Ministry of Sound sues Spotify over user-curated playlists

Source: Atatiwa, CC

If you have an interest in the music industry and its business models in the networked era, there's a couple of articles worth reading over at theguardian.com today that concern music streaming service Spotify. Spotify has been on the receiving end of negative criticism in recent months for the amount of money that artists receive from their labels for playback, as well as flak regarding the longterm viability and profitability of music streaming services. Some of the criticism may be fair but there are a few voices who think Spotify might actually be beneficial to the industry. Nevertheless, let's take a look at the Ministry of Sound case.

The first of which is by Stuart Dredge who reports that the some time night club and record label, Ministry of Sound, is seeking damages against Spotify for allowing its users to create their own playlists which ape the ordering of tracks that appear on their releases, and which may also include the name 'Ministry of Sound' in the title. This last point is significant as Spotify users can now search the service for such a term and easily locate these user-compiled playlists. The label's argument appears to be that these playlists are an infringement on their intellectual property.

It's worth noting that Ministry of Sound does not licence its releases to Spotify as the streaming service's business model seeks to remunerate the copyright owners of musical recordings, whereas compilations compiled and curated by Ministry of Sound would not benefit the label in question as many of the featured tracks are owned by other labels (which Ministry of Sound has had to pay a sum in order to licence for their

Ministry of Sound launched proceedings in the UK High Court on Monday, and is seeking an injunction requiring Spotify to remove these playlists and to permanently block other playlists that copy its compilations. The company is also seeking damages and costs.

Chief executive Lohan Presencer claims that his company has been asking Spotify to remove the playlists – some of which include "Ministry of Sound" in their titles – since 2012

So let's be clear here: 

1. Spotify has agreements in place with the relevant owners of tracks that have also been used by the Ministry of Sound in a series of compilation albums. 
2. Ministry of Sound and Spotify have no licensing agreements
3. Users of Spotify have sourced licensed tracks and complied them in playlists using 'Ministry of Sound' as an identifiable search term
4. These user playlists may feature tracks in the same order as the Ministry of Sound releases
5. There's no guarantee that the tracks in these playlists are the exact same tracks (ie same track length, same remix, etc) that feature on the compilations.

The second article worth looking at is a blog post written by Lohan Presencer, written to accompany the announcement to sue Spotify. The article itself is riddled with errors or disingenuous claims:

iTunes is now the largest music retailer in the world with 575 million customers and annual sales of $23bn. It is the main source of income for every record company on earth. Not only that, Apple built its hardware business on an iTunes foundation – iPods, iPads, iPhones. Not a penny of the sales of which were shared with record companies. 

Forgive me for being pedantic here but this claim needs qualifying. Apple did not build its hardware business on an iTunes foundation - at least not exclusively. iTunes did precede the iPod by about 8 months (released in the US in 2001), however in its original inception it was a tool for moving files from one device to another. The iTunes Store was not created for some time after that, coming to the US in April 2003 and to the UK in June 2004. Granted, sales in the iPod began to grow rapidly after 2004 with the 4th generation of devices capable of storing up to 40GB of music - enough to carry most people's music collections. 

It was hardware iteration that was key to the success here. It seems bizarre that Presencer should claim otherwise whilst also going on to note that this hardware success was not shared with record companies. Should Denon or Technics share their hardware revenue with record companies because they facilitate the consumer in being able to play their CDs or vinyls? Similarly, the success of the iPhone and the iPad have very little to do with music and more to do with devices' multiple functionality (internet access, telecoms, applications, photography, etc).

Presencer goes on to critique Spotify for failing to make a profit despite being heralded as the 'ultimate counter attack to piracy'. Perhaps the company can be forgiven for struggling to make a profit 5 years after launch given the costs of launching a new business in 24 countries, with all the various regional licencing and legal costs associated with such a venture. Spotify claims to pay out 70% of all its revenue to rights holders. Given how notoriously difficult it has been for newcomers to enter the hermeneutically sealed world of the music industry, it's no surprise that profitability is an issue. Only time will tell as to whether or not the 24 million active customers can be converted to paying customers.

Presencer then goes on to critique Spotify for its PR strategy:

Spotify is addicted to PR, its oxygen of growth. Favourable comparisons to Apple and positive reports of industry data showing exponential growth of streaming revenue are its lifeline. Yet what the believers fail to tell you is that published streaming figures include advertising revenue from YouTube, the great hidden free music streaming service.

What is the purpose of this comparison to YouTube? Are they also to be criticised for under paying artists for streams? There's very little stopping users of YouTube from creating Ministry of Sound playlists on YouTube and inserting the brand 'Minsitry of Sound' into the title, for example:

Perhaps Presencer is unaware that this can and does already happen? I'm sure he can't be that naive. The difference with the YouTube model here is that many of the songs that appear in these playlists are ripped from radio shows or uploaded via users rather than having been officially licensed (as Spotify does). Is YouTube the enemy of piracy here?

The final point worth examining relates to how much Spotify contributes to the musical economy of the UK:

According to BPI annual figures, UK record company revenues in 2011 were £795m. Total paying UK Spotify customers at that point could be reasonably estimated to be no more than 250,000. At £10 a month that's total net income of £25m. About 55% of this is paid through to record companies, £13.75m - less than 2% of total industry income

Ignoring the envelope math here (is it 55% or 70% paid to labels) and the outdated figures (Spotify had only been in the UK for 2 years at this point so was a niche player), Presencer seems to have an issue with a young company generating 2% of the total UK music industry's revenue! This beggars belief. Would he be happier if this was revenue lost to piracy? Given that attitude and behaviour change tends to develop quite slowly, Spotify and services like it should be held in slightly higher regard for their attempts to provide a better (for the industry if not the artists) alternative to piracy against a background wherein it is very easy to access music without paying for it.

A solution?

Presencer's gripe seems to be more to do with the fact that compilation curators like Ministry of Sound do not benefit from streaming services because they don't fit the business model that seeks to reward the owners of the music. The simple solution is sue and hope for success so that a service like user generated playlists in Spotify has to removed, thus making the product inferior. Or at least, nuke the ability to search for use playlists. If this does happen, then it might damage the usefulness of Spotify and subsequently, its ability to generate revenue for an ailing industry. I hope this doesn't happen as creating and sharing playlists is part of what makes Spotify a service I'm willing to pay for.

A more complex solution would be to ensure that the Ministry of Sound has to be remunerated and they could do this by ensuring that their compilations featuring tracks that they own the rights to thus making it impossible for Spotify playlists to ever be exactly like the official release (not that this is guaranteed anyway - see #5 above). Ministry of Sound used to produce tracks - I know because I bought them in the 1990s when the brand was building on its 'super club' status. It's often said of the tech industry that companies become more conservative as they age, become less willing to take risks and are more likely to sue than to innovate. Companies in this industry need to be agile and innovative if they want to stay ahead. Maybe Ministry of Sound can go back to innovating.

A lament for physical media: Daft Punk's Random Access Memories (CD edition)

The last couple of weeks have been testing times. Really, they have. As a long time fan of Daft Punk (I saw them in '97 at the Mayfair in Newcastle) it's been tricky to avoid their carefully planned promotional strategy for the release of Random Access Memories. There's been the constant radio airplay of 'Get Lucky', there's been the teaser tracks, the ad spots, the full album stream via iTunes, etc. Let's just say the hype has been building for a while (check out Billboard's timeline here).

This has made it difficult to resist the allure of the various pirate offerings. There was the video that was compiled by fans using clips from the various Coachella adverts and Saturday Night Live spots. Then there were the various iTunes live stream audio captures of differing quality appearing all over the web. The official release of Get Lucky was prompted by an illegal leak captured from a Dutch radio station, forcing the hand of Columbia into releasing the single early.

