#IRespectMusicFans

Musicians seem to be on a permanent campaign for more money, and a larger share of whatever’s going. There’s no doubt it’s tough to make a living in music. There are more musicians than there are living wages, and as an industry the way the money is shared out often leaves all but the top players out in the cold.

But beyond a general sense of fairness, that music and artists should be paid something and should if they are good be able to make a living, the public seems at best only mildly interested in music’s fair pay debate. Why should that be? And what can be done about it?

Thirty years ago Dire Straits summed up one attitude to pop success with ‘Money for Nothing’. Then or now, scamming it and behaving badly is not going to convert even passionate music fans into musicians’ rights lobbyists. And the Tidal megastar love in might have been a PR disaster if anyone had cared enough.

So, instead of esoteric arguments about how to share out 0.07 cents between the cast of thousands behind a popular song, here’s a shortlist of suggestions to help really get the public on music’s side.

1. Show the public at every opportunity what a lot of hard work is involved in creating, performing, and recording music. Tell them about the sacrifices we make to get just the right sound, the obsessive practising that delivers the perfect inflection, and the sheer nerve of putting a life and a career on the line day after day. If if they don’t like the result, they can’t disparage the effort.

2. When we claim to be doing something, make sure we can back it up. Sure you can mime to your own guitar solo or vocal on a video. But if it supposed to be sung, sing it, don’t fiddle it together with Melodyne and brazen it out. If it’s a work of studio wizardry that is fine too, as long as the truth is told.

3. Be scrupulously fair to others in our own industry, by crediting all performers, making sure the songwriters are acknowledged, and the information is all there so everyone involved gets paid properly. Nobody sides with a cheat; nobody can break through a wall of honesty and virtue.

4. Hardest of all, don’t oversell music! We’re not going to fix the global economy. When people say they can’t live without music they don’t really mean it. At best we are the sign that a society is developed and civilised enough to care about more than subsistence. A little gratitude for any help we get will go a long way.

If we show respect to each other, and make it easier to work with us and help us, and if we are duly thankful for the privilege of working with one of mankind’s greatest gifts and achievements, there is no doubt that the public, and the politicians who represent them, will reciprocate.

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Europe’s Digital Single Market is Good for Music

Accustomed as music companies are to territorial licensing, pricing, windowing, and marketing it is understandable that there should be at least scepticism if not outright hostility to the European Union’s Digital Single Market strategy. Swedes with an average GDP (PPP) per capita of $45,000 can afford more music than Bulgarians with $15,000. It doesn’t take much imagination to understand that the inequalities in such a large and diverse market make it hard to price a service or a product which is available to all.

These inequalities are unsurprisingly reflected in the relative sizes of Europe’s national music markets, with Germany and the UK each more than half as much again as third place France, then a long drop to fourth place Italy. Populations and the size of the economy and the amount of discretionary spending are relevant of course, and it’s gratifying to see that the UK is second only to Japan in the amount spent per capita on music. The wide disparity in the size of the market as a whole and the per capita spend is illustrated well by the fact that the US is only fourth largest in the latter, while being the leader by far in the former.

There might be many reasons why, even corrected for purchasing power and the availability of discretionary weekly cash, some cultures buy more recorded music than others. In some places music is universally considered an appropriate gift, and record tokens or gift cards deal with the preference problem. Historical differences in economic development mean that the dominant vectors for recorded music are much less present in some countries (and this is why universal high speed broadband is so critical for Europe’s cultural industries).

But what would a European digital music market look like? It would start out at about €4b, or roughly the size of the US market. But it would have 500m consumers, versus 300m for the US, and a per capita GDP (PPP) of a very respectable $36,000. It would also have two powerhouse centres of music export excellence, in the UK and Sweden, and the benefit of an extraordinary array of local and regional cultural support programmes.

