First published December 2009.
Towards a New Music Business Model And The New Thinking That Is Required.
The future does not fit in the containers of the past.
"..we are now in an era where spectatorial culture is giving way to participatory culture"
director, Comparative Media Studies Program at MIT.
I give thanks once again to Brian Zisk and his incredibly motivated crew for inviting me to speak at the upcoming
event on December 7th in San Francisco, and later at the
in Austin in March 2010. Brian is one of the organizers of SanFranMusicTech and is moderating the panel that I will be on at SXSW. [If you've never attended SanFranMusicTech I would encourage you to do so. It's a wonderful, energetic mix of entrepreneurs, tech experts, musicians and thought leaders in the digital space. In other words it's not just for musicians or techies...] The panel discussions will revolve around the premise of how, or if, musicians are using the tools available to them on the
I have written this essay as a prelude to the upcoming panels, both to outline my views on the subject in advance, and also as a way to organize my thoughts and past essays into one place. The debate surrounding online music distribution still evokes passion from critics and supporters alike, the most vocal being musicians who believe that I am working to make music free online and therefore
. Nothing could be further from the truth, I simply argue that musicians need to monetize everything around their musical output and stop dreaming that CD sales will one day return to previous levels; where the 2009 equation means 100k is the new 1mm, 10k is the new 100k etc. I should point out for the record that I am focusing almost exclusively on non-mainstream, independent musicians. [Although there is no reason at all that mainstream, commercial artists shouldn't be doing the same thing.]
It Has Been Almost Fifteen Years
It has been more than a decade since I was last fully
[and then only peripherally as GM of
,] and I have long held out hope that musicians would ditch the old media model, both the business and the manufacturing sides, and fully embrace the huge possibilities that the unfettered social web allows them - asymmetrical distribution as opposed to old media distribution silos, two-way communication with music fans as opposed to old media PR, and marketing tactics and an unparalleled universal sandbox in which to experiment.
I am still waiting. Unfortunately my patience is now wearing thin. And my impatience is no longer with the record labels, it’s with the musicians. Despite all the data and untold amounts of writing about the decline in music sales, mainly the fall off of CD sales, musicians appear to be sitting on their hands. The reason I am no longer impatient with record labels is because their business model is transparent - they exist to make money from musicians. On the other hand, musicians are [or ought to be] immersed in their art; no one guarantees a living from the arts, but talk to the average musician about internet music distribution and you will often hear the same refrain – “downloading and file-sharing is killing music and denying me a living..” [BTW, that is not the best argument in the for and against wars of online music distribution; in the USA musicians conveniently forget that MTV and commercial radio is built on the back of musicians and those companies don't pay royalties for that privilege. You can include MySpace in there too.]
that musicians need to drop the notion of making money from CD sales through record labels and concentrate on making money from the
; a brand they own, no one else. The downside to this for musicians is that they need to
get organized and work hard
, or arrange for what I call the "fifth Beatle" to help with online communications, selling merchandise etc. Consider
from Russell Davies
Creating music is only the first step to creating something valuable and timeless. For instance, David Byrne
. Music released as part of an event is the future - Radiohead's
was the first step toward the album release as event,
if it's an album at all.
. How it's done is also important. The
has changed forever. Remember what
has to say to advertising agencies trying to embrace the social web -
"The future does not fit in the containers of the past."
It is no different for bands.
is now in the hands of musicians, not technologists, not record labels.
or perhaps release your music
: “Control has moved from the few to the millions of many. If dull labels and dull bands keep offering dull, flat, non-experiential product – e.g. a CD, they will go the way of the Dodo. Consider what
provides as an experience compared to
’s circus. Or
compared to your average music festival.”
Valuable and Timeless - Some Examples
So who is working at the edges of independent rock music for instance? Below are but a few examples of musicians currently providing what I feel is valuable and timeless work; I consider
valuable and timeless
as 'worth spending time in the present with,' as time is our
; art does not necessarily exist to entertain us, it should fill our time with wonder.