Nevertheless, I purchased the single through iTunes and not long after I pre-ordered and paid for the iTunes LP (Mastered for iTunes) version for the sum of £8.99. I had succumbed to the hype, and on release day the album was pushed to my iPhone, my iMac and my Macbook so that I could enjoy the official release whereever I went.

However, I do have to admit to having downloaded the album in advance of this official release. I've tried all sort of versions: the supposed CD rip (Columbia / 88883716862 / CD), the WEB rip (Columbia / USQX913001 / WEB), the vinyl rip (Columbia / USQX913001 / Vinyl), and the special mastered version (Qobuz 24-bit / 88.2 kHz Édition Studio Masters / WEB). However, I much prefer the sound quality of the iTunes version. It's just a shame that if I wanted to buy the Japanese bonus track 'Horizon' I'd have to pay for an expensive imported CD (£22 registered airmail) or resort to piracy (Sony Music Japan / SICP 3817 / Japanese Edition + Bonus Track / CD).

It's an ethical nightmare

I'm a fan. I'm a fan who also loves the album - I will gladly hand over my money for Daft Punk product. However, I'm not keen on the excessive import/postage costs for 1 track alone. I want to legally purchase this music but it seems ridiculous that in the era of digital networks and near zero-distribution costs that such a disproportionate barrier exists.

And it gets worse...

It would seem that the availability of the UK CD release is less consumer-focussed than it could have been. Forgive me for sounding like a digital dinosaur (CDs are digital, right?) but I actually like to own physical media like CDs - even if I seldom play them - primarily because I've suffered several hard-drive failures over the years and lost large sections of my digital music collection. Secondly, I don't like the idea of being tied to Apple's proprietary compressed music format for the rest of time. Can I take this with me if I switch to a different device (Window Media Player? PS3?). At least with the CD, I can control the format and codecs I prefer in a few years time (without having to transcode the media and reduce the audio quality). Thirdly, it's a lot nicer to listen to CDs though my high fidelty audio setup than it is to listen to compressed music.

So if I want to buy Random Access Memories on CD I can use Google Shopping's search tool to find me a copy from Sainsbury's for £8.99. This is a price I'm happy to pay but where's the competition? Google Shopping doesn't even search most of the big providers. Tesco and Asda are both charging £10. Morrisons sell it for £10 but they don't have an online purchase option! What is this? The 1990s?

It seems like the supermarkets are the only physical music retailers left. This is okay if you are after something that's likely to chart but what about the leftfield music? HMV and Virgin are dead. Play.com has become a glorified market place where smaller providers offer products, often with a lack of detail or item description, and questionable feedback scores. Zavvi have stopped selling CDs altogether.

I guess I could always go to everyone's favourite tax avoider, Amazon (I will not link to them), but I find it morally repugnant to pay them £9.99 for a product when I know they'll go out their way to avoid paying corporation tax. CD-Wow were caught out by the Channel Islands tax loop-hole being closed down, so WowHD replaced them and they have the best price at £7.99.

So, I can buy the CD at a reasonable price but only because I know where to look (I'm not wanting to pay £19 Littlewoods!). But does everyone? And are people being offered a fair price for their supposedly obsolete media? As physical formats become less and less relevant to the consumer they'll inevitably become rarer as demand decreases, forcing the price up. This looks like its happening right now. I find this rather sad, but predictable. I guess we can always pay perpetual fees to access rather than own

EDIT #1

It seems I may need to clarify a few things about my initial whine:

My whinge here is partly about the death of the high street music retailer - I admit I didn't make that clear enough. I can go buy this album from a supermarket as it's a certainty to chart (the bookies recently slashed the odds on it being the biggest album of the year) but I've struggled to buy a less renowned artist, like Deerhunter (Monomania), from Asda or Tesco. I used to rely on specialist music stores to provide me with my physical media. Failing that, I'd go to the usual suspects (Play, Zavvi etc) who are also on the wane (Amazon excluded).

My initial lazy searches only turned up 3 recognisable UK stores selling the CD (Sainsbury's, Amazon and Littlewoods) with prices from £8.99 to £19.00. There was another company called Base.com, but I've no idea if they are reputable. Apparently they've been around for  decade but this was the first time I've heard of them. ScreamingCD.com showed up but they are Canadian based and postage is an issue.

Amazon are hardly offering music at a competitive price on all their products. After some digging around I found alternate prices: 25% cheaper in the end. This does matter to me at least. I actually spent more than I expected as I found some other bargains. I ended up buying 4 CDs for £30 rather than 3 meaning I could support more musicians, admittedly at a lower royalty rate. Then again, the royalty rate on CDs is better that than that on digital releases. The Gowers Report (2006: p51) showed that artists get 8%  from digital sales (less than the credit card company who handles the transaction!) while they get 9% from CD sales. This is marginal when dealing with one consumer (ie me) but the problem is scaleable. The shift to digital distribution is not always a best case scenario for creators.

Returning to Amazon, if you are the one-stop shopping destination for a substantial amount of internet consumers then monopolistic practises tend to occur. This is not my point by the way, it's one made in the BBC series The Virtual Revolution, in relation to sector market leaders becoming dominant (eg Facebook in social, eBay for auctions, Amazon for entertainment goods, etc) .

However, it's also about the death of the recognisable online retailer who used to provide me with many varied pricing options for my favoured consumer products. Put simply, I hate that it now takes more effort to find the things that I like when it used to so much easier.

It's easier to just buy the album via iTunes (even though Google Play and Amazon's MP3 store are offering it cheaper) - which I did. However, just because it's easier doesn't make it convenient or flexible. I still wanted the physical CD (which I have also purchased from HDWow) so that I can play the uncompressed sound through my Arcam/Mission/Marantz stereo.

A plea for help...

For the record, I can't get these 256 kbps .aac files to play in Windows Media Player without transcoding and making the lossy format even worse. If iTunes sold Apple Lossless (.alac) files then I'd be happy to batch encode them to .wav (well, actually, happy is not the best disruptive term for the process). If anyone has some helpful solutions for this issue then I'd be grateful for your advice. Likewise, I'd appreciate advice on how to get these .aac files to play on my Sony Playstation 3 without a reduction in quality. I suspect the answer is the CD ripped to .wav though...

Merry Christmas Music Industry

It's been a while since I last posted (work has been intense!), but I thought I'd get a festive post in before the new year. As the year ends there have been many things related to music and the copyright industry for people to get their teeth into: the MegaUpload video controversy; the safe harbours provision debate for Grooveshark; the ongoing arguments around SOPA and the threat to Domain Name Servers accused of hosting content protected by copyright...

On top of this though, there are some positive steps being taken by the music industry to give internet users what they want when they want it (competing with piracy?). I found myself becoming a fully paid up subscriber to Spotify Premium this year (£9.99 per month) and am now enjoying it on my Macbook, iPhone and Tivo box. I'm also waiting for Apple's iTunes Match (£21.99 annually) to filter the first 25,000 tracks in my library before seeing if I can add the other 15,000. Then there's Google Music, but I guess I'll wait and see what the UK provision is like before committing myself to another digital service.

That I've paid for these services may not be a surprise to anyone who read my series of posts in which I tracked my expenditure on music products and services for a year. However, I have found myself being a little conflicted about the value of these services - £10 per month is the same price you can pay for a seedbox and VPN package by which you can download, store and access all manner of torrented materials.

Guilty relief?