Back of an envelope maths says that is already an additional €0.75b just by taking away artificial barriers (GEMA, I am looking at you). Other positives might come from innovation, particularly in finding a way to address the less wealthy areas with affordable products and services, without undermining pricing for the higher end. If Europe can crack that there are a few more continents that could prove excellent importers of both music and the digital services and technology that sell it. The necessity of being multi-lingual and serving a very rich and diverse set of cultural preferences would surely give Europeans a strong advantage over the parachute business model strategies of our friends across the pond.

Even more, where there is already excellence in copyright administration and the digital skills that drive value, a larger internal market would strengthen the good and drive out the bad. Why would local artists trust their careers and livelihoods to inefficient and corrupt collecting societies if they could just join the best and get paid for the world’s biggest music market from one source? And perhaps regional diversity would re-create the middle class of record labels that provided so much value, before they were destroyed by the wave of enfeebling consolidation that left us with two and a half global businesses in a market a third the size it was at the millennium.

If Europe’s politicians are wise they will consider not the interests of those global businesses, even if one of them is headquartered in Paris, but rather regulate for the music industry we could have. One that has more opportunities for artists, no matter where they are from, and one that takes advantage of our diversity as well as our size. I can only see good in a European digital single market for music.

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Three Reasons Why Indie Music Will Thrive

There’s a professional and independent music industry, sandwiched in between the largest corporate and VC funded businesses, and the hobbyist and part time music makers. It is vitally important as a repository of skills and cultural memory, as the guardian of meaningful values in music, and as an engine of innovation for the future. And I think that its future is very bright indeed.

Indies Provide a Better Home for Better Artists

It used to be that their superior financial resources, and, further back, their ownership of the best studios, gave the biggest labels a strong advantage when it came to helping an artist develop a career. No longer. The necessary blend of experience, skills, knowledge and dedication is found everywhere in the music industry, but in the bigger companies it is warped by the demands of financial managers and corporate apparatchiks.

The best and most interesting artists know this, and increasingly are making the choice to treat the industry as a menu of services that they can buy in when they need them. I think that these artists will over the next few years rediscover the indie record label as a deep and long term partner, where they can find accessible and approachable support for their creativity, along with an unprecedented marketing reach.

The Digital Dividend

Professional and independent creators and producers benefit proportionately far more from the revolution in digital tools and technology. Of course access to capital is still important, but the creative playing field is now much more level.

Music is no different to any other endeavour in that it can often benefit from skills, experience, and teamwork in bringing the artist’s original vision into the world. This set of competences is supported now by technology that enables global scale business networks to be pulled together even by small local businesses. So record labels can help artists who don’t want to start at zero, and can stretch those with ambition to do more with their talent. Digital production tools make quality and authenticity affordable in a way that for many was previously out of reach. And once the music is ready, the digital revolution provides a global market.

Real Independence is Rare and Valuable

Real independence is very much in tune with today’s sophisticated consumer, who is more and more rejecting the mass market in food, in coffee, beer, and all areas where your choices say something about your values. Quality matters a lot, but not at the expense of authenticity. For today’s consumer, the way that the corporate music companies manage risk, with focus groups and ‘outsourced’ creative teams, has negative value; this audience has taken DIY to heart and shops in advance of production on crowdfunding platforms, and in small stores.

Nor can this set of values be faked or bought in. It’s part of the natural cycle of business that founders often end up selling to the big conglomerates, but they can’t sell the love and support of the customer who joined them on the early part of their journey. And of course, in music, the artists that join do so because they share the values. Independence has the chance to become not just a slice in the music industry, but a social and cultural movement.

So for the following three reasons, I think that indie record labels will grow their role in the music industry of the future:

Reason number one: The best and most interesting artists need a supportive and sympathetic environment to develop their art and their careers; indies can provide this far better than investor driven corporates.

Reason number two: Professional indies will be helped by the digital revolution to reach a bigger and more sympathetic market than ever before, with a product that is enhanced by digital recording and sound production technology.

Reason number three: Today’s consumers are embracing the values that can only reside in independent record labels, and will join the movement if they consider it authentic and worthwhile.

