I was recently at a Susan Tedeschi concert. (If you’ve never seen her – go! Trust me on this one.)
It was my third time watching her perform and as I listened to her trade riffs with the amazing blues guitarist, Derek Trucks, a thought occurred: “How did I first hear of her?” Was it a friend? Perhaps, a review? Or, maybe while sampling music online? After all, Tedeschi is not a household name. You rarely hear her music on the radio nor is she likely to ever make the top of Billboard.
It brought to mind the frustration I used to feel with the traditional model under which recording companies largely controlled the music that I heard. Under this model, industry executives identified music they thought would be a “hit”. They then promoted the song to get radio play. If a consumer liked the song, they would go out and buy a copy whether it be an 8-track, cassette, LP or CD. (Sadly, I’m old enough to have owned all of these formats). As a consumer, you had little ability to access new areas of music or artists. And, artists were incented to focus on developing single hits to sell to mass market tastes. Obviously, the digital era is turning this model on it’s head.
This was made even more apparent to me when I participated on a panel last month as part of a meeting of The Pawley Center for Media. The event this year was held in Silicon Valley. Fellow panelists included representatives of web hosting companies, major content providers and the RIAA. And, while the scheduled topic was digital rights management, the discussion quickly turned to the much broader subject of who should bear the cost of controlling unauthorized distribution of content – web hosting companies or content providers.
There are powerful arguments on both sides. In some cases, they are reflected in litigation (see Napster, Grokster and Viacom. But this focus overlooks the dramatic and profound changes resulting from the conversion of entertainment content into “ones and zeros”.
As I listened to the debate, I thought about the transition that has occurred in the software industry – it’s a good analog. Only a few years ago, most software was purchased pre-packaged and in binary form. You paid for a license and received a diskette in return. Now, software is increasingly being developed through open source projects around the globe and delivered as a service. This change has created enormous upheaval in the software industry, but at the same time has resulted in entirely new opportunities for software developers (i.e. content creators), the technology industry and customers. We’ve made this transition at Sun by shifting from revenue derived from per unit royalties to subscription and support based models. It hasn’t been easy. Far from it. However, the transition has provided us with the ability to participate in a much larger and broader market and is better for our customers.
– The same change is occurring in almost all segments of the entertainment industry, including music. Underlying it are these three facts:
– The Network will continue to grow.
– As it does, more people and devices will be connected.
– This will result in an ever increasing volume of shared content.
Without doubt, the traditional music industry is being severely impacted by the digitization of content, including greater music piracy. However, given the inevitability described above, content providers in the entertainment industry are going to need to look to new business models for revenue generation. They will need to transition from selling “copies” to selling “access”. This will include models that focus on monetization from “MaaS” (i.e. music as a service), merchandising, advertising or preferred access. I suspect that my children would pay a premium to be part of a community that receives special access to an artist – for example, to learn why a song is called “Icky Thump”. Revenue sharing arrangements with web hosting companies will be a part of this. (It was interesting to hear one of the panelists, Roger Faxon, Chairman and CEO of EMI, discussing his company’s decision to permit music downloads without DRM).
I haven’t touched on the changes for the artists (i.e. content creators). But, they are equally significant. Interestingly, EMI is now also allowing users to create derivatives from EMI copyrighted works. In this new era of user generated content it is another opportunity for monetization.
As for the consumer, we now have the ability to engage in auditory exploration and connect with artists around the world that reflect our particular musical affinities. For me, this has meant the discovery of Keb’ Mo’, Don Walser, Seu Jorge, Oliver Mtukudzi, John Prine, Silversun Pickups, Baaba Maal…. and of course, the talented Ms. Tedeschi.
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