Wednesday, April 6, 2011

SXSW: Does music matter less these days?

Even though SXSW 2011 is history now, one underlying theme of this year's music gathering is still echoing in my head. It's about the relevance of music in today's society:  does music matter less these days?

Notably, does music still have the cultural impact it had a generation ago? Or has music lost part of its power in today's society, and why? Do we have too much music? Can we have too much music? Does today's music have something to say? If not, why not? And is it good that everybody can say something with music now?

This existential challenge was hammered home by Sir Bob Geldof in his keynote and discussed in various settings by music critics, entrepreneurs, managers and musicians.

Based on his talk, it appeared clear that Geldof isn't so fond of today's music. In his keynote, he pointedly complained about too much music and too little meaning: "Everybody has got the means to say anything they want, but nobody has anything to say." According to Geldof, rock music should voice outrage about the growing inequality of today's society to be relevant, but it doesn't. "What’s music got to say about it? I don’t hear it. Maybe I can’t hear it."

Geldof wasn't the only one voicing his concerns that new technology has made it too easy for everybody to create and share music, supposedly lowering the overall quality. Chris Morris, music critic for Daily Variety, sang the same tune on the panel "I'm not old, your music does suck". He sees a problem in the amount of music produced every year. "How shall I sift through".

Paige Maguire, editor in chief for Austinist.com, disputed the idea that there could be too much music. "At what point do we say that's too many people being creative, that's wrong, that should stop?" "I don't think the amount of music is the problem. It's that we've lost our way in being able to quickly finding something that we like. But I don't know that that itself is what the problem is. I see people being able to create and share more quickly and easily and as often as they'd like as being something, that finally musicians and artists and creative are able to have complete control over what they do. If it sucks, it sucks. If it's good, then great. I see that as being a joy, as a really exciting time."

Geoffrey Himes, music critic at the Washington Post, made the same point: "From the 70's when I started, I've always felt, it doesn't matter how much bad music is out there, as long as there is enough good music to keep me engaged. That's what I care about. I don't find that that's changed." "There is a lot of really good music out there."

But Himes observed a different problem. There is great music out there but less of it is becoming hits. "You lose that shared experience which was such an important part of pop music. When the Beatles were in their prime, everybody had heard their music. You could walk up to almost anybody to have a conversation about it. You can't do that with Sam Baker. 95% of the people haven't heard of him."

Today's music universe is becoming increasingly more fragmented. Will that reduce music's social value? Morris: "For [..] our generation, music was 'it'. That was the art form. It was the central part of the culture. It was a part of the social fabric. I think that music occupies a lesser and ancillary role today. There are people [..] who are more interested in their Playstation."

A similar angle was taken by Ed Wards. He shared an observation he made in Japan in 2001, when he observed people absorbed by their mobile phones, and wondered if a major social change was about to happen. "The next big thing is probably not gonna be music. It's gonna be cell phones."  Case in point:  the biggest star of SXSW 2011 seemed to be the iPad 2. Big crowds were waiting in long lines for days to buy the new status symbol at the pop-up Apple Store in the center of Austin. Everyone talked about it, and (nearly) everybody wanted one.

Back to the state of the music landscape. Alexander Ljung from SoundCloud had a very different take on it. On the panel "Mobile Music Moves to the Cloud", he pointed out the unique ability of the Internet to create bidirectional communication and interactions between creative people. "It's all about engagement." And these new patterns of engagement are a source of tremendous creativity--for instance, DJs invite people to upload sounds in realtime to be used in a live performance. Ljung compares it to an orchestra of hundreds of people.

Ljung: "I talked to a lot of different artists. For people now, it feels like this is a very, very exciting time, because they can actually create more than ever before, they can be more engaged with people than ever before. I don't sense so much that people are scared of what's happening. And there is this enormous positivity around the fact that there are more people that can actually be engaged in creating stuff. I think, that generally for society that is a very, very positive thing." From his perspective, the Internet enables artists to get instant feedback on their latest creation and they have never been closer to their fans.

While the Internet has led to a more fragmented music landscape, it has also produced new stars like Lady Gaga and Justin Bieber. Their fast rise to the top would have been impossible without the power of social networks and the Internet, and their ability to connect with fans around the globe in a matter of seconds.

The Internet demands relevance in many different flavors, from the seriousness of Wikipedia to the cute humor of LOL Catz. Part of Lady Gaga's success is the fact that she stands for something. She provides meaning and that makes her a very powerful symbol. It is in the way she does things, the causes she supports, her art, and her special relationship with her fans.

