutely free,” he says. “It was a compact way of representing music in a simple and cheap format.”

Kusek has learned to appreciate and even extol the benefits of free and open access to music. He helped create musical notation software and was instrumental in developing enhanced CDs for the commercial market. He supports the creation of a music utility to “monetize” the immense wave of file-sharing that has become standard operating procedure in the industry. He reasons that Internet users already pay for access to a network that supplies the music, so why not add a nominal fee to the ISP bill and allow for legal trading? With approximately 80 million households using the Internet, a monthly music utility fee of $3 would generate almost $3 billion in annual music sales from households alone.

“If you tracked what was downloaded,” Kusek says, “you could create a system where the money flows exactly to the people who are listening. It could be a 30 to 40 billion dollar business again, as it was in the nineties.”

Admittedly, this system would spread those billions among a larger base of artists, establishing an unfamiliar sense of parity in the music industry. But Kusek says that the megastar is gone, anyway: “In the last four to five years, new artists coming to market are not making anywhere near what artists like Madonna made. I think that happens because of file-sharing, but also because the music industry was taking its eye off what was important. In the mid-nineties, the record companies thought their customers were WalMart and Target. They had no connection to their audience at all.”

File-sharing may have killed the megastar, but not the art, Kusek insists. “I think it’s a great time to be an artist,” he says. New performers may have smaller audiences, but they also have a more efficient way of finding that audience and staying connected to it through online chats, newsletters, and blogs. And instead of the record industry’s marketing machine pushing music at fans with an $18 plastic CD case and the elaborate promotion attached to it, word of mouth is shaping the musical tastes of the rising generation.

As it should, according to Kusek. He has brought technological innovations to the music industry by accepting such change and using it to open up the possibilities of sound. He envisions music flowing in a clean stream wherever people communicate, allowing artists and fans to express themselves freely.

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The Rise of Free Music

These days there are hundreds of options for acquiring music from free legal download and streaming services. Many of these sites offer streaming and/or downloading options. Some are up there for the love of music, some are driven by advertising and some are building business models behind the scenes. They are alternatives to paid services like iTunes, Rhapsody and Napster.

There are an ever expanding number of these services that offer great music from both established and emerging artists. Free Geekery has compiled an interesting list of 100 of these sources for your music enjoyment. Happy listening.

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Making Money When CDs Don’t Sell

Great coverage from Rolling Stone.

While up-and-coming bands may find most of their licensing offers in the $2,500 range, established bands can make much more: from $30,000 at the high end for TV shows to $100,000 for movies and $250,000 for commercials. To introduce last year’s Sky Blue Sky, Wilco licensed six of the album’s songs to Volkswagen for ads. And the veteran duo They Might Be Giants, who have been releasing recordings on their own for the last six years, made a deal with Dunkin’ Donuts for around $1 million to create original music for over two dozen spots, according to industry sources.

Perhaps no band has been more aggressive — or creative — with its licensing than OK Go. When the group treadmilled its way to YouTube stardom in 2006 with the no-budget video for “Here It Goes Again,” it was having the kind of careermaking hit that bands dream about, just as the commercial record industry was tanking. So OK Go manager Jamie Kitman sought licensing opportunities for the group — making deals for its music to be used in everything from TV commercials and video games to corporate seminars and cable TV “bumpers” (the music that’s used to come in or out of a program). Kitman estimates that when all the uses are tallied, OK Go will have granted more than 200 licenses and made old-fashioned hit-record money. “The accepted wisdom now is that no one is selling records,” Kitman says. “So how do you keep the wheels on the bus? There’s a person in my office who spends half her time fielding licensing queries.”

Ian Montone, whose Monotone Management handles the White Stripes, Vampire Weekend, the Shins, M.I.A. and the Raconteurs, says his bands no longer make most of their money on CD sales. “A lot of artists are looking toward touring and merchandising sales at shows, because that market is still vibrant if you grow it methodically,” he says. The Shins have licensed songs for use in commercials for McDonald’s and Zune. Still, Montone says the Shins turn down 90 percent of the licensing deals they’re offered. So why McDonald’s? “Why not?” says Montone. “They have kids and want to own houses.”

