Music streaming and the music industry

Reading this debate in the Observer earlier, prompted by Thom Yorke and Nigel Godrich’s decision to remove (some of) their music from Spotify, has got me thinking about the state of the music industry and its business model. Note the word “state” and not “death”.

The crux of the current argument is that the revenues Spotify and other streaming services provide to artists is not comparable to the previous model. Yorke and Godrich argue this is fine for back catalogue tracks, but not for contemporary music for new artists, who are struggling to support themselves. (I’ll continue to refer to artists during this post, though it might be more accurate at times to refer to record labels)

From reading these articles and others like it over the past few years, a few things strike me:

• The previous business model worked on a combination of broadcast royalties and individual purchases. Online streaming is usually positioned as a replacement for ownership, but really it is a combination of both, potentially depriving artists of both revenue streams
• The past is the past, and we cannot go back to the old model. If all labels withdrew support for online streaming, there would still be YouTube, Tumblr, BitTorrent and other means of distribution
• Mass (commercial) media has been derided as an advertising business, with content provided in exchange for being exposed to marketing messages. With media and content disintermediated, the symbiotic relationship is being cut and new revenue models are needed
• When radio is compared to streaming; it can be shown that streaming pays more per listener. However, the reduced scale/greater efficiency (depending on your perspective) of streaming means net revenues per artist are generally lower
• Technology has made it easier for people to both create and distribute music. With finite space in broadcast media, the long tail has become very long in the online sphere. Meaning that the proportion of artists that can thrive on their revenues is getting smaller
• The idea of a well-remunerated artist is relatively recent. Prior to the introduction of mass distribution in the early 20th century and commercialisation in the 1950s/60s, artists generally had to rely on live performances or patronage to survive. Mozart was one of many artists to famously die penniless. Could this be something that we return to? (A sidenote that I won’t delve into is that this could be another area that the post-war “golden generation” with their big houses and final salary pensions once again trumps against other generations)
• What is fair reward for an artist? Creative endeavours are difficult to judge in economic terms. A trader might argue he or she is worth a percentage of revenue generated. That could be true for artists, but that would indicate revenue generation is the primary goal for producing music rather than artistic expression.
• Some people view the music itself as the “loss leader”. The product that drives awareness of an artist, that can be subsequently exploited through other channels
• However, more revenue opportunities exist nowadays. Modern music is arguably as much about the image or lifestyle as it is the sound, and so we get artists diversifying into clothes, headphones and other accessories. Admittedly, this works better for some genres (pop, hip-hop) than others (folk, for instance).
• Despite the recent dip in the number of festivals, live music and ticket sales are often pointed to as the primary revenue driver. But unlike online distribution, live events are finite and so revenue can only be increased by playing at venues of a larger capacity (which is finite) or raising revenues to the point of marginal utility (which would ultimately segment your live audience as either the most affluent or the most fanatical)
• The more concerts (or media appearances) made, the less time available to write or create new songs. Could this make manufactured pop music the most viable music model? Analoguous to the marketing industry, tasks are split between the creatives (songwriters) who come up with the ideas, and production staff (performers) who execute them. Could this be the future, where songwriters and performers are salaried, with bonuses depending on how well things perform?

No-one yet seems to have the answers, if indeed answers are needed. The music industry is being disrupted, and whatever the future may look like, we have to accept that it won’t be the same as it was in the past.

sk

Disclaimers: I work at an organisation that operates radio stations, but I work in a separate division. I currently pay for a Spotify Premium account, and haven’t bought a CD or digital download for myself for several years

Image credit: http://www.flickr.com/photos/runeone/4168247363

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Should pitching be a classical recital or a jazz improv?

I’ll avoid the layer of lingering suspense from the subject title by saying that it is a false dichotomy. Both can be suitable in different circumstances, though I lean more towards the latter.

Over the past few months I’ve been involved in quite a few pitches – sitting on both sides of the table.

The obvious thing that all pitches need is preparation. Lots of it. But there seems to be two broad approaches (note the emphasis: The rest of the post contains exaggeration).

