I recently joined Advanced Operators; a blog carnival comprised of “super geeks” from my old stomping ground of Portland, OR, aka geektopia. The last few weeks I’ve had nothing to contribute, as I’ve not yet been elevated to “super geek” status and most of the topics go WAY over my head. This week, much to my surprise, the question at hand is regarding the future of the music industry. Finally! I think I’ve got a thing or two to say about that. But let’s follow the questions AO published as guidelines for the article to prevent too much hypothesizing and philosophizing:

1. Is the recording model still valid? If so, is it the bands that will be doing the recording and distribution?
2. If the money isn’t in a recording model, then what will the model of the future be?

I believe what they are referring to here is not the “recording” model but the “record industry” model. Recording music is still the only way to get music from artist to listener, until telepathy becomes a viable option. However, the record industry model is crumbling, as any Joe Public that has bought a track from iTunes or direct from the artist will tell you. The reason for this is not only because their commodity is loosing value in the marketplace, but because they have been slow to adapt to the changes happening in the music industry as a whole.

Record companies bring two vital services to the table, marketing and distribution. These are really the two points in question when talking about the record label business model, not recording. As for the future business model and what it will look like…that is anyone’s guess at this point. In a recent Rolling Stone article, “The Fall of the Record Business: What Next?” 5 prominent music professionals were interviewed and produced five totally different perspectives on how music will be profitable in the future. When the article was published I was in agreement with Ian Rodgers of Yahoo Music. He speculated that ad-supported music was the wave of the future. Today, after investigating many distribution options for an ebook I’m writing, I am starting to think that Nettwerk President, Terry McBride was onto something when he speculated that consumers will act as retailers. This is still a far off idea, but one that we might consider given the growing popularity of Long Tail filters like referrals and recommendations and the power of those filters in a social network community. If I like an artist I can post their music on my site for my friends to buy. I’ll make money and the artist will still make more off the sale than they would have through any other means than selling it themselves.

3. How will bands profit from the music they make?

Again, the specifics of how this will happen in the future are anyone’s guess. At the moment, artists with no record deal are making money by selling their CDs and tracks via iTunes, Snocap and other digital music stores. The beauty about cutting out the middleman is that it takes less sales to make more money for the artist. In a traditional record deal, an artist may be lucky to make 12%-20% on a record. This of course is after the advance, marketing, etc, has been recouped.

When the label and distribution company has been eliminated from the equation an artist can deliver a product from studio to consumer and retain a large portion of the profits. An artist by the name of Second Hand Serenade has become a poster child for this model. He registered his album with Tunecore, a digital distributor that charges artists a one time $30 fee per album to place on it on iTunes. Within less than a year Second Hand Serenade sold 200,000 copies of one track. After a 70/30 split with iTunes and the $30 he paid Tunecore, he made about $135,000.00 without a record label!

4. Is there a role for the Record Labels of yesteryear in the new world?

The labels will only have a place in the new world if they carve one out for themselves. By this I mean, they need to make themselves useful. Since the dawn of the record industry, they have dictated the terms and conditions of their relationship with the artist. The rules have changed and their job is now cheaply (often free) done digitally. Their new role will have to be based on a new profit center and that may be hard for them to do. For an artist at the level of Justin Timberlake, a label is a necessity. There will always be a need for a company that can negotiate corporate deals with Verizon and invest in an elaborate global tour. Most artists don’t fall under that category and may be served better managing their own career with a solid team of professionals and consultants rather than a corporate monster. Labels are taking more of an interest in touring, merchandise and publishing than that have in the past. This does not bode well for an smaller artist in the long run. They will get a nice chunk of change up front, but they are selling off more of their rights and assets than they may realize. Technology is making it possible for an artist to procure all of those services without selling their rights away, so that strategy may not be the long-term solution.

5. How do bands of the future promote themselves?

Promotion will be most effective modeled on the Long Tail theory of filters and community. Chris Andersen, author of The Long Tail, suggests that reputation is a new form of currency and this applies to musicians as well. It will take more one on one, personalized relationship building with their fans and that takes more time and energy. A band will have to WORK it harder than ever. Touring, blogging, texting, instant messaging, viral videos, and most important, being creative in how they communicate with their fans. Communication and community building are the two most crucial elements that any band must embrace to have a successful marketing and promotions plan.