By comparison, the White Stripes have focused on touring and coming up with creative merch: The band sells limited-edition CD singles on the road, as well as unique posters created for each show. “We do that because it’s something special for the fans, but it’s also a way to make money,” Montone says. “I think you’re going to see artists doing more direct-to-consumer sales.” The Stripes have already been able to reapportion the record-company pie to their advantage: The band owns its masters and strikes distribution deals with the major record companies on an album-by-album basis.

Those kinds of partnering relationships are also being sought by the major record companies, who are offering artists better money if they sign deals that include more than just recording rights. Generally referred to as “360 deals” because they seek to cover every facet of an artist’s career, including publishing, touring, merchandising and licensing, the new deals are a way for record companies to hedge their bets in a declining record market and to recast themselves as music — rather than just recording — companies.

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One of the savviest labels is Fueled by Ramen, which boasts Fall Out Boy, Panic at the Disco, Paramore and Cute Is What We Aim For. “A lot of people hear about 360 deals and think it’s a land grab, but when you own the content, there are so many interesting things you can do,” says John Janick, who started the label in 1996 while going to college in Gainesville, Florida.

Unlike conventional labels, Fueled by Ramen, which has a partnership with Atlantic Records, does everything in-house: from building Websites that sell merchandise and recordings to producing the T-shirts it sells at chains like Hot Topic. In fact, Fueled by Ramen uses T-shirts to introduce fans to new music — both Panic at the Disco and Paramore placed tags on shirts with PIN codes that enabled buyers to download advance singles at home. “We’re creating a culture for each artist,” Janick says. “Obviously everyone is still looking for new ways to monetize recordings, but our company is growing into many other areas, and that’s great.”

Read more here.

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Download this Song

I heard this song again and had to post about it one more time.

This is a blast from the past (2006) written and performed by MC Lars and inspired by the “Future of Music” book. It is interesting that the point of view represented in the song seems almost like a mainstream idea at this point. Not to say that the financial side of things is working yet, but a lot has happened in the past two years. The future is becoming clearer.

Download this Song – MC Lars

It’s 2006, the consumer’s still pissed
Won’t take it anymore so I’m writing a list
Don’t try to resist this paradigm shift
The music revolution cannot be dismissed
$18.98 Iggy Pop CD?
What if I can get it from my sister for free?
It’s all about marketing Clive Davis, see?
If fans buy the shirt then they get the mp3
Music was a product now it is a service
Major record labels why are you trying to hurt us?
Epic’s up in my face like, “Don’t steal our songs Lars,”
While Sony sells the burners that are burning CD-R’s
So Warner, EMI, hear me clearly
Universal Music, update your circuitry
They sue little kids downloading hit songs
They think that makes sense
When they know that it’s wrong!
CHORUS
Hey Mr. Record Man
The joke’s on you
Running your label
Like it was 1992
Hey Mr. Record Man,
Your system can’t compete
It’s the New Artist Model
File transfer complete
Download this song!
Download this song!
Download this song!
I know I’m rhyming fast, but the message is clear
You don’t need a million dollars to launch a career
If your style is unique and you practice what you preach
Minor Threat and Jello both have things to teach!
I’ve got G5 production, concept videos
Touring with a laptop, rocking packed shows
The old-school major deal? It makes no sense
Indentured servitude, the costs are too immense!
Their finger’s in the dam but the crack keeps on growing
Can’t sell bottled water when it’s freely flowing
Record sales slipping, down 8 percent
Increased download sales, you can’t prevent
Satellite radio and video games
Changed the terrain, it will never be same
Did you know in ten years labels won’t exist?
Goodbye DVD’s, and compact disks!
REPEAT CHORUS
You know, we just wanted a level playing field.
You’ve overcharged us for music for years, and now we’re
Just trying to find a fair balance. I hate to say it, but…
Welcome to the future.
REPEAT CHORUS

Here is what I wrote in ’06.

Check out Lars site.

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