What's Next For Music?

The funny thing about the music industry these days is the growing influence of people you would least expect to be hanging backstage with the band. Mobile operators, handset manufacturers, broadband providers and even social networking geeks - Music is fast becoming the digital currency de jour for anyone who wants to engage with consumers online. But what does that mean for the value of music going forward?

The future of music was a question hotly debated at this year's Music Matters conference - Asia's peak music industry summit held in Hong Kong. Value is a complex issue. If songs have intrinsic worth in themselves, then their commercial distribution should be defended to the hilt even in the wake of overwhelming piracy. If greater value lies elsewhere - for example selling concert tickets, branded merchandise or reducing churn on mobile data plans - then music should be free and leveraged as a promotional platform.

With fast broadband, advanced mobiles and media hungry consumers - Asia is a great laboratory for understanding where the entertainment industry is heading. In most cases, consumer behavior is still way ahead of corporate attempts at commercialisation - hence the lawsuits. But there are growing pockets of innovation. Here is a quick primer on four areas where consumers are pushing the boundaries of the traditional music industry:

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1. Buying Music From Your Phone
Until very recently, ringtones were a major cash cow for Telco operators. But as mobile networks have become faster and handsets smarter - mobile music products have also had to innovate. Japan's sophisticated mobile market is a case in point. According to the RIAJ, last year 90% of Japanese digital music sales took place on mobile phones, with only 10% over the Internet. The new music profit driver in Japan 'over the air' (OTA) song purchases. 'Chaku-uta', (30-second song snippets) and 'Chaku-uta Full' (MP3 full-length songs) have become very popular with consumers, and are largely distributed through a platform called Label Music, owned by all the major record labels.

Nevertheless, Japan is a curious and unique market. Contradictions abound. An aging population, which still prefers buying CDs, continues to support the sales of physical music. So local music labels have a segmented marketing strategy. They target the over forties with CDs and albums, and kids with mobile distribution and digital singles. The latter has had an interesting impact on the creative process. Take superband GReeeeN for example, which are focused primarily on the mobile and download markets. Unlike typical Japanese Tarento, the band refuses to show their faces - the cute story being that they haven't told their parents yet. Their hit song "Kiseki" recently broke all the records with 2.3 million chaku-uta full downloads.

Japanese mobile success may be hard to replicate elsewhere. While Asian kids have adopted their phones as music devices - sideloading poses a longer term challenge to the OTA business model. According to Synovate, across Asia 46% of young users download music and transfer tracks to their phone. Only 21% regionally download music directly to their phone.

2. Finding Music on Search Engines
The second area where the music industry is being forced to keep pace with consumer innovation is around search. In China, digital piracy is rampant. The vast majority of music is illegal - and even if you do buy a physical CD - chances are, the retailer selling it to you stole it himself. Not surprisingly, MP3s are one of the most popular search items on the major search engines in China. The China Market Research Group estimate that music accounts for 20 to 30 percent of all searches on Baidu. To combat Baidu, Google China launched its first music platform - Google Music, which in partnership with Top100.cn offers free advertising supported music search and streaming. All the music on the site has been legally provided through deals with the major labels - the vast majority of which had long since given up making money from anything other than ringtones in China anyway.

What makes Google Music interesting, however, is not just free legal music. One of the key enteratinment issues in China is discovery. An unusual consequences of the growth in ringtones in China has been the proliferation of what literally translates as 'saliva music' - songs that are simple in melody, and designed for the limitations of a 2G ringtone. Unfortunately, that makes the long tail in China pretty short.

To help expose Chinese users to a greater depth of artists and music tracks - Google Music uses an algorithym that analyses the timbre, rhythym and beat of songs, in order to recommend similar tracks. The results are impressive but like elsewhere in the world - the jury is still out as to whether revenue sharing on free streamed and downloadable music tracks will be worthwhile for content owners. But at least now, unlike before - the labels in China have skin in the game.

