MIDEM(Net) Blog

Bruce Houghton: Music Investments are Down, but the Best Opportunities are yet to be Uncovered, says Bruce Warila

It's no secret that investment dollars flowing into music startups have dwindled. Some of the drought can be blamed on a poor economy, but the music sector has also seen more than its share of failures and false starts. It may not be easy to  make money investing in music, but Bruce Warila  believes that its far from impossible if you look in the right places.

Midem(Net) Blog readers may know Bruce Warila from his contributions to Music Think Tank, but he's also an entrepreneur, analyst and part time investor that has been working with various industry startups and artists over the last five years.

"Looking across the spectrum of previous music industry investments...(most) are held hostage to, and will remain a prisoner of, the large label system that  has dominated the music industry for decades."

Bruce put together a three page white paper originally published on Hypebot outlining the state of current music industry investing and why he thinks the real investment opportunities have yet to be uncovered. Click here to download the PDF.

Bruce Houghton: Remember, It's Only 4 AM

Surrounded by constant chatter about P2P, falling sales and the latest digital tools and trends that will save us, it is easy to forget that it's really only 4 or perhaps 5 o'clock in the morning on the first day of music's digital age. 

From our current vantage point, there's is still not enough light to see clearly. But at least we are no longer lost in the darkness.

If we sit quietly and stare into dawn's shadows, we can see outlines of the obstacles that we face and the opportunities that lie ahead. From Trent Reznor to Topspin and Jill Solbule to Spotify, the first rays of light are creeping over the top of the mountains that we must climb together. 

Turn your back to the darkness to face the dawn and things will become clearer soon. Remember, it's only 4 o'clock in the morning. There's a new day filled with promise and music ahead.

Bruce Houghton: Lately My Inspirations Come From Outside The Music Industry

From Bob Lefsetz to Glenn Peoples at Billboard and from Music Ally to Digital Music News and my own Hypebot, there are a plethora of music business commentators and analysts, each with our own perspective on the seismic changes effecting industry. There are also entrepreneurs like Ian Rogers, Terry McBride, Tom Silverman, Jeff Price and Jim Griffin who share their experience and ideas at conventions and in blog posts. There are even consultants like Ted Cohen and Ralph Simon who tie the pieces together for companies trying to make sense of it all.   Each has much to offer and as an eternal student of the music business, I listen to what they share carefully. 

But lately, I've found much of my inspiration coming from outside of the music industry. No offense to my colleagues, but we are all lucky that some of the brightest and boldest thinkers in fields from marketing to socio-economics and management to technology are, not surprisingly, also fans who often find inspiration in music and the music industry that informs and influences their work.

A partial list of my recent teachers from outside the music industry include:

Bruce Houghton: Why Susan Boyle Is A Hit And What The Music Industry Can Learn From Her

How did a plain and dowdy 40 year old virgin become an overnight sensation?  Many would say talent that launched Boyle and it is true that she has an extraordinary vocal chords.  But talent, as anyone in the music industry knows, only goes so far.

No, Susan Boyle is a hit because she is every man or woman who ever sang in the shower or in front of a mirror momentarily dreaming that they were on stage receiving the adulation of thousands as they belted out a heartfelt ballad. For just a few moments our collective extra pounds and bad hair didn't matter.  The crowd reacted; and we felt it in our bones.

Susan Boyle is a hit because of her story - or the more precisely her amazing lack of one. "Out of nowhere" is a briefer, more touching and far more broadly meaningful story than "out of Compton", "from Nigeria by way of Paris" or "formerly of" will ever be.  And the producers of the show alongside a cadre of amateur video editors eager for their own 15 minutes of fame knew just how to package this short and effective story for YouTube and the viral web.

What can the music industry learn from Susan Boyle?  Even in the internet age, people still deeply need to connect emotionally and music can sometimes fill that void. Susan Boyle is a hit because she is authentic. The music industry can't manufacture authenticity and should stop trying. But as great executives did when they signed Joplin, Hendrix and Dylan, the industry can learn to recognize, support and celebrate it.  - Bruce Houghton

Are We Really Moving From Control To Collaboration?

Many who attended this year's MidemNet and Midem spoke of glowingly of how the industry had finally moved beyond issues of control to a spirit of collaboration: "Look at how the recording and publishing industries were working with the mobile sector" and "See how the RIAA has (kind of ) stopped suing fans".

But where is the spirit of collaboration when three of the major record labels can't come to terms with the most popular destination for new music discovery, YouTube?  What kind of collaboration is happening when labels and publishers slow the progress of promising startups like Spotify and cripple others like Project Playlist, push popular sites like Muxtape offline, and sue small startups like Favtape for using openly available API's in creative ways - all before their positive or negative impact on music revenue can be tested?

In some instances the sites and services being sued may have gone too far or never had any intention of sharing revenue.  But others were in the midst of substantive talks with labels and publishers when they were served a lawsuit.

Unrealistic demands and lawsuits point to an industry still fighting for control not working towards collaboration. - Bruce Houghton: Hypebot/Skyline Music

Bruce Houghton: Never Forget...

Never
Forget
The
Music

It's been said many times before. But like a great lyric worth hearing over and over again, its'  essential to remember that at the core of everything that we do is music. 

