The Death of The Music Industry

The huge variety in the ways music fans are getting their music has been a big part of why the old music industry has been challenged to keep up.  For the most part, these new access channels have been good for the new providers who are technically savvy and light on their feet so they can jump on a new market as soon as it forms up.

Well, being light on your feet also means being able to jump off of a market as it starts to fade away.  And one of the byproducts of the new music world is that trends and technologies can come and go as fast as the popularity of Super Bowl commercials.  And unfortunately, that volatility can take a good service provider down if they are not ready to move on as fast as the market does.

The article in Reuters linked here talks about how the ringtone market seems to be making that shift which has hurt some of the providers who were heavily invested in this market.  You can see how they thought this was a long running gold mine.  As the article points, out over 50% of the digital music market has been in the mobile music marketplace so it seems like it was a good bet to get into this market fast and invest heavily for big rewards. 

But competition and shifting alliances can take their toll.  And that is what seems to have happened as operators and labels learned to work around the ringtone providers who were making a good living from providing this service to mobile customers.  Should we be surprised this happened?  No for two reasons.  First, it’s a jungle out there.  We know that.  Intense competition for all parts of the music marketplace is just the day in, day out bread and butter of the industry.  Secondly, it was the search for better ways of doing things that has revolutionized the music markets so much in the last few years and broken the stranglehold the big business record labels and music businesses have had on musicians for decades.  So if this is another casualty of that same innovation that made the new music world so exciting, then we have to take the bad with the good.

http://www.reuters.com/article/musicNews/idUSN1829463520070219

<!–adsense–>

We here at “The Death of the Music Industry” always celebrate and want to throw an additional spotlight on a success in the Indie record label world.  Today’s New York Times provides an article that is an outstanding candidate for that spotlight.  Koch records is the kind of story of an Indie that did whatever it takes to be successful.  From cashing in on The Wiggles and Pokemon to begin that label that picked up what the major labels would not fool with.

The truth is the major labels leave a lot of really great talent laying on the ground because they will only go with the sure things, the acts that the majors know have big market appeal, that they can push over homogenized radio and get out there to lip sync on bland promotional appearances.  Bands or acts that appeal to a small market, that have great material that might be a bit controversial or hard to market to the Wal-mart consumer often get left behind.  That is where Koch Records and Indies like them can find success and slowly build an empire that the major labels would were too narrowly focused to recognize.

Koch also is a classic example of a label that did whatever it could to stay alive proving that “the shameless shall inherit the earth” to scratch and claw their way to the top in the music industry.  Isn’t that a perfect example of how most great bands and musical acts have to live as they too show no shame in their open ambition to make it to the top.  Small wonder Indies have an affinity for these bands and attract great acts to them to find success for both artist and label.  So congratulations Koch Records for your great success well earned by your dedication to the dream and dogged determination not to give up or be pushed around by the big record labels.

http://www.nytimes.com/2007/02/27/arts/music/27koch.html?_r=1&ref=music&oref=slogin

<!–adsense–>

It makes sense it would happen eventually. P2P file sharing services such as Limewire, BitTorrent and others are wildly popular but when you use something like this you have to wonder, how do they make money? Not only that, there is only so long that you can openly defy the entertainment industry to stop you. These may be some of the reasons for the announcements over the weekend that BitTorrent and Joost were firing up legal and “legit” versions of their wildly popular P2P services.

This is in lots of ways a good thing. While the death of the music industry has brought about a bit of a “wild, wild west” atmosphere with renegades and outlaws becoming cult heroes, its hard to see how this situation could go on forever. For us in the music industry, that renegade spirit drives our work so we were probably particularly sympathetic of anyone who could “stick it to the man”. I guess we all wanted to rewrite the song to go “I fought the law, and I won.”

As these services find ways to take the new technology that has permanently changed the music industry and the entertainment industry at large, this is a step in the right direction of seeing the new music industry begin to take shape and become a force to be reckoned with. It’s a tough road to go because it is so easy for a company such as BitTorrent to “sell out” and just become part of the old institutional setting. The money certainly is a compelling temptation to do that. But for every one of our “renegade heroes” who do make the transition and “go legit” but maintain their cred as legitimate members of the new music community, we can celebrate because its all in the name of seeing a new wind blow in this industry we are all working hard to protect and preserve.