Another powerful symbol of a different kind is Rebecca Black with "Friday" being dubbed as "the worst song ever". While hated by many of her viewers, she has received unprecedented global attention in just a few days with one--let's call it mediocre--music video. Her video reached already more than 70 million views on YouTube alone.

Lady Gaga and Rebecca Black's success in gaining global attention--as fundamentally different as they are--have two things in common. They got a lot of attention and both became socially recognized symbols around the globe. We can now use them to communicate. We can use them to make a clear statement. The fact that Rebecca Black became famous based on negative emotions doesn't stop her from fulfilling her role as a symbol. She has become a part of our culture.

According to Niklas Luhmann, society can be described as a self-referential, autopoietic social system consisting of communication. As such, society is constantly producing new acts of communication and new symbols leading to even more communication and so on.  Rebecca Black has become such a big symbol because she enabled many acts of communications around the world. It is less her than the collective's interest in expressing an idea. Rebecca Black's "Friday" video became a way to criticize the lack of authenticity and quality in many things we consume. There are many videos on YouTube displaying worse music talent, but "Friday" was produced as if it was something better. It had all the bells and whistles.

I am pretty optimistic that we will create other even more powerful symbols in the future using the Internet. Many of them might not come from the music space, like Mohamed Bouazizi, the Tunisian fruit-vendor who became the defining symbol of repression and unrest in North Africa and the Middle East. On a relative scale, music might have lost its edge because we discovered new ways to express ourselves that rival music. But there is no clear reason why music won't continue to play an important role in our global conversation.  It need only be relevant to become the symbol of choice.

So Sir Bob Geldof was right when he said: "Music needs to have meaning." The only thing is, society decides which meaning it wants.

Tuesday, November 2, 2010

Dear Musicians, You Deserve Better

You deserve to be able to make a living creating music. You deserve fairness and respect. You deserve to earn a fair share of the tremendous value you create for everyone. And when I say you, I don't mean just a few mega stars, I mean many serious musicians like you--the more the better.

The good news is that most if not all of your fans agree with me. They also think you deserve a fair share, fairness and respect, and the ability to make a living with your music. Your fans aren't the problem here.

The bad news is that the once-booming business model of selling music has proven to be a very tough business in the age of digital and free. Selling music just doesn't give you your fair share anymore. And it is getting worse every year.

There is a fundamental reason for that: music isn't "scarce" anymore. It is no longer constrained by the physical distribution of records, tapes, or CDs. Digital music is abundant. You can distribute it for free--everyone can. And if you don't, your greatest fans will. People love to share the things they love.

Well, you can try to force your fans to give you your fair share by seeking to maintain some kind of artificial scarcity (copy protection, copyright, lawsuits, scare tactics). Unfortunately, the odds are against you. Technically, artificial scarcity for digital goods is virtually impossible to maintain. Even worse, there is the catch 22: suddenly your fans might perceive you as the one being unfair.

We all learned as a child that sharing is a good thing. It is a core value of our culture. As Clay Shirky pointed out: “We have a word for not sharing if there’s no cost to you: that word is ‘spiteful.’” It is even one of the deadly sins. As a consequence, trying to stop people from sharing is futile. Changing the human nature of sharing is as difficult as fighting the waves of the ocean.

Let's try something different. To get you your fair share, surf the waves. Here is how: give fans what they want the most, and they will pay for it.

Artists: Sign up for Yokudo
That leads us to the question of what your fans really want. If you look at the most successful consumer products and services, there seems to be a common theme: people crave status, attention, and entertainment.

Gucci, Prada, Nike, Puma, Apple, Porsche, Tesla, American Express, Cartier--all of these brands make a lot of money by providing status and attention. Facebook game developers like Zynga do the same with social games like Farmville, and have successfully added entertainment into the mix. The market for attention is a huge opportunity since nearly every product we buy is meant to garner attention.

We truly live in an attention economy. Attention is the most valuable currency and the most precious product.

Music artists have made a lot of money selling attention as well. One obvious example is the concert business. At the same time music sales have faltered over the last ten years, concert revenues have grown substantially. While fans have spent less money for music, they have spent more for the (live) attention of the artists. However, this opportunity appears to have reached its limit, as a spike in the number of tours and ticket prices have collided with the down economy.

There is yet another example of musicians successful leveraging the attention economy: music sales before 2000. Fans were willing to spend a lot of disposable income for a new LP for the nice extras that came with it: status and attention. Being the first in a clique to have the Black Album and share it with friends just felt amazingly good. Your LPs defined who you were. Having them first made you special. Think High Fidelity.