6. Do you want to or think its “right” to pay for music?

I believe that artists should be compensated for their work. I also believe that HOW they are compensated is part of the new paradigm. Gerd Leonhard, a media futurist, illustrates this point in a video presentation on the future of the music industry. He claims that it is no longer a “pay first paradigm.” The recorded music is becoming a free promotional tool used to build a fan base, something that many bloggers may relate to. We give our most valuable commodity, our knowledge, away for free in hopes of building a reputation that will bring us the work we desire. A good song may bring another fan to a show, sell a t-shirt, get licensed in a movie, etc. The profit is coming at the end of the cycle, once a fan has been won and a relationship with them has been developed, not at the beginning or discovery phase. Consumers are now dictating what is popular, not the record labels. Our choices are no longer being shoved at us from the top down, we are pushing our choices upward.

Piracy is a serious issue of copyright violation. The defenders of copyrighted material are vehement in their crusade, but have done little to prevent rampant file sharing from Wisconsin to Beijing. The RIAA has done a pathetic job of convincing us that we are stealing if we don’t pay for music. Maybe because, for all their lawsuits and rabbel rousing, they have made us realize that corporations are greedy and that their least concern is the artists they claim to be protecting. What if, since the beginning of the record industry, records were free promotional tools that labels used to get people to a show? Would we consider it stealing if that had been the model all along? And remember, we are talking about the record industry, not the music industry as a whole. Music is thriving, despite the fact that the labels aren’t. Artists are still making money, just not from selling records. A recent documentary from our neighbors to the north is a very illuminating look at the subject of piracy in the music industry.

7. How important is rights management to the future of music?

I think the answer to this question is obvious…of course rights management is crucial, always has been and always will be. Whoever controls the master and the publishing is the one making the money.

The future of music is undeniably tied to technology, but which technology will produce the strongest business model is still up in the air. Perhaps it will consist of several models, depending on which direction the artist wants to take their career. And maybe it will be one that has not yet been conceived. Either way, it is apparent that it will unfold online and be community-based. I am very excited about the future of the music industry. But I see one great challenge ahead, the chasm that exists between technology (web developers, futurists, programmers, etc.) and the artist. I’ve sat in on many meetings with technology companies that have a great idea to capitalize on the music industry with no concept of how the artist thinks or works. In meetings with artists I find they are often clueless as to what the hell to do next. They are overwhelmed with options and can find no one to educate them. A bridge needs to be built between the artist and technology. Technology should reach out to better understand the genuine needs of an artist and how to facilitate them. Artists need to better understand what technology has to offer and how to utilize their services. Harmony between the two will bring about greater innovation and choice as well as a greater financial return for them both.

Thanks to my good friend Luci in Portland, OR for tipping me off to this story:

Beaverton mother sues recording industry, could make history
12:59 PM PDT on Tuesday, June 26, 2007
By kgw.com Staff

A Beaverton mother who was accused of illegally sharing gangster rap music online and sued by the Recording Industry Association of America is fighting back by suing several major record labels.

If Tanya Andersen wins, her case could make history, experts say.

Two years ago, the RIAA sued Anderson for file-sharing. Anderson believes it’s a case of mistaken identity.

The single mother denied their claims and filed a counter suit alleging fraud, racketeering and deceptive business practices by the record labels, according to technology news Web site Ars Technica.

The RIAA dropped recently dropped their suit against Andersen.

“The RIAA is also accused of trying to contact Andersen’s then eight-year-old daughter without her knowledge” in an attempt to dig up knowledge implying Anderson was guilty, the article on Ars Technica reported.

“The lawsuit was filed in the US District Court for the District of Oregon late last week and accuses the RIAA of a number of misdeeds, including invasion of privacy, libel and slander, and deceptive business practices,” the article stated.

The RIAA front group, SoundExchange, is threatening to take away our Internet radio! This is a very serious issue and if we don’t do something about it - we will no longer have Little Radio, last.fm, Live365 or any other Internet radio station you listen to.