Nevertheless, I've come to think of these subscriptions as a form of mild guilt-relief for any form of consumption that might be viewed by others as not strictly legal. I'm not sure I get the full £9.99 per month use out of my Spotify subscription as there are many artists that I love that are missing from the service. Similarly in the filmic consumption space, my £14.99 per month subscription to CineWorld's Unlimited Card hasn't been great value for money when I go less than twice per month as they don't usually get the more obscure weekly releases. I also pay for Virgin Media's most expensive TV package (£24.50 per month) despite never watching any live TV.

I've found myself spending more money this month on second-hand vinyl albums including the spinning wheel version of Led Zeppelin's III album (£25!) than I have on digital services. I guess I should feel guilty in this consumption too, as none of that cash will find it's way back to the struggling artists - at least this is the rhetoric of the games industry about resales. However, I don't. I shall never feel guilty about purchasing tangible objects, even if they are old Rolling Stones, Velvet Underground or Crosby, Stills and Nash records (I feel older than I am!).

In the brave digital future physical music might be dead but at least, for now, I can hang it on my wall.

Merry Christmas music industry!

Cheap CD tax loophole to close

Reports that the Treasury is to close the loophole that some online retailers have exploited in order to import CDs into the UK without having to pay VAT have been greeted with cheers from some quarters of the music industry this week. But I can't help feel that it's not something to feel that positive about.

Mail order businesses (like Play.com, CD-Wow, The Hut, etc) who can afford to setup in the Channel Islands have been able to circumvent the requirement to pay Low Value Consignment Relief (LVCR) on items that used to cost under £18 will, as of April 1st 2012, no longer be able to undercut businesses based on the mainland.  Apparently, this costs the UK £140m a year in lost tax and receipts.

Over the years many current high-street stores have established bases in the Channel Islands, allowing them to ship their goods to there for repackaging purposes in order to escape paying the tax. Indeed, even HMV does this, allowing them to undercut the process in their own high street stores, many of which are under threat due to the supposed slowing demand for expensive physical products in an era of free music via piracy or legal streaming services like Spotify, We7 or Napster.


There have been active campaigns to cut out the VAT-free loophole by groups like the Retailers Against Tax Abuse Scheme. Their spokesperson, Richard Allen has claimed

"This round tripping mail order industry, whilst popular with consumers, has destroyed or damaged scores of viable job-creating businesses on the UK mainland ... The removal of this major market distortion should be welcomed by all UK businesses that wish to trade online"

And here is the rub - I fail to see how beneficial it is to render the cost of CDs to a sum 20% greater than that which can be currently paid? It certainly means that customers might buy less music in a given period if there are additional pressures on their purse strings. This would have a knock-on effect for some artists and labels in that more tax equals less purchases and therefore less money finding its way up the royalty chain.

I understand the argument about taxes going back into the Treasury coffers - I'm assuming their economic analysis has predicted the fall in total sales of physical units. I don't see how Allan's argument will hold up though. Businesses that want to sell CDs online will still have to charge the extra task to the consumer, who will in all likelihood spend less. Even if Tesco has to pay tax on their goods they will have the economic klout available to undercut independent music stores via cross-subsidising.

In the mean time, quite a few employees in the Channel Islands will be made unemployed.

10 ideas for the future of digital music

A few days back Bobby Owsinksi, musician and author of the book Music 3.0 - A Survival Guide for Making Music in the Internet Age, posted a series of ideas regarding the future of digital music. These ideas came from some slides prepared by the J. Walter Thompson ad agency (see the slides below):

Things to Watch: Music Edition (October 2011)

Some of the major claims in the original slides have been summarised by Owsinski:

1. Access Over Ownership: The tide has turned on subscription music and we will all soon prefer to stream our music from a subscription service rather than buy it and download it.
2. Capturing Over Collecting: Instead of collecting records, CDs and digital downloads of our favorite music as we did in the past, we'll now capture where we can find the music online instead.
3. The Celestial Jukebox Is Here: Services like Spotify and MOG have captured our musical imaginations thanks to instant access to millions of songs and a new way to discover new music.
4. The Battle Of Personalized Radio: We're at a tipping point of how we consume music, especially via the radio. Personalization of what we listen to is the key to the future of music consumption.
5. The MP3 Player- RIP: With the massive shift to streaming subscription music, the days of the MP3 player are numbered.
6. Coming Soon To A Device Near You: Internet music access will soon be commonplace in the car and home entertainment gear.
7. Sharing Your Playlists Will Reach A Tipping Point: While personalization from a service like Pandora is getting better, it still can't beat what a human can come up with. Soon all companies will make available our playlists so that we can see what our friends are listening to.
8. The Facebook Effect: Listeners connected via Facebook have initially been found to be a lot more engaged, therefore Facebook can actually amplify the effects and popularity of a song or artist, becoming a new avenue for breaking an artist or for promo.
9. They'll Be A New Set Of Influencers: Bloggers have held sway over the popularity of an artist or blog until now, but that influence will be decreased thanks to a new set of music experts, thanks in part to Google's new "Magnifier."
10. Aggregators Help Music Discovery: New aggregator services like WeAreHunted.com or TheHypeMachine.com will collect data from around the web to help consumers discover what's new.

Most of these points I can agree with but there are a couple of issues that could do with being further clarified or reconsidered. In a series of Generator events I've attended over the last couple of years, the issue of paying for access to music rather than paying to own music (CD, mp3, etc) has been well covered by prominent figures in the business of providing such services.  

My gripe with the first point is mainly with the sweeping claim that "we will all soon prefer to stream our music from a subscription service rather than buy it and download it" - there will always be a market for purchases or downloads (ie ownership). Streaming services like Spotify and We7 are great at what they do but they are inevitably incomplete and frequently disappointing when you can't access the content you want. 

There are several instances where ownership is preferable to access:

•  If you want to make a home video of your holidays for personal consumption featuring some background music that reminds you of that trip, then naturally, a streaming service is wholly inadequate. It's not like you can drop a live stream into your video editing software.
• If you remotely interested in making digital music or performing digital music (DJ, VJ, etc) then you will need to own the music you play. It's not so easy to pitch up or down a streaming track, or beat match a stream for cross-fading.
• Streaming content is great in areas of universal wifi and fast-paced mobile data networks, but glitches in the network or coverage black spots can be frustrating. The next generation of 4G, Wimax, LTE, etc networks are a while off yet. Even when they do arrive, they need to be competitively priced or streaming whilst being mobile will struggle to replace tracks stored on the portable device.  This issues feeds directly into the seventh point too.

The final two points suggest that sites like the HypeM and aggregation services will replace the influence of bloggers. The problem with this assertion is that the HypeM is a service that aggregates what music bloggers are talking about - without the bloggers there will be no aggregation, unless the service morphs into something else entirely.

Virgin Spotify users?

While the US tech/media/music press is getting excited about the imminent arrival of Spotify in the US (register your interest here), back in the UK there are plans afoot to integrate the music streaming service into Virgin Media customers subscription plans. Given that Virgin have obvious links with the music content industry, and already provides a number of on-demand music video services to customers on the more expensive television packages, then this deal (or something akin to it) is long overdue.  If this Spotfiy deal materialises it will be a welcome addition to the Virgin Media family, but there is a history of false starts and delayed promises with regards to Virgin being able to deliver.

Back in early June 2009 a number of premature announcements were made regarding a deal between Virgin and Universal Music.  Geoff Taylor of the BPI even so far as to claim the deal would help curb illegal file-sharing (although it doesn't take a genius to see how well-managed and reasonably-priced subscription deal might be beneficial to the industry more generally):

“It is very encouraging to see an ISP and a record label working together as creative partners.  At the same time, the fact that Virgin Media will apply a graduated response system to tackle persistent illegal downloaders demonstrates that graduated response is a proportionate and workable way forward."