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Spotify Cannibalises iTunes; Universal Cannibalises Music

Universal Music has been turning in some very unimpressive numbers for parent Vivendi over the last few years. Traditionally record companies blame everyone other than themselves for their failures (I did a brief survey some years ago here). Now in the frame is Spotify, which relies heavily on drawing users in on its free offering, from where it can sell data about them to advertisers and hope they upgrade to a paid plan. That free tier, said an unnamed Universal Music executive to the Financial Times, is not working hard enough for the music company, and moreover it steals consumers who might otherwise be buying downloads. iTunes, by far the dominant download store, is suffering slow but steady attrition.

Quoted in the same Financial Times article (March 2015), Spotify managed to both prove and deny this simple proposition:

The company also rejects the suggestion that its ad-supported tier is responsible for declines in download sales. “Spotify is not cannibalising iTunes,” it says. “Spotify is monetising people who have never been monetised before.” Only 12 per cent of former iTunes users are on Spotify and of that number more than 40 per cent subscribe to the paid tier, it adds.

You don’t need PhD level statistics to see that if 1 in 8 of the people who stop using iTunes do so because they are spending more than they would on a Spotify subscription, and if nearly half of those high rolling stoppers trade down to a spend which is capped at £120 per year including VAT there’s going to be less money in the system for recorded music. Access to all the music they either lacked the time or the money to acquire might convince some lesser spenders to push the boat out, but for the majority of infrequent or parsimonious music buyers, big value 100 track compilations would remain a better deal. The gifting market has a bit of inertia and is more likely to stick with CDs, or default to an iTunes voucher.

More contentious however is that free of charge tier in the subscription service model. For the many who never or only very rarely bought music in any form, the subscription business is as irrelevant as hipster vinyl. But again common sense says that there will be  cannibalisation; between free tiers of service and whatever advertising or taxpayer funded licence fees can be scraped together for broadcast or webcast services, and between free and the paid tiers. And while some services, most notably Spotify and its direct competitors such as Rdio and Deezer, strive to find a balance between free and paid plans, for others, including YouTube and Pandora, paid plans remain commercially insignificant.

I previously calculated very approximately a net loss to recorded music revenue of about 30p for every £1 of subscription revenue. Some analysts say that streaming is just too expensive, and that the revenue maximising full service price is more like £3 per month rather than £10. One of the clearest explanations, by David Touve, can be found here and in more detail in this presentation here (but please ignore the Swedish Internet traffic data as there was a much more plausible explanation than iPred for the drop recorded). At such low prices the cannibalisation effect would be even harder to deny. And even within a single service it seems hugely important just what you get for nothing and what you have to pay for.

So this has been a brief survey of just some of the moving parts in the market for recorded music. But why is it that spats over the finer points of music service revenue models reach the world’s financial press? And why do some of the biggest and most savvy businesses seem to be pushing so hard for apparently sub-optimal results?

That cannibalisation word is a horrible one and nobody is eating people we hope – the idea is contention for finite resources. Record companies and services each have their specialised capabilities that combine to capture value from music, so to some extent they must cooperate. But naturally all music services compete with each other, as do all record labels; and in the middle is a pot of value that could legitimately go to any of the contestants, or indeed to consumers, or to the providers of the devices and networks that connect us to the music.

In that pot is the explanation for the more inflammatory proposition of my headline, that Universal cannibalises music. Here’s how Vivendi describes UMG for investors:

Undisputed global leadership position in recorded music:

  • More than 30% market share

Translate that into a set of rules governing what models and prices a dominant record label would be willing to tolerate, and the trajectory of the market becomes obvious. Dominance means that a market participant not only wins, but is also able to choose the terms of engagement such they will always win. In music that means Universal takes market share away from all the other record companies, and to the extent that it can, also takes value from music services. Those services in turn need to see more of the value they capture also coming from the other labels, and the biggest squeeze will inevitably be put on the smallest. The digital music market has the same kind of inevitability to it as a modulated Conway’s Game of Life. It ends, by the way, when there is either nothing left to contend for, or nobody left to contend for it.

