MIDEM(Net) Blog

Ted Cohen: The Spotify Effect

At every digital media event, anywhere that digital music is discussed, virtually everywhere that I’ve been in the last three months, the first question that seems to come up, “what do you think of Spotify?” It breaks out into two categories, those who use it and love it, and those who have only heard about it and just want to touch it.

In Ibiza last week, during panel that I was moderating, the Spotify love fest broke out early in the session, and this was a dance music conference!

The concept of the Celestial Jukebox has been discussed for the past dozen years, viewed by most as the holy grail of music; Spotify is not the first implementation of the dream. RealNetworks’ Rhapsody and Napster, now owned by Best Buy, were both early music service pioneers. iMeem, MySpace Music and others have been offering ad-supported music services for some time. To be frank, I have been a huge fan of Rhapsody since its inception. It completely changed my mind as to what was the future of the music business. I began to speak publicly about the advantages of subscription over a la carte models:

•    Flat fee access
•    No $0.99 barrier to music discovery
•    A lean-back/personal experience

Variable Pricing - What It Should Really Mean

Yesterday, I was quoted in the Los Angeles Times story on the impending iTunes pricing changes, it read like this:

Some music industry veterans are criticizing the 30% hike price, saying the timing is tone deaf because it comes in the midst of a recession and at a time when spending for online music appears to have reached a plateau.

"This will be a PR nightmare," predicted former EMI Music executive Ted Cohen, who is managing partner of digital media consulting firm TAG Strategic. "It is for the music industry what the AIG bonuses are for the insurance industry."  

It appears, based on calls and e-mails that I've received, that my position on this issue wasn't evident. While I wasn't misquoted, it did appear outside of the context in which it was intended. So, let me clarify where I stand.

I am a huge proponent of the variable pricing concept. I lobbied for this early on with iTunes when I was at EMI, with no success. I therefore applaud the recent efforts by the labels to bring it to market, it's long overdue.

What didn't come across in my comments is that I believe it's important that for variable pricing to succeed, it must achieve two clear goals:

• Offer tangible value to music fans
•  Maximize revenues for artists, labels, publishers and the services   

These are not mutually-exclusive objectives. 

As we continue to try to wean a whole generation off of 'free,' it's critical that we don't 'jump the shark' at this juncture. Moving to the ubiquitous availability of DRM-free tracks is just part of the solution. It's time to mature the a la carte digital music marketplace. Variable pricing can significantly contribute to this sorely-needed evolution. While Amazon has led the way by putting certain releases on sale for a fixed time period, the pricing of digital music has, for the most part, been flat. There have been few meaningful calls-to-action, this has to change.

We have an amazing opportunity to bring paying music customers back into the fold. This can be achieved by putting new artists on sale and creating customer value through creative digital bundles, such as mining back catalogue through well thought-out campaigns. 

At the same time, there is nothing wrong with putting a premium price on a new track from U2 or Jay Z. There just has to be a balance that demonstrates concern for the fan.

Based on what has been revealed so far, it appeared that there was far more focus by the major labels on pricing upward and less on increasing value to the customer. If this is not the case, I publicly apologize for prematurely ringing the alarm.  If, however, it proves to be true, we are squandering a golden moment.

I sincerely hope I was wrong.

 

Ted Cohen: The Next Chapter At EMI

I’m currently in Margaret River, a resort town 3 hours south of Perth, Australia. It’s a sleepy place, the Napa Valley of Western Australia, where broadband is considered to be 256k, not fast enough to keep up with the latest YouTube media star! I’m woken at 7am this morning by a reporter from the Wall Street Journal asking, “What are your thoughts on Douglas Merrill’s departure from EMI?”

To be honest, I hadn’t heard about it yet, the announcement came out on Monday afternoon, I’m 16 hours ahead here, so I think it hit the wire at 3am Tuesday morning, my time. So, I leap out of bed, fire up the the MacBook, and start digging around.

I haven’t learned much yet, nothing earth-shaking to report, but I am troubled by what’s happened, as I continue to believe that, while EMI & the other major labels will suffer further ‘lumps’ during this transitional period, they can ultimately survive, IF and only if they work smarter and become more nimble.

In May of 2000, I joined EMI to bolster their global digital business development efforts, recruited by Jay Samit, then SVP of New Media.