However, after 2 years this deal had very little impact or clear outputs at the consumer level. So, it's at this juncture that some kind of deal might finally materialise.  Mark Sweeney has noted that the reason for this protracted business is because Virgin Media also had to separately agree terms with Universal Music, EMI, Sony Music and Warner Music as they have the power to veto any deal Spotify does.

It would seem that a final deal is still some way off and that it the music package won't be available to all customers.  The Register claim Virgin are planning on centring this service around their new TiVo PVR box (as opposed to their V+ HD and standard boxes). Virgin Media have announced that box will include a Spotfiy app. The TiVo service has gotten off to a shaky start if the number of price cuts are anything to go by.  The service was originally launched at a premium price of £199, but has been slashed down to £99 for the 1TB version and £49 for the 500GB box (with free installation).  Virgin Media have even took the unusual measure of refunding existing TiVo users the price difference.  

The deal does present a number of questions:

• Will customers with existing Spotify accounts be able to connect this to their TiVo box?
• Will the TiVo Spotify app be restricted to just one box per household/customer or will it include multiple accounts (nobody wants to lose all those carefully crafted playlists do they)?
• What kind of pricing difference (if any) will there be between the TiVo app and the standalone versions?

So, the Spotify + Virgin deal is one with the usual caveats but there's no doubting that this is a great deal for Virgin Media customers. It also helps to challenge the market domination of players like Apple and Amazon.  This could be the start of a new phase of Spotify growth in the UK, and it'll be interesting to see how Apple responds to this (if at all) - if this partnership is successful in the UK, there's no doubt that other deals like it will be brokered in other territories.

The Know How #2: Who Develops Our Artists?

In the second seminar hosted by Generator as part of ‘The Know How’ series the attention shifted away from the first event’s emphasis on platforms and getting noticed to a focus on answering the question ‘who develops our artists?’.  The underlying context for this session was to consider some of the difficulties facing the UK music industry in the current economic climate.  There is no doubt that the UK is rich in new musical talent, however, record labels no longer have the resources to develop talent as they did historically forcing the us to question who the primary representatives of artists these days.

The panel for this event represented a number of different intersecting interests.  The session was chaired by Jim Mawdsley, the CEO of Generator and the person responsible for organising the annual Evolution music festival in Gateshead and Newcastle.  The remaining guest panellists included the lead singer of the North-East band Maximo Park, Paul Smith as well as Cerne Canning of Supervision Management (the manager of Franz Ferdinand and The Vaccines) and Jim Chancellor who is the Managing Director of Fiction Records. Together they considered some of the changing roles played by artists, managers, labels, lawyers and publishers.

Artistic Development

The session opened with a discussion of what artist development means in the current climate.  Canning made the point that the industry is ‘changing very rapidly’ – the advent of digital downloading has transformed the industry and brought back an emphasis on the single.  Whereas the 1980s and 1990s were marked by an emphasis on albums as a means of artistic development and management, the current period is one wherein the demographic is driven by singles and this is making it hard to develop artists over the long term. There’s a sense of stasis amongst the labels. The threat of a format shift to streaming with an emphasis on revenue driven by subscription services has led to a situation in which nobody wants to invest in long term contracts for fear of a lack of sustainability.

This current climate is one permeated by uncertainty in the context of artistic development.  There is no end to the supply of talent and bands will always need varying degrees of development or guidance, but how that transpires depends partly on labels and partly on the artists themselves.  As labels are investing less in promotion there has to be a more going on around the band, often in the social space in order to generate interest.  Smith noted that Maximo Park were relatively fortunate with the support they received from their label, Warp, when they signed and started touring.  As a band they had no money but Warp were happy for the band to follow their artistic vision and paid for the initial ‘leg-ups’ llke the tour van and initial recording sessions, but this was mainly due to the success of their first self-released 7” single.  Other labels had wanted to get involved, and “some of the bigger record companies had wanted to manipulate” them into being something they didn’t want to be – Warp were happy for them to carry on being who they were.  According to Smith, artist development should come from the artists who should have the songs that form the basis of a great album otherwise it becomes a struggle when they find themselves in the spotlight.  The message here is that it’s crucial to have management and record companies who know what to do with the music and that it’s not wise to engage with the media process until artists are ready

Maximo Park clearly embraced a DiY approach to artistic development which can give artists a certain amount of freedom.  Chancellor concurred stating that the “wise labels” will let artists develop the way they need to.  In some regards A&R is a often thought of “as a bit of a dirty word” and that if an artist is savvy enough then there is often no need to tamper too much.  However, pop bands tend to require more A&R support than the indie bands.  Canning claims that the best artists are not subject to excessive A&R interference, citing the recent success of artists like Florence + the Machine, Adele and James Blake.  He also cited the example of Radiohead whose first album was subject to A&R guidance which enabled them to break through – the famous guitar riff in “Creep” came about due to Johnny Greenwood’s annoyance with the label’s guidance regarding their development.

Managers

Labels like artist to have an established manger these days as this minimises the risks they face when investing in artists.  Canning made the point that the experimentation of artists like Tom Whaite or John Cale in the 1980s, many of which who went on to sell very few records, would never happen today as labels are too afraid of letting artists loose in amazing studios with top producers.  Smith noted that a good manager is invaluable early on – you need to be able to trust them to tell you that the song you’ve written is good enough for everyone else:

“You end up investing a lot of trust in these people [managers] you’ve only just met… They’ve helped us do the right thing … I just write songs that I think are good and want somebody else to tell me whether they are the right ones to release as singles…
To me they all sound like singles except in an alternate reality where I’m the DJ selecting them on the radio.  A lot of my favourite records never made it to the top 10 so I’m not really the best judge of that”

When asked about the importance the role managers play in building visibility for artists Chancellor suggested that they can be “massive” or they can do  “nothing”.  Canning suggested that some managers drive the artist while sometimes it’s the artist that drives the situation, as in the case of Crystal Castles – they didn’t have a manger until well after they'd created a significant presence.  There appears to be a dearth of excellent managers currently as it’s so difficult to survive or make a living in the industry, to the point that many lawyers are starting to multitask and do the role traditionally associated with managers. Chancellor noted that one of the key skills a good manager needs is to be “in tune” with the band. He cited the example of the manager of the band, Brother, who is doing an excellent job at the tender age of 21.  He has “sniffed out” some good connections and worked his way around the business quickly.

Promotion

The discussion considered the various forms of effective promotion.  Playing live is a significant part of promoting emergent talent – trying to get onto the line-ups for some of the smaller festivals is possible but its much more difficult to break into the larger ones due to the established networks and relationships which determine these.  Mawdsley suggested that artists only need to invest in PR when they are ready to release a single.  However, many artists might find it more cost effective to do their own promotional work, as Smith did with Maximo Park’s first album (he wrote the press release).  Chancellor said that a lot of music bloggers are now filling the void left behind by the lack of label investment and they are doing the A&R work for artists.  The requirement for recording demo tapes has been replaced by uploading tracks to SoundCloud and distributing them that way.  Canning noted that labels are expecting bands to do their own marketing now and this has produced a culture of ubiquity in which a lot of the mystique of the artist has been ruined as a consequence of oversharing information.  Many bands don’t want to blog all day long, especially if it distracts them from being creative, but it can help establish a presence

Overall, the panel painted a rather pessimistic picture of the situation facing artists who want to break through into the wider public consciousness.  There were glimpses of hope in terms of what artists can do to take control of the situation but the overall take-home point is that emergent artists need to work hard and be prepared to work for nothing for a long time – it’s not feasible to expect to make it big overnight

You can find a rather poor quality audio recording of the seminar here:
The Know How: Who develops our artists by robjewitt

The Know How #1: Transmission

Radio, live transmission (Joy Division, 1979)

Yesterday saw the first in a series of public seminars ran by Generator, one of the leading music development agencies in the UK, entitled ‘The Know How’ in which a panel of industry experts discuss the latest developments within the industry.  The first panel, subtitled ‘Transmission’ was focussed on a consideration of the present and future role of music broadcasting, specifically as it applies to radio in its various forms (analogue, digital, online, etc) and how the platforms can be employed in such a way that emerging artists can get themselves noticed.