1. The orchestral recital

This treats the outcome as fixed. Overt preparation goes into perfecting a repeatable performance.

This can be fine if you know exactly what your audience wants, and your audience knows exactly what it is getting. But is can also be a bit obvious. Perfectly pleasant, but not inspiring. It is not necessarily one-note but it is one performance.

In a business sense, it could be a face-to-face pitch follows a written proposal. But unlike a concert, the ticket isn’t bought and the relationship isn’t cemented – thus the dangerous assumption that you know exactly what your prospective client wants could back-fire if there is a miscommunication along the way.

2. The Jazz improv

The opposite end of the false spectrum is improv riffing. Here the preparation is more covert. All the pieces and mechanics are meticulously prepared, but there is no set way to put them together.

This enables a flexible performance to adjust and adapt to the mood of the room. But it still requires a fulcrum or groove to maintain structure and avoid obfuscating the issue.

This approach is more applicable to business development meetings. There may not be a set agenda, so the seller has to adapt to the need of the prospective client. The challenge is to make the covert preparation overt where applicable, through the introduction of easily digestible and memorable products or concepts.

The combination

Clearly, the optimal solution will be a combination of the two approaches – the relative weight depending on the specific circumstances. Across these, there are a few key things to remember.

1. Prepare. And do lots of it.
2. Create a skeleton structure that can be expanded or contracted to fill available space. There may not be a need to talk at someone for 30 minutes, but empty space should be filled
3. Don’t plan to communicate everything that is prepared – always leave things behind that can be brought to the fore if the conversation moves that way
4. If you can’t answer, at least respond – there is always the possibility of an intentionally tricky question. Acknowledge it but deftly segue into a related area that can more comfortably be answered.
5. Prepare multiple scenarios – don’t plan for a single performance, plan for a residency

sk

Image credit: http://www.flickr.com/photos/joelwashing/3108694945/

Content and Interpretation

Content and interpretation are the two primary components of a presentation or performance.

The best performances incorporate both. The mediocre contains one but not both. The worst have neither.

Content also requires context.

Interpretation also requires passion.

Both require relevance.

Both need to create a connection.

Both are subjective.

At this moment of reflection, I would grade a selection of the artists I witnessed at the two All Tomorrow’s Parties festivals as the following:

To give a few specific examples:

• When David Yow ripped off his shirt and jumped into the crowd as the first bars of the first song were hit, you knew you The Jesus Lizard were back, and back properly
• Holy Fuck were my act of the two weekends. Their most recent album is fantastic, and 1.30am on the Saturday night was the perfect slot for them
• Playing in a well lit Pavilion with Burger King and family amusements on show took away some of the atmosphere, but the quality of Beirut and Deerhunter’s material shone through
• Andrew WK only has one song, and that song isn’t particulary good. But he is passionate, earnest and really makes the effort to create that party environment
• !!! are one of my favourite bands and have some great tracks. They blew me away at Glastonbury in 2005, but this performance fell flat in comparison
• I only saw the first half of Tricky’s set, and hear it got better. But the 30 minutes contained all ambient material that I really wasn’t in the mood for
• Madlib closed the second weekend, but only produced a couple of pedestrian raps and complained about people not buying his records
• I may be being hard on some acts. But for acts like Grouper, who play but don’t perform, sets can be quite dull

Ensuring the quality of both content and interpretation is obviously not just restricted to the music stage – it is something to consider next time you are “performing” on any stage, whether a boardroom, conference or park.

I’m going to my third festival of the month this coming weekend (well, at least some of it). After that, I plan to catch up on my reading and writing

sk

Links – 17th January 2009

Aside from links, this blog probably won’t be updated for a week or so. I’m trying to stick to my quality over quantity aim, and my schedule is pretty full at the moment.

