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.

  10 Responses to “The New Now of Music: reflections after SXSW”

  1. I deleted your email by accident. I love your commentary. Please email me again, sorry.

    Walter

  2. Absolutely spot on mate!!! Cheers for that!

    Rokhsan

  3. this is a very clear and synthesized analysis.
    I went to a few talks at several conferences and I thought panelists were usually confused and confusing on the topic. Instead of talking about it, I want to tell them: “just do something creative whatever it is!”.

  4. Marc, your thoughts on this are very much on point. I believe they (the major players and their lawyers fully understand how much things have changed. I further believe that one of the reasons the labels and their lawyers are just chasing their tales is because as you said, they don’t want it to change and because of that they are not “TRYING” to think of new ways to do anything to bring about change. Instead they are dragging it out trying to milk the last few drops of the old model.

    I believe it’s up to the artists! I’ve often stated that the artists (including me) need to come together and create the “new” model. I think in ways the new model is already here but like many things in life we just don’t see it until it bites us on the ass. I think part of that new model could be the artists individual website. Who said fans/customers have to go to a central location for all the music they want. To me that’s still taking a bite out of the old model! I.E. going to a record store. Or maybe if we must have a central location, it could be were artists sign up their website to a central online listing location. LIke CD Baby, but instead of sending their CD’s they submit their website. There by the fan searches the artists, not the songs, that could potential make the search process easier. With a model like that, who’s getting paid? The artist and the company that the artists listed their website on and not the major players. Until they find a way to control that!

    I don’t know, I don’t have all the answers, I’m an old guy like you! But I’m historical at 46 years old, I remember 8tk tape and 1/4″ reel to reel!

    I will say this Marc, I do feel that it should be the job of the recording artist coming together to brainstorm the new music business model. If not, we will continue to not get our proper share of the capital pie!

    David

  5. This is the best overview of where “we” as an industry are headed. I second the motion of paying for quality subscription services. Obviously, Rhapsody the biggest player out there now doesn’t even come close to what is needed. I have my library at home and can put it on an NAS drive and serve it up to my work computer or my iphone. Plus I can carry big usb thumb drives or even small hard drives with all the music I’d ever want but at a certain point I’d pay a weekly or monthly fee to have access to even more if the quality could exceed mp3 or be available in places like the subway, etc.

    And as a songwriter/artist I’m always about getting a tiny taste of something than a big taste of nothing!

    Great ideas Marc!

    -Ray Palagy

  6. A decrease in interest in live music in the last ten years? You can’t swing a dead cat without hitting a free open mic or venue that pays performers next to nothing. That’s how free the market is and how commoditized the music has become. There is a huge oversupply of music talent.

    I think maybe the last significant decrease in big ticket live music was due to how much it cost to put a big show on the road. Paying people and transportation costs were the problem. BTW, for Leonard Cohen at Merriweather, outside lawn seats are $70! One site is listing “down front” seats at $1800!

    So sometimes there are huge divides between the finances of national, regional and local acts. That remains basically the way it’s always been. One thing has changed. Music has been democratized.

    Did the democratization of music cause the problem, or did the problem result in the democratization. Which came first doesn’t really matter. What matters is that individual musicians have been empowered by the evolution of recording technology. The evaporation of mid-tier recording studios, or their migration to becoming “recording schools” is proof of this. This has both positive and negative aspects.

    While it’s good that more people are empowered to record, not all of them are capable of making recordings as good as the previous generation of recording engineers. Some say, “Who cares! It’s the content that matters!” OK, fine, but the lack of real technical knowledge and lack of attention to detail is part of the slippery slope that results in some pretty gnarly music. Regardless of where you come down on this, there’s a ton of product; an oversupply.

    Then there’s distribution. Distribution via the Internet rivals and surpasses the efforts of traditional record companies. While the freedom of Internet distribution is very heady, allowing ANYBODY to be sampled internationally in seconds, this is not always a good thing. If you’re giving it away, you’re diluting the value of music.