Here’s the lowdown from the SaveNetRadio site:

“The future of Internet radio is in immediate danger. Royalty rates for webcasters have been drastically increased by a recent ruling and are due to go into effect on July 15 (retroactive to Jan 1, 2006!). If the increased rates remain unchanged, the majority of webcasters will go bankrupt and silent on this date. Internet radio needs your help! The Internet Radio Equality Act has recently been introduced in both the House (H.R. 2060) and Senate (S. 1353) to save the Internet radio industry. Please call your senators and your representative to ask them to co-sponsor the Internet Radio Equality Act by clicking HERE or going to SaveNetRadio.”

It only takes a few minutes to fill out the form. Please act NOW. If they take away our access to free radio, imagine what they’ll think they can take next. Don’t let this happen.

They even beat Haliburton for the title. The Consumerist has the full story.

My Stumble Upon addicted mother stumbled upon a real gem recently.

It is a documentary that examines the Canadian version of an issue we are dealing with in the US. What is piracy? Is it killing the music business or is that just what the Record Associations want us to believe? This is valuable information for anyone in the music industry. All of our futures will be affected by this. You can watch the full movie here: On Piracy: Piracy and the Future of MusicThank you to the filmmakers for a great project that we can all view for free. Visit their website here and buy a copy of the DVD - Piracy Documentary

Those bullies at the RIAA are at it again. This time they are going after poor college students and strong arming them into paying up to $3,000 to prevent facing a lawsuit. Rather then spend the money going after the students themselves, the RIAA decided to enlist the schools to do their dirty work for them. The plan was to send a list of IP addresses that were suspected of illegal downloads and have the schools send a letter to the student, notifiying them that they can either settle out of court at a website set up by the RIAA or face legal action.

Thus far both the University of Wisconsin and the University of Nebraska have refused. This is from The Inquirer :

“The University of Wisconsin has told the RIAA that it has no obligation to grass up its students out unless it is ordered to by a judge.

The University of Nebraska has told the RIAA that it can’t help them at all because it changes computer’s IP address each time its turned on. It says it only keeps this information for month. After that month, the school has no way of associating an IP address with a computer or its user.

This last excuse has the RIAA fuming because it believes the University should keep its records longer. Of course the University does not have to keep records just to satisfy the needs of the RIAA, and just to indicate how cross they are that the record companies are about bothering them, they have sent them a bill for wasting its IT department’s time.” see full story

And I could not resist re-posting this bit of genius from BBSpot:

“Los Angeles, CA - The RIAA has updated its mission statement from “Our mission is to foster a business and legal climate that supports and promotes our members’ creative and financial vitality” to “Our mission is to maximize hatred for the music industry by using creative legal and innovative technological methods which will further destroy our member’s creativity and financial vitality.” The organization hopes the change will more accurately reflect their long-term goals.

Chairman and CEO of the RIAA Mitch Bainwol said, “This change allows us to focus on our goals of ridding ourselves of annoying artists and consumers completely. The Internet has made this possible. In the days before the Internet only a few artists and industry insiders hated the RIAA, now hatred for the RIAA is at an all-time high.”

Bainwol explained that a committee formed three years ago has developed most of the ideas used to foment the growing hatred for the organization.

“We’re proud of them. When more people hate you than the President you know you’re doing something right,” Bainwol said.” see full story
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What upsets me most about is that the RIAA would have you, the artist, believe they are doing this on your behalf. What they fail to disclose is the sharholders of the labels are their clients, not the artists. As a corporation, a company must shows gains every year. Even if they are making billions in profit, each year must show more profit than the last. The RIAA is looking down a long, dark tunnel right now. They know their days of mad money-making are coming to an end and trying to innovate and change direction would be a costly and time consuming endeavor that the shareholders would not appreciate. So, rather than loose money, they are going after families (recently sending a subpeona to a 10 year-old girl to testify against her mother!) college students, and even soldiers. Their actions are greedy and shameful. If you are an artist on a major your record label may be a part of this organization and actually supporting it’s decisions. For more information about the RIAA check out and subscribe to: Recording Industry vs. The People