It's Time To Get On The Same Page

It's now just over a month since we were in the Debussy Auditorium at Midemnet 2009, and a lot has happened:

• Spotify and Catchmedia have become the media darlings, each showing that you can bring innovation to market without litigation and hand-wringing.
• That said, Seeqpod and Songbeat have been sued by both EMI and Warner Music Group.
• Spiral Frog teeters on collapse.
• Jim Griffin's Choruss initiative is beginning to get buy-in from the majors.
• Total Music and Ruckus have ceased operations, major label initiatives that failed to get traction.
• The Pirate Bay trial goes on in Stockholm, with no clear winner in sight.

It's clear that the chaos isn't over, we need to get down to business.

As many have stated over the past months, there is an audience out there for music, there are revenues for the taking. We need to stop posturing, litigating and talking over each other. We need to stop leaving money on the table and maximize the opportunities.

We need to creative sustainable partnerships & deliver services that address fan behavior. If we can't do that, we've truly lost.

Ted Cohen: It Was The Worst Of Times, It WasThe Best Of Times

This year's Midemnet marks our tenth anniversary, and what an amazing time we've been privileged to observe. The early pioneers: Napster, Liquid Audio, MP3.com, Rioport, Rhapsody, Soundbuzz, Musiwave, OD2, Melon, Puretracks, the next generation: Kazaa, Pandora, iTunes, and Limewire, and the newcomers: Amazon MP3, Omnifone, Nokia's Comes With Music and EchoNest. These innovative ventures have changed the face of music forever. However, as we look back at the past decade, it's clear that it hasn't been very kind to the traditional music industry. As physical formats continue their sales spiral downward, staffing and roster cuts are deep. It is painful to observe, as the labels now confront the need to rapidly evolve or become irrelevant.

It has, however, offered the independent music artist the greatest opportunity for success to date. The MP3 format, e-mail, websites, internet radio, music blogs, UGC, all these tools and more have made direct connection between artist and fan a reality. Distribution, once the Holy Grail, can be achieved instantaneously through services such as Tunecore. Marketing is key, so why not utilize the services of of ReverbNation or SonicBids?

Join us at Midemnet 2009 as we explore both the possibilities and realities of monetizing the artist-fan relationship. It's just the beginning of the revolution, arm yourself with invaluable knowledge.

Ted Cohen: School For Scandal

Two major events took place in the U.S. over the past weeks related to the ongoing battle between the RIAA and the college population of music consumers. On one hand, the music industry was emboldened by the passage of the first campus anti-piracy bill, signed into law by Tennessee Governor Phil Bredesen.

From Zeropaid, "Senate Bill 3974 requires that Tennessee public and private colleges and universities exercise appropriate means to ensure that computers connected to their campus network are not being abused for the purpose of illegally downloading and distributing copyrighted material through P2P and file-sharing programs." RIAA Chairman Mitch Bainwol applauded this development.

On the other hand, Duke University's Head of Student Affairs told the RIAA to back off, rejecting their pre-litigation notice procedure. From Digital Music News, "Duke University now wants proof of infringement before forwarding an RIAA notice, according to the Office of Student Affairs.  That replaces an earlier practice of simply passing pre-litigation notices through to students, without deeper examination......The move presents a speedbump for the major label trade group, though symbolically, it signals another episode of resistance by a major university.  It could also signal the beginning of greater levels of pushback, based on technical definitions of what actually constitutes infringement. "

The need by the music industry to try to put "the genie back in the bottle" continues, Sisyphus woud be proud!

Ted Cohen: Time To Find Another Way

The global economy melt-down happened at the wrong time for the nascent digital music industry. We had comfortably settled into somewhat of a oft-repeating pattern:

• Someone from "outside the business" comes up with an innovative approach to music marketing or discovery using a new digital and/or mobile technology/application
• They raise some initial seed funding, usually from friends & family, launch a beta, garner a favorable mention in Digital Music News, Paid Content or TechCrunch, then secure some first-round venture capital
• They then either contact or are contacted by the Majors, discussions begin, and the division of potential revenues are addressed. More often than not, the negotiated split does not result in a sustainable financial model.
• Ultimately, a significant percentage of available funds are paid out as up-front advances, leaving little to grow the business. A second round of funding is therefore required to keep the company afloat.
• Then, one of three things happen: 1. They get that next round, giving the young company some needed growth capital; 2. They get acquired; or 3. They "go dark."  Unfortunately, the latter seems to be the more frequent outcome these days.