From left to right:
as Fever Ray,
's 52 minute long 'Scotch Mist,'
Stillness Is The Move video,
live as reviewed by Sasha Frere-Jones,
, back in the 70's performing Horses on British TV and
performing on Earth Day in Washington, DC. [I know I'm walking on thin ice here as music taste, as with one's taste in art, is highly subjective, but...]
Click on the images to link to content
Online Music Businesses Cannibalize Each Other's Model
As we approach 2010 we can now look back at the decade we are leaving behind and arguably acknowledge that only
, with its
software and well designed and ergonomic hardware, was able to move the needle when it came to monetizing the MP3 download –
this I know from just a cursory look at my Warner Music royalty statements
. The one-stop iTunes package, coupled with the affinity that consumers feel when engaging with the Apple brand, simplified the downloading of music for millions of people. Those with more technical knowledge continue to use torrents to access music and film downloads.
Subscription services such as
continue to survive, but judging by their
, they have only created niche businesses supported by a minority of music fans. Recently News Corporation has
and two founders of Skype will soon launch
, yet another subscription model. These two are following in the footsteps of
. Clearly the music access space is becoming crowded which only leaves consumers with paltry options, all based around similar offerings. None of this bodes well for the future of music, or for musicians, if we consider that income from these services has come
from CD sales a decade ago. And by the way, I do not align myself with those that say the Internet is killing music. On the contrary, I argue that the major record labels and the RIAA, through their relentless lawsuits campaign, destroyed the trust and goodwill that music fans felt when interacting with music brands [musicians, artists, bands,] and by doing that they pushed music into being a
, a mere commodity.
We need new thinking….
The Physical Space to Digital Space Dilemma for Producers [Brands and Musicians]
In a classic producer to market economy the producer typically has access to, and/or controls, the distribution channels and uses mass media channels to market the product. This works just fine in the physical world of CDs or vinyl records but the Internet shatters that model. In the past, musicians signed to labels and
signed away the rights to their copyrights and masters
, in return for access to manufacturing and distribution. [Unfortunately some still do..] The labels controlled the system and the purse strings – for artists it was a heavy price to pay.
These days the web gives individuals access to the same level of technologies as any organization
; the playing field has been leveled. In what now seems like ancient history,
while in college just over ten years ago, not because they wanted to create a new music business model but because the tools to create an online music file sharing system were at hand. It did not require a well-capitalized organization to start
– whether he knew it or not, Fanning was simply a pioneering disrupter who brought the music business to the brink of disaster. Venture capitalists soon swooped in an attempt to force through a new music business model, but the labels fought back litigating the original Napster out of business. [BTW, the record labels missed a huge opportunity by not embracing Napster but that's another story.]
In a recent
, my business partner at
, Justin Spohn, writes of how brands face a similar disruption as they move from the physical to digital space:
“In the physical world, brand competition can be, and has been, essentially symmetrical. Even as new competitors come into the market, there are certain practical restrictions – legal, social and physical that they’re all bound by. Competing brands have similar opportunities based on similar goals, laws, availability of scarce resources, development of distribution chains, and access to communication channels. This symmetry helps to create a stasis that keeps established brands on top [and] prevents upstarts from posing immediate risk to established institutions.
In the digital space though, almost none of this applies. Resources are not scarce to begin with, and become more widely available everyday. Practically speaking, there is no such thing as a distribution chain, and where there is something that might resemble one, the iPhone app store for example, access to it has nothing to do with the size of your organization. Because on the web individuals have access to the same level of technologies as any organization, and because they can distribute it just as effectively, it means that brands are now not just competing with other brands, but with individuals whose goals are not only not the same as a brand, but possibly in direct conflict. The competitive landscape is flat with established brands fighting what amounts to a global asymmetrical battle.”
The paragraph above outlines very clearly why Rhapsody, EMusic, LaLa, iLike, Spotify, Google Music, Rdio and the new offering from News Corp via MySpace are all fighting an asymmetrical battle – the online music landscape is flat, these company’s offerings are almost identical [i.e. they all license music from the same pool of copyright holders,] and they are fighting each other for a miniscule share of music fans’ dollars. In short they are cannibalizing each others business models. Only iTunes stands alone as a differentiator. The CEO’s of the other companies need to understand that the only thing that’s
, and they should be looking very closely at what their company’s brand strategy is, as only that will inform their social web music business strategy. They should be constantly looking over their shoulder, as any individual could disrupt their web business models at any moment.
