Future of the music business

A slide from the keynote addressIan Rogers, CEO of Topspin and former head of Yahoo Music, gave the keynote address recently at the GRAMMY Northwest MusicTech Summit 2008. In his speech, Rogers explains the current state of the music business as he see it.

He explains that the sale of physical product, CDs, continues to decrease, and while digital sales are increasing, they aren’t making up the difference. Further, as the market becomes more single driven than album driven, the value of a unit of music is further decreased.

His response to this situation?

I don’t care.

He’s not just cold hearted toward the business. His reason is that continuing to think about the music business in these terms isn’t helping. He equates it to talking about the death of the cassette tape during the era of the CD.

The difference is that when we moved from cassette to CD the winners were the same (big companies who owned access to cash, distribution, and marketing) and the definition of winning was the same (more units sold for these big companies).

The game has changed though, not just from one physical format to another, but the physics of the media itself has changed. He concludes that the definition of winning cannot remain constant in light of this major shift.

He quotes Chuck D from Public Enemy as saying earlier this year,

There is nothing wrong with the music business, there is a problem with the CD business.

He goes on to argue that there has been no decrease in the rate of music consumption, or an unwillingness to pay for music. 2007 saw an increase in the number of “decisions to buy music” over 2006. Sure those decisions were mostly for single tracks rather than bundled albums, resulting in less music being sold in total, but he doesn’t address that. What he does address is the perspective that should be taken when evaluating the industry.

I’d like to challenge you to consider a different perspective, IMHO the only perspectives that matter, that of the artist and the fan. I see news about the health of the music industry as defined by the stock price of WMG or quarterly earnings of UMG, Sony, and EMI every day. What I don’t see, apart from a few articles on Radiohead and Nine Inch Nails, is an update on how the world is changing from the artist point of view. [emphasis his]

His point is that the new landscape, with the internet making digital delivery so easy, favors the artists and fans. He posits that we should begin to think less in terms of volume of music sold, and the effect of declines in sales on labels, and start to think more about the idea of “marginal profitability for artists and value to fans.”

The idea being that increased profit margin from direct sale releases can increase an artist’s income even if they sell less than they might have 5 years ago via physical distribution. Digital delivery certainly lowers per-unit cost considerably and makes delivery easy. The artist/label can make the connection directly to the fan without a distributer, and a retailer in between. And the percentage of revenue kept by the artist will be much higher.

By offering various price points for different bundles of music + other content/goods, the business can move away from a one-size-fits-all model of product delivery, toward multiple “target-marketed” approaches. For example, you might offer free downloads of a few tracks, $5 download of more tracks + PDF “liner notes,” $10 download + CD, $30 (or more) for some sort of deluxe/limited-edition-you’re-a-real-fan package.

He tells the story of a relatively unknown artist who has done this and enjoyed great success. And he thinks it can happen again for many others.

…there is an entire middle class of artists for whom the system hasn’t worked in the past who will be empowered by this new model…we don’t think they’ll ever end up playing the Staples Center, and we don’t care. We are more interested with seeing marginal profitability for more artists and satisfaction for more music fans increase.

He continues and discusses the idea of artists structuring their own “360 deals,” the steps the lables need to take to become valuable partners with artists, and value of greater consumer choice for the fans.

I think he has some good ideas that the bluegrass industry would be wise to learn from. Stop worrying about getting bluegrass music in Wal-mart, and start thinking of new ways we can connect directly to fans, new and old. It’s more work, but the payoff is there.

Iif you care about your future in the business, I suggest you take the time to read Roger’s keynote.

  • Jon Weisberger

    He tells the story of a relatively unknown artist who has done this and enjoyed great success.

    What he doesn’t mention is that this relatively unknown artist had a song placed on a popular network television show; as allmusic puts it, “his song “Wash Away” became synonymous with the 2004 season of ABC’s Lost.”