Music tech  builds better technologies.  Big labels "make" hits and profits. Small labels struggle for survival. Publishers collect from as many places as possible and mobile firms sell devices. 

None of this happens without great music.

Our businesses can't profit from connecting people to music
if the music isn't worth connecting with.

We forgot the music, but the fans never did.

Is that why it feels like they're ignoring us?

Bruce Houghton: Random Thoughts On Midem & MidemNet 2009

In addition to expressing my gratitude to the Reed Midem team for making me feel welcome and hosting such a well run and informative event, here are a few random personal takeaways from Midemnet/Midem 2009.

• It really is all about the fan. I went into Midem thinking it was a good soundbite and left believing that it may be all we need to know to move the industry forward. Listen to the fan. Serve them. Offer them quality, convenience and choice. I don't know if they'll reward you if you do; but I guarantee that they'll punish you if you don't
• I heard comments that the music industry has finally moved from conflict to collaboration. There is truth in that, but collaboration implies a transaction and in Web 2.0 it can't always be about making money. Where we really need to be headed is communication - with each other (rights holders + startups, for example) and more importantly between artists and fans. 
• It's been said that we've gone from making analog dollars to digital dimes. While collecting all those dimes is important, so is connecting with fans on a level that can lead to collecting dollars again.  Mike Masnick of TechDirt's presentation on Trent Reznor's release strategy illustrated the point brilliantly. I've also written more about this on Hypebot ("From Analog Dollars To Digital Dimes").
• Some of us are in the entertainment business while others are in the music business. There is overlap and one is not "better" than the other.  But knowing where you and the person your talking to stands is important. Each has rather different goals and paths to reach them.
• I'm looking forward to Midem/MidemNet 2010.

Bruce Houghton: Fan Data Resources

At the end of our MidemNet panel on data last week, we promised to list some resources here.  With the help of our great panelists here are some resources to help you explore the wonderful (and important) world of artist and fan data.

Duncan Freeman of music industry analytics provider Band Metrics mentioned two books during our discussion:

• Moneyball: The Art of Winning an Unfair Game by Michael Lewis
• The Numerati by Stephen Baker

Neil Cartwright of online music marketer Million suggests keeping an eye on these data sources and trends:

• Crowd sourcing / collaboration ( i.e. Kluster) 
• New forms of ticketing (i.e. CrowdSurge, Eventbrite) 

We will all get to watch fellow panelist Cory Ondrejka's theories and experience come to life on EMI.com and across the label group's digital efforts as he settles in as the SVP, Digital Strategy of EMI Music.

Unfortunately, Eric Korman could not join us at Midemnet, but as the President of Ticketmaster he knows a lot about artist and fan data.  He wrote with these data suggestions:

Bruce Houghton: 3 Trends, 13 Companies & 1 Wild Card To Watch In 2009

2008 was a year of retrenchment and experimentation in the music industry. Many companies cut staff while at the same time more that 200 music startups were launched according to Music Ally.  As we look ahead to 2009, three trends - democratization, data and monetization - are dominating the conversations creating the new music industry. 

Here is a look a those trends and some companies that exemplify them that I will be watching closely in 2009:

• DEMOCRATIZATION - It's about giving entrepreneurs, artists and fans the tools to compete with the major labels and Topspin Media is one of the leaders. They've already graced the cover of Billboard and helped launch new music by Byrne/Eno, Paul McCartney and others. But I'm betting that Ian Rogers and crew didn't come together just to build a better digital delivery system. Plus the real fun will begin when Topspin finally opens their platform to a wider audience and creative artists and labels show just how much they can do with it.  Honorable Mentions: Project Playlist and all the services democratizing music discovery.  Record labels need to figure out how to work with them instead of suing.  Also Sonicbids, OurStage and others working to democratize live music. Tunecore gets kudos for all access flat rate digital distribution.

• DATA - How do you know what's actually working?  Where are the fans coming from? What avenues lead to sales?  Two companies bear watching in 2009: one new and the other old but trying to remake itself.  Band Metrics will debut at MidemNet (Disclosure: I just joined the advisory board.) It's all about crawling the web, crunching the numbers and providing actionable information.  EMI.com is part of that venerable label's effort to remake itself.  So far, I not impressed, but there's an strong new digital team and the concept behind the re-launch - observe fans online and gather data - is spot on. Honorable Mentions: ReverbNation, Music Today's fan ticketing platform and others who help artists gather and use fan data.

• MONETIZATION: Any company that doesn't effectively deal with monetization both for themselves and for rights holders may not make it to 2010. In a slumping global economy,that means looking beyond ads for revenue and lowering the expectations of investors as well as labels and publishers.  I'll be watching MySpace, YouTube, imeem and We7 to see how social networks, video, music discovery and ad supported music respectively work to improve income.

• THE WILD CARD: Bapapoo. Is it lawful to sell a "used" mp3 that you legally purchased?  The courts will inevitably be called on to decide and the result could re-value downloads and effect consumer confidence.

Bruce Houghton: free music only has value if...

free music only has value if it sparks action

to contribute

to belong

to share

to buy

next time, think before giving your music away