3. Mixing Music with Friends
The third trend in music innovation is around social media. Forget Myspace Music - if you want to see the future of commercialising music through social networks, take a look at Tencent. Tencent operates the instant messaging community QQ. It has over 200 millions users in China, and even more impressive - over a billion (USD) in revenues. Unlike social networks in the US like Facebook or Myspace - online advertising last year contributed only $120.9 million to Tencent's revenues. The vast majority of the top line revenue figure ($719.1m) came from interactive services like virtual items, personalisation and music.

In exchange for small transaction fees, Tencent allows users to play music in the backgrounds of their profile pages or dedicate music to each other. It has been estimated that they make between $30-40 million a year alone on these music based services.

Virtual merchandise and the commercial integration of music into social platforms is a lesson that the West could well learn from countries like China and Korea. While platforms like Myspace Music, Last.FM and iMeem do a great job at supporting music discovery - their advertising dependent business models are still only half formed.

4. Bundling Music with Everyone Else
Finally, it is worth thinking about the potential impact of offering consumers access to large music libraries as part of bundled subscription services. Telco operators have started to pay attention to music for two reasons - ARPU and churn. But do consumers care? Denmark is an interesting case study. Under Danish law, Telcos can only bind their customers to six month contracts - making renewals a serious issue. TDC, Denmark's major carrier launched a service in March 2008 which gives their mobile and broadband customers unlimited access to music downloads for free. Of course, if you cancel your subscription, you also lose access to the music. So far, their plan seems to be working - churn is down 60%. But as a consumer model, it is still less than ideal.

Danish telcos are not the only ones looking to use music to bind consumers more tightly to their services. Even handset manufacturers like Nokia are offering unlimited music downloads to consumers who buy certain models of their phones. Music subscription services are a double edged sword for consumers. They offer infinite choice, but often lack the community infrastructure to aid music discovery. Further, the looming threat of cancelled access provides little incentive for consumers to invest time in curating a collection.

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Taken together, all of these four trends are examples of businesses adjusting to the new ways that audiences are consuming digital music. The longer term structure of the music industry is still far from certain. Things are moving fast, and the worst possible mistake is to focus on fading metrics. The top line retail sales look bad, but they only tell part of the story. At the current rate of change, in five years time - measuring the quarterly drop in CD sales may be about as useful as tracking the current decline of cassette tapes. It's time to start watching the new sources of growth and leave dying formats in the grave.

After all, the first thing you need when the world changes is a new set of maps.

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What do you think? As always - I welcome your thoughts and feedback through the community forum. Click here to comment.

Comments

[Julian Tol]

Back in the late 90's I remember strolling through a Hong Kong market and seeing the compellingly promoted "$750,000 OF SOFTWARE" with the price tag of USD 10.

I wonder how long it will be before an economically motivated, ethically challenged individual will offer a 10 or 50 or 100 TB drive with "EVERY SONG EVER RECORDED" or ALL OF iTUNES" for the price of a dinner for two.

If I was modeling new music businesses, I'd start with the question of how I could make money when every song ever recorded is available free.

In the meantime, some good reading on the subject here: www.michaelgeist.ca

[Andrew Maciver]

Im a new band manager of Sydney Rock group
Sound Casino

It is exciting yet frustrating for me to remain positive in developing the bands profile and revenue. So many avenues now - with 40 000 friends on myspace there is promise yet we remain unsigned. It will be interesting to see what becomes the turning point for us... which path to take.

Great article Mike

[the PANG]

Dear Andrew

You're frustrated because you're beating your head against the wrong wall.

I am no expert, though I am in a band and have worked with the music industry for many years.

Why get signed? The major record companies are surviving on back catalogs and pop tarts. They are only good at selling via mass media but in a Net dominated music market they are irrelevant. My friends in the music biz are looking for other jobs.

And the Indies can do little more than get your music pressed and distributed.

