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Kusek Music Business 2011

by Dave Kusek on Jan 24, 2011

14,679 views

This is the presentation I have been giving at Midem and Namm in early 2011 on the state of the music industry and where things are headed.

This is the presentation I have been giving at Midem and Namm in early 2011 on the state of the music industry and where things are headed.

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icolisme Kereeen!! means cool!! 5 months ago Reply
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Gerd Leonhard , Media Futurist, Author, Keynote Speaker, Strategist, Think-Tank Leader, Advisor at www.mediafuturist.com cool... Dave -- can I get a download? 9 months ago Reply
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Vorapoj Nimvijit , EVP at RS PLC. Useful!! 1 year ago Reply
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Hello, my name is ..... and I am the CEO of ... and the title of this talk is Music Business 101, the future of global music.\n\nI am here to introduce the music business to you and to brainstorm on the future of the industry. We will have time for questions and comments at the end of this presentation.\n\nWe are going to look at the music business from the perspective of the creative people working in it, the artists, songwriters and producers and how it works for them. After all that is where the music comes from.\n\nAnd I am going to challenge you to think about innovation in the music industry, because we really need some. A lot of innovation.\n
The music industry is a complex and interrelated set of businesses and relationships.\n\nFor the last 70 years or so, Recording was the key, the financial engine. It was the primary way of financing projects and the main revenue generator. It provided much of the risk capital and reaped the largest returns and drove most everything else.\n\nBut it is possible the the idea of capturing a recording and selling gazillions of copies of it is was just a stepping stone in the evolution of the music business. It may in fact be an anomally in business, a temporary condition of the times. Selling records is over.\n\nToday it seems, it is more important to create experiences that engage directly with the fans, to create relationships and to develop them. To use social media and the internet to market and communicate. It is less about control and domination, and more about access, engagement and interaction.\n
Today the Recording part of the music business is suffering. CD sales are down by more than 50% from their peak.\nThe industry has historically been driven by new products and new formats. The MP3 file was a new format that the industry for the most part failed to capitalize on.\n\nLive Performance is also challenged and a hard way to make money. \n\nThe business is under a lot of pressure, and it is almost pointless to describe the industry in terms of its past. The record labels only had a 5% success rate anyway, with 95% of artists failing to recoup their royalty advances.\n\nWhere do we go from here is the real question. We are building the airplane while we’re flying it.\n
The Good News...\n\n \n
The Bad News... \n\nThe MP3 format was not licensed by the major labels until relatively recently, and became a self-inflicted wound that has almost killed the business.\n\nPeople were essentially encouraged to get music for free, and now only about 1/3 of music buyers have ever paid for digital music online\n\nIt is time for a change. Records and CDs as a way to make money is not going to work moving forward.\n
I predict that we will never see a band as big as the Rolling Stones ever again. The circumstances that let them emerge and gain in popularity just don’t exist any longer.\n\nCertainly we will have major stars moving forward, but nothing like that ever again.\n\nIf you don’t believe me, try and name a major band that has emerged from the past few years that has any staying power - or can fill a stadium.\nThey are few and far between. \n\nWe have gone from tens of outlets reaching millions of people, to millions of outlets reaching tens of people.\n
What is the future going to be? I DON’T KNOW. I really don’t. \n\nBut what I do know is that we better look at the things that are working today and how they might change or be useful in the future. \n\nHow do artists make money? Well...\n\nThis is my friend Corey Smith - schoolteacher, turned to music as a vocation, build a career on touring and giving away music and cheap tickets to develop a fan base.\nAll without any major label involvement. There are many emerging examples of artists like Corey and bands like Metric putting together careers by combining revenue streams with free music and fan engagement.\n
Labels, publishers, promoters. This was traditionally who controlled the revenue.\n\nToday there are many more options and it depends on how you goto market and with whom. You can license your recordings and songs, and you can also self publish them. Today Direct-to-Fan strategies and tools are emerging that lets the artist and songwriter keep more of the money for themselves.\n\nBut this is not easy to do alone, and artists and writers need a team and an infrastructure around them in order to generate revenue. \n
