The Future Of Music Business Models (And Those Who Are Already There)

from the a-thorough-look dept

I'm at the Midem conference this week, and in preparing for it, Steven Masur asked me to write up a chapter for a book he was putting together of thoughts from various thinkers for a gathering of the International Association of Entertainment Lawyers (IAEL) here at Midem. Below is what I submitted. If you're a regular reader of the blog, there's little that will surprise you, but even so, it may be a good read, as it's got a whole bunch of different things I've discussed about -- things like "CwF+RtB" all summarized in one single place. Later, I'll do another post on what I discussed this year at Midem, since it builds on what's written below, and digs in much deeper on how to create compelling reasons to buy.

It's no secret that there's a lot of concern these days about what the music industry will look like going forward -- especially from those who work on the label side of the business and have been around for a bit. A variety of things have caused rapid change in the market. Competition from other forms of entertainment, such as the internet, movies and video games, have put more pressure on the industry, as consumers have been presented with significantly more options for their entertainment attention and dollars. And, of course, there's the ever-present specter of unauthorized file sharing -- or, as the industry prefers to call it (accurately or not), "piracy."

While the industry spent many years fighting the rise of the internet as a distribution and promotion method for music, it was eventually forced to recognize it. The labels eventually licensed music to Apple and iTunes (as well as some other stores). It took them way too long to recognize that people wanted DRM-free music, but they've finally come around to recognize that as well.

But the big new questions are all about licensing. New services are starting to show up on the scene, such as the industry's new darling, Spotify. Then there are attempts, such as those by Choruss and Warner Music, to set up something that is somewhat akin to a blanket license. For the most part, the industry hasn't shown much willingness to do these sorts of deals in manners that allow the underlying companies to survive, let alone profit. Numerous innovative startups have suffocated under burdensome licensing terms -- and as each one fails, it just gives consumers fewer and fewer reasons to actually use these services, wondering how long each will last until it goes out of business.

However, there is another solution: stop worrying and learn to embrace the business models that are already helping musicians make plenty of money and use file sharing to their advantage, even in the absence of licensing or copyright enforcement.

In simplest terms, the model can be defined as:

Connect with Fans (CwF) + Reason to Buy (RtB) = The Business Model

Sound simple? It is, if you understand the basics -- and it can be incredibly lucrative. The problem, of course, is that very few seem to fully understand how this model works. However, let's go through some examples.

Trent Reznor, the man behind the band Nine Inch Nails, has done so many experiments that show how this model works that it's difficult to describe them all. He's become a true leader in showing how this model works in a way that has earned him millions while making fans happy, rather than turning them into the enemy.

Reznor has always reached out to his fans, and has an amazingly comprehensive website, with forums, chat rooms and many other ways of interacting. He encourages fans to better connect with each other as well. While companies like Warner Music forced all the music videos of their artists off YouTube for many months, Reznor actually aggregates all the videos his fans take at concerts (he encourages them to bring cameras) on one page on his own website. He does the same for photos. He released a (free) iPhone app that allowed fans to locate each other, and communicate with each other, while sharing photos and videos as well. It's all about connecting with those fans, and helping them better connect with each other, so they feel like a part of a club.

From there, he gives fans real reasons to buy. Lately, he's taken to releasing everything he records for free online, knowing that the music will show up on file sharing sites anyway, so he sees no reason to fight it. Yet, he adds many other options that people might want to buy. With his release of the album Ghosts I-IV, he released all the tracks under a Creative Commons license that allowed anyone to share them online for free. Yet, he also set up some cool "reasons to buy." You could get the two disc CD, if you wanted, for just $10. Above that, though, was a Deluxe Edition Package, for $75. It was, effectively, a box set, but around a single album. Beyond the two CDs, it also included a DVD and a Blu-ray and a photobook of images.

Where the experiment got even more interesting was that he offered up the $300 Ultra-Deluxe Limited Edition Package -- of which there was a limit of just 2,500 available. This was an even more impressive "box" that also included the songs on high quality vinyl, and some beautiful giclée print images. But, most interesting of all was that that limited set of 2,500 were all signed by Reznor himself.

