Apr 122009
 

This year at SXSW I attended several panels focused on the future of the music business, and although I am obviously in the business myself and would probably draw larger benefits from an old-school music business model, I am very aware of the fact that it is never going to be like it was ever again, for better or for worse.

Throughout the panels I attended I came to an alarming realization: the major players and their lawyers have not yet understood how radically everything changed and are still hoping that they will be able to somehow monetize the distribution of music. They are desperate to find solutions to do so but in the process can’t even agree on anything amongst themselves. So, in the meantime, everything keeps moving towards the point of no return (that being the point where the old business model for monetizing music becomes 100% obsolete) – which I think we already passed anyway. They think that the music industry is changing and are trying to move along as swiftly and cumbersomely as they possibly can. I think that the change has already taken place and it’s irreversible.

The most interesting of these panels was the one called “Is Collective Licensing for P-2-P File Sharing a Future Source of Income for the Music Industry?” featuring Songwriters Guild of America president Rick Carnes, entertainment attorney Dina LaPolt, Future of Music Coalition general counselor Walter McDonough and McGill University professor and Schulich Distinguished Chair Sandy Pearlman (definitely my favorite speaker as well as a great producer, radio Dj, manager, record executive, poet and more):t probably some of the brightest, most engaging and well meaning of all the panelists I have listened to this year. Contrary wise to some other backward thinking stone age movers and shakers who are in denial and just can’t swallow the fact that they are not making as much money as they were used to making and that their pants are around their ankles (as a smart fellow attendee eloquently put it), these four individuals definitely have a more mundane and intelligent approach. Nevertheless I personally think some of them are missing the mark (at least on some of the things discussed) and I would like to offer my personal opinions on the matters.

The ubiquitous paradise of infinite storage theorized by Mr. Pearlman will soon be here (at least in the western world) and I look forward to having my first infinite mobile storage implant (and of course a second implant for the backup – unless that will be in the cloud). Whether storage will be cloud-based or solid and personal, it will be virtually unlimited for everyone soon enough, which means that even if there will be successful subscription-based total-catalog-access music services, future generations will probably still choose to go “steal” the music rather than pay for it (we are in a recession after all ;-)). The reason for that is simple: the old “stealing” is the new “getting”. New generations don’t perceive it as stealing and that’s how they are growing up.
Therefore I cannot share Mr. Pearlman‘s hope for a re-education of the masses because I just don’t think that is a realistic proposition. As a professional audio engineer and producer I have great appreciation for high quality audio and for the differences between a compressed mp3 and an un-compressed wave file. I would love nothing more than for my work to be heard uncompressed and on good systems and I would love nothing more than for the world to even be able to tell the difference. Unfortunately that also has changed. The “kids” of today are unable to discern or just don’t care about quality all together (whether that is their fault or a result of the habit of listening through computer speakers or $5 earbuds is another story). They care about free and free is all they know. They don’t know that people used to pay for this and the future generations will barely even know about the existence of the CD (let alone the vinyl) and of how these medium(s) sounded. As Pearlman pointed out, surveys show that people are not willing to pay for music anymore because they have gotten used to free instant access. This is the new now.

LaPolt is absolutely correct when she points out that nobody is able to agree on anything. Frankly I strongly believe they never will reach an agreement because the nature of free markets pushes all the players towards greed and competition. They can’t agree because they are unwilling to share, every one wants it all for themselves.
Where I think LaPolt is mistaken is when she invokes the help of the ISPs to regulate the distribution of music by charging a blanket fee for having access to music downloads (which would probably not go over well with people who just check their email once every couple of days). ISP’s aren’t even subscribing to the three-strikes-and-out policy lobbied by the record companies because they are so afraid of loosing subscribers.
Charging a blanket fee is highly unfeasible for two main reasons: (a) as McDonough points out, with the availability of encryption and hackers always being a step ahead it won’t be possible to control what data users are downloading; and (b) we are slowly but surely (at last!) moving towards a wireless world where free internet access is available to everyone everywhere, and once there are enough open networks and enough bandwidth people might no longer even need to have a contract with a specific ISP.
Either way, surely it is easy enough to mask your mp3 download as a (say) picture download, so how would we know who is downloading what?