In his essay
concludes by saying - "
There are several trajectories here, but the main thing I want to point out is just that: the multifaceted influence of technological mediation.
Every change has unintended consequences
, and we lose something with every gain. These changes are neither good nor bad, but we should be mindful that they’re happening
Get Over Sucking on the Music Nanny State teat. A Digital Future Requires Strategy
Now that the internet has provided
with all the tools they need to bypass the existing recorded music system, there should be
no excuse for musicians to not go it alone
. Yet, the producers – the musicians themselves, remain the problem. I believe that the safety and comfort offered to them in the past – record label deals, publishing deals, old media distribution, plus MTV and commercial radio for the most successful – created a diabolical music
, an addictive teat at which to suck that they are now having trouble weaning themselves off. I know there are many examples of musicians embracing the web but they have taken only baby steps and are in the minority – the majority are still staring into the headlights. [I purposefully won't discuss Radiohead and Nine Inch Nails here as much has been written about their successful use of the social web and I consider them special cases.]
The Nanny state reduced risk taking and danger in popular music. The very founding spirit of rock and roll was danger. Danger as perceived by those who didn’t understand the outburst of energy and excitement that this early musical form drew out of teenagers. Parents and adults in authority voiced their concerns and this led to ridiculous moments in musical history such as TV cameramen being told to only film
.. If we fast forward to 1975 in the UK, we find that rock and roll, a mere 20 or so years later, with only a few exceptions, had become commercial, flabby, conservative and mostly dull. Then along came a new genre of music delivered by bands like the
who injected rock with some street smarts and and sprinkled it with just a
of danger. It was known as
I bring up punk rock here as it defines a moment in rock music history that was as disruptive in 1976 as online music distribution became in the late 1990’s. Punk rock challenged people’s assumptions that popular music would always be, and could only be, controlled by large, well-capitalized, business organizations. Punk rock drove down production values and just like the Internet, became disruptive and leveled the playing field. Punk bands formed quickly, releasing records as 7″ vinyl singles on their own equally quickly formed record labels. A long term career in music was not the point of this enterprise, many bands flamed out within six months of their existence. Small independent labels sprang up to cater to this avalanche of bands, offering more favorable contracts than the majors had in the past. Business is business though, and the small label owners had plans for growth that ultimately led to punk rock’s demise. Soon enough punk rock was commoditized and, after a brief fling with
, quickly fizzled leaving the stage for the
and their ilk. It wasn’t long until it was business as usual for the record labels – five years of promise had passed very quickly.
So I have to ask – why is there no online music equivalent of punk rock? Why is there no real and passionate embrace of the new?
The barriers to entry into the new music business are even lower than back in 1976. Why then, when the options to go it alone are everywhere online, do bands sign up with
for instance, a
company owned by the right wing media curmudgeon Rupert Murdoch? [Without going in to too much detail, I wonder if musicians and artists have ever read the
?] And then there’s
, two privately owned companies who are amassing a large amount of data about their users – how will that information be shared, or will it? Who owns it? Questions about who owns what with regard to copyrights and masters were paramount during the punk rock period of 1976 – 1981. Why not now, as data becomes the new master copyright?
Example from Jay Rosen, Journalism Professor at NYU, from Twitter:
This headlong charge by musicians and artists into social networking, without thinking through the long term ramifications of such behavior with regard to their copyrights, most likely stems from the fact that the average 20 – 30 year old has grown up, knowing only progress and advances in society driven by Internet technology and mobile communications; the use of these networked tools is second nature to them.