A final note that is a bit disturbing is that, as is pointed out in the article linked below, These new services are going to cave on the DRM issue and the downloads they make available for a cost will come with DRM imbedded in them. As several articles on this development noted this weekend, the real competition that these new services will face will be themselves. If users can still use BitTorrent, Limewire and other services to get their music and movies for free and without DRM, they why should they too go legit?

It is my belief that people want to deal in an honest fashion without giving up the good things that P2P downloading provides. I would say to these new services, don’t shoot yourself in the foot by allowing DRM to become part of the download. This move alone could be a serious detriment for users to switch over and stop pirating music from the old services you provided, most of which will continue to be available either from you or form new P2P services that spring up to take your place. Its something to think about.

http://www.reuters.com/article/musicNews/idUSN2518922420070226

<!–adsense–>

It’s a 28 page read but its an interesting approach to finding a way to get artists the royalties they deserve for music that is being distributed online without imposing some ridiculous software inhibitor on the music such as DRM.  The article I referenced yesterday is worth a look.  Now get a cup a coffee, its going to take time to get through it. 

What I particularly liked about Lincoff’s analysis of the problems plaguing the music industry is that he is so thorough.  The discussion of the nature of the problem is one of the most in depth dissections of this particular problem I have read in a while. 

His solution is food for thought to be sure.  It is primarily aimed at devising a new way to compensate royalty owners for music accessed online.  And to be sure, the old royalty system is a bit archaic when we are talking about downloading services such as Itunes.  Lincoff’s solution is the creation of a new royalty right that he calls the “digital transmission right” or the “X” right which would charge license fees to services that offer music for download and those license fees would be distributed to royalty beneficiaries to replace or supplement royalties coming from traditional sales of music.

As I said, this approach deserves its day in court.  On first reaction, I don’t think it entirely solves the problem of music piracy via P2P file sharing.  But that problem seems to be on a self correcting path to a limited extent.  The success of subscription based music downloading services shows that consumers want to be able to access music in this way but they also are gun shy of doing so in an uncontrolled and possibly illegal fashion.

Now I do regard that consumers are basically honest people and they know artists need to be paid and deserve to be paid for their work.  The young people I know in my family and community often download a catalog of songs of a new artist and then go about buying the CD.  I have heard them openly admit they do that because they want to support the artist and because they want the physical CD.  Their reasons are not just charitable.  They know if the artists they love don’t get paid, they wont keep producing music because they cant afford it and the music industry will suffer.  Music fans are not dumb, they know how things work.

P2P file sharing services also have an element of danger to them that scares off a lot of music consumers.  When using one of these services, it is not uncommon to see files that are of questionable if not downright disgusting content.  Further, there is a perception that any file downloaded from one of these services might contain a virus, spyware of something else nasty that could hurt their computer.  That perception, real or not, drives people to want to get their music from “someone nice” and its worth the fee to join a network that provides that safety. 

I think these factors along with good marketing by subscription based services who are providing a large catalog and good value for the money spent goes back to the fundamentals of how to deal with music consumers that makes sense and is working.  Now if the “X” right, completes the picture by providing a way to fairly compensate songwriters, publishers, music labels, and publishers then we may have a winning solution on our hands.  But check out the white paper and decide for yourself.

http://www.bennettlincoff.com/fixing_what_is_badly_broken.pdf

<!–adsense–>

I like to track a number of other blogs besides my own to keep up on breaking news about new technology, what Indie labels are up to and other developments particularly as they pertain to the way the new music industry is shaping up.  The blog I am referencing below is somewhat interesting although a bit depressing because it gives us an in depth portal into the legal war that the big music industry businesses are waging on open access to music that is shaping how business is done in this century.

This open letter that I stumbled across today is a smart and well thought out response to the push that Steve Jobs and his cronies are putting on to bring about the death of DRM.  DRM as you know is the imbedding of protection software in digital music to restrict or stop the users ability to spread it.  And DRM is a disaster.  As the article points out, the people DRM was designed to stop were smarter than the designers of DRM from the get go.  So now the industry is faced with a dilemma of whether to curl up and die or keep fighting the wave of the future, a fight they are destined to loose.

