by : April 2011, Business

Music Companies Meet in New York

Music Companies Meet in New York

On February 24, 2011, the 11th Annual Digital Music Forum East was held in New York City. The conference hosted a series of panels that assembled artist representatives, label executives, publishers, and technology companies to discuss the current issues regarding all aspects of the music industry.

New Research Data

The conference commenced with a research presentation that analyzed the current state of digital music, and how consumer behaviors and attitudes have been an influence. Eric Garland, CEO and Founder of BigChampagne, and Russ Crupnick, President of NPD Entertainment, shared eye-opening statistics. Crupnick discussed how the music industry has catered to the consumer, slowing the increase of music prices, allowing more access to digital content, and offering more choices of services to use. Instead of expressing gratitude, “consumers are flipping us the bird,” Crupnick explained. He continued by showing that the population of buying music fans has declined by 20 million.

Garland discussed that although YouTube is a viable alternative source for an artist to post content and earn potential income, few songs are able to amass millions of hits before the ad revenue starts to trickle in. The disproportionate income is the same for streaming as well – 1,000 streams equals about $1 of revenue for an artist. Only 5% of US consumers are using subscription services, and that includes free trial users. Is an artist’s extreme effort to accrue thousands, even millions of hits worth the small payoff?

Crupnick pointed out that the remaining fans still willing to purchase music are often times only buying CDs. He stated that 55% of paying music fans are only purchasing CDs. There’s always the argument that an artist can depend on their “super fans,” but is that enough to recover from the loss of so many buyers?

“More people are listening to services like YouTube than they are their own libraries, and that is a trend that’s happening fast,” Garland added, “People play what they don’t buy, and buy what they don’t play.” So, if consumers don’t listen to the music they buy or download, and prefer to stream new content, maybe streaming services are still the answer.

Beyond Oblivion

Beyond Oblivion seeks to be that answer. Adam Kidron, the CEO and Co-Founder of Beyond Oblivion, presented a new business model. Recognizing the limited royalty checks from album sales and streamed plays, Beyond Oblivion strives to monetize usage.

“With Beyond, we believe that the download and the ownership should be free, and that what we must pay for and what people would be interested in paying for–and where people see the value is in usage,” Kidron explained. Beyond will not require subscription fees and intrusive advertisement interruptions. Instead, users pay a one-time lifetime-use fee. The size of this lifetime fee, however, is uncertain.

Beyond Oblivion is setting out to have the largest infinite music library. The concept sounds nice, but it seems that it would lead to massive licensing pains, similar to Spotify’s constant headaches. Once Beyond aggregates a respectable music library, users would be able to access the music through a licensed player. Users could stream, download, and share music and playlists with their friends who have licensed players. These licensed players would be able to track play counts, regardless of whether the file was ripped, shared, or downloaded. This means artists and labels would be paid micro-royalties per play, hence Kidron’s coining of the term “usage model.” Beyond encourages fans to virally spread music through social media, because more music consumed means more plays, which means more money.

The Beyond player will function not only on computers, but also on smartphones and tablets. A beta version of this usage model will be released in April, and the official service should launch in June or later, depending on certain locations of the world. Beyond Oblivion most recently received $77 million in venture capital investment, but time will tell the true success of this new service.

Spotify, MOG, and Rdio

Following Kidron’s presentation, the various panel topics began. Spotify continued to cause quite a buzz in the cloud technology world, as well as the prospect of an Apple or Google streaming service being launched. Surprisingly, representatives from MOG and Rdio didn’t seem phased by the potential rivalry. Anu Kirk, Vice President of Mobile Products at MOG, and Carter Adamson, COO of Rdio, said they would welcome the healthy competition and be content with riding on the massive marketing dollars of Apple and Google to bring better awareness to subscription services to general consumers.

Matters of Public Policy

Another panel aimed to determine the right amount of government involvement with illegal downloading and piracy affairs. This topic was extremely relevant due to the exhaustive efforts and money that are constantly pumped into bringing powerhouses like Limewire and RapidShare to court. What could have been a constructive civilized conversation turned into heated bickering.

“The recording industry is falling, but the music industry is doing fine,” argued Julie Samuels, Staff Attorney at the Electronic Frontier Foundation. Rich Bengloff, President of A2IM, had other thoughts. “I have looked at the touring numbers over the last ten years,” Bengloff stated in rebuttal, “I’ve looked at the merch business, and the overall pie – whether it be endorsements, advertising, synchs – this industry has gone down however you want to measure it.”

It’s certainly not a positive view of where the industry might be headed, but Bengloff’s brutal honesty hits hard. Finding who to put the blame upon seems to be a popular game among industry folk. “We’ve seen the decimation of the recorded music industry in terms of the staff, the personnel, and the creative product,” Mark Eisenberg, Digital Media Executive and Consultant for LatticeWorks Media explained, “So we have seen the worst case scenario when technology runs its course, without any type of bounds or restrictions.”

Eisenberg’s statement suggests the fact that perhaps the government should place further restrictions on how the Internet is used within the music industry, especially in the case of Limewire and RapidShare. Of course, the converse argument points to the fact that technology enables an artist to make leaps and bounds that were inconceivable a few years ago. “We are living in the golden age,” stated Michael Petricone, Senior Vice President of Governmental Affairs at the Consumer Electronics Association. “There’s more music being made than ever before, there are more people listening to music than ever before, there’s more discovery than ever before. Meanwhile you’ve got independent musicians coming up with innovative business models that allow them to support themselves.”

Petricone is right that technology allows more music to be made than ever before, but is all of that music great, quality music? Have the filters been lowered – filters that block inexperienced music made by people who see music as a hobby, which now has been poured into the same pool as serious musicians that struggle to create an art and a living? Ultimately, the same arguments and the same points were echoed across the panel, leading the discussion to nothing but a standstill.

Hopefully the conversation will continue at the Digital Music Forum West, which will be held in Los Angeles on October 6, 2011. Despite the muddling of pessimism and optimism for the business, it is conferences like the Digital Music Forum that encourage forward thinking among industry officials.

By Nicholas Susi

 

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