Kusek keynote

Digital Music Revolution • Music is the canary in the coal mine for other media. • Digital music has created mayhem for the record companies. • However, digital music is also driving a renaissance in the music industry.

Challenges for the Music Industry • CD Sales have fallen off a cliff • Old promotion strategies don’t work anymore • “Hit” records don’t exist • The Internet is a giant copying machine • Publishers and Labels are not cooperating

A Digital Train has left the station • MP3 is the latest format and it has replaced the CD

Media Landscape is changing Down Up Television Videogames/YouTube Radio Internet Magazines/News Blogs Telephone Mobile Postal Service Email/IM/Facebook Desktops Handhelds

Possibilities for the Music Industry • Take advantage of the digital revolution • Find new ways to connect with fans • Develop interactive relationships • Generate more value all around • New business thinking required

The Top 10 Truths

The Top 10 Truths That will guide the future of music.

#1 Music matters more than ever: the music market is alive and vibrant.

Top 10 #1 Truths Music matters more than ever: the music market is alive and vibrant.

Driven by New Formats • Vinyl LP • Cassette • CD • MP3 • Where are the new formats?

Evolve or Die • Free music is here to stay • Things will never be the same again • More music is being consumed today than ever before • Find a way to proﬁt from this explosion in customer interest • Focus on customer experience

#2 The record business is not the same as the music business.

Top 10 #2 Truths The record business is not the same as the music business.

#3 The artists are the brands, and entertainment is the main attraction.

Top 10 #3 Truths The artists are the brands, and entertainment is the main attraction.

#4 Artists and their managers will shape the future.

Top 10 #4 Truths Artists and their managers will shape the future.

Build Artist Brands • Managers are sitting in the driver’s seat • Maximize income streams • Sponsorships • Ad deals and marketing co-ops • Syndication fees • Equity in partnerships

#5 Publishing income is a crucial income stream for the future.

Top 10 #5 Truths Publishing income is a crucial income stream for the future.

Publishing has a bright future • Everything is a license • Challenge the iTunes model • Game, movies, TV, Ads, Media, everything • Recording and Publishing rights are converging

New License Required • Global Digital License • Voluntary Compulsory license • Label - artist - publisher - writer • Support and enable formats for the future • Requires the cooperation of labels and publishers • Need to do it before US Congress steps in

#6 Radio is no longer the primary way that people discover new music.

Top 10 #6 Truths Radio is no longer the primary way that people discover new music.

New Drivers for Music • Hyper word of mouth • Pandora, Blogs, Facebook • File Sharing • Video Games • Cell Phones • Recommendations

Exposure leads to Revenue, not the other way around. Exposure Discovery Community Revenue

21st Century Promotion • Think Direct to Fan Marketing • Webcast, Podcast, Blog • Put samples everywhere • License, bundle, rent - get creative • Up-sell and cross-sell • Create communities of customers

#7 Digital niche marketing outperforms mass marketing.

Top 10 #7 Truths Digital niche marketing outperforms mass marketing.

Digital Music Strategy • Target and build a dialog with your audience • Free music leads to more fans and friends • Interactivity builds relationships that lead to more value and more revenue

Community Strategy • Plug into existing social networks to drive sales • Establish an opt-in community • Use email/sms/social media • new releases • music, ticket, merchandise offers • newsletters, fan clubs

#8 Customers demand—and get— increasing convenience and value.

Top 10 #8 Truths Customers demand—and get— increasing convenience and value.

Give customers what they want • People want a relationship with an artist • Provide easy access to everything • Find ways to add value and gain attention and trust • Charge reasonable prices • Develop satisfying experiences for customers to enjoy

#9 The current pricing model goes out the window.

Top 10 #9 Truths The current pricing model goes out the window.

This model makes no sense for artists and writers

iTunes is a Scam for Labels, Artists and Writers • Since 2000 CD revenues have declined by over 50%, down at least $20 billion • iPod/iPhone Sales total $30 billion • iTunes digital music revenues are a joke - apple gets 35% - label gets 65% - artists and writers split about 8%

# 10 Music is part of our culture, and new models will embrace a more dynamic view of music.

Top 10 # 10 Truths Music is part of our culture, and new models will embrace a more dynamic view of music.

Access vs. Ownership • We are moving from a world of ownership to a world of access • Fortunes will be made in reinventing the way that fans ﬁnd and experience music • Obscurity is the enemy of all artists

New kind of music company • It is not a record label, it is a music company. artists management publishing touring merchandising recording books/dvds/games licensing appearances movies/television websites/fan clubs commercials fashion/food teaching syndication other

21st Century Music Services Company Publishing Recording Touring Artist/Writer Merchandising Marketing Management Production Customer Artists & Management Operations Repertoire Business Finance Technology Affairs © 2006 David Kusek

Business Strategy • Spread the risk across multiple revenue streams • Increase the potential ROI for each artist • Align interests of artist, manager, label, and publisher

A new kind of deal • Artists own their masters • Managers drive “musician business” • The artist and company are partners • Revenue splits across all income streams

Advantages to Artists • Own your masters • One stop shop for all services • Integrated marketing approach • More revenue opportunities • More room for experimentation • More control of your career

Thinking creatively to grow the market will lead to Solutions • Today only 10-20% of people in the US purchase recorded music. • 70% of people don’t go to concerts. • If the artistic and business interests can be aligned to beneﬁt from the digital revolution: • The music market could be 4 - 5 times larger.

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Kusek keynote

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