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

Gerd Leonhard, Music Entrepreneur & ‘Music & Media Futurist’

www.mediafuturist.com www.gerdpresents.com CEO, www.sonific.com

The “End of Control” and the Future of

[email protected]

2006 -some rights reserved - Gerd Leonhard Music Futurist [email protected]

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http://www.mediafuturist.com


http://www.gerdpresents.com

http://www.gerdpresents.com

http://www.sonific.com

http://www.sonific.com

mailto:[email protected]




Gerd Leonhard Music & Media Futurist www.mediafuturist.com

About me www.mediafuturist.com • 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 gerdleonhard.net

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http://www.musiclikewater.com

http://www.musiclikewater.com


Our future: selling Music to Digital Natives

0102030405060708090

NowSoon

Tomorrow

Analogues Digital ImmigrantsDigital Natives

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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 "serious" work

Selling music as a SERVICE is the consequence

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Gerd Leonhard, Music & Media Futurist www.mediafuturist.com

Mass Media > Niche Media > Lifestyle Media

Source: IBM report

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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

Mass Media to Personal / Lifestyle Media (inspired by Paul Saffo)

Consume Participate / Usate

Music = a Product you buy Music = a Service you subscribe to

No significant

Substitution!

THEY pick YOU pick

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2006 © Gerd Leonhard Music & Media Futurist www.mediafuturist.com

2 crucial paradigm shifts

CopyRIGHT

USAGE RIGHT

Controlled

Monitored

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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

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Gerd Leonhard, Music & Media Futurist

And it’s a new game for music companies

Produce, select, deliver

Finding and being Found

Unknown consumers

Known participants

Seller controls Buyer controls

License Syndicate

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Mega-hits may no longer be the main objective

Seth Godin: “If your marketing strategy requires you to hit #1 in order to succeed, you probably need a new marketing strategy.”

Point of more choices!

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More choice = less hits

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The End of Control

My next book... and a good headline

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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)

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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

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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

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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’

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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

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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)

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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

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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?

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The REALITY of the digital natives

Listening to music = getting music Performance = reproduction Access is outmoding ownershipSo, why are we still trying to sell

MORE COPIES if we could also sell ACCESS? Why do we need the traditional copyright mechanism?

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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 [email protected]

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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!

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The MUSIC FEE is only the beginning: the real $$$ will come in from:

Music Fees(Pool)

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And:

Cross-Selling

Music Fees(Pool)

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And… (!!!!)

Sharing Advertising Revenues

Music Fees(Pool)

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2006 © Gerd Leonhard Music & Media Futurist www.mediafuturist.com

The new ecosystem: make $$$$$ with music, beyond the COPY of a track

Flat FeeMusic

Services

Up- & Cross

Selling

Advertising (2.0)

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Gerd Leonhard, Music & Media Futurist

Changes reviewedContent 1.0> Content 2.0

Distribution Attention

Shelf Space Mind-share

Mass Marketing Monolog Niche Marketing Dialog

Control Influence & Reputation

Control Attention & Trust

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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

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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

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

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