Look at (Google) CD Baby, TuneCore and ReverbNation. Each offer international digital and physical distribution for a small flat fee per track/album. This is a much better deal - assuming you can market yourselves.

ReverbNation also help with Net marketing but nothing beats a stand out clip on YouTube (look at OK Go), infiltrating communities for a bit of viral marketing and air time on the radio networks your audience like. Simply building email lists won't get you to new people.

MySpace has not been a venue for promoting music for years. We only use it to network with other bands to organise gigs (but get a number or email ASAP). You'll have better luck with FaceBook.

What has been written in this article is more of an indication on how you might monetize your recordings - irrelevant until you are already successful.

Free downloads are the new radio - if people are downloading your stuff that means they like you, you have infected them, and they'll come to your gigs. Track where the downloads are coming from and tour wherever you are popular. Maybe you'll be huge in Japan!

So think of your recordings as a way to get people to gigs where you you can take their money at the door and for merch.

Good luck - we're in the same boat!

the PANG

[Chris Simon]

Hey Mike

The Tencent figures cannot be ignored and I expect MySpace and Facebook hate them already. I must take a look some time.

Always so timely or relevant; but this time around, I cannot completely agree on all these things. Music conferences, like digital, have been going on for so long, but one constant in music has never changed:
Feelings.

As you once mentioned, “elegant lines of code” which I loved as a statement and have adopted, was your descriptor for the free-form and open social ambience of digital clouds.

I’ll start with some history. When “I decided” the NZTB should negotiate for the Slice of Heaven hit song, (yes me)-not it’s brilliant Creator, (Brett Clements) or the then brilliant Board of NZT; it was the hardest and most cut throat deal in my life with Mushroom Publishing. There was a “them and us” mentality and I was not even one of “them or us”, neither an ad man nor music man. But-boy-they hated ad men and ad men hated them. End of story. I think I paid a lot too much, (NZTB-thought I did an amazing deal. So did Dave Dobbyn and Mushroom:-)….But even only a year or so later, Mushroom would have tried to quadruple what I got the song for! On the retrospective face of it and for a campaign that ran almost 7 years and created multiple tourism figures and content awards, I did get it “for a song”. But at the time of the negotiation –no one could predict how great our campaign would be, because it had absolutely nothing to do with cashing in on pop culture of cartoon dogs in Footrot Flats (but everything to do in my mind) of making the first point of view home video virtual bungee jumps or white water rafting for social internet purposes as I knew it would become and stay “forever young”.

That’s feeling. And DIGITAL is also and must be about FEELING, if it is to ride a successful saddle with and alongside some of the beautiful music that makes Twitter tweet and Facebook apps jump from a moonlit mobile night. This is a fact of life.

If I really begin to analyse the feelings of Google or Facebook or Twitter (or Telstra, Optus or Vodafone) or any Authoritative Moderator associated with any of those names, I would rather not.

But, sadly, the Music Industry and the Ad Industry and now the Digital “Media” Industry have all played a role of forever making it hard to retrieve certain ground rules about feelings.

Ask Richard Ashcroft about how he feels about The Rolling Stones being credited for Bitter Sweet? Ask Girltalk whether he should create incredible and brilliant loops without asking first?

I don’t care about my personal pov….Here are some more facts about both Feelings and business:

Many, many years ago Metallica and their Record Company sued an application called Napster that was initially illegal and pre-dated Google by years! Trent Reznor of Nine Inch Nails always references this part of history and is himself always going into battle on retail price of his own music… His conclusion was that as long as fans perceived any rip off-they would always continue to use the free download option, illegal or not!

Rapid change in the distribution and copyright of music was happening well before Google became a giant and, by the way, I do not like their giant corporate nature as much as the next man. I have been dwarfed indirectly by it on many occasions with Telstra’s WotNext and YouTube Moderators and Ad Agency vigilance and not letting me even use my own clips or approved music or games, with them simply ignoring me or saying I am infringing when I never am!