Lets start with copyrights. Copyright law grants the copyright holder exclusive rights to do or to authorize the following stuff...\n\nCopyright protection lasts for the life of the author, plus 70 years\n\nHowever we have seen rampant file sharing and copying of music, mashups and remixes, sampling and online collaborations and the way that they are challenging the assumptions behind copyright to the limit. It is questionable whether our current definitions of copyright and how they are controlled and administered will hold up in the digital world. We will see.\n\n\n
The amount of money involved in touring has a lot to do with ticket sales, and the total number of people acts can attract to a venue. \n\nThe money generated by ticket sales is divided between the promoter and venue, the booking agent, the artists and their manager. \n\nThe more popular you are, and the more fans you can reach, the more money everybody can make playing live.\n\nBut this is not an easy business, or a great way to live. In fact the touring business in the US was down 15% last year.\n
With the decline of the traditional record label promotion machinery, it has become very important for artists today to create direct relationships with their fans -\n\nYou do this by building e-mail lists and social media touchpoints, to help promote the shows, recordings, merchandise, and appearances. \n\nThis means facebook, twitter, email blasts, websites, search marketing, cross promotion, sponsorships and lots of energy.\n\n\n\n
The innovation that really defined the modern ear of the music business was amplification and recording technology. This changed everything.\n\nBut lets look at touring. Believe it or not, there has not been much innovation in the touring space, and this area is ripe for innovation - \n\nin ticketing, merchandising, travel services and new digital products.\n\nTours are basically still the same as they were 50 years ago, with lots of costs and many hands to feed. It is a tough way to make a living. If we could find a way to make live performances more profitable and reach more people, we can extend that revenue stream by applying technology.\n
We have yet to see a really compelling digital alternative to a live event, but many people are trying new things.\n\nThis past December, the band Phish found a way to celebrate new years eve with all of their fans. They had 8 people record their a 3 MSG shows in a multi-camera shoot that they streamed live worldwide during the show. People pay $39 to see the streams remotely and got to feel like the were at the shows. More is going to come from connecting remotely with the fans. \n\nThe bandwidth required, the display resolution and the interactivity is there for something new to emerge. \n\nPeople are more and more willing to pay for online content, as a recent PEW study showed. I predict that this will become a very hot area in the future.\n\n
Think of how email, instant messaging and social media has transformed the way people communicate with one another. There have been waves of innovation that have revolutionized modern communications and created some enormous companies as a result.\n\nWhere is the innovation in live performance? How can we apply the transformative potential of technology to the live space?\n
More music being produced and distributed than ever before. \n\nMash ups, remixes and online collaboration are reinventing the definition of “music” and what we listen to and participate in.\n\nAt the Berkleemusic online school, the most popular classes and programs are all related to music production.\n
All kinds of deals can be made - from traditional label deals, production and distribution deals, to do it yourself.\n\nLabels often get a bad rap when it comes to record deals, but they really do have a lot to offer to an artist. Labels can provide infrastructure, capital, marketing and distribution. Even though distribution has become largely commoditized, artists still need financing and marketing.\nBut unfortunately, lucrative label deals are increasingly hard to come by, and ultimately may not be the best option for todays artists.\n\nNew kinds of self publishing or production and distribution deals, or a combination will make the most sense for most artists. \n\n
The distribution of music has been radically transformed by technology.\n\nTraditional distributors like - WEA, Sony, Universal, Red, ADA, Caroline and others are struggling. Most physical music stores have closed.\n\nDigital distribution via - Tunecore, iTunes, Amazon, and CD Baby is growing, but has not come close to replacing the lost revenue from CDS. \n\nBut lots more innovation is on the way.\n
There is a whole new world of possibilities in mobile music applications and games and new innovations that you can hold in your hand. Ubiquity comes when everyone is doing it, when everyone enjoys, when everyone participates.\n
In looking at the music industry it is important to understand who owns the music, and the copyrights and the revenue streams and how does it all work. \n\nWe have a very complex system of laws and collection societies based on an old way of looking at “copies” that needs to be reexamined in the marketplace of tomorrow. \n
Music publishers work with songwriters to take their songs to market. Traditional performing rights societies like BMI, ASCAP and PRS, and new agencies such as Sound Exchange collect the money.\n\nThe publisher represents an artist and their work, and administers the copyright so that the writer can focus on writing songs.\n\nPublishers sometimes finance a writer’s career with advances, but this is getting harder to do with the decline of mechanical royalty revenue.\n\nPublishers connect songs with artists to record them, issue various licenses, and collect and distribute income that a given license might generate.\n\nMusic publishers usually split royalties 50/50 with the writer or sometimes take as little as 25%. There has been some innovation in publishing and licensing but this is also an area where technology is just starting to play an impact and there is more opportunity.\n
