The Dream Is Over: Music Labels Have Killed Their Digital Future
finance.yahoo.com
finance.yahoo.com
But by creating a startup-free zone around themselves, all the labels are doing is hosing themselves, because they won't have startups working to develop whatever would have been the new ways of delivering and using label music. They've created an anti-platform.
That's true, but not as true as you might suspect. Pandora is profitable. Yes, they are certainly pumping a large amount of money to the record labels, but they're able to exist without driving their users away with over-advertising.
I wouldn't do a (label) music-based startup today, though. Sad.
* http://blog.pandora.com/pandora/archives/2007/03/riaas-new-r...
* http://www.washingtonpost.com/wp-dyn/content/article/2008/08...
they are at the mercy of the labels.
In a nut shell, you need roughly $1M upfront for legal fees to negotiate with the big four record labels (for an interactive service, not a non-interactive service like Pandora).
I guess I understand what you mean. Though I wouldn't use the words interactive/non-interactive. Pandora is quite interactive in a UI sense, even though you can't select tracks directly.
Interactive/non-interactive in this context are actually widely used terms in the digital music space.
It seems that if the labels have positioned themselves as unfavorable toward startups to the point of making an anti-platform, that there would be demand for an independent, label-free music buying/selling experience for startups to work with. Yet the only thing I think of that comes close was the old version of thesixtyone's marketplace.
Are the startups that apply to ycombinator in this area trying to build something outside of the current music ecosystem and failing (and why)? Or is everyone just trying to work with the current system and finding that it isn't feasible/profitable?
And so what's happened is that digital delivery of music has largely been via alternative channels such as P2P. And a new generation of music fans is growing up, liking this, and hating the music industry.
I will be revisiting these themes at my Startup School talk this year.
This is in someways analogous to what YC, super angels, et al. have done with venture capital. Just like ~$20,000 is about all you need to get a talented founding team started, musicians today can do things on the cheap just as well. The entire system no longer hinges on the $100M home-run in either case.
Everyones been focused on investing in the killer app that will bring the music industry back to equilibrium. The Spotify's and last.fm's will certainly play their part, but its a fundamental shift in capital structure that the industry needs. Making it as a musician is, never has been, nor ever will be easy. There's extremely talented people out there though that, given a little cash and a little support, have the drive and persistence to make a career for themselves. Sans record label.
What the music industry needs is a platform where unsigned artists can go to promote their music without the help of the labels. This platform could probably act like a label, but better serve the artists and users. It would have to garner a lot of eyeballs so it could effectively break artists into the mainstream. It would have to be smart at targeting a specific demographic of listeners so artists could know where to travel and know they can fill auditoriums. Lastly it would have to be a tech company, so the Platform would be in the hands of every listener.
MySpace might be able to do this if they gave up on the social network thing. There certainly is room though for a new company to have this role, but it is going to be a long and painful process. And you certainly shouldn't do it for short term gain.
They could say "Hey artists not [yet] on a label, join the iTunes Label. We're a great distribution channel, and we'll give you a 70/30 split."
OK so it's a bit far-fetched, and it really depends on what iTunes-as-a-label would provide (but with GarageBand/Logic/CuBase who needs tons of financing?). Really the only thing iTunes doesn't have a great story for would be touring (but even then, what better way to sell concert tickets than through iTunes/Ping?).
Honestly, the artists don't even need those people anymore. I've seen artists who sell their music directly on their own site, and I don't see why more can't.
Most can't.
A good producer can pick a rough artist or band and get something popular out of them, but it often involves both mentoring and investment in recording and promotion upfront before any opportunity of return. Note I deliberately use the word "popular" rather than "good" (which is subjective anyway) because clearly as a business "popular" is where the money is. The "long tail" theory is fiction. Music is a hits business where most of the money is made by a relatively short fat body of popular music.
Many of the most popular "artists" are created from scratch by producers. Where do you think Britney and the Spice Girls came from? Like them or not, the revenue from hit music funds the production of new acts who haven't become profitable yet.