The panel comprised a high profile selection of guests from across the audio spectrum including Trevor Dann (former Head of BBC Music, writer and independent radio producer), Jeff Smith (Head of Programming at BBC Radio 2 and 6), Huw Stephens (DJ/Presenter BBC Radio 1) and Dave Haynes (Vice President of Business Development at SoundCloud).  While the first three panellists all have an obvious connection with radio, Haynes was quick to admit to feeling like somewhat of a charlatan amongst the others.  However, as many online music streaming services are opting for radio licences like We7 and Last.FM, it made sense to include the service that is increasingly being used by artists, producers and consumers alike to discover new music.  Indeed, this point was one of the first to be considered by the panel when Dann asked the audience how many of them used Radio 1 or 2 as their primary ways to discover new music (the answer: very few). When asked how many people used Radio 6 the audience response was slightly higher, but when asked how important the internet was for discovering new music the results were as expected – a unanimous sea of arms.

One of the key questions at the start of the debate involved a consideration of radio’s enduring importance as a means of connecting music lovers with new artists, something Radio 1 has been focussed on heavily in recent years ever since their ‘In New Music We Trust’ campaign began, and more recently with ‘Introducing’.  In some ways the BBC has played a large part in bringing new music to the attention of the public, especially across Radio 1, 1Xtra and 6 Music.  There is much needed promotion of emerging talent across the public service broadcaster as commercial radio, according to Smith, is ‘not bothered on a whole by new music’ – their focus is driven by hits and familiarity, which audience and advertisers alike appreciate.  For Smith the BBC ‘like to lead taste’ not follow it.

In many ways presenters like Stephens act like taste makers or gate-keepers akin to John Peel, listening to all the music, both good and band, so the audience don’t have to.  Stephens’ popular Wednesday night slot on Radio 1 gives him free reign to play what he likes and enables listeners to discover something new.  He admitted to playing music that he personally doesn’t like, but that he knows the listeners might. There was an acknowledgment that services like Spotify offer music consumers to create their own bespoke playlists to share amongst friends, enabling people to come in contact with things they’ve never heard before – radio has to compete with these trends.  He regularly gets sent music from emergent artists via email, MySpace, SoundCloud, Twitter, etc like many consumers do, many of which he will play if they are interesting enough.  Stephens sees his show as a ‘filter’ for the masses of music we come in contact with now – it has to be a varied mix otherwise people would never find new stuff they didn’t know they like.

Much of what Stephens had to say chimed with what Haynes said about SoundCloud.  The aim of the service is to push audio to people and enable people to share music.  If presenters like Stephens represent a certain type of quality filter (ie new music good enough to reach a large audience), it was suggested by Dann that services like SoundCloud are devoid of quality control yet they must have detailed information about what is popular on the site.  It was put to Haynes that this must lead to a temptation to exploit that knowledge to provide a commercially driven product to the SoundCloud user base.  However, this idea was rejected by Haynes as not being in keeping with SoundCloud’s desire to enable artists to ‘reach their audience no matter how big or small’.  Other digital services might do this already, but SoundCloud doesn’t have a ‘big discovery push’ on their service and only occasionally promoting content – mainly from small acts or undiscovered artists.

The panel spent some time discussing the merits and pitfalls for emerging artists in trying to get themselves heard.  The option to hire a plugger to promote content to presenters like Stephens or those in control of playlists, like Smith, can either be very beneficial or beset with unscrupulous people looking to make some quick money from the uninitiated.  This is where tools like SoundCloud come into their own – Haynes suggested that the amount of free or cheap digital platforms online has enabled artists to build a presence like never before, and with this presence comes an audience.  It makes very little sense to try and charge people for digital singles if you haven’t built up a loyal or interested audience.

Ultimately, the message coming out of this seminar for emerging artists is that it pays to think and act smart when it comes to trying to break through and gain attentions.  There are many ways of building and maintaining interest in new music but being creative and determined to succeed are crucial – from shooting video diaries on YouTube to doing novel cover versions of familiar tunes.  Artists have to think strategically and network with as many people as possible to build a buzz around their content

A busy week in tech for Gateshead-Newcastle coming up

The North-East (well Gateshead and Newcastle to be precise) has a number of interesting events lined up for those with an interest in music, media and technology, hosted by Generator and Thinking Digital.

Generator

Each evening from Monday to Thursday Generator are hosting a number of free (registration required) music industry themed events as part of their "The Know How" series at Northern Stage, opposite Newcastle University Student Union.  I'll be attending as many of these events as possible and hoping to post my take on the events after each one - the wifi signal is a little poor in this venue so Tweeting might not be an option!  You can find a brief overview of the events below:

Monday 23rd - 'Transmission'

This seminar will examine the past, present and future role of music broadcasting (TV, radio and new technologies), and identify existing and new opportunities for emerging artists to get noticed.

Points for discussion:

• The role of traditional broadcasting (radio & TV)
• New broadcast platforms and modern music consumption (podcasts, online and DAB radio, video-sharing websites, blogs and music streaming)
• Associated revenue models
• How do emerging artists and businesses embrace new technologies and broadcasting platforms?
• The changing face of regional broadcasting and consequences for emerging artists

The guest panel includes:
Trevor Dann – Independent Radio Producer
Huw Stephens – BBC Radio 1
Dave Haynes – Soundcloud
Jeff Smith – Head of Programming, Radio 2

This should be an interesting discussion. I was impressed with Dave Haynes after his appearance at a Generator event last year: he's an intelligent guy with a lot of interesting ideas around online music distribution and the challenges facing the industry.

Tuesday 24th - 'Who Develops Our Artists?'

In the current economic climate traditional models of developing talent for the UK music industry are significantly fewer but there is no let up in the amount of quality artists coming through. Record labels no longer have the resource to adequately develop talent which begs the question: Who are the primary representatives of artists these days?

Points for discussion:

• The impact of the diversification of label services on the artist
• Is the role of the manager outdated?
• The consequences of inadequate artist support
• Should central government have a responsibility for talent development?

Jim Mawdsley – CEO, Generator, Director – Evolution
Paul Smith – Maximo Park
Matt Thornhill – A&R Director at XL Recordings
Cerne Canning – Supervision Management (Franz Ferdinand manager)
Jim Chancellor – Managing Director, Fiction Records

Wednesday 25th - 'What Does "Scene" Mean?'

Reviled and relied upon in equal measure – is ‘scene’ a convenient ‘catch-all’ journalistic term or something more substantial? Guests will look at how dance and electronic music scenes develop and achieve longevity – it will examine how emergent scenes rise and what they owe (by influence or outlook) to the original operators.

Panel guests will offer their views on:

• Myth or not? What makes a scene?
• The impact of new influences or new entrants
• Can it generate creative complacency?

Bill Brewster has a particular connection with Newcastle given his early connections with Forensic Records and Shindig moving on to a significant career in promoting, DJing, and journalism, where in his book ‘Last night a DJ Saved my Life’ he described Ralph Lawson as ‘Britain’s best kept secret’.

