Thursday, April 24, 2008

The Future Of Music: Like Water, Feels Free, Ubiquitous, Full of Marketing Opportunities - Music 2.0 Is Coming

Music 2.0

Hello this is Gerd Leonhard, music and media futurist in Basel, Switzerland.

I want to talk to you today about what in the world is Music 2.0. Lots of people are using this word and I have been quite guilty of that myself even calling my new book Music 2.0.

So what in the world is Music 2.0, lots of people have questions about that, if you want to know more go to my book site music20book.com, you can download the whole PDF or you can order the book if you wish in the same of course on Amazon... so give me all of your money I'll be a happy man.

What Is Music 2.0?

So what is Music 2.0? Let's start someway here... I think we've been doing this the wrong way around for quite some time in the music industry, I think we've been, for the last ten years pretty much asleep, we're trying to sell music in the particular way that we want to sell it, that means as a physical unit or as individual download. You know essentially trying to sell copies.

I think the future of music, Music 2.0 clearly is that we're going to self access to people first, we have to sell it in a way that people actually want to buy it, which means with a click.

Kids today between twelve and thirty don't buy music on a unit based, they buy music based on clicks.

So this has been the music industry's response in the past to almost all new ways of using music, essentially saying "no, we can't do it". This happened again and again with huge detrimental consequences for the artists and writers.

I think we have to change this because time is fleeting... people are getting used to music being just ephemeral in the networks.

You Have Heard This Song Before: Enough is Enough

I think it's a bad idea to let this continue so we have to change it and come up with a new model "we've heard this song before" as the CEA in this great poster points out while saying "it's time to say enough is enough", we have to let innovation do the work.

2.0 Ideas Will Breathe Inside Music 2.0

Music 2.0 means getting all those new ideas from Web 2.0, Media 2.0, TV 2.0, into music and creating an open and transparent ecosystem.

So what do these companies have in common? Amazon, Google, Nokia and so on, Wordpress and Linux, and Last.fm, and Tivo, and Netflix, and EasyJet...

Well they have disruption in common and that is what we're seeing in music right now.

Disruptive companies like MySpace hopefully, or Last.fm will do it in music, and there's many others, including LiveNation, and including companies that have nothing to do with music... we will see that I think fairly soon, as I said last week on my blog.

I think bloggers will end up being part of the revolution in music, if you want to read more go to storiesonthefuture.com, to read the stories about blog.

Disruption Is Good

Disruption is good. Disruption is inevitable, it is where we must put the money.

In the music industry disruption means that creators and the users are taking back the control and that is a good thing.

Which side are you on?

I think this is something to think about when you're talking about your business plan and about how you want to go forward.

So everywhere else, outside of music, the shift from closed to open is in full swing.

Look at this, the New York Times, airlines, Wikipedia, the Botanica, OpenSocial, and of course even NBC, and of course the mobile phone people with open applications like Androids.

So the shift is here, means this is something we can't avoid, if you look at all these examples, I mean it's quite obvious that everywhere but in music we have an open ecosystem, and this is extremely urgent first to get into creating Music 2.0 as an open, transparent and uncontrolled ecosystem.

Music Protection

In the past we have tried of course to protect music and to get more money out of it in this way, which is not going to happen here.

First we tried DRM, but nobody was admitted to make copies or to share the music, which is just a very ludicrous idea that you cannot share music, which is the essence of music.

I mean, it takes a long time to imagine why that'd be good for anyone. So that has resulted in empty audience spaces, nobody came, 2% of the population buy music online, what they really are doing is networking to each other and now people are trying to disconnect people, networking and sharing stuff online, which is a completely wrong approach, not because the shouldn't be paying for it, but because sharing and networking IS what people do today.

This stuff isn't going to work, it's going to go up in flames and of course even worse pretty soon people are going to want to control our brains to see what we're sharing about music, which some of the proposals that we're seeing out there from ..... and others is to control the Internet and make it a police state... it's not going to happen.

Trying to control digital distribution via technical protection is going to fail, it's not going to happen, it may happen in other areas like television maybe... if the mobile to some degree if we don't notice, but with digital music in general it's not going to be a fruitful to do with this.

Music Is In The Network

So what we're seeing right now is that music is in the network and to take it out of the network like people are suggesting is the worst idea we could possibly have, because we're also removing the way that we could possibly charge and monetize it.

The whole argument of content is king of course keeps coming up as an argument of monitoring people, locking them up and seeing what they can do.

iTunes is a great example for that, it works great but man it's a locked community.

Some keep arguing that protecting intellectual property is key to digital business. But what are we seeing here for the last few years down, down, down the spiral goes, we're making less money for the record labels and of course lot less money for the artists and composers.

This isn't working, we have to give up on the idea of control and move towards an open ecosystem in music.

So this whole idea of saying my way of the higher ways, I think this is what is killing the record industry, and it's time that we flip it around and go forward into a new system, I think this has to end now.

EMI announced that they were thinking about exiting the IFPI and of course they've changed their mind pretty simply, unsurprisingly so. But this is the right move.

