by
Emmanuel Legrand
The
US music business is enjoying some sort of renaissance. Amid the
merger process that has seen the market reaching new levels of
concentration, the digital market is growing and the the eco-system
is getting each day more complex, driven by technology and consumers'
behaviour.
These trends were in evidence at the recent DMW Music,
which took place in New York Feb 20-21. Here's a bullet point version
of things seen and heard in New York – a kind of State of the
Nation address. (All the quotes in this piece are from executives who
spoke at the conference.)
1
– Rejoice, rejoice! The pot is growing!
Digital
sales are up n the US, slowly taking over physical, digital revenues
at rights society SoundExchange have reached $460 million, brands are
getting increasingly involved with artists and digital platforms, and
music is reaching consumers in many more forms than before, mostly
thanks to the rise and rise of streaming platforms. For lawyer Ken
Hertz, a senior Partner at Goldring Hertz & Lichtenstein, 2012
was the year when the music industry stopped being a cottage industry
and “finally became part of the convergence process” – which
integrates films, music, advertising, games – and is now part of “a
much bigger business”. As an example, Hertz said the fragrances
backed/created by celebrities such as J-Lo, Lady Gaga, Beyonce,
Celine Dion, J-Lo and Katy Perry represent $2bn worth of business for
these six artists alone. “We're seeing the next music business as
much larger than the one we're lamenting the demise of,” concurred
Michael Simon, CEO of HFA, the society providing mechanical licenses.
Added David Israelite, president & CEO of the National Music
Publishers’ Association: “We've left the 'theft period' where the
music industry was focusing on stopping theft of music and now we are
into how to monetise music.”
2
– Social media is driving the change
The
role and function of social media has also changed, according to
Hertz, who quipped that social media “was about a kid telling you
that an act was great. Now everybody is into creating content and
jumping into the media stream and make money.”
“If
I am an artist I want a sincere relationship and as broad as possible
with my audience,” added Hertz, who warned that there was “a
tyranny about transparency: You cannot lie about anything, this is
the nature of connectivity. People don't care about privacy. So the
key is to become more transparent. To be more honest, less
contrived.”
The
new element in the mix has been Twitter. An unknown entity a couple
of years ago, the 140-character message platform has not only become
a way to connect with fans, but also a tool to discover music. “There
has never been a better platform for music engagement than Twitter,”
said Jamie Sampson of Schematic Labs.
3
– The next playgrounds? Cars and living rooms...
Be
warned: A revolution is coming near you. This time it will affect
living rooms and cars. “In the next few months, the living room
will be a big focus for us. We see tremendous growth on mobile and
extended platforms. We expect to be far more active in the living
room through over-the-top boxes, consoles or any other ways,”
explained Alex Kisch, SVP business development & business affairs
for Vevo, the three-year-old platform co-owned by Universal Music and
Sony Music. Vevo's primary business of to deliver music video – now
in ten territories – and monetising them. “Mobile tablet is by
far the most important platform to focus on.”
Meanwhile,
John Quain, The New York Times technology contributor said that the
“automotive industry is going through one of its biggest upheaval,
and it is happening extremely fast. With a lot of these connected
cars come connected services.” There is already some serious
players in the field, from satellite platform Sirius/XM to Pandora.
And Spotify recently announce an agreement with Ford. But it does not
come easy. Jake Sigal, founder & CEO of Livio, it is “a huge
undertaking to get music into the car”. There are as many systems
as there are services and devices. “The iPhone 5 does not have a
video connection, so imagine if a car manufacturer has build all its
system around video,” said Sigal.
“It
is going to get more difficult and crazier with the multiplication of
options,” confirmed George Lynch, VP Automotive BD at Pandora.
“There are too many platforms.There is not going to be one
standard.” The
greatest danger with cars is that the level of entertainment can
become a source of distraction for drivers. “We are working really
hard with the car companies to minimise driver distraction,” said
Lynch, who admitted his fear of seeing people and watching video at
the same time. Quite rightly so!
4
– Technology empowers artists
With
so many options for entertainment, there are more ways than ever “to
reach the fans” according to Marty Diamond, who runs the Paradigm
Talent Agency's East Coast Music Division.“The barriers of entry
have been eroded,” he explained. But to get fans “engage beyond
one song and start spending money” is the real challenge for the
industry. “They do not have to leave their couch and my job is to
get them to leave their couch,” said Diamond.
The
next frontier for artists is to figure out what to do with the cloud.
"Innovation happens when creative people bring their insights to
technology,” said Paul Campbell, CEO/founder of The Amazing Media
Group, who believes that artists using the cloud will eventually find
a way to create new usages for the cloud.