It took just 30 hours for all 2,500 to sell out, bringing in $750,000 in just over a day.

For music he was giving away for free.

But, by connecting with fans, and giving them a reason to buy, they did. In the first week alone, combining all the other offerings for Ghosts I-IV, Reznor brought in $1.6 million. Again, this is for music he was giving away for free.

The idea that you "can't compete with free" or that free means there's no business model is a myth. As Reznor and others have recognized, when the music goes free, it opens up new opportunities for better, stronger, more efficient business models.

Reznor's next album, The Slip, was released just a few months later, and again, was given away entirely free, but it was released the very same day as he announced his next Nine Inch Nails tour. All he asked, if you wanted to download the music, was that you provide an email address. He then gave fans the option of what quality to download the songs -- all the way up to lossless FLAC files. All for free. But, if you downloaded the files, you also learned about the tour, and the tickets were quickly snapped up.

The free music didn't hurt Reznor's ability to earn money. It enhanced it.

By connecting with fans and giving them a reason to buy, he's been able to thrive.

Some have complained that Reznor is not a representative example. After all, that huge fanbase came about in large part because of his success under the "old" model, where he was signed to a major record label who helped promote his album and turn him into an international rock star. While some may quibble with how much the label actually helped Reznor, it's worth exploring how this model has also worked for many other artists -- from the superstars to new up-and-coming acts.

Josh Freese is a session drummer based in Los Angeles, who appears on well over 100 albums and performs with many different bands. He's played with (among others), Nine Inch Nails, Guns 'N Roses, Sting, Devo, The Vandals, the Offspring. Yet, outside of certain musical circles, he doesn't have a huge individual reputation with fans. So, when he released his first solo album, called Since 1972, in March of 2009, he decided to set up a system similar to Reznor's Ghosts I-IV experiment, but made it more fitting to his own personality -- which meant making the options extreme and hilarious.

There were cheap options to get the music and CDs, but at $50, you would also get a personal 5 minute "thank you" phone call, where he said you could ask anything you wanted (his suggestion: "Which one of Sting's mansions has the comfiest beds.") There was a limited $250 option to get lunch with Freese at a PF Changs or a $500 chance to get dinner with him at Sizzler. The lunches sold out in about a week.

Then Freese took the model to a different level altogether. At $2,500 (limit of 5 available), he would provide a drum lesson, where you'd get to keep one of Freese's snare drums. You'd also visit the Hollywood Wax Museum with Josh and one of a rotating list of his rockstar friends (depending on who was available). Finally, you'd get to take and keep any three items from Josh's closet.

At $10,000, you'd get dinner with Josh and a rockstar friend, before hanging out at Disneyland (where Josh's father worked for many years, and where Josh got his start as a professional drummer) with Josh. And at the end of the day, you would get to keep Josh's Volvo station wagon -- after dropping him off at home. Obviously, there was only one of those available.

There were also $20,000 and $75,000 options available, including many more offers, like having Josh join your band or be your personal assistant for a few weeks. You'd also get to go on tour with Josh. He would also write and record a five-song EP about you. A teenager in Florida actually purchased the $20,000 option, and spent a week with Josh, including a night on the Queen Mary cruise ship, a pizza party at Mark Mothersbaugh (of Devo)'s house and a game of mini-golf with the singer from Tool.

Once again, by connecting with his fans, and giving them something of scarce value, Freese was able to create a business model that worked.

Connecting with Fans (CwF) plus a Reason to Buy (RtB) worked again.

However, some still complain that he's a product of the "old" industry, even if he was little known outside of it.

The next example is Jill Sobule, who had a hit song in 1995 with "I Kissed A Girl" (not the Katy Perry song). Since then, however, she's been dropped from two record labels and had two independent labels she was signed to go out of business. When it came time to record her latest album, she decided to get her fans to help fund it. She'd already done an excellent job connecting with her fans, regularly interacting with them on Facebook, where she would hold fun contests each day and actually chat with them and respond to questions.