Another flawed assumption is that everyone wants to listen to new music. A lot don't. So you have a large body of recorded music that the record labels will never give up or let you sample or remix without a hefty toll. And as soon as any new act gets popular, you can bet they'll be offered a seat at the "big 4" music table. It's the DeBeers business model applied to music.
Personally, I think what the radio station JJJ in Australia does with their unearthed site (http://triplejunearthed.com/) is an excellent model for identifying quality artists. The next step IMHO is a ycombinator style production startup company that invests in developing the most promising acts to become popular and then offers all the recording, promotion, management and touring services that the labels do but on just terms. Distribution is just the last piece of the puzzle.
Its true that the endorsement approach only works for popular artists, but everyone else can take the Youtube approach and let their content speak for themselves. Plus, not every artist wants to be mainstream popular. A lot of artists just want to get their music heard and know more about the people who listen to them. They make their money by touring and merch just like the popular ones do.
And artists don't need a lot of capital anymore. Yes, labels sink enormous sums into the production and marketing of a track in the hope they have a Lady Gaga hit, but I think you'd be surprised by how many successful artists there are that have chosen to go their own way and do just fine.
Hell, I'm looking at the data right now its its quite convincing.
I'm talking about successful disruption of the established music industry and the oft mentioned suggestion that simply offering artists a distribution alternative will do it. It won't. We've had a decade for grassroots indy web publishing to take over and it hasn't.
My point about the long tail isn't that it doesn't exist, but that it's largely irrelevant. Just as Youtube has barely scratched Hollywood, indy music publishing isn't moving the profitability needle of big music enough for them to care. They still have the back catalog, they continue to acquire the vast majority of popular artists and they're still driving the creation of the most popular music which is where the money is.
Don't be fooled by the crowd that says the music industry is "investing" in talent, they are lending money (and producers, which of course they charge to the artist again)! There are some ridiculous stories about the music industry.
from the article: "There will be no new players of significance to enter the business. Investors don’t want to entertain the remotest possibility of funding any start-up that deals with music" once again, it's not fair to think of all startups related to music as synonymous with the struggles of the streaming startups. as one who has been involved in the music space for a couple years, i still believe there is potential as more & more music is being produced --> how do we sift through all the noise?
The way I see it is that if it's possible to do this then the reward would be huge since the system is so broken.
Even people who like to listen to indie music usually have some more mainstream music owned by the big labels that they want to listen to. The problem is that most people won't stick with a service that doesn't offer the range of music they want to listen to.
And of course, the other issue with an all-indie catalog is that then you have a lot more players to negotiate with, many of whom will be just as clueless as the big labels.
So, you might be able to start a business with a small fraction of the indie labels represented, and appeal to a fairly small demographic, but there just isn't much room for growth there. I remember trying to use Emusic back in the day; while there was some music on there that I was interested in, it didn't even begin to cover most of what I was looking for.
Not soon after we shutdown the founder of a similar service, Favtape, was sued. Yes you read that correctly, Favtape the business wasn't sued, the founder (Ryan Sit) was sued personally. I'm not sure what ever came of that lawsuit, but I'm fairly convinced our name was on their too until we shutdown since we had received threatening letters from the same label a few months previous.
At the time we looked up to imeem as a beacon, thinking if we made a kickass product we could be be on crest of a new wave of successful digital music startups. Fast forward a year later, at 16m users strong Imeem was "acquired" by Myspace for $1m (compared to $50m+ invested) and turned into a redirect to MySpace Music.
Looking back I'm happy we figured this out when we did.
For example; they're well aware DRM does not work, but their insistence on the implementation of DRM is absolutely not focused anymore on the idea that they can stop piracy, but that they can implement market segmentation and suck the profit out of the kind of content that people actually want.
Case in point; digital music startup that charges a subscription for global access to a large library of content from the major labels charges a flat fee to the customer and is charged by the record labels on a pay per play basis, thus the effective margin that the startup makes is a function of (average amount of plays per user / subscription cost per month) - price paid to record label for the play. It turns out that if you do not use DRM for your player the record label leaves you around a 10% per play margin (on quite a hefty monthly subscription fee). With DRM it's much much more profitable for the startup in question, they bank on DRM being so repellent to customers that the startup will pay the much higher rate for DRM free.