    Rogers’ presentation is an interesting one, but it doesn’t really come to grips with some fundamental questions, most notably the one about how a new artist gets enough attention to gain some traction in a marketplace awash in new artists.

  • Try being excellent for starters.

    But you’re right Jon, all the questions aren’t answered so we should just ignore his ideas and keep doing what we’re doing, which isn’t working all that well anymore, but at least it’s not unknown.

  • Jon Weisberger

    Well, gee, Brance, that’s not what I said at all. And “excellence” is kind of subjective, isn’t it? The point is, where you say (in the original post) that we need to “start thinking of new ways we can connect directly to fans, new and old,” I agree. But “thinking” is done best when it’s done, well, thoughtfully, and with constant testing of new ideas against reality. If the only substantive example of a new artist finding one is a guy who got plucked out of obscurity to write a song for a hit TV show, that’s not getting us very far.

    And equating the observation that virtually every “new model” success story so far has been built on “old model” success first – or by just dumb luck – to advocating that we pay no attention to the changing environment isn’t very helpful.

  • mitch_cumstien

    BitTorrent pwns.

  • mwrowe

    I don’t see why the publicity associated with Lost invalidates the example. Assuming of course that the song didn’t end up on Lost because of the promotional efforts of the artist’s label, it is still an example of success via a non-traditional path.

    I was a fan of the jamband Phish for many years, starting when they were a local band. Over the years, I saw them play in rooms with a dozen other people, and at self-produced multi-day shows with 80,000 people in attendance. And they never really had a hit record (though some of their albums went gold over time). They were successful because of their excellence, and the bond they created with their audience. They practiced endlessly, played hundreds of shows a year, and played everyone differently. They were one of the first bands to have an internet newsgroup, and they encouraged their fans to tape and trade their shows. These things created loyalty among their fans, so they didn’t need hit records. When they signed to a label, it was totally on their terms.

    The big labels these days seem to be run by MBA’s who are more interested in moving units of product than in promoting great music. Most of what they put out is total lowest-common-denominator crap, and frankly they deserve to go out of business. With digital recording and distribution technology readily available, they really serve very little purpose.

  • Very interesting,yes,that is a nice success story, how be it, what I see as a viable music market is in trouble, CD sales are down, big time, He did not mention that in his article, no similarity here with Cassette to CD formats which, after the kinks were out of the original lousy sounding CDs,it started the Digital era, he’s talking computer music, I’m familiar with this, funny, did he mention the song from the super popular TV show, that is one of the biggest ways to get your music heard, get a song associated with a TV show or big commercial. A must read is “Excuse me for being Rude, but –” By Simon Cowell, a man who has made millions making music stars. He is a rags to riches story, his ideas were original and right now, he is trying to persuade someone you would never dream of to record a song. He badgered a cop show duo in Britain to make a record for him, they wanted nothing to do with it, finally he offered them a rediculous amount of money upfront, They make CD, they tour, they win Big time, make millions for them and Simon. Their names are in his book, you wouldn’t know them, neither would I. After a couple of CDs, they miss being rock stars and go back to TV. The fact is there, that is why his dream group got famous, not because of itunes. Honestly, I do not own a computer, digital downloads and mp3s do not sound as good as a CD played on a stereo. We are raising a generation of youth listening to lo quality mp3s on ipods and saying, isn’t this great, sure, for ipods and people in itunes it is great.
    I was refreshed recently when Metallica (not a band that I would listen to) released a new CD, They also released a version for guitar hero. Big Problem ,smart fans, The quality of music on the guitar hero game was alot better, they noticed and got furious. The CD was overcompressed, like mp3s and a lot of heavy metal CDs today. Overcompression causes a loss in the dynamics of the music,kids today wouldn’t notice. The record company thought they would pull one over on their fans- did not work. Cassettes sound better than Cds, especially early CDs, They are totally analog, no DAC required -Digital to analog conversion, another problem besides overcompression to gain storage.
    Allright, let me wind down, before I get away from the topic at hand, bluegrass music. I review Bluegrass music and Americana, country music. Bluegrass, usually is the best sounding genre, because there is very little processing. A couple of years ago, I was reviewing a new Rhonda Vincent disc. First one in her new studio, Adventures studio. I had reviewed the 2 Cds before that also. The new CD was “All American Bluegrass Girl” ,it followed “Next Step Ahead” recorded by Bill Vorndick, one of the best. Sorry, I don’t remember her new recording engineer, but her producer, husband Herb Sandler, produced it. I complained to them that there was something wrong with the advance that they had sent me, it was full of clipping(digital distortion). Nobody in ther camp answered my e-mail, so I posted something on her message board, I had everybody all over me,Sandler was furious, I said, why didn’t anybody get back to me, You sent me the CDR to review, I thought there was a problem, turned out, no problem, that’s the way it was mastered, overcompressed.
    Finally, Yes, there is a problem with music sales, but selling downloads ain’t the answer, I sure don’t want to listen to mp3s. The answer is to keep on touring and having bluegrass festivals, it works.
    Jim Moulton