Merchandise can be a cash cow for artists. We’re talking t-shirts, clothing, vinyl, stickers, posters, key chains, DVDs, books, hand crafted stuff and a wild variety of other things that fans buy to connect with their favorite artists. \n\nMerchandise is sold at live shows, online, and in physical retail shops. This can be very lucrative for some.\n\nIn fact, musician entrepreneurs like the Dave Matthews Band, Russell Simmons, Sean Combs, Jimmy Buffet and Jay-Z, have created merchandising empires around their music, and have taken music merchandising to an entirely new level.\n\nA company called Merchluv has taken a unique approach by letting fans create merchandise for artists. Fanmade merchandise. They are taking the idea of crowdsourcing and applying it to merchandise creation. Crowdsourcing is a way of leveraging the wisdom and talent of your fans. This is real innovation in the merchandise space. merchluv.com\n
Most Merchandise is made available under a licensing arrangement between the artist and the merchandiser.\n\nBut there are other ways to exploit “Name and Likeness” that transcend the t-shirt into consumer electronics, phones and online services.\n\nSponsors are the new Patrons in music. Corporate sponsorship in music exceeded $1 billion in 2010, compared with the $5 billion that the record companies spent developing and promoting artists. \n
Lots of experiments are underway that leverage free music to make money. Kanye West gave away a track a month to promote his new release. The Flaming Lips are doing the same thing as are many other bands presenting their music almost in real-time.\n\nUsing music to market products has worked for older artists exploiting their catalogs, and these day also for new artists breaking into the mainstream. Apple did a lot of this with its iPod commercials.\n\nAt Berkleemusic, we are teaching people how to survive in the future of the industry.\n\nFor example, here is Jack Conte and Nataly Dawn of Pomplamoose. They gained massive exposure by creating a new “video song” format and posting covers of popular songs on YouTube fro Lady Gaga, Beyonce, Michael Jackson and EWF. \n\nThe VideoSong format these two produce is very inviting and addictive, providing a glimpse into the process of recording and creating music. \nThey have received tens of millions of views and attracted the attention of major ad agencies.\n
Over the holiday season in the States, we were beseiged by commercials for Hyundai fueled by Pomplamoose’s covers of Christmas songs.\n\nThese kids now have an active career that was largely spawned by being innovative with music and video.\n\nAnd I heard that Hyundai sales were up 29% last quarter.\n\nThey also launched an effort to donate books to their local school district in exchange for a copy of their christmas album. Over $60K worth of books had been donated in mid December, and they received a lot of publicity as a result. \n\nThese two are extremely creative, and that’s what you need to be these days to succeed.\n
Many people have said that the power in the music industry has shifted to the fans, but I really think the truth is that it is shifting to both the artists and the fans.\n\nNew ways of thinking are driving a surge in new businesses being formed to service the artist who chooses to control their own careers and connect directly with their audiences.\n\nThese new businesses are critical, because artists cannot be successful without a team of players around them. But this does not necesssarilly mean a record label deal, but a new way of thinking.\n\nThe Band OK GO has build a huge following thru the use of creative videos like this treadmill video, combine with sponsorships from the likes of Range Rover, Samsung and State Farm. They are in control of their career. \n
This is not a 360 deal. This is a Direct to Fan structure where the artist is feeding multiple revenue streams by engaging directly with fans, and with different service providers.\n\nThis is a custom business entity created to align with the needs and talents of the artist, and exploit direct marketing and social engagement to drive revenue.\n\nThis could be a new entity, a new service provider - but most likely this is a collection of entities that come together or are subcontracted to support an artistic vision.\n\nThere are huge opportunities for companies to provide artist services and there is already a lot of innovation in this area as we will see.\n
A few years ago, in 2005, Gerd Leonhard and I published a book on the Future of Music. In it, there were a set of truths that we used as a framework to describe the changes happening in the music business.\n\nMusic matters more than ever....\n\n
A few years ago, in 2005, Gerd Leonhard and I published a book on the Future of Music. In it, there were a set of truths that we used as a framework to describe the changes happening in the music business.\n\nMusic matters more than ever....\n\n
A few years ago, in 2005, Gerd Leonhard and I published a book on the Future of Music. In it, there were a set of truths that we used as a framework to describe the changes happening in the music business.\n\nMusic matters more than ever....\n\n