Unfortunately for you, music--as soon as it is digital--comes without status and attention. You have a cool new song? Well, me too. Actually, everyone has it. It is on Youtube, Pandora, last.fm, Spotify and countless other legal and illegal sites. Owning music files simply doesn't have the same cachet.

This leads us to a great chance for artists: start selling status and attention again.

Give fans what they crave. Amazing music, yes, but also the identity and status that they get from being your fan. Whenever you successfully bundle something with status and attention, its value explodes. Diamonds are just a little bit of carbon when you subtract the status and attention that come bundled with them...

Yokudo has the solution to help you give your fans what they crave.

Monday, November 1, 2010

Beyond Selling Music

It can be hard to make a living as a musician, even when you have won a lot of fans on Facebook, MySpace, YouTube, and Twitter. But It shouldn't be, and the good news is that Yokudo is about to change that.

What if there were a solution that would generate a new revenue stream for you without hurting your existing ones? A new revenue stream that doesn't rely on music rights or ads?

And what if this revenue stream was completely piracy-safe and fair? No lawyers needed, and no reason to sue anyone.

Would you be interested?

What if the solution could also enable you to engage with your fans in a meaningful way, and take joint action for a cause in order to have a much bigger impact?

And what if your fans could turn into highly networked distributed street teams, promoting you with all their creativity and passion?

Now would you be interested?

We hope so, because Yokudo aims to provide a platform for you to do all that.

One more thing...you also might wonder how much money it would cost you to be a part of it. The answer is much less than expected--zero.

Yokudo is free for artists. Join now to be part of our exclusive beta launch.

Friday, October 8, 2010

YOKUDO loves Mutabor

Sometimes you are lucky. I was when my first company, CoreMedia, looked for a corporate design and one of my colleagues stumbled upon Heinrich Paravicini of Mutabor and invited them to pitch their ideas. What they presented was simply from another galaxy, far above all the rest that we saw. Heinrich was transpiring more energy than a supernova. He had recently co-founded Mutabor with Johannes Plass, and CoreMedia seemed big enough to be an attractive client.

Mutabor excelled in so many ways. At one point in time they took the challenge to design our booth for the yearly CeBIT trade show. It was the first time they had designed a booth, and what a booth they designed. Even 9 years later, we were still using basically the same booth and were complimented for the fresh design.

One of Mutabor secrets seems to be that they search for the core idea of something, and when they have found it, they turn it into the DNA of the design. There is always something to discover when you see their designs.

10 years later, that initial energy I recognized has put Mutabor in a different league. They have won countless awards and are chased by big, global brands like Audi, Adidas and Deutsche Telekom to reactivate and rejuvenate their identity.

Lucky for me, when Heinrich heard about our idea for YOKUDO, he was up for the challenge of creating a corporate design that captures our vision, and, once again, he’s completely blown me away. Here is a little preview of what he has envisioned for our logo, to capture the self-expression that will be core to our platform:
Danke Hein! Kudos for your amazing creativity and many thanks for your great friendship. I really hope that Depeche Mode will sign up soon : )

Artificial scarcity failed, let’s try abundance


Some things are pretty scarce--things like clean water, fresh air, oil and steel, iPads and iPhones 4, to name a few. Other things aren’t scarce at all. They are abundant:  crazy ideas, creativity, information, digital music, pictures on the Internet--especially pictures of little kittens.

As Stowe Boyd pointed out in one of his talks at the Reboot conference in Copenhagen a few years ago, we seem to confuse things when it comes to scarcity and abundance. Indeed, we tend to treat many things that are scarce as if we have an endless supply of them (fish in the ocean, clean water, a stable atmosphere), and, at the same time, create artificial scarcities for things we have in abundance, like ideas, digital content, and knowledge.

The main reason for such confusion might be purely economical. It seems so much cheaper to treat natural resources as abundant, and it has proven a successful business model to make abundant stuff seem scarce in order to make tons of money selling it.

However, the consequences can be dire. We have not only wasted precious natural resources and created global warming, we have also limited our potential to create better solutions in order to clean up the mess by preventing “ideas from having sex”.

Fortunately, there is good news. The Internet is changing the underlying dynamic. The first fundamental change is an unprecedented level of transparency, global awareness and coordinated action that helps companies realize the cost of destroying common goods.  Through collective action, society has started to print the costs of common goods in big red ink on corporations' balance sheet--a language corporations understand well.