And as for sticking view counters and all that silliness, it is exactly that and very, very silly.

What I often say about the music industry and communication and DIGITAL is that it has spent far more time litigating than integrating. I go back very, very far before Google and certainly before YouTube and all the web models that came for artists to sell their own tracks and swap files. This is a time when the then extremely powerful and rich Music Industry should have listened to people who understood the Internet and take them on to help them grow new “legal” applications modeled on Napster, Kazaa and things like that.

The Music Industry could have owned it and today they would definitely have the upper copyright hand for really bringing about new online licensed music deals and-eventually-leading to wonderful institutions like iTunes and iPod…

But Optus, Telstra or Vodafone backstage at Pink, I’m still not gonna “buy in” to any of the real “feelings”, except Pink’s. And Ad Ageny’s now finally saying they love the Music Industry –I’m not “buying into that” either. Or the Music Industry saying to me we love you Chris, can you do us a 50Xmobile rig just for fun.

I am in full support of what the PRS are saying in certain articles and certain lawsuits…., but I think you have to have a healthy knowledge of the history of where it all began before there was Google and before there was YouTube. I do think the Music Industry (of which PRS is a part) has spent far too many years in litigation when they could have been more involved in integrating their artists' music more interactively!

If you really think about from when the music-internet industry began with artists like Billy Bragg and Ice-T selling their music through Kazaa. They did that because it had 60 million users and they (BB 'n Ice-T) were smart enough to know how people wanted to access 'n interact with music.

David Bowie always knew-even pre dotcom-and Gorillaz are a premier example of just allowing the Internet population to build their popularity with fan sites cropping up everywhere and anywhere. That was a Social Network floor plan before there was either a floor, plan or proper network and still had everything to do with feeling.

Almost 19 years later from the vast popularity of Napster, what do you have?

Artists predominantly launching off My Space, You Tube (and now Tencent, Facebook, Twitter, Vimeo and many, many Phone initiatives) and a Music Industry still obsessed with litigation is what you still have!

Don’t get me wrong. I think some phone companies have “got it”. (Nokia definitely have and for awhile I thought Motorola had….Sony are just ubiquitous with it, (entertainment) anyway and Steve, (our mate Jobs) has always had his ears in place)…

But,some litigation sort of came good; but just against a few individual Kazaa users in the US and led to an increase of 45 million a month in Kazza downloads of licensed content files. So digital and music got together. Almost half of these legal files were GAMES and at least 16 out of the top 20 US game publishers started to give Kazza new release product at the same time as retail stores.

Today- as you well know artists like U2, Daft Punk, Air, Stray Theories, (I wish) and thousands of others, regularly compose gaming music. I think this area with the really big brands-(you know), Guitar Hero, Rock Band, etc, will just keep going on and on and on. Ironically, bands that always slagged Gorillaz, like Motley Crue, Metallica and Aerosmith are the major cartoon rock acts today. Aerosmith have made more from Guitar Hero than their whole history of albums and Motley Crue launched their comeback through Rock Band. Newer acts like Rage Against The Machine and My Chemical Romance means that music tracks decades apart are clocking up 300-400% online sales jumps through punters playing plastic guitars and becoming digitized rock stars. It all makes absolute sense now, huh?

The problem is all these conferences and legals and talk is vastly behind what a majority of this worlds artists are now in front of. That is that if you blast your work out over open networks, you should accept its fair game for others to experiment with it. TO A DEGREE.

It hardly ever damages the original source content and often brings viral marketing sales blasting back. It can create multi-channels for the original source artists that they never previously had. Even the new crop of social media experts and companies that miraculously set up the day they became Twitter members argue all sorts of claim and counter claim over the culture of the internet.

I believe as I have done for many, many years that the greatest media, (which music and feelings are also) can only ever be the product of the people who use it and contribute participation and content to make it. On a large scale and Asian internet music piracy-Yeah! What’s new! That is NOT what a lot of this is. What a lot of this is; heralded MP3 Players and Digital Download Charts.