A few years ago, in 2005, Gerd Leonhard and I published a book on the Future of Music. In it, there were a set of truths that we used as a framework to describe the changes happening in the music business.\n\nMusic matters more than ever....\n\n
A few years ago, in 2005, Gerd Leonhard and I published a book on the Future of Music. In it, there were a set of truths that we used as a framework to describe the changes happening in the music business.\n\nMusic matters more than ever....\n\n
A few years ago, in 2005, Gerd Leonhard and I published a book on the Future of Music. In it, there were a set of truths that we used as a framework to describe the changes happening in the music business.\n\nMusic matters more than ever....\n\n
A few years ago, in 2005, Gerd Leonhard and I published a book on the Future of Music. In it, there were a set of truths that we used as a framework to describe the changes happening in the music business.\n\nMusic matters more than ever....\n\n
A few years ago, in 2005, Gerd Leonhard and I published a book on the Future of Music. In it, there were a set of truths that we used as a framework to describe the changes happening in the music business.\n\nMusic matters more than ever....\n\n
A few years ago, in 2005, Gerd Leonhard and I published a book on the Future of Music. In it, there were a set of truths that we used as a framework to describe the changes happening in the music business.\n\nMusic matters more than ever....\n\n
A few years ago, in 2005, Gerd Leonhard and I published a book on the Future of Music. In it, there were a set of truths that we used as a framework to describe the changes happening in the music business.\n\nMusic matters more than ever....\n\n
Here are some of the areas for innovation and opportunity in the music business today.\n\nMany of you in this room are running businesses that are helping to redefine what a “music business” is:\n\nDirect to Fan - topspin Curation - echonest\nAnalysis - nextbigsound Merchandise - merchluv\nArtist Services - rootmusic Education - berkleemusic\nMobile apps - mobile roadie\n
Today, the elephant in the room in the music industry, is financing. The three pillars of the record label model, namely financing, distribution and marketing are still required. Distribution today is easy. Marketing and Financing are still hard. Where is the money to develop and break new acts going to come from?\n\nPatronage is a time honored financing method that has undergone recent innovation and has helped to fuel a lot of new projects, new acts and helped artists attack the elephant on their own terms.\n\nEllis Paul is an American singer-songwriter and folk musician who has toured incessantly for many years. Last year, he raised over $100K direct from his fan base to fund and promote his latest release and tour. There are many, many examples of artists reaching out directly to their fans to finance their careers.\n
There are hundreds of new companies that have formed to take advantage of opportunities in the music business, and many more just starting.\n\nI tried to pick a set of businesses that I think are having and will have a significant impact on the music industry of the future. Some of these companies are huge like Apple and Google and Facebook.\n\nBut many are tiny and emerging and innovating and spotting market niches and the clever application of technology to solving problems for artists and fans and helping to define the new music industry.\n\nIf you are in this room and not on this list, I apologize. But clearly you can see an explosion of new businesses attacking the music market.\n
As I said earlier, the music industry has aways been driven by technology and new products.\n\nFrom piano roll, to radio, to vinyl, to cassette, to CD, to the iPod - new technology sets the pace.\n\nWhere are the new formats that will lead the way into the future? What new products will emerge and create entirely new revenue streams? How can we use technology to build emotional connections between artists and fans?\n\nThere is a lot of room for innovation in live, in mobile, in new digital products that truly exploit technology to entertain people.\n\nWhat are you working on?\n
The people at this conference, and in this room and many more who are hard at work back at the office are going to create the new music business.\n\nAnd it is going to look quite different than the music industry of the past.\n\nIn fact, we are hosting a conference in association with MIDEM to be held at Berklee in April called Rethink Music and we invite you to participate as we ...\n\nI hope that you have learned something about the music business in this session and what some of the key variables are.\n\nI thank you for your time, and please let me know if I can help you in any way in creating a brighter future for all of us.\n
We have time for questions and comments, so if you have one...\n
We have time for questions and comments, so if you have one...\n

25 Favorites

duncanhutchison 3 months ago
Cornelio Austin , CEO at Mind Over Music Media 4 months ago
Kevin Mitchell at Kevin Mitchell 5 months ago
icolisme 5 months ago
Ed Schaffer at Home Tags music 6 months ago
loveinfl 6 months ago
ronin101 Tags music business 8 months ago
Mars Mertens , Business Development at OurMusic.Biz 9 months ago
Jean-Baptiste Bigand , Student at Univ of Westminster 9 months ago
Gerd Leonhard , Media Futurist, Author, Keynote Speaker, Strategist, Think-Tank Leader, Advisor at www.mediafuturist.com 9 months ago

Kusek Music Business 2011 — Presentation Transcript

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