Bill Brewster – Lowlife, ‘Last Night a DJ Saved my Life’
Ralph Lawson – Back 2 Basics, 2020 Soundsystem
Luke Una – Unabombers, Electric Chair, Electric Elephant

I'm looking forward to hear from Bill Brewster as someone who has fond memories of his book 'Last Night A DJ Saved My Life' (available for a very low price on Amazon at the time I write this), amongst others. It's an enjoyable trip down memory lane, outlining some of the key events in the emergence of dance music in the UK.

Thursday 26th - 'The Beggars Group Story'

Generator is extremely pleased to have Martin Mills MBE, sole owner and Chairman of the Beggars Group take part in our ‘In conversation’ sessions with BPI Chairman, Tony Wadsworth.

Artists that Martin Mills has worked with over the years include White Stripes, Pixies, Interpol, Cat Power, Basement Jaxx, The Prodigy, Adele, Radiohead, Gary Numan, Vampire Weekend, Bon Iver, and TV On The Radio.

Mills has been actively involved in promoting the interests of the independent music sector, being instrumental in the setting up of the Association of Independent Music in 1999, IMPALA in 2000, and most recently the Worldwide Independent Network.

Tony Wadsworth, Chair of BPI, and former CEO at EMI will be asking the questions and offering his own views.

I'l be intrigued to hear from Wadsworth, perhaps more so than Mills, given the former's role at the BPI. Despite some of the conflicted messages that come out of the British body, Wadsworth has come across a bit of a pragmatist in the face of the challenges facing music distribution in the UK.

Thinking Digital 2011

This Wednesday and Thursday sees the return of the North East's premiere technology conference to the Sage Gateshead.  Last year's event was a wonderful showcase of ideas from the worlds of science, technology, digital media and much more and I was fortunate to attend.  Take a look at the video below to get a feel for that event:

Thinking Digital 2010 in 4 Minutes from Herb Kim on Vimeo.

This year my wife is going (courtesy of company sponsorship from Accenture) but my work load prevents me from attending.  The speakers look great (Gerd Leonhard and Conrad Wolfram are good value for money), as expected, and the event has sold out already so if you want get involved you can still sign up for the event webcast at the bargain price of £79+VAT.

No doubt the hastag #tdc11 will be trending on Wednesday and Thursday!

Click this link to get involved.

Now, if only I could get all this university marking out the way...

Spotify questions

One of my students has just asked me for some info about Spotify as part of their journalism final year project.  Whenever I do this kind of thing I like to post my answers here in case it helps any other student.  The questions are outlined below and have already been answered by Paul Carr (TechCrunch) and Kieron Donoghue (ShareMyPlaylists.com)

Q: How important is Spotify to the way we consume music both now and in the coming years, does it have a longterm future and is its business model sustainable?

A: I think Spotify is quite important to the way many Brits (and some Europeans!) currently consume music in that it's been a highly visible alternative to illegal filesharing.  Its simple to use interface and clear legality is an obvious boon to the industry in its attempt to get people to pay for music, whether that's by subscribing to one of the pricing plans, following a purchase link to their partner's service (7digital) or by paying for listener's attention via the ads.  The fact they've managed to convert around 15% of their user base (1 million people) to paying for content is remarkable in and of itself when there is some much competition for attention (both legal and illegal).

Does it have a longterm future?  I think its recent announcement that it will be limiting the amount of free streaming available to listeners (down from 20 hours per month to 10) was taken by many of the freeloaders to signal the end of their relationship with the service.  However, I think it was a necessary step in their evolution - one of the common features of new start-ups is that they need to attract a critical mass of users quickly and scale up fast.  Typically this involves making short term financial losses in order to cement a market position from which to grow - in this case giving users lots of content at little cost.  They had to make the proposition to pay more valuable if they were to grow and penetrate the US market.  There were rumours flying round that they made this change in order to appease the US labels before entering the marketplace, for fear their existing provision would cannibalise the other legitimate music services that are already fairly established there (eg Rhapsody, MOG, Pandora, etc).

Their most recent announcement regarding the purchase of music bundles and the ability to synch songs to iPods and Android phones also make it a more viable threat to Apple's iTunes, especially when buying 100 MP3s for £50 - undercutting their rival significantly.  However, it remains to be seen if this will be crucial to their long term growth as iTunes will still be needed for synching videos, photos or calendars.  It does point to the seriousness of their intent.  Many people loath iTunes because it has
become too bloated in size; Spotify is an attractive alternative to managing a music collection.  It has had to adapt in order to ensure its business model can survive - there's very little profit margin in online music services due to the licensing costs involved, so services have to be versatile.

Q: Will music streaming services like this replace downloads  legal or otherwise  and hard copies of music as the most popular medium?

A: There is some indication that the industry would like to see music streaming services take the place of (illegal) downloads, but its a nuanced issue.  The industry would like to be able to compete with free services in a manner by which they are able to make a profit.  Streaming services are potentially lucrative to the recording industry, if not so much for the recording artists.  Rights deals are still lopsided in the distribution of royalties in this regard.

Also, it makes a lot of sense to keep people paying for access to content rather than paying for something they can own forever, or at least as long as the format is viable (remember Mini-Disc?!). This is often referred to as the 'celestial jukebox' - an infinite music supply in the cloud where you pay for perpetual access without having to buy the infrastructure or manage the content (this has certainly been the tone coming out of some of the industry events I've attended in the past 12 months - see http://www.themusicvoid.com/author/rob-jewitt/).

However, there is still a lot of money to be made by having consumers pay for access (Spotify) AND paying for ownership (iTunes).  Having a mixed-market proposition has significant advantages, and this is what Spotify is currently moving towards.  As for whether or not streaming services will replace ownership of files - it's difficult to judge.  There are many music fans out there who have taken advantage of digital distribution during a period in which the industry lacked a clear direction, and have amassed huge music collections stored on inexpensive hard drives.  It's unlikely that these people will shift completely to streaming services like Spotify as there are still gaps in the collection on offer due to licensing restrictions.  Of course, one of the ways around this  is that Spotify allows you to replace import your collection into their player.  As for newcomers to digital music, it might be that they will be more likely to forgo amassing large collections of digital files in favour of streaming services, but people still like to be able to do things to their music (eg. edit tracks, make ringtones, mash-ups, use them on personal projects, etc) so streaming seems likely to be just one aspect of a more varied music diet.

Q: What do you see as its major strengths, and what are its shortcomings, if any?

A: The strength of Spotify is in its ease of use and cross platform functionality (ie the Spotify Mobile service for smartphones is well executed).  Many people aren't so bothered about trying to manage 250+ GB of music data on their computer hard-drives.

The weaknesses of Spotify are tied to the limits it places on user control of the content.  When it was primarily a streaming service there was very little you could do with it other than play tracks on demand or make/share playlists.  They've altered this proposition now somewhat with the purchasing of bundles etc.  However, there are still gaps in their library (eg no albums by house musician Gui Boratto) and this is a problem echoed across other similar services, so it's by no means a unique problem.  This comes down more to licensing deals with the majors and indies.  There's also been some vocal criticism by musicians and smaller labels about the fairness and parity of the royalties offered by such services.

Digital Music Dilemmas

I give up.  I have tried to love the digital music file as the format of the future but I cannot.  Don't get me wrong, I don't dislike the format in and of itself.  I do love having a large collection of digital music files that I can play around with in Ableton Live or Virtual DJ, but in terms of actually embracing the digital music file as a replacement for physical music, I'm afraid I can't go for that (no can do).