The other fundamental change lies in the astonishing ability of the Internet to create and exchange astronomical value without any money being involved.

I guess I should explain that statement a bit more. Our economy is based mainly on the exchange of goods or services for money:  the transfer of value generally involves cash. Barter deals and gifting are minor exceptions.

However, the Internet has changed this dramatically. Most of the value created on the Internet comes for "free." We can read Wikipedia for free, Google the Internet for free, video Skype with friends around the world for free, listen to music for free, exchange pictures with our loved ones for free, become a star on YouTube for free, get thousands of followers on Twitter for free, and so on.

The fact that all these abundant things come without a price tag doesn’t mean that they are of little or no value. Quite the opposite. Just imagine the price you were wiling to pay to buy an Encyclopedia, to make an international phone call, or to transmit 10 Gigabytes across the Atlantic ten or twenty years ago. Now, you get so much more for less. Now you can even get your very own global TV station with YouTube for free.

As a consequence, the official GDP growth of every country on Earth is not even remotely related to the gigantic value each one of us has gained over the last two decades.

Exploding value creation on the Internet is a great thing. It enables us to give free or comparatively cheap access to services that were luxury goods only a few years ago to people around the world, even in some of the world’s poorest areas. Equally important, it enables more people to use their talent and to participate in this global value creation.

There are still various barriers that must be overcome to unleash more of the full human potential. Fortunately, a growing number of emerging ventures work on exactly that. They implement smarter ways to make use of abundant resources like human talent and social capital.

Nathaniel Whittemore, founder of Assetmap, calls this the “New Era of Human Capacity Startups”. He makes the convincing case “that people have more to contribute to their own lives and to their communities than they currently realize”. The Internet is certainly the most powerful tool we have to unleash this potential.

Unfortunately, there seems to be a dark side of free, a major barrier if you will. Where is the business model? If everything I produce is free, how can I pay for the milk in the morning? This questions feels increasingly real for many musicians, artists, writers and other members of the creative industries.

If the stuff you try to sell becomes abundant, your market will collapse. The declining revenues of music labels are a pretty vivid example of this rule. And their struggle might teach us a lesson.

The music labels decided to fight the unwanted abundance of digital music. Their main strategy was to maintain an artificial scarcity through DRM, Copyrights and legal action. Technically, digital music is abundant, but, legally, it is not. However, given the declining revenues in the industry over the last 10 years, the success of the “artificial scarcity strategy” seems questionable, to say the least.

On the Internet, artificial scarcities proved to be harder to maintain than expected. Technical solutions didn’t live up to their promises. DRM technology wasn’t 100% water tight and often too cumbersome to use. However, the far bigger and decisive looming threat to artificial scarcity might be a social one. Many, if not most, users don’t mind sharing digital content and, while doing it, lack the emotional restraint that is (nearly) universal when it comes to shoplifting.

Users seem to feel a difference when it comes to real scarcity (stealing an apple) and artificial scarcity (copying a piece of digital content). The rule “don’t steal” is generally accepted and a core value of our culture, but the rule “don’t copy and share” is not.

While the above observation doesn’t make copyright infringements legal or a good thing to do, it still leads to an interesting question:  If we can’t maintain artificial scarcity for digital music, how can artists make a living by embracing abundance?

yokudo is working hard to answer the above question. If we and other startups succeed, one more barrier for the free exchange of creative work will be gone. Abundance of (legally free) content will eventually become the new norm, and it will finally be a good thing for the artists, not just for their fans.

Posted by @soerenstamer
Image: http://www.timgilbreath.com/

Selling music - a dead man walking

If you believe in selling music as a business model, or are about to fund someone who does, then you might want to pause to consider a few numbers, as well as recent trends.

First, the numbers.  97,751 albums were released in 2009, according to Billboard.biz and Nielsen Soundscan. 12 of those sold over 1 million units (down from 35 albums just three years earlier). That’s a paltry 0.0123% of all new albums.

Yet, there is an even more disturbing number to consider: 2.1%. That is the percentage of new albums that sold at least 5,000 units. In fact, only 2,050 albums reached that goal in 2009. Which means that 95,701 albums--97.9%--didn’t.
If you don’t think this looks like the last breaths of a dying business model, we can wait for the 2010 numbers...

While waiting, we might take a closer look at recent trends among music start-ups:  a spate of already established, brand new, and about-to-launch music subscription services. If the number of start-ups in a given field is any indication, there must be a ton of money to be made. Or not?

The New York Times observed correctly “Suddenly, Mobile Music Services Seem to Be Everywhere” and surely it won’t be long until Apple and Google sing the same tune as well.