She launched a website called "Jill's Next Record" that -- like Reznor and Freese -- offered up many options for how her fans could support her to fund a new album. They could pay $200 and get free access to any shows for a year. They could get their name mentioned on a "thank you" song. At $5,000, she would do a home concert at your house. She even noted you could charge for that one, and maybe even make some money. She ended up doing five or six such concerts. At $10,000 (described as the "weapons grade plutonium" level) you could sing on the album. This was meant to be a joke, but a woman in the UK purchased it, and Jill had her flown out to LA where she did, in fact, appear singing backing vocals on the album.

Her goal was to raise $75,000, and she had no idea if she'd be able to reach that number at all. Yet, she broke through that number and ended up raising over $80,000 in just 53 days. With that, she was able to go into the studio and record a full scale production, including hiring famed producer Don Was to handle production.

CwF+RtB worked again.

Again, some complain that Jill is not representative, due to her hit song in 1995 -- though, again, they'll ignore her being dropped from two record labels and and having two others go out of business.

So, let's look at Corey Smith. In the earlier part of this decade, Smith was a high school teacher, playing open mic nights on weekends. But then, he started focusing on building his music career. He started playing numerous live shows, and really worked hard to connect with fans. He gave away all of his music for free off of his website, and used that to drive more fans to his shows. On top of that, he offered special $5 pre-sale tickets to many shows, which has a useful side effect: his biggest fans would convince many others to go as well, building up his fan base, and getting more people to go to more shows. He tried pulling his free music off of his website as an experiment, and saw that his sales on iTunes actually dropped when he did that. In 2008, mostly thanks to live shows, Corey was able to gross nearly $4 million. While giving his music away for free. Connecting with fans and giving them a reason to buy worked wonders.

Jonathon Coulton was a computer programmer. In September of 2006, he decided to write, record and release a new song every week for a year -- with all of the songs being released under a Creative Commons license, so anyone could share them. And share them they did. Coulton became a cult sensation, and was making a good living within months of this decision. His fans were supporting him along the way, even creating music videos for every song he released. He started using services like Eventful to more strategically target concert opportunities. If enough people requested a show in a certain location, he knew it would be profitable and started "parachuting" in to do shows that he knew would make him money. Again, by connecting with fans and giving them a real reason to buy, he was able to build up a great following and make a good living.

Moto Boy is a singer/songwriter in Sweden on the wonderfully named label "Songs I Wish I Had Written." Moto Boy and his label purposely put all of his songs on file sharing networks -- including The Pirate Bay (the label's founder, at times, has shared an office with one of The Pirate Bay's founders). But, Moto Boy has worked quite hard to connect with fans. He has a great website, where fans can interact, and he encourages sharing his music in creative ways. When a bunch of his fans started filming his concerts and putting them on video hosting sites like YouTube and Vimeo, his label found the best such vidoes, and put them all together into a "YouTube concert." Compare that to record labels like Warner Music forcing their content off of YouTube. While all of Moto Boy's music is free, he's continued to connect with fans in fascinating ways. Last year, he began selling wind-up music boxes, that play one of his songs. Just recently, he launched a limited edition (only 25) of those music boxes in beautiful, hand-crafted wooden boxes, signed by Moto Boy, with a CD and the music notation inside the box. Connecting with the fans and giving them a reason to buy beyond just the music has turned Moto Boy into a star in Sweden.

Amanda Palmer is a singer who made a name for herself as a member of the "punk cabaret duo" The Dresden Dolls. While she put out a solo album on Roadrunner Records (a subsidiary of Warner Music), she found that they had little interest in promoting her, and took things into her own hands. She reached out directly to fans on services like Twitter, often setting up "flash gigs" where people would show up wherever she wanted to perform. In June of 2008, one such flash gig at a beach in Los Angeles ended up with an impromptu, beautiful, music video for a song that Palmer had just learned that morning, due to a suggestion from a fan on Twitter. And she's doing a good job making money, as well. Bored in her apartment one evening, she started twittering with fans and came up with a jokey t-shirt suggestion, and set up an immediate store, selling $11,000 worth of t-shirts in days. Another night, she started a live video stream from her apartment, and started an impromptu online auction for various items in her apartment associated with a recent tour, often with a personalized twist. In three hours, she brought in $6,000. Connecting with fans and offering them something fun and unique to buy worked wonders. To date, she hasn't received a single royalty check from Warner Music on her album.