    As it has always been, it’s about creating an audience. That means putting butts in chairs, either in local clubs where food and drink allow the owner to make a profit or on American Idol where the show appeals to the masses and the masses are then sold to the advertisers. American Idol, and it’s various offspring, are an ancient but wonderful Darwinian invention with roots that probably precede the Greek and Roman Coliseums.

    While appealing to the masses in highly produced spectaculars, the better performers survive. Then, after the judges decide who has the chops, the masses get to vote in a popularity contest. What a great deal for the…well, lets call them Entertainment Companies, because there aren’t many Record Companies anymore. These “reality” shows deliver eyeballs to the sponsors and at the same time, create artists with pre-built MASS audiences. WHAT A BEAUTIFUL MACHINE! So the big company model not only still exists, it evolves and does quite well.

    I’m sorry. What was the question? The future of the music business? Oh, right. Put butts in seats, deliver eyeballs and/or ears to sponsors, make product and get it distributed so we can sell it and make a living. Isn’t that what record companies used to help do? Yes. It is. So we can do without them if we accept the responsibility of doing it ourselves.

    That used to be the job of the record companies. The job hasn’t changed. The only thing that’s changed is who DOES the job. Us. Now, we are faced with the tough decisions of how to sell and for how much. For the most part, we are pitiful shop keepers. Getting a consensus of where to put the price and when to say “no” is not likely to happen. But one thing is clear, the value of music will remain depressed as long as it remains commoditized and distributed at little or no cost. If I had my way, I’d like every musician to grow a pair (ladies welcome) and start building some self-respect so they feel good about asking more for their efforts. Without that, we will continue to be victimized, with only ourselves to blame.

    Regards,

    Ty Ford

  7. […] a reposting of a recent article by Marc, after his experience at SXSW […]

  8. Hey Marc, great article.. I posted to EPNYC.org

  9. I wanted to respond to Ty Ford interesting reply.

    Yes I do indeed see a decrease in interest in live music. I am not sure if my view of this is biased by the fact that I live in New York, where, as you say, “you literally can’t swing a dead cat without hitting a free open mic or venue that pays performers next to nothing” (usually it’s actually nothing, they just get the tip bucket or a part of that if they are lucky) but to me it does seem like people are less interested in live music and less motivated to go out to shows…

    In the last ten years or more, I have seen a lot of music venues close everywhere… I moved to the US ten years ago and before that I was living in a rural part of Southern Italy. There, in the middle of nowhere, a thriving punk/hardcore scene existed and between 1994 and 1998 there was a punk/hc/rock concert almost every weekend (which believe me, for that rural godforsaken place was a LOT!)… Then around 1997 and 1999 all (and I mean ALL) of these venues closed their doors forever, one after the other, dropping like flies killed by swine flu or something, for no apparent reason (except an obvious lack of interest from concert-goers)… In ’99 I packed up and left for the US and over the 10 years I spent here I saw the same thing happening again… Of course it’s NYC so not all the venues closed but a lot of them did… Some new ones opened as well of course but I don’t think that that number rivaled the number of the ones closing…

    In NYC real estate prices were a major factor in the closing of some of these places, but the second biggest factor was the decrease/loss of interest from the people… And if nobody goes out to concert how do we expect venues to stay open?
    Has anyone noticed that after 9/11 the phrase “have a nice flight” turned into “have a safe flight”? Well in a similar way the ritual and sometimes just habitual “thank you” that the band screamed into the mic at the end of a show, turned into a conscious and heartfelt “thank you for coming out” at the beginning, somewhere in the middle and at the end of the show… I’ve actually noticed this change and the reason for it, in my opinion, is the fact that it is much harder to get people out and interested.