If on the other hand we can establish the absolute identity of the user (as Carnes advocates) it might be possible to charge based on bandwidth usage. Aside from the great online privacy and security concerns that this would generate, I think this solution is also impractical for two other main reasons: (a) there are bandwidth-intensive uses that we already pay for in other ways (think Netflix subscriptions for instant on-demand movies) and (b) there are users (for example photographers or videomakers or business people who do 4 way netmeetings and audio/video-conferencing) who stream, upload, download and share huge files without ever infringing a single copyright (and these users would probably need to take out a mortgage to pay for their bandwidth usage).

I believe it was Carnes or LaPolt who suggested that the government should step in, but nothing good has ever come from the government so I doubt they have any interest or motivation in trying to resolve the conflicts between spoiled music lovers and greedy music sellers. Wars pay (better) and that’s what keeps Uncle Sam busy all year around.

Conceptually I agree with Mr. Carnes when he says that music is more like wine rather than water, but in my opinion this almost egalitarian view of how wine should be paid for is anachronistic and inapplicable at best. I would like to think of music as wine but truthfully nowadays, at best, it is watered-down wine and it is definitely traded more like water.

I had a nice chat with the same well-spoken fellow panel attendee I mentioned above, and he brought up an interesting point I tend to agree with: most likely, while all these players are busy fighting amongst each other, somebody like Google will probably suddenly “solve” the problem on how to put the ‘m’ of money back into the word music.
This is an especially forward thinking opinion when you think about the fact that Google has been quietly acquiring fiber optical properties and licenses and telephone/VoIP companies left and right.
Once bandwidth won’t be a problem anymore (and Google might have a big say when it comes to bandwidth) the move will probably be from desktop (or even laptop) computing to absolute mobile computing. When devices like the iPhone will have the processing power of today’s laptops and be able to project a keyboard and a larger screen on a surface OR when cloud computing becomes the new computing (the recent increase in netbook sales could be a testimony to this development) the people in control of the internet’s bandwidth will be the people in control of the access to the cloud, in control of information and in control of the world.

Personally, if there was a service which gave me (1) ALL the music of the world and gave it to me in (2) HIGH quality and gave it to me (3) EVERYWHERE and (4) AT ALL TIMES (even when I take the subway underground), I would pay for that service. But that’s just me. I care about music, I care about quality of the music, I work in the music business and I am old! Let’s face it. I am barely 32 but that makes me old. That makes me somebody that remembers CDs and vinyl and remembers that music used to be paid for.
Personally I highly doubt that there will ever be a service like that (one that offers all four things) so infinite personal and portable storage is probably much more realistic at this point.

I believe we have to accept that music distribution can just NOT be controlled any longer and that from now (or yesterday) on music is (to be) considered a free commodity. We need to find out how to trade free and make money at it.

I would like to offer my own personal opinion on what will be the only ways left to make money from music in the future (besides control of internet/cloud access, which will realistically not be something start ups and young entrepreneurs will be able to partake in). Of course there are theories and possibilities (added value, subscriptions, tie-ins etc) but I think it will boil down to two big areas:

1. Filtering Services: with all the music in the world soon to be available on a USB9 keychain dongle (or whatever), there will be a big new need to catalog and filter this music accurately and beyond id3 tags. Accessing millions of songs is no joke if you don’t know exactly what you are looking for and this presents a great opportunity for new business models and ideas.
Example: today the google search engine is free but you don’t always find what you are looking for and you could end up getting lost searching for something and never actually finding it. If there was a google premium search service that lets you find exactly what you are looking for right away and every time, wouldn’t it be worth your money?
I believe this might be one important aspect of how the music industry will change, evolve and maybe find alternative revenue streams again.

2. Live Music: although there has definitely be an inexplicable decrease in interest towards live music in the last decade, I strongly think/believe/hope that there might be a huge come back of concerts because this will always be the thing you cannot replace, steal or download. Yes, there is youtube and you can view, download and even steal concerts online, but it will never be the same as actually being there. Blood, sweat and tears are not digitally reproducible and the enthusiasm and emotions that you can feel at a great live show can hardly be felt any other way. Wherever the music industry will go, I believe there will always be a place for live music and that sector (marketing, promotion, venues, managers and agents) will become a more valuable asset.

Possibly concerts might even re-rise the bar and become the new filter for good music made by good musicians (it’s easy to cheat in the studio but on the stage technology isn’t gonna make up for a crappy performance). But I am just being optimistic now…

Of course everything remains to be seen and I am just speculating, like everyone else is, but these are the reasons why I think the currently discussed plans to salvage the old music industry are not practical. We should just stop thinking of the old music industry all together and start inventing the new now of music.