Matthew Ebel is a singer in Boston who started building a fanbase by playing live and actively participating in social networks and other sites. He started regularly performing in Second Life, for example. At one point, he decided to set up a "subscription" backstage pass offer, whereby fans could pay $5, $10 or $15/month to get various benefits -- including access to new songs every couple of weeks, as well as having new recorded shows sent to them. Depending on the level of support, they could get access to special shows, gift bags or other opportunities for unique offers not available to others. Ebel has discovered that he's making enough so that music is his full-time job. Subscription revenues represent nearly 40% of his income, which is about equal to live gigs and sales of CDs and digital songs combined. Connecting with fans and giving them a real reason to buy has made it so that he can have career as a musician.

Moldover is an electronic musician based in San Francisco. Being in such a high tech hub, he had an interesting idea for his next album. Along with the music itself, the CD case would be a working circuit board, with all the songs spelled out in soldered electric circuits. These connected various components to make the CD case itself an instrument. Pushing a button on the side of the case, would light up the center and make a noise, which could be modified through a pair of light sensors, creating a virtual theremin. The case even had a line out jack, so it could be plugged into a computer or an audio system. The CDs themselves were sold for $50, and Moldover discovered the demand was far stronger than he expected. Yes, even though we're told that no one will pay for music (without strict copy protection), this less well known artist is doing brisk business selling $50 CDs.

Of course, these are just musicians, but these sorts of models impact the wider ecosystem. Companies like TopSpin, Nimbit and Kickstarter are making this work today (for artists big and small). TopSpin has helped enable musicians to better connect with fans and give them a reason to buy over and over again -- and found that, when it's done right, people absolutely buy. One of TopSpin's artists recently had an average transaction price of over $100, and multiple artists have seen their average transaction price at over $50. The claim that fans just want stuff for free is not borne out by these examples. Across all of TopSpin's artists, they've seen an average transaction price well over $20 -- more than the cost of your average CD. By enabling bands to connect with fans while giving them something of unique value to buy, beyond just the music, these bands are thriving.

And, of course, there's a role for labels to play as well. Terry McBride runs Nettwerk, a Canadian-based label that has tremendous success embracing these sorts of models with a bunch of different artists. McBride has declared that copyright won't even matter within a decade, and he's acting accordingly. But he's making sure that his acts really do connect with fans. With a recent album release by the hip hop artist K-OS, before the album was released, they released all the stems from the songs to let the fans do their own mixes. These weren't "remixes" because the original mixes weren't even out! Rather than worrying about an album leaking, K-OS and Nettwerk purposely got the core of the music out themselves and let fans do what they wanted with it. They then set up a system to submit the fan mixes and to vote on them, such that the best mixes were then put on their own album, and both the "professional" and the "fan mixed" albums were released at the same time -- leading many fans to buy them both. Both albums, separately, but at the same time, ended up in the top 50 on the charts.

As you look through all of these, some patterns emerge. They're not about getting a fee on every transaction or every listen or every stream. They're not about licensing. They're not about DRM or lawsuits or copyright. They're about better connecting with the fans and then offering them a real, scarce, unique reason to buy -- such that in the end, everyone is happy. Fans get what they want at a price they want, and the musicians and labels make money as well. It's about recognizing that the music itself can enhance the value of everything else, whether it's shows, access or merchandise, and that letting fans share music can help increase the market and create more fans willing to buy compelling offerings. It's about recognizing that even when the music is shared freely, there are business models that work wonders, without copyright or licensing issues even coming into play.