  • Jon said:

    And “excellence” is kind of subjective, isn’t it?

    Not at all. Style and taste are subjective, but excellence isn’t. Musical excellence involves honing your skills on a particular instrument, working on timing, tuning, phrasing, vocal pitch, etc. A band that is excellent will have a much easier time gaining “some traction in a marketplace awash in new artists.”

    …isn‚Äôt very helpful.

    Just an observation, but I’ve seen you throw this phrase around quite a bit. Yet I don’t think I’ve ever seen anything you’ve written that is helpful. You seem to delight in tearing down any new idea concerning the future of the business, but you’re certainly not offering any of your own.

    The truth of the matter is that everyone is not going to be successful. The system just doesn’t work that way. Pointing out that someone who is successful is different from those who are not, is pretty obvious.

    every “new model” success story so far has been built on “old model” success first Рor by just dumb luck

    Really? So this artist (Joe Purdy) is successful because of “old model” success? Nope. So I guess that means it was “just dumb luck” then? I bet Purdy doesn’t think so. I’m sure he would tell you that he worked hard at his music before that song was ever chosen for the TV show. He may be a humble guy and try not to take the credit for it (maybe, I don’t know him), but I think he’d be offended at the suggestion that his efforts to excel as a musician and businessman, had nothing to do with his success.

    Instead of disregarding the lesson because he’s successful, maybe we should learn how he got there and take a lesson from it.

  • Jon Weisberger

    Brance said:

    Style and taste are subjective, but excellence isn’t. Musical excellence involves honing your skills on a particular instrument, working on timing, tuning, phrasing, vocal pitch, etc.

    Timing and phrasing and the importance of tuning and vocal pitch are largely matters of style and taste. It’s not hard to think of artists who don’t meet typical expectations in those departments who are nonetheless pretty successful. And of course, those expectations (and matters of style and taste) vary widely across genres – and artists ultimately compete for attention from new audiences across genres, especially in an increasingly levelled marketplace.

    But for the sake of argument, let’s agree that excellence, however you define it, is necessary – the key phrase in your original statement was “for starters.” Because it’s certainly easy to think of artists who are or were excellent (however you define it) who nonetheless struggle or struggled to find a sustaining audience. And isn’t that the main point?

    Really? So this artist (Joe Purdy) is successful because of “old model” success? Nope. So I guess that means it was “just dumb luck” then? I bet Purdy doesn’t think so. I’m sure he would tell you that he worked hard at his music before that song was ever chosen for the TV show.