The white paper Bennett Lincoff wrote and sites in this letter is a fascinating read and I want to talk about it in more depth tomorrow.  But what caught my eye in this letter was the following statement…

Mr. Jobs suggests, and I agree, that DRM should be abandoned as a tool for the protection of recorded music. However, before Mr. Jobs can implement his DRM-free utopia, the music industry must have a viable alternative business model by which it can continue to thrive. Mr. Jobs has not suggested one. Mr. Bainwol denies that one is needed; intending, instead, to continue efforts to preserve the industry’s sales-based revenue model. In any event, in the absence of an alternative business model suited for digital transmissions of recorded music, Mr. Bainwol cannot even begin to discuss the possible elimination of DRM.

What jumps out is this idea that the music industry “must be presented” with an alternative business model or it cannot begin to discuss dropping DRM.  This strikes me as arrogant and more than a little out of touch.  It is not responsibility of the winners in a war to give the losers a business model so they can retire a strategy that is a laughable disaster for them.

Here is a business model for the big music industry businesses to consider.  DRM is more than a failure, it’s a joke.  You can keep trying it until you are blue in the face and you are just pouring money down the toilet.  The new music industry is forming around you faster than you have time to respond to.  You have a choice between getting with the program as best you can or going the way of the dinosaurs. 

Nobody owes you a new business model for us to somehow persuade you to stop using a defense strategy that is considerably less effective than declaring bankruptcy.  You have lawyers, you hire bring young minds from the Harvard Business School, you come up with your own business model.  Don’t sit around waiting for Steve Jobs to throw you a rope.  He is happily going his way putting you out of business.

That off my chest, now on to the white paper.

http://recordingindustryvspeople.blogspot.com/#liberated_music

<!–adsense–>

There are many reasons why Indie labels are able to find markets that the major record labels either gave up on or don’t know about.  So much of our time that we talk about the death of the music industry, we are focused on the internet and cutting edge technology that is changing the landscape of all aspect of the music business.  But there are many ways that the Indie movements are finding ways to do great business in an industry that has traditionally dominated by the major labels.  And these little advances by small Indie labels are doing their fair share to change things for the better almost as much as the technology of cyberspace is dong.

Mosaic records, this small jazz label has found a way to do just that.  And they are doing it for he right reasons too, to make sure that fans of this music genre have access to music they love and that they service a need being either abandoned or has completely unnoticed by the major labels.

This is one of the many beautiful things about the rise of independent record labels. In addition to facilitating greater creativity, being more adventurous creatively, generally encouraging an artist friendly environment and being nimble enough or respond quickly to change, an Indie like Mosaic can cater to the needs of a small but devoted niche of music fans who otherwise would not have their needs met.  And that is what matters most as is summarized eloquently by Michael Cuscuna, co-founder and president of Mosaic in the article when he states, The void major labels create opens up opportunities for Indies to do the right thing, all in the service of the music.”

http://www.reuters.com/article/musicNews/idUSN1629496120070217

<!–adsense–>

This is the kind of thing you love to see.  The great thing about how MySpace and YouTube has blown the doors off of the music industry is how deserving young bands who may have never been able to bust down the big oak doors of the major labels ten years ago can now make it pretty big getting some attention online.  That is what happened to the band “Writer’s Block” as discussed in this article. 

Their experience with the explosive exposure they got getting their video on YouTube just reinforces what we have been saying both in how powerful these tools are and how fast things can move now that the cumbersome bureaucracy is out of the way.  By exploiting the internet, Writer’s Block got sales that surpassed expectations and sold out shows with little more promotion than just getting the music out to the people.

And you have to give some credit to the Indie label that handles Writer’s Block, Almost Gold Records.  By knowing well how to leverage tools like YouTube and the internet, this Indie put some real momentum into their act’s career, serving to help their band take off.  That’s what a record label is supposed to it and that is what Almost Gold did.  When you see this kind of success get this kind of publicity, you know that other Indies and other struggling bands will look at this situation and say, hey why not us?  And they should say that because the internet has changed the paradigm from “its who you know” to be successful to “its who has talent”.  And that is much more in balance with the industry we are a part of.