And the lesson I guess for anyone who makes or owns music that they believe is as valuable, or more so, than Universal’s, is not to swim in a shark pool. It’s probably time to test the always dubious notion that a a platform without chart hits (dominated by UMG and Sony, with Warner and the indies taking turns every few weeks to get a look in) would be unacceptable to a consumer with more developed tastes.

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Listen to the Music, not the Audio Nihilists

The trade offs that made digital music possible, when storage and bandwidth were scarce, are no longer quite so necessary through much of the developed world. Some brave services are trying to take advantage of this technological advance by offering higher quality music on demand. They face considerable obstacles, and oddly, a chorus of voices shrieking ‘snake oil’ and calling the whole endeavour a con. We should listen to the music, rather than the audio nihilists. Here’s why.

A little compression is very hard to notice; unsurprisingly the more sound that gets removed the more likely the listener is to notice a degradation. This is only a small part of the story however. The best and most professional do everything they can to ensure the end product is as good as it can be, right the way through the recording and production chain. But they have a low target to hit, and nobody can easily justify overspending in a tight market. Many of course deliberately take short cuts in order to save time and money. Now that nobody can plead necessity, having a higher final target would be likely to raise standards generally, and this would be a good thing for music fans.

Not all ears are equal, but recording and compression by their nature target a mid point of hearing acuity. And now the discussion becomes a bit speculative. Higher pitched sound is harder to compress, but is important both for the complexity of timbre as well as locating a sound in space. Location in a stereo signal is a bit of a fake anyway, as obviously a single audio source needs to be converted to two separate sounds to be perceived as either to the left or the right in a normal listening environment. In nature, as well as tiny time and level differences, it’s the wrinkles in your ears that subtly reflect and modify high pitched sound in ways that you have learned to associate with position. Because of this complexity the recording or sound creation process has already made many compromises in order to sound mostly OK to most people, and compression adds another layer of compromise.

But still, as many experts say, most people can’t reliably tell the difference between the source and its compressed version, and express no preference either in listening tests. Surely depriving them of what they can’t hear does not hurt them!

Sound, however, is not music, and hearing is only part of perception. Nor can simple tests really hope to discover the immensely complicated ways we respond to music, nor how that might be affected by the ways we experience the sound. We all know this of course. Our imaginations fill in the missing parts of familiar instruments, so that even a sketchy recording of a violin shares some of the wonder of a platonic Strad. We are continually exposed to newly imagined sounds, which we fit into our own personal collections of virtual instruments and performances. Musical training even alters the structure of the brain, it is that affective. Even if the audio testing equipment says that the sound you hear now is exactly the same as the one you heard five minutes ago, your perception of it has been irrevocably altered by both memory and imagination. We create what we hear as much as perceive it.

So for these reasons we should not let the audio nihilists deprive us of the opportunity to create and experience a world of sound and music that could take us far beyond the standard fixed by the CD and then compromised by compression to fit the business needs of the late 20th century. We should and can encourage a music industry that can really stretch our ideas of what is possible in audio perception.

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A Global Release Day is the Wrong Kind of Globalisation

Big record labels are gearing up to move their release scheduling so that all new records come out on a Friday at a minute past midnight. They argue that everyone knows anyway through social media when a record is released; that record stores for those buying physical products need to know what day to rotate their displays (they do now of course, but risk being out of sync with download and streaming release dates); that new music should be introduced when interest in music is at its peak in order to compete better with other entertainment options. And also, that simpler planning means better coordination for global marketing campaigns, and also for their flip-side, anti-piracy activity.

This all looks convincing. Some High Street shops might prefer a different day (Fridays must already be busy for non specialists as everyone gets ready for weekend shoppers) but will welcome being at less of a disadvantage to digital retail and streaming. Much of the rest looks like simple common sense.

But let’s look at some of the assumptions here. For a start, this is clearly built to fit the Western Christian working week. OK, so the major music markets might work on Western weekly cycles, but at the very least this shows some overreach from record label representatives in the UK & USA who led the decision to move to Fridays. So much for ‘think global, act local’. Also underlying this move is the idea that new music discovery is a short burst of highly competitive attention. It allows no time for second listens, or getting used to an unfamiliar style over the week before deciding to spend your money and make your mark on the chart.