They also micromanage the hell out of the details of implementation, for example they have a specific set of "acceptable DRM" standards which you must adhere to to be eligible for the rates in question. There have been negotiations running for months with them just to get approval to run the same kind of streaming clients as the web service provides available as applications to android / iPhone clients. When considering implementing AWS for site infrastructure one of the objections raised by the music companies was that "they don't want their music on the cloud".
Effectively it chokes what it is possible to do in the market, inflates the prices, and makes the entire offering far less appealing. It does seem like they're headed for destruction but they seem just as steadfast in their refusal to amend their course.
The Dream being control over distribution. Selling over and over the same product. Selling lots crap (most songs on album) on the backs of 1 or 2 hits. Being the gatekeeper between artists and their fans. Near monopolistic control over supply and demand. All of it, a cash fucking cow.
Over, for the Record Labels. Although they're doing a damn good job at legislating their dream into law. Their government mandated welfare will live on similar to but more insidious than farm/corn lobbies subsidy program. And just like corn subsidy it(warping of copyright) will fuck the rest of us for decades.
The other half is the culturally ingrained phenomena of "the dream." Many artists jamming in their basements dream of "signing," and expect a big advance, tours, radio play, and all of that old-world stuff. Many today of course realize that there's the Internet and they can afford to distribute their work for pennies and market to their hearts desire; but even those artists generally still think that "signing" is the next, big logical step.
The big labels cannot change. The 80s and 90s left us with a market and taste for stadium tours, music videos, and times square billboards. Six decades of business have given us a model that requires a huge up-front investment for a risky, but lucrative return.
The problem is the returns are becoming scarce.
Yet I think big labels will continue to persist only because they're the loan sharks with the money. I think the author is pretty close to right that there's likely no one that will fund a start up that has anything to do with music. If you have an innovative idea that you think can improve the situation, create new markets, etc you'll have to do it on your own.
Aren't human beings flexible enough to thrive anywhere on earth?
Yet, some humans choose to die rather than adapt.
The labels don't want to deal with the changing business. So they rather die.
I'm serious. :)
I personally would rather pay a monthly fee than pay for each individual song or cd. I also want the ability to do what I want with the music. I don't want to have to work to get music on an mp3 player or worry about whether I'm going to randomly lose access to songs in library, which has happened with Ruckus.
Chances are, if you run a major music rights company, you get paid a large sum of money and the financial incentives are structured in such a way that it's in your best interest to simply keep the ship sailing rather than make any drastic changes. Why take risks when you can keep getting your 7 figure check? If you tried to stop the bleeding all at once, you'd most likely be shown the door.
Larger venues (most of which are owned by Clearchannel) will not give you the time of the day if you don't have a label behind you. It doesn't matter if you consistently sell out of venues a tier below them. Their booking agent won't even take your call. Sell a million mp3s of your song online? If one of the subsidiaries of the Big Four aren't behind you, forget getting to play a place like Bowery Ballroom. The "break-in" venues like CBGBs don't even exist anymore.
In order to tour, and I mean really tour - spend six, eight months on the road - you need a lot of money. To haul equipment. To pay people to schlep your equipment. To deal with contracts with venues. To deal with venue management. To make sure you don't get screwed by the venue management. To book the shows. It's really, really hard for even a locally established artist to tour. That's where the label helps out. I'm not talking stadium shows. I'm talking about shows that break even, where 200-300 people show up.
There is a very successful tier of well run larger indies like Warp, Domino, Beggars Banquet. They've worked out that not fucking your golden geese is a good long term play.
But yes, even they struggle with the costs of big tours. Touring is expensive.
edit: and most importantly don't forget XL Recordings, who have Radiohead, the Prodigy and the White Stripes among others.
Labels sit on content, and their monopoly is protected by the full force of the law. The number of startups in the field or the evilness of label people does seem a little bit irrelevant.
There is only one way labels can die: if they cease to have a monopoly on music content -- which means, either the world gets rid of copyright, or (young, new and aspiring) artists stop signing with labels.
None of this is happening anytime soon. (It may happen, but in a rather distant future.)
