An Outsider Gets A Peek Behind The Scenes Of The Music Industry's Mindset: Optimism Into Denial

from the it-ain't-pretty dept

I'm writing this on the way back from MidemNet, where I had the chance to present a case study on why Trent Reznor's various experiments with business models represents the future of music. I know many people (both at the show and among the readership here) have asked to see a copy of the presentation, and the folks at Midem are working to get a full video of the presentation online -- hopefully sometime next week. I'll talk more about my presentation at that time, but it seemed to go over surprisingly well, with many of the later presentations making references back to it as a great example of optimism.

That's the good news.

But, of course, we're talking about the recording industry, which has an amazing ability to turn optimism into denial. My presentation wasn't the only bit of "good news" either. The Midem organizers did an amazing job bringing in numerous positive examples of musicians and record labels who hadn't learned to just adapt, but thrive in this changed world. It was like a who's who of folks that we discuss here on a regular basis.

The Outsiders And The Innovators:

Jill Sobule talked about her experiment with getting folks to pay various "levels" to pre-finance her latest album. She said she expected only her mom to donate originally, but instead she raised nearly $90,000 in less than two months -- even more than her original goal. She was especially shocked that someone paid the highest level ("weapons grade plutonium") which she had intended as a joke. But the woman who coughed up that $10,000 got to sing on one of the songs on the album -- though, Jill noted that they had to use Autotune to make her sound good.

Mark Kelly from Marillion spoke about the business model experiments they've been doing as well. As noted in the past, they've been doing this for years and years. Back in 1993, some fans of the band suggested opening up a bank account and donating to a pool in order to allow the band to do an American tour (in that case, those who donated didn't get anything special -- they still had to buy separate tickets to shows). From there, the band kept experimenting, using their mailing list to fund new albums, rather than go with a record label. On the latest album, they decided to go with the free music model -- giving it away entirely, and offering various levels as well (including, like Sobule, getting someone to play on the album as well), and the end result was a huge jump in mailing list names, from which the band expects to derive future revenue.

JY Park, an entertainment mogul from Korea, gave a series of examples of massive success stories he's built in the Asian market, by forgetting about trying to charge for the music, but creating full entertainment brands, where music is just a part of it. He actually has a series of "academies" around the world where he's training the next international superstars -- making sure they know at least two languages, and then getting them involved in a multimedia smorgasbord, from music to TV shows to live concerts to sponsorships and many other things. It's already proving to be a huge success with artists like Rain and Wonder Girls, and there are more opportunities from there.

Terry McBride talked about the various experiments he's been running as well with the Nettwerk Label, to take artists and figure out new ways for them to connect with fans in a manner that helps them build an all encompassing business model that brings in plenty of money.

Martin Thornkvist, who runs an indie record label in Sweden called Songs I Wish I Had Written, and who's built up a coalition of indie labels in Sweden who embrace the internet, called The Swedish Model, talked about all of the possibilities the internet has created -- and why things like The Pirate Bay can be good for music and open up new opportunities. Last year we wrote about how Moto Boy, one of the artist's on Thornkvist's label, was assembling a virtual concert from fan footage. Another cool new thing he's doing with Moto Boy is that he created a little mechanical music box that plays one of Moto Boy's songs. You can place it on any surface and wind it and it plays the song. Moto Boy's music is available for free -- but the music box is a cool souvenir that Moto Boy's true fans are more than willing to pay for.

Nancy Baym showed just how much value there was in the fan community, and the fan's relationship with musical acts -- and how musicians that had learned to embrace their fans were doing amazingly well. For example, the most talked about bands on Usenet weren't necessarily the biggest album sellers -- but they did represent a who's who of the top concert earners. There's a reason for that.

There was a session on how the Chinese music model had evolved. Almost no one buys music there, but it's still a huge money maker for musicians. JY Park had mentioned this in his presentation -- his musicians make a ton of money from brand sponsorships in China -- but there were numerous other examples of musicians in China making plenty of money through mobile subscription services. For example, some musicians get fans to sign up for special subscriptions that represent the only way for them to potentially get tickets to see those acts perform live.

To be honest, it was great to see all of these examples of openness and business models that work on display at the event. The Midem folks certainly weren't shy about bringing in "outsiders" to highlight these things.

The Insiders And Denial:

But, then along came the insiders. There was an intensely frustrating two-part "debate" over how ISPs and the recording industry needed to work together. And, even as they referenced the various presentations and examples that we all made showing that things aren't nearly as grim as they make it out to be, they immediately jumped back to the "problem" of piracy. There were so many examples of artists showing that there were business models that were working today -- often earning musicians more than they ever made before without worrying about piracy, and record company insiders would say "that's a great example to follow..." and then immediately afterwards would say "but we must stop piracy."

Actually, I should clarify that. They seemed to have learned at least some of the lingo of "embracing" file sharing -- but they would say entirely contradictory things right afterwards. It was as if they'd learned a few buzzwords, but not bothered to understand what they meant. Over and over again we heard music industry insiders say that they had made a mistake attacking fans, and that they had to learn to embrace piracy... but then, they'd immediately make a statement about how they needed the gov't or ISPs to take responsibility to squeeze excess cash out of file sharers to make up for their "losses."