World economic crisis has disrupted the dance. Venture funding has virtually dried up. Ron Conway, the legendary Silicon Valley 'angel' who backed Napster in 1999, allegedly recently said the following, "I will no longer fund a venture that depends on the rationality of a music executive." Whether this is Urban Legend or fact, that sentiment is pervasive. The deals are perceived to be irrational and economically undoable.

So, a change in approach is being thrust on all of us by forces beyond our control. If the traditional music industry wants to successfully navigate the transition to a digital & mobile ecosystem, they need to be willing to enter into true partnerships, supporting innovators' efforts & working together to grow the business. They must expand on some of their recent efforts to invest in this very promising future.

To be clear: A. labels, publishers, artists and songwriters, all are both entitled and due reasonable compensation for their investment and creativity. B. The business must change to survive. These are not mutually-exclusive statements. We can both compensate and innovate, they can work hand-in-hand. Let's put a little more effort into collaborative solutions, they will yield the most rewarding outcomes.

Ted Cohen: Disruption Is Ultimately Good; a Music Industry retrospective (Part 1)

Over the past fifteen years, it's taken disruption and innovation to move the traditional industry forward, sometimes kicking and screaming, into its inevitable future. At each inflection point, we were forced to explore the possibilities. I believe that without these interruptions to 'business as usual,' we would have experienced a very bland alternative. Music is truly better off for it.

The major milestones, from my perspective, have been:

1993 - IUMA, From Wikipedia: The Internet Underground Music Archive (IUMA) was the pioneer of online music. IUMA was started by Rob Lord, Jeff Patterson and Jon Luini from the University of California, Santa Cruz in 1993, for the purpose of providing a venue for unsigned artists to share their music and communicate with their audience. IUMA's goal was to help independent artists use the Internet to distribute their music to fans while circumventing the usual distribution model of using a record company.

1995 - MP3, From How Stuff Works: The MP3 format is a compression system for music. The goal of using MP3 is to compress a CD-quality song by a factor of 10 to 14 without noticeably affecting the CD-quality sound. With MP3, a 32-megabyte song on a CD compresses down to about 3 MB. This lets you download a song much more quickly, and store hundreds of songs on your computer's hard disk.

The Same Side Of The Table

Ted Cohen (TAG Strategic), MidemNet's founding figure and digital music industry reference, is already looking forward to the forum's 10th anniversary next January...

First of all, I'm very excited to once again serve as Chairman of the MidemNet Visionary Committee. This year is MidemNet's 10th anniversary & I'm proud to have been involved since its inception.

Over the years, we have presented some of the best & the brightest:  Anssi Vanjoki of Nokia, Legendary Producer Bob Ezrin, RIAA head, Hillary Rosen, MP3.com's Michael Robertson, RealNetworks founder Rob Glaser, EMI Chairman Eric Ncoli, YouTube's Chad Hurley and many, many others. The 2009 edition will, appropriately, raise the bar. I look forward to an amazing anniversary event.

Looking back on a great Midemnet '08

It's been nearly a month since Midemnet 2008, I've been reflecting on what we accomplished this year. In short, I feel it was the best Midemnet ever!

The quality of the speakers, the candor of the dialogue and the interaction with our global audience, they all contributed to a world-class event.

But it can always be better! We need your continued input, ideas and criticism to make Midemnet 2009 even more informative, inciteful, relevant and valuable to your everyday endeavors.

On another note, I've been asked on a few occasions to make available the closing points/thoughts that I presented at the close of day 2, so here they are:

Music Industry 1.0 is officially over, going forward:

It’s not about business as usual, it’s about being unusual
It’s not about protecting music, it’s about monetizing it
It’s not just about revenue, it’s about mindshare
It’s not about suing consumers, it’s about serving consumers
It’s not about file sharing, it’s about sharing experience, recommendation and discovery
It’s not a devaluation of music, just a revaluation
It’s not about music as a product, it’s music as a service
it’s not about advances, it has to be about partnerships
It’s not about overthinking, it’s about experimentation
It’s not about being desperate, it’s about being brave

It’s not too late, it’s just the beginning!!