Next question those people have been leading us into this misery for the last couple of years. This isn't going to work and I think we need new people to bring out new resolutions, EMI has been good in this regard of course hiring the Google CIO.

"It's time for a change", I think open is king now and that is really what Music 2.0 stands for: an open system, transparency, lack of control over the artist and the user, and complete success built on merits.

We have to prepare to stop the whole system of control and the whole system of exclusivity also for example as the copyright organizations are concerned.

Goodbye Scarcity, Welcome Abundance

So here's a message for the IFPI and the others IAs and IIs, "say goodbye to the world of scarcity", not Tower records but iPods, not shelf space but Netflix, I mean we're going from scarcity to abundance to ubiquity of music and that is what we have to license, rather than to control.

We need to license access bundled into the networks, into devices, whether we can get away from the scarcity idea that a copy needs to be paid every time a copy happens.

Say goodbye to the dominance of hits.

As you can clearly see on this chart which I got from, I think from the Long Tail (I'm not sure but I hoped it was from there, it maybe have been IBM study, they have lot of cool stuff) but if you look at this US TV shows going from I love Lucy, to American Idol, from 60% all the way down to 12%. You know the hits are no longer what they're all about.

There will be hits in the niches but going on the future holds niche market success and this is possible of course because of the zero cost of digital distribution.

The same will be true for television, for film and ultimately of course for books as well.

The Old Tollbooth Logic

So welcome to the people formerly known as consumers. That's you and me, people who are now sort of in charge of a new system, they're not just consumers, they're participants, they are engaging and therefore need to have a new tollbooth logic, the old brand look like this, I'm sure you've very familiar with this.

If you want music you got to pay up for the CD, got to pay a dollar for the iTunes track and lots of money comes out on the other hand.

That means of course two billion dollars or something like that, so not a whole lot but you never know, ... so that's the old tollbooth logic.

The New Tollbooth Logic

The new tollbooth logic looks a little bit different.

The music is in the network, and we can't deny it being there so we also have to put tollbooths into the network and these tollbooths will not be obvious, they won't be painful to the user, there won't be attacks, they'll feel like free, but still they will be measuring and metering points about what's happening with the music and where money can be made.

So from there we generate, as my buddy Jim Griffle who's now at Warner likes to talk about, the pool of money in a fair way to split it up.

I think this is the way to go forward, this is the way that makes the users happy because they won't feel the tollbooth, unlike crossing the Golden Gate but she won't be charged five bucks everytime you do something,... they will bundled and wrapped into things.

All we have to do is to provide a license to create this new pull of money and I think the tollbooth again is a very very interesting phenomenon, the old days it used to be very obvious, where it is now it's integrated into the network.

Let's move the tollbooth because the consumers will pay with attention.

That sounds like a California geek hippie phrase, but consumers paying with attention means advertising, it means consumer based engagement metrics, it means the clickstream that we can measure and make money of by upselling, by connecting, by affiliate, by commissions, by marketing, by data-mining, all that stuff that most people don't know much about, and I'm just diving into that myself, but paying with attention I think music paid with attention and the " yes, music paid with attention is real money", I mean obviously advertising is based on attention: 720 billion dollars a year are spent on advertising, and if that's not real money then I don't know what is.

So this idea is basically very straightforward, I think we need to look into this, put the tollbooth into the network and think about for the creators who would create money and love by the users because obviously this would be an easy way, so for the users they would create the network for love music.

Finally in a legal way, this is the best thing that could possibly happen for them because they can build additional business activities on top of the network license very much like radio.

Objections

And for the many people who are critiquing this out there, this is not involuntary, this is a license agreement that companies offering music would use, would get to use and build that business on so for the users there's absolutely no drawbacks except for one which is privacy.

And this is a major issue that I have to dedicate another slideshow to, but the anonymizing of my data of course is going to be crucial apart from me opting into advertising and again different subject but a huge flag to raise here for that.

The Marketing Funnel

music-2-0-consumers-will-pay-with-attention-funnel-opportunities-250.jpg

So "feels like free" is great, paid with attention, this pool of money gives us essentially a funnel where we suck people into the funnel and out on the other hand, as a record label and artists this is the best that could happen on marketing cause it can decrease, we can get data back from the network, we can market to them, we can run ads on very specific targets.

This is like Google Ads times a hundred, so I think this final idea is definitely the way to go, and there will be lots of different funnels into other ways of making money with licenses, with sync deals, TV, films, games, live concert recording, social networks, tickets, sponsorships, merchandising, there's lots and lots of money in a network where the user is engaged.

If the users are not engaged, that means they can't afford it, and they can't get the music they want then I think we have absolutely nothing.

So this is the way to go, going forward, let's put those tollbooths there, they will be much less painful than they are now, in fact they won't be painful at all, they are cleverly built into the system and think of this for example as an email subscription or a mobile phone, or Gmail, or there is lots of ways that Gmail and Google makes money with what their offering but they're not painful.