My point as unsubtle as it might be, is that The Music Industry could have been YouTube if they had started integrating (rather than litigating) with what online music buyers wanted 19 years ago. And PRS would be a lot richer and far more in control over Google.

And last, but not least Mike, music or feelings has always been currency de jour for anyone who wants to engage with consumers in any way whatsoever. I hope I have managed to add clear POV as an adjunct to your research and other POV’s for the value of music going forward online, (remembering absolutely critically, that I could not have been inspired to write this without reading you)?

[music player]

There is no question that music will evolve to be a free commodity. However, with this evolution will arise a premium on concerts, or live events. After all, what was radio for tens of years? Free music. Now you can download and make your own radio stations for free. Yeah, some people pay, but eventually even grandma will be torrenting her favorite tunes. Live events and merchandise will be the only way to make money for musicians. Just my $.02.

[Roadman]

Music will not be free nice thought though music will evolve to be monetised through networks but free is a joke,

Adam smith's invisible hand means the product of labour spurs monetary growth,

You can only do so much charity work for nothing before you need to eat yourself, or charity takes a back seat, see the world food programe.

Music can be monetised check-out the x-factor, but offcourse there are a few in the no who can make this sh*t happen.

[Chris Simon, Bracket Boys]

Mike: Thx 2 all ur members for their ongoing comments; but mostly:thx 4 making this important debate u started ur current insight brief. I will be POV'ing again soon, (that's point-of-viewing:-) Because a number of groups worldwide have contacted me on this and Bracket Boys now have some REAL objectivity from Music Artists; (that's real): Game Makers; Music Videographers; Mobile Music Makers & Name Artists; New Digital Music Apps and more. When u wrote about this it was hot. Please mark my words, I'm about to make your kettle boil. It wld be really cool if u cld update some of ur own perspectives Mike? And/or if some of the other guys 'reacting' to this; (particularly Music Artists and Creators of Music....Expanded their opinions)-Since they are about to become a Renaissance3.0 |-{ It will be some good grief for a change, too:-) I soooooo wish I cld phone this in to guys that really know the subject backwards like Kyle Sandilands and Jackie 0....Sir Richard speaks v.highly of those guys....The REAL one, you know, a guy called Branson!!!! (BTW-On Twitter I'll speak in CAPS and !!!!!!!!! whenever, but I never do, 'cos I simply save space...As you know, I'm not one for 'talkin 2 much;-) THX AGAIN and proper 'academic' objectives coming as soon as I get 'clearances' across a lot of 'now cases'....CHRIS-harDrive-SIMON.

[Chris Simon]

Although there should be major Music Matters conference updates by now-Here's précis from my 100 page analysis:There is a New Style Sheet of Music: All manner of iPhone clones, apps, screens, software updates and just more ‘width of design’ for music now exists; like PEM: Pixel Extended Music.OMM or Opera Mini Mobile and many other mobile browser testing tools for what I call the new style sheet, (like a CSS metaphor) of music. A song can be a bulky promotion of scripts, images and, of course, video. A song needs Alt Tags just like traditional web design. Safari Viewport defaults are 980 pixels width. So if you are ‘designing your music’ on iPhone you really must be able to in a not altogether WUCIWUG interface. Cross-integration for the new style sheet of music is as intrinsic tomorrow as it will always be. At the same time, firmware updated N97s and many, many iPhone Clones bring more different pixel widths to the new style sheet of music. A new 3.0 Renaissance for sound track digital and social media use is rising and each song needs VM or Visual Management, not just Music Video. No doubts iPhone done best to date in constant connectivity content.

But Ovi might become its own literal translation and open the Door one day winning more scale of music activity than iTunes or the App Store. Nokia’s ‘Dance Fabulous’ development is really ahead of the Game, with the first Music Artist to properly debut as both soundtrack and animated video Avatar starring in the game. This was the final Gorillaz solution, but that was history and now first in line is brand new multi lingual singer Cindy Gomez and protégée of UK Eurythmics founder, Dave Stewart, one musical genius if ever there was one.