But are we not increasingly ignoring charts, and making our own journeys of discovery through social media and infinite libraries of music? That would be nice to think, but the money says otherwise. Those charts are important, not just as a signal of success, but also as a vector by which music can move from a niche audience and find broader support. So constricting the gateway is an inherently conservative strategy, favouring the bigger and better resourced marketing teams, and familiar artists. It would not be too far fetched to suspect that the same voices calling for a global release day will soon be trying to coordinate global charts, all based on the ability to mobilise marketing clout in a very compressed and highly contended window of essentially two day’s sales.

This is a kind of market shrinking madness, inevitably benefiting bigger companies and those with access to TV, which is probably no accident. The recorded music market is essentially static, so if the dominant labels want to improve their financial performance they need more market concentration, and less cost.

For the rest however, young artists, independent record labels, and anyone who wants to roam outside of the mainstream music playpen, we need to get a bit more organised and find ways to support truly local music and music retailers, outside the hypercompetitive sharkpool that global release day will become. May I start by suggesting Folk Monday’s, Welsh Tuesday’s, Opposite Latitude Wednesday’s, Over 50’s Thursdays…. you get the picture. And then we will be fortified against the torrent of Global Pop Friday.

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The Dog in the Manger

Nobody ever claims to have contributed to a traffic jam, despite all the evidence around them when they are doing so. And clearly had they not contributed, the jam would have been less of a delay for everyone, especially them. So it is with yearly summaries of markets; the great temptation is to see the aggregate as something to beat, or be beaten by, or as an inexorable force that prevents good outcomes for oneself while making inevitable better outcomes for one’s competitors or vice versa. Or, as some kind of gestalt which absolves participants from their responsibility to repair and regenerate for next year what this year they have fed off.

Quick off the mark UK 2014 music numbers from the BPI are reported in the FT this New Year’s Day 2015, and they show a retail value decline of 2% to £1.03b. While that might not sound like much it is still about £20m that record companies and artists had last year and not this. The FT is absolutely sure about the cause of the decline, which it ascribes to the effect on downloads of the growth of streaming services, which in revenue terms are up 65% to £175m compared to 2013. A bit of math tells us that roughly speaking, if the relationship is simple and the numbers are right, every £1 in streaming growth reduces the retail value of recorded music by about 30p. Of course nothing is quite so simple, but it is an interesting thought nevertheless.

And here’s the bit where we play spot the dog. On 1st August Vivendi put out a press release so brief I can quote the whole thing:

Vivendi announced today that its subsidiary UMG has completed the sale of its share (approximately 13%) in Beats to Apple for a total amount of 404 million USD.

That is £260m of revenue for the world’s largest music company that cannot and should not figure in any of the retail recorded music markets, but that few could honestly argue is completely unrelated to UMG’s portfolio of recorded music rights and roster of popular artists. If 10% of that were returned to the UK recorded music revenue pool it would more than offset the loss that the FT considers due to streaming. Perhaps the FT needs a better model!

That £1.03b retail value returns probably around £700m wholesale revenue to suppliers, and as the FT points out we do like our local music currently with all of the top 10 albums coming from UK artists. It would be foolish even to try to second guess how Apple’s acquisition of Beats is going to grow the retail value of recorded music in the UK. Taking 10% as perhaps a slightly generous estimate of the UK’s share of the world market, approximately £200m of the price of Beats needs to wash its face in Blighty. Coincidentally, a 10% annual return on an investment that size would be remarkably close to the £20m net shrinkage in the retail market last year. If significant growth in the UK market seems a bit far fetched, especially against the net shrinkage that success with Beats seems more likely to cause, there are two other obvious ways buying a competitor can be justified. A defensive buy neutralises future threat; consolidation also controls wholesale prices.