Marketing

Paul Isakson posits that weird and wonderful advertising works because of the prompt that our brain receives, irrespective of what the actual message is

Advertising has been about persuading people to purchase things they don’t need. So, with overconsumption being scaled back, Brian Morrissey wonders how the industry will react

Demanding a read/write city – why interactions such as graffiti should be encouraged (Anti-Advertising Agency)

The best and worst logo redesigns of 2008 (Brand New)

Fred Wilson predicts that display advertising will become so cheap that it will outperform search. I somewhat disagree – prices may fall, and effectiveness may improve but publishers can justify premiums due to the surrounding content and context. Network display is more likely to be filtered out. However, the piece is worth reading

Technology

The Feltron 2008 Annual Report – Nicholas Felton has collated a huge amount of data about his life, and published it.Are the benefits of this self-analysis worth the expended effort? I’m not convinced but the report is fascinating, and his interest has led to the development of daytum

CJR has a fascinating two part interview with Clay Shirky

Russell Davies has some excellent ideas in his new schtick

Graeme Wood’s post on the future of television and TV advertising dovetails nicely with my post on targeted TV ads

Business

Umair Haque has a brilliant guide to 21st century economics – he argues that we have to reinvent the global economy

The mistakes that are made in the hiring of NFL coaches (via Ben)

Music

Do the BBC’s Sound of 2009 and other such polls encourage a narrow and homogenised outlook on upcoming music? (Sweeping the Nation)

Interesting look at the remuneration (or lack of) with perceived promotions e.g. I didn’t know that US radio didn’t pay royalties as it claims it is free marketing

Websites

Stack – a great idea for magazine subscriptions – a pick and mix from leading independent titles

I Wear Your Shirt – another social media get-sort-of-rich quick scheme. Pay (fee rises at $1 per transaction) for a guy to wear your t-shirt and promote it online

For the time-pressed, particular recommendation goes to Clay, Russell, Umair and Graeme

sk

ATP – always in beta

The Nightmare Before Christmas, co-curated by Melvins and Mike Patton was fantastic. Musically, it was the best of the 7 All Tomorrow’s Parties weekenders I’ve been to. There are few places where you could find a bill diverse enough to incorporate Mastodon, Squarepusher, Rahzel, Os Mutantes, James Blood Ulmer, Junior Brown and Monotonix (pictured below)

See my Flickr for some more photos from the weekend

Aside from the music, I came away hugely impressed by the organisation. Past events have come in for criticism, but by and large these have been addressed.

• The venue was a bit small and tatty – so they moved to a larger one
• This venue initially restricted alcohol to the room it was bought in – a “zone” of free movement and consumption was introduced
• Some acts attracted big queues – a new stage was created in the pavilion with a larger capacity, and second performances were introduced
• This venue wasn’t optimised for a good sound – the stage was dismantled and the overall event capacity was reduced
• Security had been accused of being heavy handed – virtually all the security I saw were pleasant and approachable (they even let a chalet gig go on until 5am before shutting it down)

Now if only they could improve the road links to Minehead…

This is the idea of business as a service. This harks back to Russell Davies’ post on the lines getting blurry. Organisations should accept their mistakes but work with their stakeholders to continually evolve and improve.

This isn’t a new concept. Back when Japanification was en vogue, kaizen – continuous improvement – was the big buzzword. As epitomised by companies such as Toyota, a stream of small changes was the key to incremental performance gains. Success would be borne out by evolution and not revolution.

I believe that this notion is so crucial because it empowers all of us – whether chief executive, event organiser or researcher. ATP have shown what can be achieved with humility and dialogue. We should all keep the following question in mind.

How can we improve today?

sk

Live Nation’s monopoly

The advantage of having a monopoly, or near monopoly, means that you can pretty much do what you like without fear of revolt. If a customer wants the service, they have nowhere else to go.