Why the question?
EDIT: oh, I understand the question, you work at a label.
Well, I live in France, where "Hadopi" just went live. It's a government agency that monitors Internet traffic for copyright infringement and that can then cut off the Internet access of alleged offenders -- not because they themselves are convicted of copyright infringement, but because their Internet connection was used in this manner and they failed to prevent it.
This law was inspired by and received the heavy support of professional organisations such as SACEM, etc.
When an industry is instrumental in creating such legal monsters, I think it deserves the hate and contempt of the public, and more.
Now, none of this has much to do with the subject of the article which was about the "digital future" of the industry. I just wanted to elaborate a little on the "hate" part of my initial post.
My point is that the industry is right not to care much about its digital future, and to care more about what matters, ie, their monopoly on content. For as long as this monopoly stands, they will be strong and prosperous.
That doesn't make them likable, but that does not make them stupid, either, as the article implies ("They killed competition. Brillant.").
Besides, here's what PG writes in one of his essays:
If you can figure out a way to turn a billion dollar industry into a fifty million dollar industry, so much the better, if all fifty million go to you.
(http://www.paulgraham.com/web20.html)
So maybe the "dream" of a "digital future" is just self-preservation, and maybe, yes, it IS brillant...
So instead of making people be grateful for their services, the record labels are doing everything in their power to alienate their customers, bullying them into paying: and in the meantime piracy gets stronger and more accepted, since it's a lot more comfortable to just download a torrent (and no matter how much legislation they're lobbying for, the genie is out of the bottle and millions of people are doing it).
Not only that, but they've been promoting crappy music for a while now, since it is cheaper to produce and such artists are expendable.
I'm not a hater, but as long as they are selling crap, then I'm not buying.
I'd pay that to be rid of iTunes.
I quite like the three column browser for quickly finding music even if I only have a very fuzzy idea of what I would like right now. It scales quite well, even if you have a library with several thousand songs and a few hundred artists. Together with the hybrid cover view it doesn’t even look very much like a spreadsheet.
Then there’s the grid view which also has its uses. I especially like to display albums by year which gives me a nice chronological overview. Coverflow is pretty worthless, though.
I think that while iTunes gets the big picture somewhat right (at least as far as its audio library functionality is concerned) it gets many details spectacularly wrong. The UI for tagging feels ancient. Oh, and it’s modal. iTunes forces me to play column jockey. I don‘t want to change column widths just so I don’t get vertical scrollbars. iTunes should keep it all nice and tidy for me, kind of like Mail. That, and many other small details.
Today, I use foobar to play my music. And I keep iTunes around to load my iPod. Cause as stupidly annoying as iTunes is, foobar gets it worse.
Disclaimer: I totally work for them.
edit didn't see the comparison below, but this works very well with Iphone/pod/pad
I hate dealing with my library of songs. If I could stream it to any device, any time, as well as have -any- other value-added service attached, I'd pay the $25 per year.
By 'any device' I mean TV, PC, Android Phone, PS3 and more. Basically, any device that I can hook to the internet.
- 3G quality and speeds are guarranteed everywhere and every time. I was left with nothing but the songs I had on my SD card when I was on vacation on an island.
- Constant streaming kills battery life, killing your phone and music player in one kick.
- Because of massive roaming charges, you can forget using it outside of the country.
If you don't travel much, have a good plan and don't mind the battery issue, it could be useful.
Perhaps someone else can support this: "Music" has never been the same since then. It seemed so much more available, so much more pervasive, more frequently invasive to my life; better than it is now.
Like I said, I've grown. But it seems that as the generation behind me moved online in a major way, the music didn't quite follow. Its not that you can't find great music these days, it's that - ironically - it is so much more difficult to do so.
I don't see this ever changing really. The blip that was the 20 century music industry is dead and gone, replaced with essentially a long tail market of grains of sand of that - occasionally if you look hard enough - has a couple of diamonds hidden away in obscurity.
But then again, maybe I'm just getting old.
- Mick Jagger: http://news.bbc.co.uk/2/hi/entertainment/8681410.stm
The problem is that that monthly price is a bit high for most people.
