What is your background? Could you explain to us what being a “Media Futurist” entails?
I went to the Berklee College of Music and studied Jazz guitar there, so I’ve basically been in the music business all my life, as a musician, producer, concert promoter, etc. I spent 12 years as a professional musician, touring and recording different projects and playing everything from concert halls to cruise ships. In the mid-90s, I started working for the European Commission on a project that employed 800 experts from all over Europe – the Arts Education and Training Initiative. We were looking at ideas to improve the economic conditions for artists, musicians and writers, to help them make money.
After working on that project for two years, it became clear to me that the Internet was going to completely change the economy of how artists, especially musicians, distribute their products and make money from them. In 1994, I started my first Internet projects and wound up working for ten different Internet companies from 1995–2002, as well as founding six of those myself.
Long story short, after the Internet bubble crashed and all the companies died in 2001 I moved back to Europe and wrote a book called The Future of Music which became a bestseller in the industry. It’s been widely translated and pretty much everyone has it. There, share the things I learned in my years in the business, and since then I’ve been lecturing, blogging and writing about the future of digital technology and music. I talk about things like the proposed flat rate system, artists’ direct connection to the market, how niche markets are growing more lucrative and how agents and managers are becoming more important than the labels – all things that are quite clear to anyone who’s been following the progress for the last few years.
I do a lot of work advising companies and artists about the future of music. For the last two years I have expanded into film, video, TV, branding – in short everything that has to do with content and technology, the overlap between creative work, intellectual property and how technology is using it. I help technology companies understand record labels; record labels understand opportunities and artists realise how they can market themselves. Starting October 1, my new book, The End of Control, will be available free of charge on-line at endofcontrol.com. There I discuss how artists, labels and publishers will have to give up the idea of controlling who gets their content and how, and how there are other things they can sell than physical copies of it.
How, then, do you foresee the future of music distribution and consumption?
The biggest change is that the model is moving away from selling units to selling access. That means that at first you have to give access, in some cases for free. You provide a way for people to find it on the Internet, blogs and social networks like MySpace and Facebook. You provide access for the larger communities in return for an ad-revenue split, so that money is made from the web site but the music is free for the user, very much like radio is done. No one pays for radio, but there’s still money being made.
The thing about music consumption is that it’s changing over. The kids don’t want to start by buying a physical product, although they may spring for it later. As you know, those aged 12–27 only want to click on a website or through their mobile phone to check the music out; they consume music in an interactive way and aren’t ready to pay right from the beginning. In the old way, you had to buy the full CD before making your mind about the music, while now I can check out a punk band from Japan, listen to all of their tunes and watch their videos for free – if they draw me in and I become a fan, I will try and buy their CDs and T-shirts and go to their shows.
This evolution is positive for the musicians and the consumers, but bad for the intermediary, i.e. the music industry, which has made almost all of its revenue from selling copies. Very few artists made any money from selling CDs, as most of the record companies tap up 85% of the revenue on them. So in light of the old model, this new way of doing things is excellent for artists and for fans but not for the people in the middle, who now will have to think of new ways to make themselves relevant.
The small record companies have already figured this out; all of them are becoming agencies now. Distribution is easy now, you can have it on the net for almost zero cost, so what they do is specialise on helping the artist making the best possible music, and marketing that and promoting to get attention. The only thing that matters now, if you’re a musician, is getting attention, and there are a lot of ways of getting it.
Bands are seeing the importance of building a brand name. If you have a million views a day of your blog and 5,000 people downloading your video, you can build a brand from it and don’t have to be so concerned about selling a CD. You can still sell them to anyone who wants them, but the main focus should be providing access. You have to build the audience, to borrow a marketing term, it’s a big switch from “push marketing” where you force your product on people via advertising and flyers, to “pull marketing” where you play a gig, provide a good web-site that features downloads and free streams to social networks; all of these things work to pull people in. If what you’re offering is any good, they’ll get stuck, and if it’s really good, they will become loyal fans. And then you can sell them something.
Lots of bands don’t sell any CDs at all, instead making all their money from concerts. Grateful Dead is a good example, and Prince is a more recent one. He gave away his last CD for free in England recently because he could make more money from playing a concert. There are many, many ways to make money as a musician aside from selling copies, whether it be licensing songs for movies, television or computer games, selling concert tickets, merchandise, writing a book even.
So to summarise, there are two changes evident. One is from access to ownership, where you now make money by providing access, and the other thing is that musicians and labels will have to look at all the different ways they can make money as musicians – but first, they have to build a brand. Robbie Williams made seven or eight times more from branding and ads than record sales. The artist has nothing to worry about if you download his music, it doesn’t take away from him, provided he is smart enough to see the opportunities at hand.
Iceland is being discussed as a suitable test-market for the new flat-rate system. Do you see this happening?
The proposed model is simply a network license. Rather than saying that everyone has to pay when they want a song, we give them access to everything and charge a flat rate for that access. We provide a license to the telecom operators and portals and anyone who has a cell phone or any other kind of network access can get all of their music from there.
I think it would work over well in Iceland because there are no major music labels in the country. It’s so small that even if nobody would buy any CDs, it would be relatively painless for the labels. The experiment is thus contained, and you can study the results. I think the total market for CD sales in Iceland is around 10 million Euros, so this is very possible if you do the math. If everyone in Iceland pays one Euro a week for this access, and that revenue is distributed to labels and artists in accordance with the number of streams or downloads a track gets, everyone will make more money and the consumer will also pay less. Iceland is also suitable because the people here really like their music, and there is lots of local talent that would benefit from an early start in this model.
What we have to do is create value for the composer and musician, a system where we don’t bother charging for the individual song, at least not in the beginning. If you had to pay for every song you heard on the radio, you wouldn’t listen to it. We need a system that’s all wrapped up in a flat rate, a system that’s ad supported and whose many operators would take care of the consumer costs instead of ad revenue. The ISPs and phone companies will probably wind up paying your one Euro per week fee for you, if you agree to watch a couple of ads per day.
So, you ultimately see this evolution as benefiting musicians and music-fans alike? I think that no matter what we do, the users and what people used to know as consumers – which is not that easy anymore – the user will get benefits everywhere. There are 1 billion people on-line, 1.5 billion people watching TV and 3 billion with cell phones. What’s happening is that the user is becoming more powerful, as there are so many of them. Anything that keeps the user from getting his desired value is swept away. If you put a rock in a river, the river will get around the rock, it will find a way, and this is how you should view the users. There’s no use in trying to place rocks in their way to stifle their route, you should rather try and go with the flow. Travel agents, for instance, used to book your trips and flights for you, a process that you now take care of on-line. There are still lots of travel agents around; they have simply reorganised what they do.