Take Live Nation for instance…

• They have been accused of using their dominance to artificially inflate ticket prices
• The 360 deals mean that they will concentrate their efforts on a few commercially successful acts at the expense of diversity and the long tail, squeezing every last bit of revenue to recoup as much of the outlandish fees paid out
• They can offer ridiculous “No readmission” policies without providing food or a smoking area. I am a non-smoker, but “pro-choice”. I didn’t realise Live Nation were into health planning.
• And to top it all, they can introduce priority tickets. The amount you like a band or willingness to queue/wait for a ticket no longer matters – it is all about the phone you have (On the plus side, this may mean that they will no longer be serving Carling)

Is there a concerted boycotting effort going on? Or, like me, are people sucking in their distaste in order to see some of their favourite bands.

sk

Photo credit: http://flickr.com/photos/larimdame/

Eco-clubbing at Bar Surya

Club4Climate recently announced the launch of (according to their press release) Britain’s first eco-nightclub. It is located at Bar Surya in Kings Cross, with the press launch occurring next week on the 10th July.

Among their initiatives include the use of poly-carbon cups, charitable donations, low-voltage lighting and a recyclable water system. However, the most eye-catching element of the scheme is the energy generating dancefloor. The Daily Mail have a diagram of how it will work here.

Due to the costs involved in getting this system up and running, this is more than a mere marketing stunt (though as the Mail story alludes to, you wonder how eco-friendly printing 200,000 Boris Johnson leaflets is). In spite of this, the club will need more than its eco-outlook to survive. I’m tentatively in favour of the idea, but there are several elements of this particular scheme that make me sceptical

• The initiative will get people in the door once. But the primary choice of clubbing venue revolves around where you will have the most fun. The website doesn’t contain any details on the styles of music or the DJs involved.
• People don’t want to be preached at on a night out. Making people sign a pledge (no. 8) before they are allowed to enter will turn people off
• Free entrance to those that travel via public transport, walk or cycle can go one of two ways. Firstly, unless they are targeting the upper reaches of society, the vast majority of clubbers will travel via tube or bus to get there (taxis are for the journey home only) and so few people may pay. However, how do you prove you have walked in? And getting a receipt for Oyster card journeys can be a hassle
• Sadly, the credit crunch means that people will start thinking about the now rather than the future. Will this disrupt eco-projects?

So as far as the PR goes, the venture is a hit. But i think the details may need to be adjusted for it to take off.

If the owners are looking for another PR move, perhaps they could stock some Booty Sweat – the fictional drink in the new Ben Stiller film that Paramount are licencing as a real product during the marketing campaign.

sk

EDIT: I’ve just noticed that Club4Climate have used the Cheeky Girls in a previous PR stunt. Looks like they won’t be going for that more affluent level of clubber

Links – 22/03/08

A couple of days late due to the MRS Conference and Easter playing havoc with my scheduling.

Blog-related

• IBM blogging policy NB: All companies should have one; few do
• Review of WARC Online Conference
• NIN make $1.6m in the first week (Wired) NB: A dedicated fanbase willing to pay for deluxe editions seems to be a pre-requisite for this model to work
• Party trashed after Radio 1 shout-out (BBC) NB: So “traditional media” still has the social power for flashmobs/crowdsourcing/generic person-based buzzword
• Moonwalking Bear Advert (youtube) NB: TfL have been accused of plagiarism for this
• 10 ways digital can help you thrive in a recession (David Armano)
• Are brands out of tune with the global economy? (Nigel Hollis)
• Burger King “Morning tongue” advert (youtube)
• Analysis of the Twitter messages during the Zuckerberg SXSW keynote (Marrowbones)
• How to make a video go viral (technobabble2dot0)
• Marketers biggest challenges with social networks (Advertising Age)
• Will newspapers follow Google’s model? (Brand Republic) NB: The comments are of far more value than the article – a great example of web2.0 in action
• IPA (unsurprisingly) say marketing budgets shouldn’t be cut in a downturn NB: I like the share-of-voice to share-of-market comparison
• Great tool that segments audiences by web participation (Forrester/Groundswell)
• 15 free social media white papers/e-books (Mashable)
• Retort to article on Wired comparing Apple to Google (daring fireball) NB: It is a good argument
• The obsolescence of demographics? (Pitchfork/Blackbeardblog) NB: Thanks Richard!