Besides, doesn't Grooveshark already do this for free?
And I'll be honest, I have no clue what Grooveshark's business model is. I like it, but I don't see how the RIAA doesn't come down on them like a ton of bricks, and I really doubt the ads they show can cover what they ought to be paying in royalties.
I would not assume that.
Grooveshark makes money through their VIP, advertising, and promotions put on by the artists themselves.
Technically they are not sharing music since you cannot download it, which is why I would guess they get around a lot of things that way.
It's a bit high for music backup.
And Lala, and Walmart.
As time goes by I have noticed that most of what I have downloaded is becoming extra baggage to log a round. I keep going back to the same set of things to listen as nothing really good seems to coming out in the genre I like (ambient, electronica).
In short, I perceive digital music as the money pit not that's not worth it.
A new dream is starting. A different dream than the fantasy of being "discovered" by a major record label and becoming rich and famous overnight (which translated into a reality that often didn't quite match up to the dream, for the bands or for their fans). A new dream where increasingly many artists are bootstrapping themselves into making a living from their music without big record labels interfering with their creative process, sucking the bulk of the profits away with little in exchange, and adding layers of corporate bullshit between artists and fans. Instead, bands are connecting directly with fans, selling music directly to fans, producing their own albums on their own schedules and releasing them however they like for whatever prices they wish to charge, and making the lion's share of the profits for themselves.
This is happening right now. Spreading right now. Becoming the new way that music is produced and distributed. It's something to look forward to.
The music industry is dead! Long live the music industry!
An interesting bit of insider info I have - a relative of mine is a young Sony VP. Apparently their senior executive still wants their digital people to explain things in terms of 8 tracks and tapes. No exaggeration.
The ecosystem, the market, and working with artists engenders a much more complicated landscape than one might think.
agentultra has some good points there.
I probably would. $25/year for my collection would make it by far the cheapest file hosting available, and as I have a couple machines and a couple OSes, being able to consolidate everything, synchronize everything, and actually keep my ratings of songs across different systems would be wonderful. Most places I go I can stream music, so I wouldn't even need to keep most / any of it on my devices.
Another idea for a service, something that scans a computer for pirated music, lets a user select which albums they would like to buy and offers a big discount.
Small labels like https://www.candyrat.com/ are signing on new and growing artists.
it's not like the major labels have much in the way of good music to offer these days anyways
If anyone is interested I am going to be handing out a bunch of trial membership codes to interested parties in a few days...
And yes, Amazon is my savior for unecumbered music. I'm a very happy customer of theirs. But they weren't always around.
What if cloud hosting was bundled with MobileMe or the initial sale of an iPod? I bet Apple could get people to pay $12.50 additional hidden in the price of the iPod and $12.50 as an add-on.
Yeah, except the verdict on Buzz isn't in yet.
I don't know anyone that has it that bothers with iTunes or actually buying music anymore. Get the free version, and get any music anytime and the occasional ad. Pay a few bucks a month, and you get any music anytime with no ads.
Grooveshark is also paying the music owners royalty from a share of their ad revenue.
I'd be curious to see what Sony and Warner choose to do.
[1] Universal Music Group Now "Declaring Legal Jihad" Against Grooveshark... http://www.digitalmusicnews.com/stories/090310groovesharkumg
Nonetheless I'm happy with Spotify, although the number of unavailable records is increasing
Reminds me of youtube. I'm in europe and about half of the time I click on a youtube link I get this friendly message about the content being property of UMG|Sony|Warner|whoever and I'm not worthy to see it...
Personally, I ignored a bunch of artist just because they don't have their music in Spotify; "you want me to listen to your music? let me do that the way I want, otherwise go screw yourself" type of thing.
My attitude is the complete opposite: "I can listen to Madonna but not to Tallest Man on Earth, who is from Sweden? Kthxbye".
(Worth to note: Spotify actually has Tallest Man on Earth in its' catalog, I'm now listening to the guy)
One really scary thing I've heard though, is that the masters for a lot of older music is missing, so while the labels might have the rights and even the willingness to license the music, they just don't have it anymore.