Adding in new licensing schemes only serves to distort this kind of market. Fans and artists are connecting directly and doing so in a way that works and makes money. Putting in place middlemen only takes a cut away from the musicians and serves to make the markets less efficient. They need to deal with overhead and bureaucracy. They need to deal with collections and allocation. They make it less likely for fans to support bands directly, because the money is going elsewhere. Even when licensing fees are officially paid further up the line, those costs are passed on to the end users, and the money might not actually go to supporting the music they really like.

Instead, let's let the magic of the market continue to work. New technologies are making it easier than ever for musicians to create, distribute and promote music -- and also to make money doing so. In the past, the music business was a "lottery," where only a very small number made any money at all. With these models, more musicians than ever before are making money today, and they're not doing it by worrying about copyright or licensing. They're embracing what the tools allow. A recent study from Harvard showed how much more music is being produced today than at any time in history, and the overall music ecosystem -- the amount of money paid in support of music -- is at an all time high, even if less and less of it is going to the purchase of plastic discs.

This is a business model that's working now and it will work better and better in the future as more people understand the mechanisms and improve on them. Worrying about new copyright laws or new licensing schemes or new DRM or new lawsuits or new ways to shut down file sharing is counterproductive, unnecessary and dangerous. Focusing on what's working and encouraging more of that is the way to go. It's a model that works for musicians, works for enablers and works for fans. It is the future and we should be thrilled with what it's producing.

Filed Under: amanda palmer, business models, connect with fans, corey smith, culture, cwf, jill sobule, josh freese, matthew ebel, moldover, moto boy, music, reason to buy, rtb, techdirt feature, trent reznor
Companies: nettwerk, topspin

Nordic Music Week: Optimism Galore And Found Songs

from the good-times dept

Last week, I had the pleasure of attending the Nordic Music Week event held in Stavanger, Norway. It was a smaller event, mainly involving those involved in the music industry in the Nordic countries (Norway, Sweden, Finland, Denmark and Iceland), with a heavy emphasis on independent musicians, as there were no major label representatives there. As such, the event was quite different than most of the typical music industry events I go to. There was very little fretting and worrying about "piracy" and such, and most of the discussions were quite forward looking and forward thinking. In fact, I'd say much of the event was downright optimistic about where the music industry was heading. While there were many great discussions (and I liked the fact that much of the event was focused around open table discussions, rather than just presentations), one of the most interesting presentations was by Òlafur Arnalds, an Icelandic musician, who started his presentation off by saying he disagreed with me and my presentation (which had been an updated variation on my NARM presentation), and had adjusted his presentation to be a response of sorts to mine. Except it wasn't. His presentation was yet another great example of a musician who understood exactly what works in the industry, even as he thought he disagreed with me. We later chatted briefly about it, and realized we're actually very much in agreement about where we stand on the industry. The confusion came about because he is really focused on the music, and felt that my presentation focused too much on the money aspect.

And, indeed, my presentation did focus somewhat on how to make money, but that's because if I just focus on the music, people complain that no one will make money and then no one will make music. But, of course, that's ridiculous. None of these models work particularly well if you don't make great music. And Òlafur Arnalds makes great music -- and once we started talking, even he admitted that in order to do what he does, he needs (and wants) to make a living (which he does). And his actual presentation was about how to do just that. It was all about how he closely connected with his fans and gave them a reason to buy (even if he didn't like to think that way). Instead, he noted that he needed to come up with a good story to go with the music, that would help attract his fans, better connect them to him while also giving them a reason to support him monetarily.

So, with that idea (having a story behind the music) as his basis, he came up with a great project called 'Found Songs', where he would write, record and release a new song every single day for seven straight days. He did it all out of his bedroom. His fans then stepped up and created artwork for each song, and in some cases, amazing videos, such as this one below, which is truly beautiful, and within days had thousands upon thousands of views: You can watch the videos, look at the artwork people created for the songs and even download all the songs for free as mp3s. But, there's also a store where you can buy the beautifully packaged vinyl or CD versions of the album, and some higher quality digital downloads. In other words, it was yet another perfect example of connecting with fans and giving them a reason to buy (and, yes, it involved great music as well -- which is, in fact, key). The importance of having a good story to go along with things, as we've seen with other projects, is a particularly good point. And, again, it shows how an infinite good (a good story) can increase the value of a scarce good (the products you're selling). He also showed how his own fanbase increased massively after doing this project -- much more so than when he was out opening for Sigur Rós. So, in the end, we absolutely agreed, and I found out about some more great music and yet another great story and example to go along with all the others.