Random

• Best band logos (Spinner)
• Biggest record label screw-ups (Blender)
• Funny flow charts (MMOABC)
• Very detailed blog on London’s River Fleet (lndn)
• London’s underground mail railway
• Subterranean London mapped (Londonist)
• 100 best last lines from novels (American Book Review) NB: This link is a pdf
• Freecell games split by difficulty
• Excellent write-up of a non-league football match (Guardian)
• Top 10 sci films that never existed (pointlesswasteoftime)
• 5 facts about the Batman TV show from the 1960s (Mental Floss)
• Examples of recreations of the Last Supper in popular culture (culturepopped)
• Evolution of video game consoles (Fun Fever)

A bit of a bumper week given that these links cover 9 days. In particular I would recommend:

From the blog-related side: Are brands out of tune with the global economy?, Analysis of the Twitter messages during the Zuckerberg SXSW keynote, How to make a video go viral, Will newspapers follow Google’s model? and Marketers biggest challenges with social networks

From the random side: Funny flow charts, Excellent write-up of a non-league football match and Examples of recreations of the Last Supper in popular culture

sk

Measuring the success of free music

As an addendum to my prior post on free music, Kevin Kelly has posited a “true fan” model. He argues that having a core following of around 1,000 people per artist would bring in enough revenues to sustain a career. Nine Inch Nails appear to have managed this – their run of 2,500 deluxe ($300!) editions of their latest release sold out straight away, and John Otway has sustained a career this way. Of course, this requires either your fans to grow up with you, or a constant stream of new fans to replace disillusioned ones. NIN’s early music was quite angsty – will their fanbase remain loyal as they enter maturity? The evidence so far suggests they will.

I’m interested in how one can make this a robust business model. In TV land, there is increasing talk about moving from eyeballs to engagement. It is no longer enough for someone to have a TV programme switched on – they need to be attentive, to be interested, to interact. But measuring this is tricky. With music, as the methods of distribution increase, it becomes more difficult to know exactly who owns, or who listens to your music. What proportion of tracks owned by music lovers came into possession through legal (and measurable) methods? And how does ownership intersect with passive listening – through TV, radio, Myspace and so on.

Could musical success be measured by engagement? If the Seinfeld Curve is borne out, the record labels (or their successors) will need greater certainty in predicting ticket sales, not to mention advertising on artist websites and other revenue streams. A minimum number of units sold will be meaningless. Some artists (I can’t remember their names) are now getting people to pay up-front for tours or CDs. If enough people sign up, it happens. If not, the transaction won’t take place. This may work in the odd case but is too rigid to be sustainable for the majority of the market. A model of engagement therefore needs to be found.

A lot of data is already available on music consumption and engagement, but it is proprietary. Could iTunes or Last.fm become an industry currency? If they asked all of their users whether they would be willing to share their data with the music industry, a lot of people would refuse. Understandably so, given the amount of pirated and leaked music available. But if incentives were offered, I believe a a reasonable number would. Interested users could fill in an additional form for demographic information, and this can then be calibrated to the wider audience for greater accuracy. If this became an industry standard, there would be no competitive advantage. The more parties that sign up, the cheaper subscriptions could be and the lower the barrier to entry

Some of the possibilities of data analysis this could offer include:

• Knowing number of plays, not just number of units shifted
• Finding out the top rated tracks for each artist
• Seeing how quickly new tracks are forgotten about and never played again
• Profiling the most avid fans
• Segmenting these fans by geography to plan tours
• Getting similar artists to join the tour
• Measuring the speed at which new music travels globally
• Tracking and predicting popularity of different genres
• Last.fm event attendance can be correlated to music libraries
• Using the messageboards to gather information on buzz
• Surveys can be used to gather opinions to supplement the raw data

I realise this is just a pie-in-the-sky idea and that there are many barriers to this actually being implemented. But if music does become the loss leader to the experience’s premium product, then there is no point in restricting the distribution to official methods. If the music can be democratized, can the information?

