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Gerd Leonhard Presentation in Helsinki: The Future Of Music End Of Control Sept 8 2006


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Gerd Leonhard's 2006 Presentation on the Future of the Music Industry

Gerd Leonhard Presentation in Helsinki: The Future Of Music End Of Control Sept 8 2006

  1. 1. Gerd Leonhard, Music Entrepreneur & ‘Music & Media Futurist’ CEO, The “End of Control” and the Future of Music 2006 -some rights reserved - Gerd Leonhard Music Futurist 1
  2. 2. About me • Music & Media-Futurist & Author, Speaker and Presenter, ThinkTank Leader, Strategic Advisor • 20 years in music & technology, EU and U.S., Entrepreneur, Musician & Producer • Berklee College of Music graduate, Quincy Jones Award Winner • Digital Music Entrepreneur, latest venture: SONIFIC - Soundtracks for your Digital Life, previously: LicenseMusic • Speaking activities around the globe: “The Future of Music & Media”, with a focus on business design for media companies, and helping industry organizations plan for the future • Co-Author of the book “The future of music”, next book “The end of Control” coming in late 2006 • Blog at Gerd Leonhard Music & Media Futurist 2
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  4. 4. Our future: selling Music to Digital Natives 90 80 70 60 50 40 30 20 Now 10 Soon 0 Tomorrow Analogues Digital Immigrants Digital Natives Gerd Leonhard Music & Media Futurist 4
  5. 5. About those Digital Natives (and why it matters) Marc Prensky: • They are surrounded by digital media to such an extent that their very brain structures may be different from those of previous generations • Digital Natives are used to receiving information really fast • They like to parallel process and multi-task • They prefer their graphics before their text rather than the opposite • They prefer random access (like hypertext). • They function best when networked. • They prefer games to quot;seriousquot; work Selling music as a SERVICE is the consequence Gerd Leonhard Music & Media Futurist 5
  6. 6. Mass Media > Niche Media > Lifestyle Media Source: IBM report Gerd Leonhard, Music & Media Futurist 6
  7. 7. Mass Media to Personal / Lifestyle Media (inspired by Paul Saffo) No significant Substitution! Music = a Product you buy Music = a Service you subscribe to TV as dominant force Web as dominant force Anglo-American ‘hits’ dominate Diverse / niche content works thrives Radio: on schedule Anytime One-way ‘broadcasts’ Receiver also SENDS Consume Participate / Usate THEY pick YOU pick Gerd Leonhard Music & Media Futurist 7
  8. 8. 2 crucial paradigm shifts USAGE RIGHT Monitored CopyRIGHT Controlled 2006 © Gerd Leonhard Music & Media Futurist 8
  9. 9. Copyright becomes usage right • Just asserting control, and restricting use, will not generate revenues • Allowing and encouraging ubiquitous use, and tracking it, will (watermarking and fingerprinting versus DRM) • We must license digital music like we license radio - but with a better share of overall revenues, and with build-in up-sells Gerd Leonhard, Music & Media Futurist 9
  10. 10. And it’s a new game for music companies Produce, select, Finding and being deliver Found Unknown Known consumers participants Seller controls Buyer controls License Syndicate Gerd Leonhard, Music & Media Futurist 10
  11. 11. Mega-hits may no longer be the main objective Point of more choices! Seth Godin: “If your marketing strategy requires you to hit #1 in order to succeed, you probably need a new marketing strategy.” Gerd Leonhard Music & Media Futurist 11
  12. 12. More choice = less hits 12 Gerd Leonhard Music & Media Futurist 12
  13. 13. My next book... and a good headline The End of Control 13 13
  14. 14. So...what does that mean? ★ In a digital content world: • Un-Control means success (see myspace) • Engaging Users and enabling Usators means success (see YouTube) • Being trusted means success (see ebay) • Getting attention means success (see Apple) • Just enforcing control means certain demise (see SwissAir) Gerd Leonhard, Music & Media Futurist 14
  15. 15. To be more practical: ★ For us, this means • We must offer / sell unprotected and universally compatible music content, in order to really engage most of the users. On other words: there is no Safety Net • We must stop using legislations based on outmoded copyright laws to shore up the beloved distribution and valuation models • We must pursue a ubiquity model not try to maintain artificial scarcity • We should let the users do the rating, tagging, and viral marketing • We must respect and expand user’s rights, and re-earn their trust • We must carefully consider where to put the toll-booth, and be much smarter with handling pricing, bundling and re-bundling • We may sometimes need to forego immediate revenues for large scale exposure Gerd Leonhard, Music & Media Futurist 15
