On the panel:
Ian Rogers- Topspin
David Ring, Universal Music Group
Fred Von Lohmann, EFT
Jim Griffin, Choruss
Tony Van Veen, Disc Makers
Celia Hirshman (Moderator), One Little Indian/KCRW
Rogers: Cost of marketing is increasing. Harder to sell than ever. Our dream is an efficient marketplace where people get to interact with the music they like in their way. There will be a rising middle class of artists; the tails will get longer.
Griffin: There’s more than one model that works. Publishing is up, sound recording is down, so it doesn’t take a genius to figure out we should look at publishing and figure out how to do the same. Choruss is an experiment. It is a test in patience. The model where we take out artists to the world and expect it to happen over night doesn’t work.
Do we need the government as a custodian to manage pricing and rights?
Can the music industry turn the wagon without shooting at ourselves?
Griffin suggests looking at analogous models: “Look at the Sports industry coming to grip with loss of seat at the stadiums. Sports finds itself at the very basic tier of cable. There is a monetization layer upon which service layers flourish.”
“The music industry is the world’s largest law-firm.”
Van Veen: The business fundamentals are the same: Offer value, tools to help artists get ahead.
Von Lohmann: Typical recorded songs incorporates two separate copyrights: one owned by the original recorder, usually shared with the original recording label, then there’s the sound recording—generally owned by the label who paid for the track to be made. And the publishers, to make things more complicated, has split the rights to the music composition side—and to the entities handling the mechanicals. All of these different entities want to be paid. The Choruss experiment is important not only because it tests various pricing models—but also because it tests payment models between the universities and all the other major players.
The music business as a whole is realizing it must come to the table. Peer-to-peer is here to stay. The iTunes, Rhapsody, and all these guys together amount to less than 10% of what’s going on out there. for the other 90%, people have been paid zero. The only way to compete is to give fans what they want…not to force $0.99 per download. Imagine your college student paying $5 per month to access music from wherever they want, in whatever format they want, using the school’s network. The music industry is enjoying the greatest profit margin in the entertainment industry. The movie studios haven’t made the same mistakes that the Music industry has been replaying since they banned Napster. The movie industry is playing content for free (See Hulu and the major networks).
Ring: How do you market to fans who don’t want to be marketed to anymore? We have to get the music to where the fans are and marketing that is very expensive. We need to figure out how to monetize. People will pay a lot of money to join what they consider is exclusive.
“We need to explore certain type of network node licensing so we can monetize the activity that’s going on in a way that makes sense.”
The investment required to get the artist to success requires significant investment…who will be paying for it?
Griffin agrees on covering the cost of marketing but argues that we should focus on music’s ability to draw a crowd. Every ISP now offers music downloads in their plans. They figured that music and media draws crowds to them. We should license to them—not to the user.
Von Lohmann: Network operators will recognize that there’s value to them. Imagine how much better it’ll be if they can advertise “all the music you want for free…as long as you purchase this plan.” That’s a product they can use to sell a lot more residential broadband. There’s a win-win here. People will download music regardless. We should be able to do better than the 90% who make zero. it’s not realistic to ask a college student to pay $30,000 to fill their iPod. Right now the music industry is not getting paid for 90% of what’s on their network.
Leveraging the 10% That is Being Monetized
Rogers: People are not thieves. Small percentage of people who use WinApp offered to pay for it. It comes down to the question: are people generally good or generally bad? When given a choice between more value for a higher price, enthusiasts will choose the higher price. People are convenience sensitive, not price sensitive.