The Solution

All we have to do is offer a license to the networks first, and enable a flat rate... a flat rate that legalizes the ubiquitous use of music.

As Kevin Kelly for Wired magazine says aptly "copy of digital content will most likely be free or feel like free", I think his argument is that they are free like Chris Anderson, I wouldn't go quite as far, I think they feel like free, which means you decide to participate and that is your payment.

Context is not, that means the relevance of the music, the selection and all these things, that is not. The experience is not. The packaging is not. The curation is not.

And this is very important as Kevin Kelly says "the key is to offer valuable intangibles that cannot be reproduced at zero cost".

Makes perfect of sense because music as a digital file is at zero cost distribution, zeros and ones, of course not production but distribution.

But to offer valuable intangibles is the way to go because there's lots of money in this and the immediacy of selling for example priority access, or immediate showing times, or fan club special access, the personalization of tailored programs and tailored productions that are just for me, the support and the guidance of the network, the authentic part to make sure it's actually from this artist, this is actually real, make accessible the experience and all these things.

I mean this is a huge step forward if we can make the switch, this is Music 2.0, is creating values in this way, not through scarcity, but through ubiquity.

Where To Start? By Giving Permission

I know this is easier said than done but let's start sharing in those revenues!

The online social networks spending, the global mobile advertising revenue, internet video ad spending and podcast ad spending, all we have to do is start giving permission.

Tell your publishers, your record labels, your industry organizations, you want to start giving permission, not denial, that is Music 2.0.

It is being part of this ecosystem rather than extorting it like we've had in the past, mostly from the major labels, when asked for a license, essentially is paid-to-play and out of their fear never doing anything again, like MTV, this has come up in the last few years, it's pretty bad.

So once 4 billion phones are connected, and Google will no doubt serve the advertising to them, imagine how much money we can make from sharing in the revenue streams that will come through these devices, if we're not so worried about making copies or not making copies, this idea is ten years old, we have to let go of it, we have to license the network.

Music 2.0 Is Frictionless

Music 2.0 where friction is really fiction and the old days of Music 1.0 or Music 0.0... friction was part of the game, that's how you make money but this is completely gone, if you want to know what to change get rid of the friction, make money with ubiquity.

Let's take a quick look at Google and see how they make money: they make money with content, the video search, the web search, the image search, all other the people's content, news search, book search, blog search. It's amazing Google makes money with content, with lots and lots of content and it's doing a fabulous job for the content owners.

Google in China is coming up with a program that makes music feel like free when you use it through their search engine, absolutely amazing.

So why in the world do we not license Google? For music what better place to offer the music, why isn't Google licensed for music yet?

This is the big issue, I think we should solve it ASAP. Think about the 380 million dollars or something that Google makes a month, by those tiny AdWords, if I can get my music in there for free I'd gladly take a piece of those revenues in return for the music.

A Huge Opportunity Is Waiting

This is a huge opportunity, all we need is to actually provide the music. And if you look at the stats today, 2% of the consumers have engaged in digital music so far, that is a pathetic number. Four billion songs sold on iTunes. I love iTunes, I love Steve Jobs, that allowed to make my iPod, obiously I'm making this on the Mac, but that's not enough.

Four billion songs isn't enough to make us happy as musicians or creators. Four billion songs maybe be sold on Yahoo, Napster, let's add them to it, if we're extremely optimistic, I don't think that's the case, but, in general let's look at these numbers, I think there's 400 billion songs unsold, a hundred times, or at least fifty times as much unsold.

So do we need more of this? Do we need more people who want to take a hard line and basically force the ecosystem onto people? We don't need this.

What We Really Need

We need more of this: music like water and people who know how to collaborate, those other people we should ask to run the music business, people who can work together, who can collaborate.

Martin Luther King says "injustice anywhere, is a threat to justice everywhere" and I think we're seeing very hard pervasive injustice everywhere in the system, one estimates that within Europe, about 90% of the population is actually criminal because of their activities of file sharing and sharing music through USB drives or even Bluetooth.

This can't continue, Music 2.0 is a radical change in the system selling access, being transparent, being open and using what's already out there on the web which is a connected ecosystem that can really scale.

Thanks for listening and of course don't forget to look at my book, you can buy or download whatever you like and comment on my blog, and thanks for listening, bye.

Check out "Music 2.0" - the full unprotected book in PDF format is immediately downloadable.

Gerd Leonhard is a media futurist as well as an author and writer, a media and Internet entrepreneur, a strategic advisor, and a keynote speaker & presenter.

If you want to get a good feel for what he does, you can check out Gerd's blog MediaFuturist, or watch some videos from the new Media Conversations Future Talks series (to select an episode just click on the book icon / guide button, and go from there). You can also visit his Youtube channel, or subscribe to his video feed.

Intro and editorial formatting by Robin Good - Text transcription by Nico Canali De Rossi

Gerd Leonhard -
Reference: MediaFuturist

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posted by Robin Good on Thursday, April 24 2008, updated on Tuesday, May 5 2015

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