Judeumeh's Blog

The Natural History Museum at Kensington, complete with dinosaurs and tired allusions to the music industry, was the venue for yesterday’s EconMusic conference. This excellent event was focused solely on the vexing topic of digital music economics, or lack thereof. Read on to find out more.

This half day event, which was organised by ContentNext, did a great job of exploring “key strategic issues surrounding the emerging economics of digital music” by dividing them up into four panel sessions, and an interview style keynote by BPI CEO, Geoff Taylor. Further details / coverage on each session can be found at the PaidContent:UK website, but below is a summary of the key points covered:

Keynote Interview – Geoff Taylor, BPI.

• Memorandum of Understanding (MoU) – At least six UK ISPs have signed up to this initiative, and will send out warning (ahem educative) letters to people suspected of illegally downloading music. According to Geoff, this initial phase will be followed by some, yet to be decided, action against repeat offenders.
• DRM and Interoperability – DRM should really be an enabler of innovative business models and would be a shame if it dies out completely due to lack of interoperability between platforms / devices.
• The ISP’s Dilemma – An attendee from VirginMedia raised the poignant question of if & how ISPs might be compensated for cutting off their own customers. The answer went along the lines that it won’t necessarily come to that, because the BPI are open to exploring other options as well.
• Opportunities for ISPs – It was observed that ISPs could become competitors to music service providers and labels especially if they are subsidiaries of media / mobile / content companies. Overall this was an insightful session delivered with some conviction by Geoff Taylor. For example, I raised the question of the possibility of digital music evolving into a utility type service, paid for by a combination of Internet subscription and / or device makers, and the optimistic answer was “yes, but only on a voluntary basis by the ISPs”.

Session 1: Paying vs. Piracy – (Speakers: Ben Drury – 7Digital; Thirsten Schliesche – Napster; Eric Johnson –Wolfgang’s Vault; Marla Shapiro – MCPS-PRS Alliance; Session Moderated by Robert Andrews) Session focused on how to convince users to pay for music, and which models will work best. Main messages were:

• It is difficult to value digital music because the supply is nearly infinite and easily accessible
• Legal Peer-to-Peer (P2P) services may struggle because P2P technology is not the most efficient way to deliver music to customers. A dedicated Content Delivery Network (CDN) is preferable.
• Music labels may do well to partner with ISPs; however this could spoil the party for dedicated music service providers like iTunes / 7Digital / Napster etc.
• Global and Pan-European licensing issues remain very real obstacles to Internet music, for example one attendee observed that the Radiohead experiment was made relatively easier by the fact that one entity (i.e. Warner Chappell) held the global publishing rights for the release.

Session 2: Mobile Music – (Speakers: Julian Zsmood – O2; Tom Erskine – Nokia; Tom McLennan – Vodafone; Ian Henderson – SonyBMG; Session Moderated by Mark Mulligan) Key points:

• Mobile music is in decline
• Handset manufacturers like Nokia are now competing with mobile operators. The answer may be to “grow the pie” in order for all parties to get more revenue.
• Innovations and observations: Nokia – “Comes with Music” due to launch in the UK; Vodafone’sMusicStation is also being used as a music discovery tool; O2’s My Play initiative with Sony BMG;
• According to Ian Henderson, it would be great to see more music label business models that involve mobile operators, handset manufacturers and other third parties.

Session 3: Social Media – (Speakers: Billy Bragg – Musician, Spencer Hyman – Last.fm; Steve Purdham –We7, Danny Rimer – Index Ventures. Session Moderated by Angel Gambino) This session’s heated debates were by far the most interesting and thought provoking of the event, and it covered some of the challenges faced by innovative models for digital music as follows:

• Billy Bragg – Content market is changing and record labels need to bring artistes more to the front. Criminalizing the audience is wrong. Any platform that makes money from music should pay artistes (e.g. MySpace makes significant ad-based revenue from music that cost them nothing to produce).
• Danny Rimer – Music might just become a Trojan horse for monetizing content. Artistes may need to go ‘Open Source’ and give away their music in order to get paid in other ways.
• Steve Purdham – Rights licensing issues gets in the way of innovation, for example it took 18 months to clear Peter Gabriel’s catalog for distribution on We7, a platform in which he is a founder / investor
• Angel Gambino – Music labels are often dysfunctional when it comes to innovative models, e.g. a music label marketing department might be uploading songs onto a new service at the same time the legal department is sending out cease and desist letters for those same songs – true story.
• Spencer Hyman – It took a lot of effort for Last.fm to secure streaming rights from record labels. The music industry can be very challenging to deal with – they have far too many lawyers.

Session 4: Direct-To-Fans – (Speakers included: Ed Averdieck – Real World; David Courtier-Dutton –Slicethepie; Erik Nielsen – Intact Records; Johan Vosmeijer – Sellaband; Moderated by Rafat Ali) Coverage of innovative direct-to-fans music models as employed by these organisations:

• Real World – founded by WOMAD and Peter Gabriel, provides world class recording facilities for talented artistes from around the world
• Slicethepie – monetizes production of music by enabling fans to select and pay for a band to get their album produced.
• Sellaband – provides a similar platform for fan funded music production, but they also produce and release the resulting album on their own label.
• Intact Record – part of the Marillion’s business empire, embodies the 360 degree deal model (or band as brand), possibly before the term itself as even coined.

Conclusion: this event packed in a lot of content for its half day duration, but even though a lot of what was said is not news (as observed by one artiste attendee), one was still left with the impression that this particular gathering had started to glimpse the way forward to future of the music industry. Watch this space. Some key takeouts (and well done for getting this far) :

1. It will be interesting to see the outcome of ISPs implementation of the MoU, and what subsequent actions are to be taken against repeat offenders.
2. Opportunities exist for ISPs to play a major role in the eventuality of digital-music-as-a-utility by partnering with music labels. This could present a challenge dedicated music service providers, (e.g. iTunes / Amazon / Napster etc.), but only if they don’t preemptively become / acquire ISPs.
3. Rights licensing is, and will continue to be, a major issue for digital music, and even for established licensing / collection societies. In the words of Rafat Ali, why aren’t there any problem solving entrepreneurs out there trying to solve this problem, and make tons of money in the process?
4. Future digital music business models must ensure that artistes are placed, and paid, at the forefront, especially as we evolve ever more innovative models that take advantage of the Long Tail and other sophisticated contextual valuation models for pricing and charging for digital music.
5. The future of digital music is an exciting one for those open minded enough to embrace the change of mindset required to reach its full potential. Oh, and this also applies to other digital content / media formats as well

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Note: This post was previously published on my BCS DRM Blog, where you can find the original post, and reader comments, in the archives.