sk

Nine Inch Nails and free music

Photo by http://www.flickr.com/photos/mightymightymatze

As the world and his blog is now aware, the latest Nine Inch Nails album has been released over the Internet, in a variety of formats and prices. Rather pointedly, Trent Reznor remarked, “I’m very pleased with the result and the ability to present it directly to you without interference”. However, the most interesting thing about this (press) release is the following quote:

“Now that we’re no longer constrained by a record label, we’ve decided to personally upload Ghosts I, the first of the four volumes, to various torrent sites because we believe BitTorrent is a revolutionary digital distribution method.”

Furthermore, the album is being released under a Creative Commons licence that permits sharing. So, while the music has been made available for purchase both digitally and physically, the band are essentially saying that it is OK to distribute for free. They are not concerned with revenues or royalties on the release.

This leads back to a couple of prescient posts from some very authoritative figures. Firstly, Chris Anderson started the PR campaign for his latest book with a preview in Wired entitled “Free! Why $0.00 Is the Future of Business”. He highlights how Prince was able to release his album for free (or the price of a newspaper, with a free Mail on Sunday bundled in) by making money from live performances. That he could have sold out the dates without the CD is seemingly incidental. I was at one of the O2 gigs and while the performance was fantastic, the CD has had one listen.

The free hypothesis ties in with Seth Godin‘s Seinfeld curve (the second link is a must read):

If you like Jerry Seinfeld you can watch him on television, for free, in any city in the world two or three times a day. Or, you could pay $200 to go see him in Vegas. But there is no $4 option for Jerry Seinfeld. This is death. You can’t make any money in here. Because if you’re not scarce I’m not going to pay for it because I can get if for free. And one of the realities that the music industry is going to have to accept is this curve now exists for you. That for everybody under eighteen years old, it’s either free or it’s something I really want and I’m willing to pay for it. There is nothing in the center-it’s going away really fast.

As Seth points out, digital makes scarcity obsolete. There are no longer finite units – when I lend or share music, I still have my copy. With infinite supply, the price gravitates towards zero.

The traditional business model of the record label is in ruins. Seth suggests that we are moving from brand/artist management to tribal management:

That the next model is to say, what you do for a living is manage a tribe…many tribes…silos of tribes. That your job is to make the people in that tribe delighted to know each other and trust you to go find music for them

I think the Seinfeld curve is genius but, through my interpretation at least, tribal management is flawed. It is saying that niches need to be identified – almost isolated – while an editor of sorts suggest music for the tribe to select. Evidently people can be in multiple tribes, but a tribe – traditionally based on kinship – is the primary social identification. There is a hierarchy. Musical influences don’t conform to this. And if music is free at the point of entry, why should people choose bundles?

Furthermore, musical movements shift faster than general societal trends (where is crunk these days?). Newspaper editors can predict and adapt to shifts, but in this sphere it would be far more difficult. A Nick Denton type mogul could emerge and preside over an ever-shifting portfolio of niche movements. But can this trust last? Gawker hasn’t had the smoothest of rides recently.

I am not nearly as clever or insightful as Seth, and I do not have an alternative answer. What is clear is that the Internet is brilliant for musicians to disseminate their creations virally. More people are listening to more music through more methods than ever before.

And for businesses? In a free economy, one needs a combination of creativity, luck and finance to be heard over the cacophony. And with less control over distribution, it becomes more difficult to judge the success of a release, to measure a return on investment, and to forecast future finances. Dull perhaps, but integral to a healthy business. Guy Hands must be in his worst nightmare. However, this can be where the Seinfeld Curve comes in. The live arena offers a unique, finite experience where supply and price can be controlled. So will CDs become the loss leaders – the razors to the blades?

From a research perspective, the future is fascinating. With no accurate measurements, how can we assess succcess and forecast for the future? As well as music, it raises fascinating questions over the future of TV. I will return to this topic later in the week with a few further thoughts.

sk