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January-February 2010


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Reinventing the Music Business

Will artists and fans even need record companies in the future?

     The music industry continues to search for a sustainable long-term model for the digital age. Recently, industry leaders, musicians, and policy makers gathered to search for innovative solutions at the Future of Music Coalition Policy Summit in Washington, D.C.

     “It’s chaos, the music industry right now,” said Greg Kot, music critic for the Chicago Tribune, during a panel discussion. “But chaos is not necessarily a bad thing.”

     Nowadays, musicians have the option of signing to a label (large or small), relying on outside investment, or finding the time, energy, and money to manage everything themselves—the do-it-yourself approach. Convincing fans to microfinance their efforts is a fourth possibility, and a bit riskier. Each choice comes with its own set of advantages and disadvantages. Speaking at the conference, Emily White of Whitesmith Entertainment emphasized that what’s best for an artist depends on a number of factors, including where artists are in terms of their careers and where they ultimately want to be.

     In other words, just because independent musicians now have the power to tap into the global marketplace from their laptops doesn’t mean that the “middle man” is obsolete. On the contrary, White pointed out that having to constantly promote and market one’s own music takes a great deal of effort and leaves less time to focus on actually making music. It is probably a task better left to others.

     Nevertheless, even with an army of publicists behind them, bands need to take advantage of social networking sites to connect with fans, spread the word about their music, and gain support. As a number of speakers and panelists pointed out, social networking is a huge component of a successful promotional strategy that also includes giving away MP3s for free.

     Ariel Hyatt of Cyber PR insisted that musicians should view MP3s first and foremost as a method of self-promotion that can lead to other financial opportunities. Music sales form only a small fraction (possibly even the smallest fraction) of a band's revenue. There is greater financial opportunity in licensing recordings (for use in movies, television shows, games like Rock Band, and commercials, for example).

     Legendary band manager and artist advocate Peter Jenner predicted that music sales will never recover now that anyone can effortlessly copy an MP3 file, arguing that music producers need to move beyond outdated industrial models of mass production. The Internet is a communications medium, and actually functions more like a radio station than a large store, he said. In other words, music is a service rather than a product.

     The popular European Web site Spotify is one of a small handful of recent start-ups intent on offering music as a service under a blanket licensing system. As co-founder Daniel Ek explained, Spotify offers subscribers the ability to stream millions of recordings for a monthly fee. There is also a more limited, ad-supported free version.

     Such online music services, which enable users to access virtually any music at any time without having to download it, could render peer-to-peer file sharing—the industry’s white whale—a thing of the past. Spotify users can share and collaborate on playlists, there are applications for Facebook and other social media, and the basic interface is simple to use. One music critic has said that it’s like having the entire iTunes library on your laptop or phone. So far, Spotify has been enthusiastically received in France, Spain, and the U.K.

     There are no gatekeepers, so independent artists’ creative output is just as easily accessed as that of those on major labels. Ek pointed out that independent music makes up approximately 25% of what users are listening to. A more even playing field for musicians is one of the great advantages of digital media, but it faces a potentially large challenge.

Net Neutrality

     Internet service providers, in the interest of increasing profits, could put bumps in that level playing field, warned Michael Bracy, co-founder and policy director of the Future of Music Coalition and co-owner of Austin, Texas-based independent record label Misra. Bracy noted that ISPs can make exclusive arrangements that direct consumers to certain large, corporate marketplace sites and slow down or even block access to competitors’ sites. Some ISPs might offer different tiers of service, where consumers would pay a premium in return for increased options. 

     The result might be a few large corporations controlling the digital music sphere in much the same way that they have American commercial radio, where independent and local artists face insurmountable obstacles in order to get airplay. Summit speaker Senator Al Franken pointed out that, without regulation, ISPs would have the power to transform a free, open, democratic system into a corporate pay-to-play system where those that can’t compete financially simply aren’t allowed in. Currently, “a garage band can stream songs just as easily as a multiplatinum superband,” he said, “but recently, business executives from top ISPs have declared their interest in offering prioritized Internet service to companies that can pay for it.”

     This wouldn’t just affect the music industry. Determining what content moves at what speed across servers threatens innovation across the board, Franken warned. And restricting innovation would adversely affect the economy as a whole. In the United States, the Federal Communications Commission is currently working on regulations to keep the Internet neutral.

—Aaron M. Cohen

For further information: The Future of Music Coalition, futureofmusic.org.


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