    So, yes Ty, there are a lot of open mics and venues with un(der)-paid bands, but HOW MANY PEOPLE are going to those venues?
    There are some places (like Rockwood Music Hall in NYC’s Lower EastSide) who manage to be packed every night of the week, but there are other places (like the Back Fence in NYC’s West Village) that are often so empty that if you swung a dead cat in there you might not hit anyone at all!

    As Ty correctly points out there is an oversupply of music talent, which is why it is harder to get people interested in anything and to get people to go anywhere. It’s like the internet, there is so much to choose from that a lot of people give up overwhelmed and just choose not to choose and turn to something else (movies, anyone?).

    Concert tickets are becoming insane and are making concerts unaffordable for a lot of people and yet I just read on this month’s issue of Mix Magazine that Live Nation was one of the only companies that made huge quarterly profits in spite of this economic downturn (guess which industry is the other one that seemed to be unaffected? the hollywood industry… again: movie, anyone?).

    Supply and demand has something to do with it but you can’t compare open mics to the concerts that LiveNation puts together… that’s just like saying that if Radiohead gave away their album for free and made a profit anyway, any unknown indie band that gives away their album for free will break even… LiveNation is a major player and it’s also a monopoly… if to that you add the fact that they are merging with TicketMaster it should come as no surprise if big concerts become more expensive.

    This is increasingly going to turn attending a rock concert into the same thing that attending the opera has been for many years: an elite source of entertainment, unaffordable to most people and only available to those who can… almost like in earlier centuries, in a way. I wouldn’t be surprised if in the future at rock concerts you’ll see less ripped and worn out t-shirts and more male and female fashionistas that are there to be seen rather than to listen.

    I was talking to my friend John Zorn the other day about the challenges of running a venue (John opened the Stone, in NYC, to support the local downtown music scene and I have been thinking for a while myself about opening a music venue in NY). He is pretty much the only person I know that runs a music venue without trying to or caring about making a profit. He does it ONLY for the music, 100% of the door money goes to the band and the Stone doesn’t even sell alcohol. He does a benefit concert every month to pay for the rent and that’s it. The reason he choose this formula (not retaining any money, giving all the money to the artists, not selling anything) is because he truly cares about the music and wants to bring the music to the people. Unlike a LiveNation event and many other concerts, the Stone’s concerts are actually priced affordably ($10) and the price is the same every night. True dedication to music, John should be an example to many!

    Anyway, I digressed, sorry about that…

    I agree with Ty about democratization, oversupply and (of course) arguments about recording quality, people’s abilities, form vs content, form and content and so on and so forth. I think we are on the same page there.

    Distribution is most certainly an enormously important factor in all of this. Traditional retail-based distribution is however dead and the new models of distribution tie in with what I said about filtering. If the new value of free that Chris “Mr. Long Tail” Anderson talks about at length is tied in with zero shelf costs, then the ability for consumers to filter the unlimited supply stored on these virtual shelves becomes paramount!

    So, to conclude, we might be victimized by ourselves, but we can be empowered by the situation too! It’s up to us. As always it’s a case of making the best of it.
    The traditional record labels and distributors are both dead and we don’t need them to do what they used to do. We can still use them, but they are probably going to become promoters and marketers more than anything else… They might become street teams, of sort.
    I do have to disagree with Ty on the fact that we’ll be making a living from selling and distributing our product (if you wanna call it that). I don’t think money will come from sales which is why I wrote that post in the first place. People are too used to free and there is no going back I am afraid.

    Distribution and filtering will be the name of the game and hopefully (wishful thinking here) they will trigger increased interest in concerts to the point where concert tickets will go down and music will be available to everyone. Because ultimately it should be taste for certain musical genres and the ability of a band to put up a kick ass live show that should be the final decision-making filter for an audience member, not price!

  10. […] has created. Grammy winning engineer Marc Urselli posted a thorough analysis of what was discussed here. – There were so many great things to see that we skipped the Kanye West party sponsored by […]

 Leave a Reply

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

(required)

(required)

*