Seamless, cloud-based music streaming is certainly feasible these days. And it’s not just feasible, it’s great. It will happen and we will love it. Why should anyone need to manually select, buy, download and sync files when we are always online?  The superiority of cloud-based services with local caching will pretty much kill the “old” way of distributing music (e.g. “buying and downloading files”).

However, regardless of the superiority and bright future of the cloud-based music service itself, I don’t see a big buck to be made.

Here is a likely scenario:

  1. Someone will figure out a significantly better way to distribute digital music. This is basically what just happened.
  2. More than 10 companies will compete for the users who are willing to pay 10 bucks per month for a music subscription.
  3. One or more companies will try to gain momentum by offering subscription services for less than $10 per month.
  4. A company with complementary products and services like Nokia, Samsung, Dell and HP (devices); Apple (devices, advertising); Google and Microsoft (advertising); or AT&T, Verizon and T-Mobile (network) will feel the need to bundle music with their core products to make them competitive.
  5. Competitors will follow to stay competitive and, by doing so, will turn music into a commodity.
  6. The effective price of music will be zero.


The fact that we already see so many startups with very compelling services in this field turns #1 and #2 into done deals.

There are also some signs that #3 is already under way. Rhapsody used to charge $10 ($9.99) per month and the same price point was adapted by Rdio and Thumbplay. However, the market hasn’t stopped there.

Napster pushed a $5 per month price point and others followed suit. Rdio and Mog offer packages that are somewhat limited for $5 a month in addition to their regular $10 packages. Furthermore, there are quite successful players like Pandora, last.fm and Spotify that offer ad-supported music streaming services for free, and ad-free options for a subscription fee.

Given this high level of competition (plus the “default” option to freeload music illegally), there is only one way for the price of music to go: down.

It’s only a matter of time until the price of music will disappear completely. Nokia’s “Comes With Music” looks like the first serious attempt to implement #4 and bundle music with other products and services. Comes With Music is part of Nokia’s strategy to become an internet service company and it seems to be gaining traction in some markets. For instance, by the end of the third quarter of 2009, Comes With Music had claimed around 10 percent of the digital music market in Brazil, according to IFPI.

The more that global music revenues decline (down 7% in 2009 to $17.03 billion), the cheaper it will be to implement a bundling strategy. The cost for bundling music with other services might become astonishingly low compared with the profits at risk for some of the above mentioned global players.

Nokia desperately needs a silver bullet to compete with Apple and the iPhone. The same is true for Microsoft, whose latest push to improve the music search experience on Bing in order to beat Google’s dominance indicates the same strategy. If they want to make Windows Mobile 7 a success, it had better “come with music” as well.

But Microsoft is not alone here. With Google Music, Google might also decide to become a more disruptive force in the music business in order to steal iPhone’s thunder when it comes to music.

We will see. As a consumer, the future sounds excellent. As an entrepreneur or investor in paid music services, it just doesn’t rhyme with making money.

Posted by @soerenstamer

Pretty close to ZERO and falling

Whether we like it or not, digital music will be free.

And nobody is to blame. It's not the fault of Napster, Pirate Bay, the music industry, or any other group of people (except maybe the brilliant minds that invented the Internet).

Free information is the systemic result of a highly networked society. With the Internet came abundance:  the abundance of information. And with abundance comes a steep price decline, the simple supply and demand paradigm of Economics 101.

More than 10 years ago, Carl Shapiro and Hal R. Varian pointed out that the price of digital information will soon approach zero because the marginal costs are zero (For more details, I highly recommend their straightforward analysis of the "New Economy" in Information Rules - A Strategic Guide to the Network Economy).  And that is what is happening.

If you prefer this dry theory as a juicy chart, a British journalist, David McCandless, has produced a great visual. He answered the question how much do artists earn online? See for yourself.

According to David's analysis, Rhapsody pays $0.001365 per stream to the artists (there appears to be a slight discrepancy in the numbers between the spreadsheet and the chart, but the takeaway is equally dramatic). While this isn't a ton of money, it is still more than twice as much as Last.fm pays. And the newest platform, Spotify, takes this trend yet one step closer to zero by cutting the price per stream in half again.

To understand how tiny the difference between $0.000255 per stream and free already is, let’s take a look at a pretty successful song as an example. According to this report, Spotify's payment to Lady Gaga for over 1 million streams of her hit track "Poker Face" amounted to $167.

Pretty close to ZERO and falling.

Posted by @soerenstamer