5
– Artists are entrepreneurs
It
was refreshing and enlightening to hear two young
artists-turned-entrepreneurs: J Sider, CEO/founder of Bandpage, and Evan Lowenstein, founder & CEO of
Stageit. Sider had the idea of a platform
that would connect bands, and after moving to Silicon Valley, raised
$19m, and built a service that is now used by half a million
musicians. “What I do, I trust my gut. If I feel like I can trust
you, I will talk to you about my idea,” said Sider, whose
relentless drive got him to meet thousands of people in San Francisco
and built a team of aces for his project. “What I did was I said
yes to everyone for four months. It sounds crazy but that's how I met
my engineer,” he explained.
Lowenstein
created Stageit when, being a musician, he was constantly being
frustrated by the lack of venues available, and by the way concerts
were monetised. “Artist by the very nature are entrepreneurs, we
create things and we sell them every evening,” he said. “I have
been driven from the start. My drive as an artist has left me being
an entrepreneur.”
Lowenstein
added that his platform is “very transparent” and that he took
pride in having create “entire new revenue stream, and did not
cannibalize any other streams”. Very much an artist of the 21st
Century, Lowenstein constantly balances between the two sides of
copyright protection. “As an artist, I support record label rights
to protect copyright; and I also need to side with my fans,” he
explained, while adding that he wanted to be “a bridge between the
music industry and Silicon Valley”. He finished by urging all
artists to let their entrepreneurial spirit blossom, and not be
afraid of entering areas which could be very crowded: “Of course
there's a lot of competition, but competition should never stop you
from creating your company.”
6
– Artists are brands and brands love artists!
In
the 60s, artists would do anything to stay away from big brands, the
epitome of the capitalistic world that they were ideologically trying
to stay away from. So who would have thought that 30 years down the
line, rock, pop, and even hip-hop acts would entertain such a close,
almost incestuous relationship with brands. It is now natural to see
will.i.am batting for Intel, Justin Timberlake for Bud, while Alicia
Keys is a Blackberry ambassador. Matt Ringel, managing partner at New
Era Media & Marketing and Red Light Management, was extremely
open and honest about the type of relationship that artists and
brands could build. “Brands are focused on creating programmes that
are authentic with artists, and artists want to work deeply with
brands,” he explained. “One of the trends is seeing these
relationship getting closer.” Brands, he added, want to interact
with artists “on multiple touch points” with a range of
integrated marketing activities, involving content, social media, and
cooperative development. “There are artists whop are marketing
machines, will is, pitbull is,” he said.
But
it has to be a good match, not one that consumers can perceived as
constructed and fake. “Alicia [Keys] was looking for close
technology partnerships,” said Ringel. “She's tech savvy. So the
question was of finding the right partner. Blackberry not done much
in smart phone market and was coming with the new phones. Alicia fits
the bill. It's a real role. She has business cards, she is in contact
on daily basis, talking to developers and developing interesting
programmes. How does this become authentic is the key issue.”
So
what are the risks for both sides? Obviously a credibility factor. A
wrong association brand-artist can damage both an artist and a brand.
“There is a risk to the artist,” admitted Ringel. “But we have
to be realistic in setting the roles. Some categories are easier to
control, some are not. Most deals will have very specific
restrictions. There has to be an alignment and it has to be good for
both or don't do it. If it's the right relationship, no need to look
elsewhere.”
7
- Artists are also...er...artists!
When
so many people are trying to take artists for a commodity –
monetised as well as dependable (hello Simon Cowell) – a few voices
at DMW had a fresh and almost old school approach to artistic
endeavours. John Rubey, the president of AEG Network Live talked
about “respect” for the artist, which also meant that sometimes
you had to know when not to ask or force artists to do something.
“My
artist’s integrity is what I’m hired to protect,” added Marty
Diamond, who runs the
Paradigm Talent Agency's East Coast Music Division. He added that his
responsibility as an agent is risk management, and find “what bands
are comfortable with.”
Diamond
explained that he's seen the rise of a new generation of clients who
have new skills and who are totally in synch with the digital
environment. For him, these
artists will navigate through the new eco-system and will be far more
self-sufficient.” He added, “The grace for me is that some of
these bands get to hone their craft..and that's when you really got
something. They learn their
craft and move from being a good band to being a great band.”
8
– But is copyright broken?