This might well become ‘currency de jour’ for Music Video as it is today and as it might become with VM or Visual Management. Some video is already tailor made for this transition: Such as brilliant Australian band, ‘Empire Of The Sun’ who are now leading edge with a very new style of simultaneous video release for all music. I was an instant fan of their ‘video music’ as soon as I saw it a long time ago. To a degree I think they are Australia’s MGMT. Brainchild of PNAUs Nick Littlemore and The Sleepy Jacksons Luke Steele, Empire Of The Sun’s first single release was an audio-visual viral bending ‘Walking On A Dream’. Their latest beautiful work is ‘Standing On The Shore’ with a whole new visual concept, ‘The Sword Fish Girls’. Also, this now completes a trilogy of Luke Steele playing the role of ‘The Emperor’. Music tracks are as much role playing and episodic and conceptual as they are a song. But there is a new kind of concept album. What Empire Of The Sun provides is both music video to promote the song, and an all encompassing concept for music release.

A VM or Visual Manager is not only a filmmaker, but a person who creates concepts around the music as it downloads. This includes etailing it; turning the consumer emotional bond with the sound, song or lyrics into a long term emotional and marketing bond; evolving the visual elements and artworks of the download for sharing as much as the song; ensuring the visual and audio concept thrives and grows across Twitter, Facebook, MySpace, YouTube, Vimeo. Not just as a promotion and even when and if people have tired of the song. The song becomes a social fabric in itself and must, (any song) always involve handset consideration.

It must live happily in the microSD card and then will as happily sit across 2,000 social browsing pages and instant messages each time it rings up on any individual handset. It is really a highly emotional entity becoming an emotional application. A song now goes far beyond MP3 Player and FM Digital Radio. And on that last note of radio, I could of course- not make contact with Kyle Sandilands and Jackie 0, whilst local media, advertisers and agencies slaughter them. I think the lie detector incident was disgusting. I also think the parent allowing it and carving out a new media livelihood from it was. But mostly, the media that previously supported these type of promos, who could not switch it off and can only now use Sandilands and J-O as
scapegoats. It shows how easily sponsors, agencies, moderators, media (and others) believe they can crucify people or try to sacrifice careers. We can only watch this space on that issue now and I believe its wide open and that KS and JO will always $urvive.

Getting back to the subject of visual management of music and the homogeneity of brilliant artists like Empire Of The Sun. Each song should openly invite its participation by making it available to instantly message, touch, push, browse, flash and access. If you are only starting out on iPhone 3GS, N97, Android or HTC Magic, other Clones and Phones: It is time to drop all prejudices and think more about each and every guitar pattern, ramped-up bass and thumping dance track and lyrical narrative having about 1GB worth of internet and cloud computing hitting each separate beat on each separate handset or cell.

It really has already become a song you can see and –increasingly- a song that the ‘world publics’ might see themselves in or feel emotionally tied to from pre release to final post to ongoing share and participation and performance. It is the dawn of a new visual management and cross-integration of music and will become increasingly conceptualized….Songs should not only be written to duration, but also to viewport defaults and pixel width narratives with video. Computers and Networks have forever changed music consumption, but phones are revolutionizing it and have, already, put the internet in your pocket. Whatever way you look at your phone, it is now part of the biggest delivery system for apps and entertainment and with 1.1 billion users of Nokia, Dave Stewart and Cindy Gomez have chosen a pretty cool Record Company.

It might just be that Empire of the Sun will be looking for Motion Capture Makers as well as Video Makers in the not too distant future of music. Or someone or something like a VM, (Visual Manager) that does both. Then the Emperor really will be wearing new clothes.
CUL8R.

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Good post. I find your article very interesting and your right, what's next for music? Because of this fast moving technological advancement. What will we expect to happen.