It's as if they weren't even listening to what they, themselves, were saying, let alone what others were saying. Here we all were, showing how musicians were making good money (often more than they made in the past) by adopting new models, and all the insiders could talk about was how much money they were losing on piracy. The most striking may have been Kenth Muldin from Sweden's STIM, the Swedish performing rights society, who literally said: "Nothing will drive P2P file sharing from the earth. Nothing. And that's why we need to have legal sanctions against it." If nothing will drive it from the earth, why not embrace it, rather than attack it?

Even worse, that whole session was kicked off by Keith Harris, of a think tank called "Music Tank," and he set the tone for the entire "debate" by noting that all of the important stakeholders were present -- except, of course, the consumers "because they can't afford to be here." To that, everyone laughed -- but it was quite telling. The industry still doesn't believe that the actual consumers really should be a part of the conversation. The idea that they would be there for this debate seemed laughable.

Feargal Sharkey, former punk rocker and now in charge of a group called UK Music that basically represents all of the different players in the UK recording industry, was equally as contradictory. He started out by saying that the industry had made a ton of mistakes and set up adversarial relations that needed to change. But it didn't seem that he meant the adversarial relationship with fans -- but with ISPs. He said that it was time to get past the emotional arguments, and focus on reasoned arguments. And, immediately following that, he launched into an impassioned emotional argument about how "the music is all that matters" and he was sick and tired of bogus outsiders with their "utopian visions" and who spout "wild rhetoric and innuendo," but now was the time to work out commercial agreements whereby the ISPs would finally take responsibility for file sharing and start licensing. In fact, he suggested that, in the UK, at least, such agreements are months, if not weeks away.

Then there was Peter Jenner, manager of various music stars like Billy Bragg, who is nothing if not outspoken. He started out making a decent point that the recording industry was dysfunctional and had a long record of making things more complicated, not easier, but then he went on a rant about how "as long as there are free riders, there's a problem" and demanded that the gov't needed to step in and set up blanket licensing, requiring ISPs to pay up. Apparently, he's absolutely blind to the fact that you can turn free riders into a benefit. It's that old (incorrect) mentality that every freely shared copy is a lost sale, rather than an opportunity.

In fact, he made the incredibly laughable claim that if the gov't doesn't step in soon, "we will see the collapse of the entire entertainment industry." That seemed odd considering all of the examples in other sessions of musicians and record labels doing quite well despite the lack of gov't intervention. Perhaps he was too busy screaming for gov't help to bother to attend those other sessions.

As a representative from the Isle of Man gov't said: "The problem is that this industry is so focused on how much it's going to lose, it never looks at the opportunities of how much money there is to be made."

Perhaps the most amusing was Howie Singer, from Warner Music. He piped up from the audience about how their main focus was on compensating the artist. You certainly could have fooled some of the artists on Warner Music who have noticed that WMG has done plenty to make it more difficult for them to get compensation.

In that discussion, about the only reasonable voice was Gerd Leonhard, who pointed out that a better solution was setting up a truly voluntary (not mandatory) licensing offer that could be paid in a variety of ways: it could be individuals. It could be ISPs. Or, most interesting, it could be brands. What if Pepsi paid to cover all your music file sharing if you bought a certain amount of Pepsi drinks? I still don't think any such license is really necessary given these other business models, but he was one of the few in the debate actually noting that you can't do a top down solution that tries to "control" users.

Surprisingly, Geoff Taylor from BPI was much more reasonable than I expected. While he definitely wants ISPs to "take responsibility" he avoided some of the more ridiculous suggestions made by the industry in the past. In fact, when someone in the audience claimed that ISPs had to give up liability "safe harbors" Taylor pointed out that wouldn't be productive at all, and such safe harbors were at the core of how ISPs worked -- and even raising it would set the discussions back tremendously.. He's right, but it's surprising to hear that from a recording industry guy.

Basically, though, the industry insiders are still so focused on "the piracy problem" that they're blind to the idea that it might not actually be a problem -- as was shown time and time and time and time again during the other sessions. All these guys were doing was focusing on "free riders" or finding others like ISPs and the gov't to "blame" for not stepping in to fix the "problem" rather than looking at all of the amazing opportunities that musicians and indie record labels are already embracing to tremendous success.

So, for all of the optimism presented throughout the event, it was somewhat disappointing and frustrating to see the old guard still totally focused on the wrong issue. The overall event was fantastic though -- to see the various players mixing it up in a discussion like this, rather than it just being a pure echo chamber. It was just frustrating to see so much of the focus from the existing players apparently missing out on all of the amazing success stories and opportunities laid out in front of them.

Hopefully, though, with this dialog started, over the next few years, these ideas will start to permeate more deeply.

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  1. identicon
    Jason, 20 Jan 2009 @ 1:52pm

    Re: Re: business model evolution

    Thus the saddening manufacture and international stardom of Hannah Montana. Oh me.

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