Beyond that, I met a bunch of fascinating people doing very interesting and unique things in the music industry in the Nordic region. All of the Nordic countries are working hard to help enable their bands to adapt to a changing music environment, and there are definitely some very creative indie labels, artists and managers who are thinking through and implementing some great ideas that left me quite enthusiastic for what comes next. I also got a chance to meet Moto Boy, who took part in our CwF+RtB experiment, and see him perform live (which was fantastic). Overall, a very encouraging trip.

Filed Under: moto boy, music, nordic music, norway, olafur arnalds, optimism

Hello. My Name Is Martin -- And I'm A Creative Administrator

from the my-story dept

With our CwF + RtB experiment in full swing, we've asked some of the participants involved to provide some guest posts, including their thoughts on the experiment itself. Martin Thörnkvist runs the Swedish Record label Songs I Wish I Had Written, who represents Moto Boy, one of the artists involved in our Techdirt Music Club. If you order both the Techdirt Music Club and the Techdirt Book Club before midnight PT, August 3rd, we'll throw in a free Techdirt hoodie, or a free lunch with Mike Masnick. We asked Martin to write about his experiences with the "new" music world and new music business models:

In 1999 I attended a Ron Sexsmith concert. As always, he did a great performance. He did an amazing cover of Leonard Cohen's "Hey That's No Way To Say Goodbye." The way he introduced made me even more exited: as he played the intro, Ron said, "this is a song I wish I had written." That's admiration of somebody else's art.

Some years before, I had tried to learn play the guitar. I remember one summer in particular I spent way too many hours trying to learn Yellow Submarine. Damn, was I bad. Instead of tearing my hair out while playing guitar, I decided to channel my love for music in another way: I started a web-based fanzine. This was four years before MySpace, and to make it possible for our readers to listen to the obscure indie pop acts (artists like Peter Bjorn and John, Jose Gonzales and Jens Lekman) we wrote about, we started a special webshop for music. Some years later, we got tired of the fanzine, but after some months I missed the webshop bit and started it up again. After a few months, I asked a new band called Eurosport if I could sell their CDs -- to which they let me know they didn't have any! Still, I loved their songs and asked them if they wanted me to print a cover and burn some CDRs, and they agreed. After receiving a threat of being sued, the band changed their name to Le Sport, and the first song they had ever written (and I ever released) turned out to be a summer hit in Sweden. I went with the flow and tried to learn how the music business work. Suddenly, I had a record label. Wihoo.

The name of the label was of course: Songs I Wish I Had Written. The statement I wrote then still pins it down quite well, I think:

"We see this label as a frame that puts pieces of art in the focal point. It's the art itself that is important; the frame exists as a context which further emphasizes the brilliance of the chosen creations."

Now, as you can imagine: a guy with no experience and no money had to rely on something other than the traditional ways of doing things. Luckily for me, some years before the label was founded, the internet had become popular -- with music fueling much of its progress.

"Hey, what a perfect match," I thought. My main goal is to spread the music I love, and here's the most powerful copying machine the world has ever seen at my desktop, free to use. The main reason for the instant success of Le Sport (apart from the great songs) was our way of using free music as a way to market the music. We were sure that the more listeners we got, the more buyers we would get.

I've never really felt any need to think about my role in relation to the artist I work with. I have always gone with the flow. But lately, after a variety of in-depth discussions on the future of the music business, I've started to think more of my specific role in all of this. I think there is a need for a discussion on the role of middlemen in the music industry. I think that's because, to me, it's crucial to make correct (or at least good) decisions on future possibilities and strategies.

In the work of positioning what you offer to your costumers, I think you get a good picture of what contemporary reality looks like. You learn from both the good and bad examples that others are executing in music industry (and other digital content industries). So how could I position myself, where it would be obvious which powerful tools can be used in an inventive way in order to be the best in the world to offer what I need to offer?