The dog in the manger eats none of the food it so assiduously guards. If streaming is popular among downloaders, then it is missing by a wide mile the theoretical average person of wage earning age. UK resident 16-75 year olds averagely spend roughly £23 each on recorded music each year. Spotify subscribers spend £99.96 excluding VAT on their annual subscription. To get the net shrinkage observed in the annual numbers, each of those would have formerly to have had a £156 per year download and CD habit. In a Gaussian worldview, perhaps that £99.96 could represent a point from which to measure likelihood of consumers to convert from ad hoc sales to a fixed and predictable future spend, less than ideal to the extent to which it shrinks the total pool (currently about 1:1.3 according to the BPI numbers). But even if it were 1.3:1 it would not necessarily follow that the manger was fuller, nor that anyone could get at the food.

Wholesale revenue could be under more pressure than retail, for several reasons. Inventory continues to grow (with 43m tracks reportedly on iTunes worldwide) increasing competition which reportedly, at least for now, Apple with its single take-it-or-leave-it indie deal is not taking advantage of. More of the wholesale revenue is now going to suppliers of public domain recordings, and this will only grow as the public domain expands each year (retailers could usefully tweak the incentives in that area).

And the new wildcard is changes in private copying regulation which introduce new competition at the retail level from music lockers, which will be exempted from licensing and not required to pay compensatory levies. These will offer mobile access to music collections and could be filled with rips from second hand CDs, or worse, files found from who knows where. And just as with Vivendi’s Beats sale, locker money is part of the music economy but not part of the music market.

So the conclusion, after a little excursion around 2014 in the industry is that there are several quite surprising dogs in the manger. Between them they contributed to a 2% decline in the retail value of recorded music in the UK, with further declines anticipated. Market gestalt says that this will be a self-fulfilling prophesy. Perhaps 2015 will bring a much needed new manger.

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Digital Music in 2015

Some ‘state of the nation’ observations about where we seem to be at the end of 2014 in the world of digital music:

1. Only an extreme optimist would make a meaningful bet on the recorded music industry as a whole growing significantly in the next few years. Sales of downloads are likely to show slow growth or stasis, streaming will grow, some new territories will emerge, but what growth there is will be about enough to offset the continued slide in physical product. On demand playback, over the air, over wires, or from encrypted caches on devices and hard drives, is getting more people habitually paying for music, but for many previous download and CD buyers it is a better value replacement for owning files and discs.

2. We have, finally, a reasonably well set up supply chain in digital music, with a collective path to future improvement through DDEX, which has changed in an important way by including compliance, and is also now touching ancillary areas of metadata management and communication. There is renewed impetus to address other shocking failures in metadata and identifiers. As a whole the industry is probably still investing, but a return on that investment is now firmly in sight.

3. Good as it is, and with proven scalability to support the 45 million tracks now commercially available, our metadata capability is very skinny, and is not even starting to approach the depth and richness of the LP sleeve or CD booklet. This is a serious consumer issue; if we don’t feed the passionate or even the merely curious we are devaluing all recorded music, and taking oxygen from artists and the industry. What commercial databases there are are an insult to fans with their bad prose and out of date reviews and biographies. One square artwork image, and one artist photo, is equally poor. Record labels and services need to collaborate to improve this dramatically, or face a future where recorded music is a utility, rather than a passion and an obsession for fans.

4. The professional part of the industry needs to differentiate from hobbyists, and the best way to do that is by embracing every aspect of product quality, from the microphone right through to the press release. Twenty years ago it was OK to represent the product as an unfortunate impediment between the art and the audience. Now not so much; the world is rediscovering its love of authenticity and craft, and music needs to be part of that journey through recognised high product quality standards and extensive consumer education. This applies to digital as well as physical, where it is visible already in the re-emergence of the vinyl record. Our love affair with DIY culture is no reason to demolish all formal signs of professionalism. This is not an argument for closed shops and exclusion however. Consumers will embrace the effort and care that goes into a music product in the context of fair and open markets.