  16. 16. So where is music commerce going? • Open, flexible, interoperable, intuitive, ‘heavy lifting in the background’ - technologies • Very competitively priced subscriptions that can accommodate just about every user, everywhere, and that may be advertising supported • Flat fee deals that will just be the tip of the iceberg of consumption (and payment!) • Ad supported and P2P models, bundles and ‘content fee included’ products will create ‘feels like free’ environments Gerd Leonhard, Music & Media Futurist 16
  17. 17. Selling Protected Music Won’t Work • Users are staying away from protected music - the value proposition is lousy • Devices and services don’t connect • CDs are still unprotected! • DRM is an attempt at using technical solution to solve a business problem • One could argue that DRM is a major DRIVER of online ‘piracy’ Gerd Leonhard, Music & Media Futurist 17
  18. 18. And for the artist - label relationship: ★ The future is Change • Artists will go a long way by DIYing before even starting to look at label or publisher deals • Labels will offer completely new services that will create new reasons to consider them • Record labels become music companies • Agents become labels • Labels become publishers Gerd Leonhard, Music & Media Futurist 18
  19. 19. Artists & Labels, and the Record Company of the Future (RcoF) • Rights ‘leasing’ will become the standard • Composition and master rights will converge • Labels will prove their value by offering access to a vast NETWORK (rather than Distribution) • Labels that are brands, in itself, will thrive • A few online players will start RcoFs • Model is based on revenue splits (25-50% for RcoF) Gerd Leonhard, Music & Media Futurist 19
  20. 20. Today: A perfectly broken system  The current market is not working  Apple sells 45Million+ iPods - using music as a loss-leader  Windows DRM-based services have serious problems if used to-go, for now, and good services are destined for failure because of out-moded policy decisions  MP3 services work great but are effectively black-listed by the majors  80% of the market is STILL trying to control distribution  The USER (aka consumer) is STILL severely under-served  Digital music revenues could be 10x of what they are right now 20
  21. 21. The fact is, we don’t control distribution any more - like it or not. And why would we want to when the USERs can do our marketing for us? 21
  22. 22. The REALITY of the digital natives  Listening to music = getting music  Performance = reproduction  Access is outmoding ownership So, why are we still trying to sell MORE COPIES if we could also sell ACCESS? Why do we need the traditional copyright mechanism? 22
  23. 23. The Flat Fee for Music  Everybody uses everybody pays: one flat fee gets every user a LOT of content on any and all networks  And: it will ‘feel like free’ (i.e. payments are bundled)  Labels: you can’t refuse to be distributed on digital networks - just like you can’t refuse to be on radio  The flat fee is only the beginning for music commerce  Selling only a la carte / by the ‘unit’ does not make sense for CONTENT in the digital ecosystem 2006 -some rights reserved - Gerd Leonhard Music Futurist 23
  24. 24. The basics  A ‘Music Fee’ of approx 3-4 Euro /month (EU), sign-up via ‘music registry’  But: Cellcos / Telcos, ISPs, Media Companies etc would soon want to bundle the fee into their offerings  Music Fee ID and password would give the users access to any and all digital music services (TV, Wireless / Mobile, Internet…) - and builds a hugely valuable database! 24
  25. 25. The MUSIC FEE is only the beginning: the real $$$ will come in from: Music Fees (Pool) 25
  26. 26. And: Cross-Selling Music Fees (Pool) 26
  27. 27. And… (!!!!) Sharing Advertising Revenues Music Fees (Pool) 27
  28. 28. The new ecosystem: make $$$$$ with music, beyond the COPY of a track Advertising (2.0) Up- & Cross Flat Fee Selling Music Services 2006 © Gerd Leonhard Music & Media Futurist 28
  29. 29. Changes reviewed Content 1.0> Content 2.0 Distribution Attention Shelf Space Mind-share Niche Marketing Mass Marketing Monolog Dialog Influence & Control Reputation Control Attention & Trust Gerd Leonhard, Music & Media Futurist 29
  30. 30. Benefits for the creators and rights holders  Levels playing field of distribution  Monetizes what people already do  Exploits ‘long tail’ effect, and gets the user to EXPLORE  Exposure translates DIRECTLY to revenues  Provides equal market access 30
  31. 31. Why all of this is good for musicians • Direct market access, and a leveled playing field • The tools of production, promotion, communication, distribution, and marketing have become increasingly available to anyone • A lot more can be accomplished ‘DIY’ which increases a potential deal value • Music is everywhere, literally • Attention can translate into immediate revenues Gerd Leonhard, Music & Media Futurist 31