The two most important cornerstones I defined for my future work are:

1. to make the music I work with available in as many ways my customers want to listen to it and
2. help the artist I work with with creative ideas to engage with those listeners.

I would like to coin a new term for the type of modern music professional I see myself as being. I'm hereby dubbing myself as a CA - Creative Administrator.

To explain the admin bit: Most artists I know aren't even able to keep a calendar! That's ok, but they surely need help. And so do their fans, who all are wandering around in an all you can eat Mecca. Musicians need an admin and fans require reasons to buy. I need to be creative and always keep an eye (if you have been in the biz longer than me you'll probably need to keep two -- and it probably helps to talk to your kids every day to keep track of what they're doing) on the reality of what I can and should offer my customers, artists and fans: something they can't get elsewhere.

Now, download "A Room Without You" by Moto Boy for free (and enjoy it!) and check out the Techdirt Music Club which features that song as a musical box (creative! right?)

Filed Under: creative administrator, martin thornkvist, moto boy, music
Companies: songs i wish i had written

My Keynote At The (RIAA Sponsored) Leadership Music Digital Summit

from the fun-stuff dept

In mid-March, I had the pleasure of giving the second day keynote talk at the Leadership Music Digital Summit. It was a lot of fun, and generated some really fascinating discussions (as always). There was a lot of demand to get the video online, and I wanted to thank the team at Leadership Music (Kira and Abby) and Matt Houser who volunteered to put together the video with my slides, which you can see on the media page or embedded below:
Leadership Music Digital Summit 2009 - Mike Masnick keynote address, 3/25/09 from Leadership Music Digital Summit on Vimeo.

If you've seen my earlier Midemnet presentation, this is actually an extended and improved version of that, so part of it will already be quite familiar to you. However, the final 10 minutes of the presentation gives me an opportunity to respond to the biggest question that came after the original presentation: how does this work for less well known musicians. So, I went through five different musicians, who all come from different backgrounds and experiences, representing different "success levels" in the industry, to show that this basic concept of connecting with fans, giving them a reason to buy (and not freaking out about piracy) works quite well.

You'll note at the beginning of the presentation, I note that the RIAA was a major sponsor of the event, and there was a huge RIAA logo hanging over my head (not seen in the video). The RIAA also sponsored the lunch following my keynote. While I actually did end up talking to representatives from all four of the major record labels while in Nashville (with... um... very, very, very different reactions from reps from each label, from outright frosty, to curious, to very interested and engaging), no one from the RIAA itself actually said hello. Too bad.

In the meantime, there are a bunch of new events I'll be speaking at in the coming months (all doing very different presentations), and I'll be putting up a post detailing some of those in the near future as well -- and I hope to meet more readers and Techdirt/Insight Community participants at these events.

Filed Under: business models, jill sobule, jonathon coulton, josh freese, keynote, moto boy, trent reznor

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.

Filed Under: business models, jill sobule, jy park, marillion, midem, moto boy, music industry

When Fans Post Videos... Why Not Make A Virtual Concert Out Of It?

from the connecting-with-fans dept

A few years back, the Beastie Boys gave video cameras to a bunch of fans at a concert and then pieced together a video of that concert from all the footage. Other bands have done similar things more recently, and it's becoming increasingly popular for bands to tell fans to video tape them on mobile phones and to put the footage up on YouTube or other video hosting sites. While we do see some musicians, such as Prince, claim copyright over these fan videos, other musicians are trying to do things in a much more creative way. Nancy Baym points us to a Swedish musician named Moto Boy who went around to various videos sites, found all the videos fans had posted of his concerts, picked the best ones, and put them all together to create a "virtual concert" for fans (both new and old) to enjoy. This isn't just to call out this particular act -- as plenty of others have been doing similar things lately, but to show the contrast between this type of reaction -- embracing the fan effort and doing something useful with it -- compared to the "old" model of quickly claiming copyright infringement and demanding a takedown.

Filed Under: fans, moto boy, videos, virtual concert