(Image: Dr Stephen Dann, 2005, some rights reserved)

Over the last 18 months I've been accutely aware of the amount of money I've spent on music and its related activities.  During the period in which I tracked all my expenditure, I found myself buying a number of different music formats (vinyl, CD, mp3, aac, etc) only to keep returning to the Compact Disc, due to its versatility.  I love physical formats.  I am a dinosaur.  I must be.

I came to this realisation this week after thinking through a few digital music dilemmas.  I recently presented a paper at University of Sunderland's Centre for Research in Media & Cultural Studies in which I attempted to balance the demands of copyright, the behaviour of music fans and the role of government policy as it pertains to file-sharing.  In that paper I was keen to qualify the claim that music industry is dying under the weight of illegal peer-to-peer traffic, whilst looking at some of the industry figures regarding sales in the UK (see the slides below).  

Piracy, Policy, Participation

View more presentations from Rob Jewitt.

Frequently, claims are made about the size and scale of illegal filesharing and its impact on the music industry whilst ignoring the recent growth in sales overall.  Indeed, a few days after the presentation the Guardian carried a few interesting reports in which the size and scale of the 'problem' was staggering - but not just for the industry.

BPI

The first article drew on a press release from the BPI who were pushing their annual Digital Music Nation 2010 report (.pdf here). The article was full of the usual headline figures and the size and scale of the UK music industry's problem, which BPI chief Geoff Taylor employed to urge Ofcom to enforce the Digital Economy Act quickly.  Here are the big figures:

67 - the number of legal music services in the UK

3/4s - the share of all music downloaded in the UK that is done so illegally

149.7 million - the number of digital singles sold in 2009

160 million - the projected sales of digital singles for 2010

16.1 million - the number of digital albums sold in 2009

21 million - the projected sales of digital albums for 2010

370 million - the equivalent total separate tracks for 2010

500 million - all time sales of digital singles

50 million - all time sales of digital albums

82 pence - the average cost of a digital single

29 - the percentage of 16-54 year old using illegal methods to obtain music

23 - the percentage of 16-54 year old using P2P software to access music in 2010

23 - the percentage of 16-54 year old using P2P software to access music in 2009

24.5 - the percentage of the recording industry revenues generated via digital services

7.7 million - the estimated number of people downloading music illegally in the UK (source: Harris Interactive)

£984 million - retail value of single tracks downloaded in 2010 (source: BPI)

1.2 billion - the number of tracks illegally downloaded in 2010

However, there is a caveat tucked away in the 'notes for editors':

£219 million - the recording industries losses from 1.2 billion illegal downloads

Those losses don't seem quite so bad set against the headline grabbing fears that the 7 million plus figure evokes.  There is a decline in the sale of physical formats like CDs which fits with the usual life cycle of formats.  Indeed physical sales of singles (on CD) account for a tiny amount - around 1% of all single sales.  Anyone who has attempted to buy a CD single recently will testify to the difficulty of finding the format in local music stores, so this is unsurprising.

What seems apparent is that there is growth in digital music, but that piracy is still fairly constant.  The figures above seem to rely on some very strange substitution logic in which each file downloaded illegally equates to a lost sale for the industry.  I'm not convinced that this is a tenable claim.  There are many reasons why people access files from illegal sources. Personally, I own several Macbooks, desktops, iPods and iPhones - way more than the 5 that Apple let you use your legally purchased DRM-infused tracks on.  Had I bought a CD I'd be able to rip that to each of the machines (illicitly!).  Digital music isn't always as flexible as physical.

Changes in the law are unlikely to impact on the behaviour of consumers, many of who are accessing content both legally and illegally.  The way the industry tends to frame this discourse is that there are reasons to be optimistic (ie growth) but there is still a hardcore minority that are not paying for content.  It's never acknowledged that this minority are also the same people paying for music (and indeed, might even be the best customers!).

Consumer rights?

The other article worth referring to here is concerned with the rights of consumers and was published by Consumer Focus.  Essentially, customers have more rights when they buy physical formats (CD, DVD, Bluray) as opposed to digital formats which are not protected under the Sale of Goods Act as 'tangible goods'.  If a consumer buys a digital file that is not fit for the purpose (as in that the file might not be compatible on the portable device it was purchased for) they have no recourse.  They can't return the file to the store or vendor.  Add to this the fact that most shoppers aren't provided with the kind of information about their digital purchase that they might need in order to get it to work and there are some hidden problems with the shift towards digital

Philip Cullum, deputy chief executive of Consumer Focus, said:

"It's crazy to have a situation where someone who buys music on a CD has the legal right to a refund if it doesn't work, but someone who downloads the same music does not. Consumer laws on buying digital goods, whether it is streaming films, or downloading music and software, need updating to reflect the reality of 21st-century life.

There is also another glaring problem dinosaurs like myself are confronting in the shift to digital - what will happen to their rare music collection when physical formats die out completely?  It's not like Robbie Williams or [insert generic pop star here]  can sign your MP3 download after all?

Music Futures #2

Last night was the second in a series of 4 seminars hosted by Generator exploring the future of the music industry.  The session featured a number of established and relative new (but influential) players in the digital music market place.

Image: Peter Kirn, 2007, Flickr, CC

The guest panelists include Dave Haynes (Soundcloud), Atan Burrows (mFlow), Ian Greaves (Napster) and Colin Rice (We7).  The general theme of the session was similar to the previous night: digital downloads versus streaming services, looking to address the opportunities presented by services driven by retail and those that work on an access-basis (and whether or not the two models are mutually exclusive).

In a slight departure from my last post in this series, I've attempted to precis the discussion that took place last night in a rather linear structure, adding a few observations and comments where appropriate.

Killer/filler tracks?

The first issue to be raised revolved around the decline of the album sale and the emergence of a la carte download services which permit music consumers to cherry pick individual tracks (eg iTunes).  The panel was asked to consider whether or not this has led to a position in which people now have more control over the quality of content they access rather than paying for an artist's entire catalogue (underpinning this assumption is the notion that albums contain 'filler' tracks that casual listeners may not want or need).

Atan (mFlow) responded by suggesting that shopping for music online today has become boring and sterile. The shopping experience lacks innovation - it's like shopping for groceries. Indeed, many supermarkets (like Tesco and Asda) have taken this logic and applied it to CD sales.  Shopping for music needs to be more integrated into the social life world of music fans - something mFlow aims to capitalise on.  Users can 'flow' (share) tracks they like on the service with their followers (it's also integrated into social networks like Twitter and Facebook) who can then listen to each track in full.  If they go on to buy the track the person who 'flowed' the track gets 20% of the cost of the tune - quite a unique proposition.

Colin (We7) suggested that many companies are looking at 360 degree deals as a way of taking a slice out of merchandise and live performance opportunities in the face of declining physical sales. There are now a variety of different sources from which artists can generate revenue - record labels still have a role to play (eg skilled at marketing large acts like Madonna etc) but that role has changed in lieu of the DIY ethic. They aren't dead just yet despite it being frequently predicted. Going down the major label route is useful for certain kinds of artists but there are more tools available to help empower musicians today, enabling them to have greater control over licensing their content.

Ian (Napster) also added that major record labels are good for developing artists through their career but the labels do need to see some return on their investment early on (usually by the second album).

Free or pay?

The question of whether or not people were still willing to pay for music reared it's head.