5. One school of thought sees music, particularly pop, as a grand illusion, or less charitably a charade. At its best the pop music spectacle remains utterly compelling, and great escapist fun. We are also, however, in an age of radical transparency, where every action, word, contract, and posture is minutely scrutinised. For the music industry, romance of the kind eulogised in the famous Thompson quote, is dead. This means, I believe, that we have a very difficult path to walk, between the excesses of the past (behaving badly and getting away with it) to a future founded on a different kind of passion, for high quality and ethical product and business practices. But nobody likes a pious fool, so we must do this without jettisoning our humour and ability to connect emotionally with music fans.

There is nothing special about the music industry; we see trends in business and in consumption across the world promoting ethics, quality, transparency, and a shared sense that we should use what we do each day to improve the world we live in. These thoughts for 2015 are offered with hope, and with goodwill to all who work in the music industry, and all who love music.

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Streaming Payouts Need Some Simple Tweaks

Continued debate about how to share revenue generated by on-demand music streaming services is less enlightening than it could be, mostly because it is conducted in an almost information free context. We don’t really know how much money is being brought in, how it splits between subscriptions and advertising, or what’s in the deals that govern the payments to the recording owners. Nor do we know what the contracts between the artists and the labels say, including what the artist traded off against what now seem to some to be grossly unfair royalty rates.

Different belief systems will of course have more impact on the opinions of the debaters than any evidence might; that is just human nature. One of the fundamentals is whether the price of something is considered to be the best available proxy for its value, or whether it is an ethical expression of some kind (look for the word ‘should’ to sift out the latter type). When lots of people collectively buy lots of things it is easy for the relative values in each of those things to get flattened, and a ‘fairness’ approach to pricing might even point in the direction of ‘one price fits all’. It could perhaps also be argued that each track in a catalogue has a potential range of values from highest to lowest; it just needs to find enough ears for this to emerge.

Common sense however suggests that some recordings will be generally valued higher by more people, and some might even be seen by most as a blight which warrants compensation for exposure to them. And by the time your ears tell you which is which it is too late. It is very hard to unhear something, and even Cher has not infallibly managed to turn back time.

When the consumer clicks the play button some noise must happen if the on-demand model is to become universally trusted and accepted. Any pricing or licensing scheme that could withhold a track at the moment of demand is therefore unlikely to work very well – driving away the subscriber is not how to create long term revenue growth for all. Search is also a sensitive moment for the consumer, and no service wants to be forced to advertise incompleteness.

Yet it seems clear that we need a more dynamic wholesale layer in the market, so that the reward and incentive is much better allocated than currently. Here are a very few simple suggestions, which might stem the criticism for long enough to find out if an on-demand world is capable of supporting professional recording artists making high quality recordings.

1. The first listen of each track by each listener could be royalty free, or even create a debit against the licensor’s account. This automatically shifts revenue towards artists who can make tracks listeners want to hear more than once. Preference data (favouriting, playlisting, caching) might then start to give some clues about likely future value, with relative rates adjusted accordingly.

2. Historical play counts could be used to stratify the catalogue, and each tier could be allocated a royalty pool. Models of what affects play counts will be naturally very complex, so this might be a relatively weak tool to discover how tracks are valued, but it could effectively, for instance, be used to incentivise external support for ‘growers’, or just ensure that providers of unpopular and unloved music had fewer reasons to market within a service.

3. Similarly, style and genre metadata could be used to differentiate between royalty pools, allowing a service to encourage and reward specialisation. This just reflects what happens in the downloads market with specialised stores. Combined with play count data it would also encourage better categorisation – faking a genre for a higher per play rate could quickly get punished.

4. Subtly different from (1), the first day, or week, of a track’s life on a service could bear a discounted royalty rate, pushing more revenue collectively towards the later stages of the sales envelop for the more popular tracks. This would explicitly drive windowing behaviour, which might end up being seen as overall positive for the market by supporting higher prices for downloads.