, the Director of the Network Architecture Lab at the Columbia University Graduate School of Architecture, Planning, and Preservation, has similar thoughts about young people and progress. Here is an extract from
where he considers the collapse of complex societies and the end of technological advancement as we know it:
“The generation now in its twenties and thirties is used to nothing but growth and to the success of systems like the Internet and cell phones. They’ve seen their lives transformed, largely for the better, by technology. So they find it hard to understand other possibilities, which is going to make it very hard for them. In our culture of punditry, everyone expects an easy, overarching solution, but I don’t think we’re going to find one this time….[Edit]..I think that a young person today needs to learn to be enormously flexible. Ten years ago who thought that we’d be talking about how long the New York Times has to live?”
Digital Natives, Digital Youth and Mobile Computing
I believe that only a minority of musicians are less than precious about their musical works. In other words they understand the power of the social web and how, when a song is released online as a free MP3, it is taken and repurposed by todays creative digital youth. The results can be startling and can often be better than the original work, [although I accept that defining "better" is in the ear of the listener and the artist may not agree.] It is also hard to argue that any "song" by
is not an original work even though it might be crammed with dozens of samples from other artists' songs [but that's another essay..]
The term Digital Native is defined in a
as "a person for whom digital technologies already existed when they were born, and hence has grown up with digital technology such as computers, the Internet, mobile phones and MP3s." The idea has many critics as it only considers a narrow slice of young people and "
...It suggests a fluidity with technology that not all children and young adults have, and a corresponding awkwardness with technology that not all older adults have
And yet it can be argued that when we expand the demographic range of the digital native it increases the audience for online music exponentially.
has no affinity for the CD or even a computer unless it's a mobile device, plus their parents and grandparents are now well up to speed with accessing the social web as well as dealing with mobile technology.
The Herald Sun ran an article earlier this year about Gen Z:
"Gen Z had easily adapted to the challenges of the modern world, including technology, terrorism and climate change, said Sarah Cornish, former editor of magazine Total Girl. "They have never known a life without the internet, let alone computers, and many don't know a world without mobile phones," she said. "Most are also born post-September 11 and some of our readers are concerned about terrorism, and they are much more environmentally aware than previous generations."
When the Herald Sun interviewed seven Gen Z students from Reservoir's Merrilands College, aged from eight to 13, almost all identified global warming and climate change as the world's biggest issue. When asked about terrorism most could recall the September 11 attacks, despite being only very young when they happened. "They blow up everything like the Twin Towers. People had to jump off the building otherwise they'd get a face full of fire," Royce, 12, said.
Technology is just another toy to play with for many of the children.
As we enter 2010, musicians need to acknowledge that the new generation of music lovers do not consider music as more important than the environment or terrorism. They also do not grow up with, or are burdened by, the "
," an endemic institutional culture problem that boils down to this -
when we know something, it becomes hard for us to imagine not knowing it
The new generations will hold previous generations more accountable for creating harm instead of creating and doing good. Not in a liberal, wooly, back to the earth way, but how they define themselves - their
- and how they want to be perceived in society. Young people will move from wearing a brand's clothing that defines them, such as shoe companies, to just simply wearing clothes made by companies that have traditionally used efficient, renewable earth-friendly ways to manufacture and produce. Brand clothing will be acceptable wear if the brand follows those principles and does "good." It will also apply to products. It will definitely apply to musicians and how the next generation perceives their actions, both politically and environmentally.
I will leave you with this Twitter post that I saw, from someone attending a recent media conference:
Ominous thought on media upheavel from Cisco exec: "music is lucky because it went first."
So, musicians and/or bands - do you want the next generation of musicians saying "bands in the decade 2000 -2010 are lucky, because they went first?" I thought not.
Please embrace the web
Supporting Articles and Related Posts
Roy Christopher -
Ze Frank -
Umair Haque [Harvard Business] -
Dave Allen : Some Essays and Posts Regarding Online Music
Additional Articles and Posts
Justin Spohn of
Google vs MySpace
Get Busy Committee
Let's Deliver "Albums" This Way -
Now Now, Every Children
Sydney Morning Herald
The Daily Telegraph
New York Times
Harvard Business Review
Henry Jenkins of Comparative Media Studies Program at MIT on
Harvard Business School
Harvard Business School
New York Times
EMusic and Sony