    He might, but that’s not the point. The point is that his success was unrelated to either “old model” or “new model” – it resulted from something which can happen either way. His work was brought to the attention of large numbers of listeners because of, yes, dumb luck; it wasn’t the result of promotional efforts, it wasn’t the result of viral marketing, it wasn’t the result of a 360 degree deal, and it wasn’t because he was giving away music. It’s the same kind of chance that put Flatt & Scruggs’ music into millions of homes via the “Beverly Hillbillies” (as Neil Rosenberg puts it, Paul Henning “stumbled” across them) and again exposed it to millions with “Bonnie And Clyde” (Warren Beatty happened to attend a high school presentation on bluegrass by a classmate – Pete Kuykendall – that awakened an interest in the music). The defining moment in his career (at least, so far), was model-neutral.

    That doesn’t mean that it won’t happen again for someone else; it almost assuredly will, and at least a few small steps can be taken to improve the odds, like the inclusion in the IBMA’s new strategic plan of presentations of bluegrass to film and TV producers and music directors (and BTW, Brance, that’s a point that I proposed and lobbied for which you might think is helpful). But it does mean that citing Purdy’s subsequent “new model” tactics as though they alone were sufficient to bring him the fans he now enjoys is, to say the least, incomplete.

    A lot of Rogers’ comments, while interesting, aren’t really helpful to bluegrass artists in particular. For instance, you say:

    The idea being that increased profit margin from direct sale releases can increase an artist’s income even if they sell less than they might have 5 years ago via physical distribution. Digital delivery certainly lowers per-unit cost considerably and makes delivery easy. The artist/label can make the connection directly to the fan without a distributer, and a retailer in between. And the percentage of revenue kept by the artist will be much higher.

    Well, most bluegrass artists are already selling most of their music directly. So if they sell less than they did 5 years ago, their income from music sales is going down; there isn’t a “much higher” percentage to be kept now than there was then. And moving to digital download sales can reduce income even further, as they’re priced lower. In many respects, the plus that Rogers alludes to – a more direct relationship between artist and fan – already exists in bluegrass, and he simply doesn’t address the negatives.

    The music market is in a real flux, and there are a lot of folks out there offering advice. Some of it is good, some of it is bad, a lot of it is purely speculative, some of it is premature (like, for instance, declaring that the physical CD is “dead” when it still accounts for 2/3 of music sales) and almost all of it is hard to sort out when it comes to artists and others in the business making career decisions. For those whose involvement is primarily as observers, there’s little at stake in sorting it out, but for those whose livelihoods are (or might be) dependent on figuring it out, keeping facts – inconvenient and “negative” though they might be – in the forefront is always helpful. There is no substitute for both reading (and listening) widely and open-mindedly *and* evaluating what comes across in the light of reality.

  • Back at ya, “Excellence”, I am so picky at what I review it isn’t funny. In a CD, Excellence starts with the artwork, presentation,The first song picked on album, sound quality of recording, I wish digital recorders cost alot more, there are too many mediocre sound alike acts in all genres. Funny, I had a fella listen to me, He was a very good Christian singer, Dearl Hardy, sent me something that his producer helped him record. He wanted my honest opinion, I told him it sounded awful, but there was some good material there and he had a good voice. Over the next two years, He took my advice ,dropped the sheister who was going to make him a star, got good recording engineers and musicians and made a surprisingly good CD. Most people think you are rude if you try to help them. I’m still old fashioned, right now, I’m buying my second CD player, first one was in 97. At first I was in awe, then the digital chill set in and I saw the importance of good mastering which is nothing new.
    Bottom line is somewhere, ya gotta know somebody, Remember the great Norah Jones (daughter of Ravi Shankar)that doesn’t do something, is bluegrass in trouble. And What is Alison Krauss up to with Robert Plant. Hmmmm.
    Meanwhile, Jerry Douglas, Ron Block and especially Dan Tyminski have new CDs out. I thought the Cherryholmes were great on their first album. I haven’t listened to the 3rd,the 2nd was too bad. Rural Rhytmns is a label with a plan, they split the label in two, half progressive and half traditional, brilliant. Still waiting for something bad from them.
    Jim Moulton