It would be surprising if ideas like this were not being actively considered all the time by services and by the more sophisticated music providers. While they stop short of providing the wholly dynamic wholesale marketplace that would inherently be capable of rewarding higher value with higher rewards, they have the advantage that the skills required to optimise strategies on either side are close to the marketing and release management skills that already exist in the industry. We don’t all have to become futures traders overnight. And underlying all of it is a drive to discover a sustainable way to incentivise new production of a great variety of new music recordings. That has to be a decent goal for all of us.

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GRD? More Like GOELRO, Comrade!

Music industry watchers will have noted the recent demise of the Global Repertoire Database (GRD), a project so misconceived that its collapse should more properly be greeted with relief than hand wringing and woe.

Some background. In 2008 EU Commissioner Neelie Kroes posed a question to a small and odd group of interested parties at two roundtables. The meeting notes are online. What, she asked, could be done to move digital music towards a single internal market in Europe? The territorial nature of copyright, and the fragmented administrative structure, were identified as barriers. Sir Mick Jagger was present at the first meeting, as was Steve Jobs. Sir Mick seems not to have had an opinion about anything. Jobs suggested investigating an EU copyright to subsume national rights as a long term aim, and articulated the idea that became the GRD:

Apple therefore advocates the creation of a central electronic repository for ownership information into which all collecting societies and other right holders feed information in a common format, and which could be accessed by licensees, so that the problems caused by the information vacuum can be eased and timely and accurate remuneration can be fostered.

SACEM rehearsed a line that needed to be retired at the point Ebay was growing out of Beanie Babies – everyone in the music industry should be forced to repeat three times every morning ‘there’s really not that much data’, but instead you get this:

SACEM points to the difficulty that collecting societies face when they deal with millions of works: for some works, they perfectly know who owns the rights; but for others, they need to check carefully the information.

That’s right – mere millions. A third year undergraduate project.

The rest, as we have recently learned, has just become history. Committees were formed, politics was played, Deloitte was hired, the slush fund was spent, nobody could really agree either scope or funding, incumbents were nominated to do what quickly stopped looking like innovation. Most importantly, and it is a lesson that the music industry desperately needs to learn, no ‘outsiders’ were given the chance to bring a new perspective or new capabilities. In other words, those who had failed to keep updated an infrastructure and set of business practices that were acknowledged by all involved to be obsolete, were asked to oversee and execute the regeneration.

When the Soviet Union had no power infrastructure it was entirely appropriate to build power plants and a grid, and Lenin (more here) famously recognised the importance of the project, but also its massive scale and complexity and need for experts:

Communism is Soviet power plus the electrification of the whole country, since industry cannot be developed without electrification. This is a long-term task which will take at least ten years to accomplish, provided a great number of technical experts are drawn into the work.

Surely by now it is obvious that the music industry is already electrified! We need no grand Electrification project, especially not one which looks more like an effort to preserve a set of organisations and infrastructure that I sometimes refer to as the Union of Soviet Socialist Republics of Music. And it is a form of Soviet malaise, that faced with an exponential growth in complexity – which brings opportunity as well as threats – many music insiders look to the already failed system to protect them.

But it can’t. In the new electrified music industry, data processing which is significantly weaker than music’s partner platforms (Google, Amazon, Apple, Pandora, Spotify…) is a handicap (remember ‘there’s not really that much data’). There’s no justification for lengthy discussion around standard terms on standard uses; new models require a thorough examination, which is something best handled by a team of experts with lots of industry input, so that could be considered a core competence for the collectives. Beyond well controlled new deal terms approval and CRM however, every function currently undertaken by collecting societies could be better either outsourced or federated.

And the horizontals are where the exciting things can happen, particularly where large groups of individual rights owners are affected. Instead of pushing songwriters and performers into national monopoly providers, communities of interest could bundle royalty collection and distribution with a range of supportive services. Private business could innovate in technology to drive down the cost of administration.

Music already has too many databases and not enough competition to kill off the weakest. GRD was an old school move, to reach for yet another database, by a group of organisations understandably unable to imagine a future in which there is no need for them to exist. Our newly electrified music industry needs copyright utilities for sure, but, comrades, it’s time to leave the Soviet power behind.

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