That
was the key question asked more than once during DMW. There even was
a panel dedicated to this issue that did not fully meet its promises
but kind of circled around the issue. “I don't think it is broken
and there is always room for improvement,” noted
Sandra
Aistars,
executive director at the Copyright Alliance. “We do not agree on
what copyright is. Some believe it is a property other a human
right,” added Jay
Rosenthal, general counsel for the National Music Publishers’
Association. BMI executive director for business development, new
media and strategic development Michael Drexler argued that there
were “some
cracks and some disconnects” and that in these “radical times”
maybe it was time “to re-think
regulatory restraints” applied to rights
management societies like BMI. Colin Rushing, general counsel for
performance rights society SoundExchange said that there were “some
important parts of the law that need to be changed, but there are
also all the aspects of metadata that needed to be fixed.”
Meanwhile,
Michael
Petricone,
SVP of government affairs for the Consumer Electronics Association
(CEA)
refered to the US Constitution, in which copyright is tasked
to promote progress and the arts. “By that measure things are OK,”
he said. But in the same breadth, he said two contradictory things:
a) that the CEA wants is “to make sure creators are compensated,”
and b) that they want “a healthy eco-system especially for the
streaming services”, which is interesting since certain streaming
services like Pandora are doing whatever they can to lower the rates
set to compensate creators for the use of their works. Which prompted
the following reaction from NMPA's Rosenthal, “There
are some who think that maybe Pandora has to figure out a business
model that will bring in revenues, rather than say that 50% goes in
fees. We
want Pandora to survive as a good business model.”
9
– Seriously, isn't copyright broken?
Well,
if it's not broken, it needs to be fixed (at least in the US). BMI's
Drexler noted that rights societies in the US operate in a regulated
market that needs to be revisited. He said, “We operate under
consent decree. We can't say no if somebody comes to us for license.
If we disagree on rate we have to go to court and it can be a very
long and expensive system.” This situation has led some major
publishers like Sony/ATV, EMI Music Publishing or Universal Music
Publishing withdrawing their digital rights from societies like ASCAP
and BMI. This “experimentation” leads to increasing fragmentation
of rights but seems to be the only way for publishers to enter into
negotiations with digital platforms and negotiate better rates than
the ones applied to societies.
For
NMPA's president and CEO David
Israelite,
the key issue is not that copyright is broken but rather that
“licensing is completely broken”. Why? Because the two sets of
copyright – the one on recordings and the other on the compositions
– that are regulated differently. Record labels are operating
within the realms of a free market, while music publishers have been
regulated since 1909. “We are regulated by three judges,” said
Israelite. “ASCAP and BMI are under consent decree. This makes
licensing scheme impossible for platforms.”
He
also offered a solution: “DiMA [the trade body representing digital
platforms] and NMPA have largely agreed on what to do. We have a
solution. In performance, there are three PROs. ASCAP and BMI control
a large part of the market. What if you had four [PROs] and each with
a 25% of market share, then maybe the government would leave them
alone. And for platforms, it is not too difficult to go to four
people. If
a PRO can't say no, then that is a broken system for the songwriter.”
Another
imbalance noted by Israelite concerns the split of royalties between
the two sets of rights. “We need to address the re-balancing of the
value of the two copyrights,” he said. He pointed out that if
Pandora paid 54% of its revenues to music rights holders, that 54% is
divided 96% for labels and 4% for publishing. “The
only way to fix the copyright issue is rebalancing of the two
copyrights,” concluded Israelite.
10
– Leave an impression...
The
award for best off-the-cuff reply went to litigation lawyer Barry
Slotnick, partner at Loeb & Loeb, who bluntly replied “I
certainly hope not” to moderator Ted Cohen's question “Are we
reaching a consensus [in the industry]?”... He also added, “We
apply market correction: We identify people who are not doing things
properly and we take action.” Ah, lawyers!
The
award for funniest quote went to aforementioned Cohen of TAG
Strategic, who introduced a discussion on copyright by stating, “It's
the bar mitzvah of broken copyright, time for copyright to be a man.”
The
award for the most unexpected quote went to George
Lynch, VP Automotive BD at Pandora, who said, “Voice recognition
still has a long way to go. It is hard
to say 'Chaka Khan' in the car and get the voice recognition to
actually play 'Chaka Khan'.”
The
award for stating the obvious but it was good to hear it anyway went
to Andrew Kippen, VP
marketing at Boxee, who said, “There's
a mentality in the tech world that you get the audience first and
then you think of ways you can make money.”
The
award for best quote of the conference went to Ken Hertz, of Goldring
Hertz & Lichtenstein, who said, “Like my dad would say, 'If you
try to make an impression that's the impression that you make'.”
One to meditate...
[Typed
while listening to Nick Cave And The Bad Seeds' 'Push the Sky Away'
(Bad Seeds) and Veronica Falls' 'Waiting For Something To Happen']