<!–adsense–>

http://www.reuters.com/article/musicNews/idUSN1629472320070217

Its funny how sometimes something nice and fun and enjoyable can turn into a big headache when it goes big.  That’s the case with YouTube.  I know for my part when I first heard about and then played around with YouTube, it was more or less the “America’s Funniest Home Videos”, internet style. 

What drew my attention to it and what made YouTube a potentially exciting new player in the shift of the music industry to alternate and independent production and distribution systems was when new bands could get their music out there and use the service to get a wide viewership of their work, virtually without the aid of a record label or really of any kind of budget.  Combine that with the power of MySpace to build an audience and drive them to YouTube and you have a powerful and very modern approach to the new music business.

But I guess like a lot of things, once the service got bought by big business, things started getting messy as discussed in this article.  All of a sudden YouTube is spending more time haggling over who, what, when, where and how they are going to offer piracy protection to partner companies.  Since when did the whether one big business hurt the feelings of another big business become the main focus of the music business?  But then again, YouTube wasn’t really “the music business” yet was it?

 Of course I had the knee jerk reaction that YouTube should offer the same service to everyone that it offers to its trading partners.  But what really got my attention about this article was that it wasn’t important any more about the users of the site, the people who made the site a hit or the fans of bands who use the site to see and hear new music.  Now, the needs of the bank accounts of big business is what is driving the discussion. 

 You got to wonder if they will ever learn.  As they haggle over these legal details, they might want to watch over their shoulder as some new upstart comes in and quietly walks away with their audience like the Indies have done from the major record labels and like file sharing and MySpace did to the record industry in general.  I am not saying that this is what is going to happen.  But they might want to watch their core audience rather than take them for granted.

 http://www.reuters.com/article/internetNews/idUSN1321663620070217 

 <!–adsense–>

If you have not watched The Henry Rollins Show on the Independent Film Channel (IFC) then you are missing out on something for sure. Yeah, when I first spotted that show name on the schedule out there, I was taken aback a bit as well. After all, I had never really connected Rollins hard driving, head banging, metal rock experience with independent films before. Silly me not to make the connection that the genre of music that is Rollin’s territory has that same renegade, “live free or die” approach to art that independent film makers exemplify flipping off the major film studios to make films that are actually interesting and watchable.

Each week, Henry ends the show with a “rant”. The rants are available for download on his web site and they are pretty thought provoking. I wanted to direct you to the rant on show #20 in which Rollins puts in pretty succinct (and plenty profane) language how the internet has become one of the last bastions of freedom of artistic expression that we have left. And he goes on to express both his outrage and concern about seeing even the venue of the internet shut down by those who would like to channel all creative thought through corporate channels and limit the kind of freedoms that has always made our music thrive.

Its worth a listen. The link below will take you to the page on the IFC.com web site that is devoted to The Henry Rollins Show. Scroll down and you will find a list of the shows he has done so far. The rants are summarized and you can download each one as a MP3 file and get caught up with what Henry has to say. And Henry has plenty to say that in lots of ways expresses things we all think about but maybe don’t have the venue or the stones to say like he does.

http://www.ifc.com/series?aId=18035

<!–adsense–>

A few days ago I got to talking on this blog about how YouTube seems to have stepped in and taken over the excitement and momentum that MTV seemed to have until they decided to throw it away to show endless repeats of Beavis and Butthead. Well now MTV wants to play in the YouTube world. Viacom, owner of the many MTV variants and Comedy Central is doing some pretty strategic, (e.g. tricky) stuff to try to pull people away from YouTube and capture that viral marketing opportunity for their own corporate needs.

Its not a bad one two punch. First they used their legal punch to get all of their material out of YouTube, a move that may have been made easier once YouTube itself became the property of a corporate giant themselves. Now they deliver the two punch and prepare and offer huge volumes of musical material for free to internet users to use on their own websites and distribute. They finally bought a clue that all of that file movement isn’t a marketing tragedy as they have been trying to tell us for years, it’s a marketing opportunity that they were just watching slide through their fingers.

This is probably not the last time we will see one of the entertainment media big boys make a move to try to recapture their lost glory. And hey, if it makes them more accessible, more sensitive to the needs of the music community and more aware that they have to play by the rules the fans lay down, not the other way around, it can only be a good thing.

<!–adsense–>

http://www.reuters.com/article/entertainmentNews/idUSN0940727920070212