Dave (Soundcloud) made the point that the growth in digital is not replacing or making up for the decline in physical sales directly. The reason for this is largely due to the industry itself as having been the barrier to the growth of digital. Digital Rights Management (DRM) software in the case of Napster and iTunes are cases in point. Fearful of piracy the major labels insisted that digital files be encumbered with software which monitored users and limited how they used the music they had legitimately purchased often in multiple competing file formats that were not always cross-platform compatibile.  This was a headache for the typical casual music consumer.  The industry effectivly applied the brakes that prevented mass migration to digital.  In recent years a relaxation of the rules governing DRM and the growth in streaming services has acted to redress this - convenience of access should bring more people in and therefore bring in more money from smaller payments in greater volume (eg Spotify's ad-supported streams). We are seeing a shift from  a period of music ownership towards music access.

Atan emphasised that ownership is still important to many music fans, if not all of them, and catering to a diverse set of interests in a flexible manner is what is needed. People will buy content but they are becoming more discerning about what they are willing to pay for.

Radio

The chair raised the point that most music listening (80%) is done via the radio and most of that is done in cars. How do companies monetize this?

None of the panelists were able to tackle this mobile issue directly.  Colin was keen to highlight that We7 is adding more social functionality to their newly upgraded radio service which allows people to share their musical taste with friends via Last.FM recommendations, etc.  It also allows people the chance to discover and hear music related to their intersts.  One of the problems many music fans face when confronted with huge catalogues of millions of tunes is the scope of such access results in them freezing up due to the limitless possibilities - this is where profiling and recommendation radio services come in.

Ian claimed that when Napster started (as a legal service!) people didn't really 'get' what a monthly music subscription service meant. Clearly we've moved on since then. Historically people used to trust formats (radio, CD, etc) as you knew where you were - a CD played in a CD player - the proposition was simple. A subscription service didn't always make sense to people and took a while to become simple enough for casual users.  Formats have largely been static. Going forward you'll want to access your music that you've selected wherever you want, whenever you want - that will be where digital will innovate.

Dave returned to the point that early services crippled by DRM that involved platform specific third-party clients installed to Windows partition drives on Apple Macs, where users regularly had to make the effort to reset all the DRM licences on one machine in order to take the music on the go. As an early adopter, he was willing to make the effort for the benefits but he was not typical of the casual market. The dream is a cloud-based solution which includes a mixture of tracks owned alongside those leased via a service in much the same way that Spotify works now; combining a users personal iTunes library with that of the cloud-based service.

Recommendation and discovery

The chair posed the question asking how important recommendation engines will be in the future for music discovery?

Atan talked about some of the research mFlow have put into various algorithms.  This showed that people like to talk to each other about music and share their thoughts. This (sharing) aspect is one of the most important issues that couldn't be talked about a few years ago, when the industry associated sharing with giving away content for free, piracy and the fear of declining sales.

Colin claimed that personalisation is important part of the user experience. If a service feels personal and  less mechanistic or pushed at you by the industry, then music fans relationship worth music changes. We7 is increasingly looking at social media integration.

YouTube Fear?

The chair recounted an anecdote about how his 13 year old son consumes music, typically via YouTube, and questioned whether or not the audio quality of the service of the content itself was worthwhile. For him YouTube is primarily a video platform.  As one of the key spaces for new music discovery amongst the youngest demographics is YouTube a threat to digital music distributers?

Dave took umbrage at the chair's intonation that YouTube may be full of 'crap' or questionable content, or even that it is just a video platform rather than music. However Dave sees the platform as an essential creative outlet irrespective of how professional the content is. In this instances YouTube is a democratising tool that allows people outside of the mainstream system to gain some traction. Some smaller acts are seeing 4 figure sum monthly returns from their YouTube content alone. Companies are increasingly hiring youth teams for advice on how to generate more subscribers and connect with music fans. YouTube gives good control to labels or acts in that there are various controls offered to users (eg around video embedding, uploading and playlist controls).  Companies or acts can generate money around their video content by taking advantage of Google Adwords and links to buy.

Atan suggested the reason why YouTube is successful with kids is that it just works.

Ian highlighted a problem within the industry which seems to have a bizarre distinction in how they view video.  They view video as a marketing tool, partly due to legacy reasons associated with promotional campaigns, and often are not overly concerned if music videos leak to YouTube before they've secured an audio distribution deal or licensing with digital retailers.  But the digital start-ups trying to make headway in the audio distribution space -  companies like Napster -  they aren't allowed to carry these promotional releases in audio form until an official release date has been agreed. Even users uploading tracks and videos to YouTube are viewed by many in the industry as an adjunct to marketing.

Dave suggested that it would be in the best intersets of digital retailers to close the release window gap. The industry is configured to work over a staggered release window with their eye on promoing tracks in print or waiting for confirmation they've made it to Radio 1's playlist. A release date may be way off but the viral nature of the Internet means tracks can leak quickly, circumventing the often slow processes of the industry. Some music journalists (the NME was named) still insist on review copies on CD so that journalists can make some money from selling them! This has led to a recalcitrance regarding digital as they'd lose this perk.

Freemium

The question turned to whether or not the freemium business model was a feasible one?  Typically this is often described as giving away content for free (often ad-supported) to the vast majority of users whilst offering a paid-for premium service taken up by around 10% of users.  The paying customers typically offset the costs of the free users.  I've discussed this model a few times on this site so regular readers will be familiar with the idea.

Ian started by describing Napster's early attempts at dabbling with it a few years ago in the US but they struggled to make enough money required to pay the labels for the licenses from the ad-funded service.

Colin's company, We7, currently works with both freemium and subscription models. They have around 10000 UK paying subscribers with millions more accessing content for free. Back in April We7 announced that they had managed to make the ad-funded model work for them.  This is important as much of their funding is still reliant on venture capital.  Their recent switch to the  radio stream makes a lot of sense as it typically cost 30% less than the licences for subscription services.

Dave pointed out that being free allows you to get heard when radio playlisting isn't working for artists. Soundcloud is less of a consumer destination, rather its a space where musicians (both amateur and professional) can upload and share their content with certain controls, circumventing traditional radio.  Even if you give content away for free you have to be savvy about the social contract involved and get something back - eg data on users, geography etc. This can help musicians targe certain geographies for  live tours or related campaigns. Soundcloud is built of the premise of the social share: ensure you get something in exchange for the download.  You can give users of the service the ability to download tracks providing they tweeting or embed the content in Facebook for increased presence. Location-based data is increasingly important and there is promotional potential in this area.  Recently James Blunt gave away music to people that checked in to a certain place at a certain time using the GPS in their phones and a location-based application like FourSquare, Gowalla or Facebook Places.

From this point on the panel took questions from the audience.  It became clear that one of the biggest barriers preventing start-up companies from joining to what seems like an already overcrowded digital retailing space is the cost of licences from the major labels for delivering digital content to music fans.  The majors seem to think that cannibalisation of the existing business models will occur if the costs they charge come down. Digital Music News recently carried a feature listing 100 companies that have tried to make it and have failed.

Dave noted that some labels' business models revolves around ensuring they extract as much venture capital money as possible from new startups.  This focus on short term economic gains undermines the ability to develop, nurture and sustain new platforms and opportunities for growth. Initially the industry didn't think it needed these new digital startups but the decline in paying customers has forced a redress of the balance somewhat.

The panelists where in agreement that there will still be innovation in the technology going forwards despite the licensing barriers, notably around the ability to build API's around limited types of access to free services.  Features like this helped to sustain Twitter's growth and it isn't inconceivable that something similar could happen with music catalogues, creating interesting data mash-up services.

One current problem that many digital services face is a lack of standardisation around metadata, eg things like playlists, top-rated tracks, etc - a playlist created on We7 cannot currently be taken to Spotify if a user decides to switch music services.  This will become increasingly important as more services will be built upon the same 11 million or so tracks currently licensed.  The prediction here is that metadata will be more important that tracks owned.

You can catch up with the event via the video on the Generator site here.