Tuesday, November 16, 2004

BTW, GarageBand has been busy setting up a partnership with MSN Music. Check it out at http://music.msn.com/garageband. Of course, it's really exciting to bring the marketing power of such a large company to work for independent music, but what makes this effort significant is the impact of being the first company to really break an artist via the Internet.

Thursday, November 11, 2004

Today I feel complete. We just launched the last in a series of component improvements to the GarageBand system. Now, I can gladly say that the system works the way it was always meant to work. I'll bore you with the full details of the GarageBand system some other time, but let me explain this most recent improvement as an example that other music companies could follow.

GarageBand unleashed an enormous amount of intelligence and activity by creating a model to review and rank songs without the need for a centralized editorial staff. We developed a way for a large group of non-experts to do what takes a small group of experts much longer. The accuracy of the system requires subdividing songs into contextual categories of manageable size. But the problem was that all existing classification models needed to be managed by a small group of experts. Using one of the old models would just replace one bottle neck with another. So, we created a new paradigm: an Emergent Taxonomy of Music

What we've done should be familiar to those who are aware of the application of genomics to taxonomy in biology. Arguments in biological systemics center on the question: should characteristics (Linnean taxonomy) or evolutionary history (phylogeny) define the categorical relationship among organisims? Comparing genetic maps asks a more direct question: what are the relationships among individual organisims? The categories and the relationship between categories emerge from that.

One company, All Music Guide, has become the de facto musicologist for the internet by creating a fairly comprehensive database of Linnean categorization (styles, mood, instrument, theme, country). The centerpiece of their taxonomy is genre which incorporates all the Linnean factors with reference to an extensive music style history (the music maps). Ultimately, they first ask "What is Rap?" and then ask if a specific song fits that category. While this works fairly well for categorizing a historical body of material, the main problem of applying it to a new music catalog like GarageBand's is that the categories can't predict the new forms of music that are being created.

By contrast a new company, Music Plasma focuses entirely on the relationships between artists, eschewing categorization entirely. In a sense each artist is their own category and is connected in a web with other similar artists. Webs are not confined in the way categories are, because relationships aren't restricted by definitions of genres. While it is not a taxonomy really, the editors of Music Plasma have created a more fluid and relationship minded way of browsing music.

At it's core, GarageBand's new system is like Music Plasma, with one important difference. We have no editors to define the relationship between artists. This is partly by necessity. Our bands are so little known, so plentiful (10x what either of these other sites deal with), and so varied in quality that there is no way we could pay for a large enough editorial staff. Instead the artists themselves create the web of relationships, by writing in three artists they sound like and three artists they are influenced by, and name of the genre of music they play. You can browse from artist to artist via search results for the "sounds like" and "influenced by" and "genre" data.

Despite the difference in process, the new system shares functionality with AllMusic. In addition to browsing the web-like relationships between artists, we make available genre categorization. Again the big difference is there are no editors. In addition to writing in an exact genre name, artists select the closest fit from a prequalified list of genres. This prequalified list is generated automatically according to frequency of exact genres written in. In this way the genre taxonomy emerges organically from the relationships between songs themselves. Moreover, they emerge almost as they are created without the latency of an editorial cycle.

Ultimately, the new genre system is an empirical process rather than a theoretical construct. A genre doesn't exist because experts can describe it and derive it from the model they've already built, but because the categorical word is already in common use. The theoretical model is thus inferred and constantly re-inferred from the data.

You can see the new system in action at http://www.garageband.com/genre

Sunday, October 03, 2004

What did we get when we combined a winnebago, an election year, and 100,000 indie bands? We got smelly, very smelly. And dirty, too. The real elements of this experiment?
  1. A different set of independent bands in each city rather than one set for all cities
  2. Municipal venues (parks, amphitheaters), rather than traditional club venues
  3. Using press interest as the primary promotional vehicle.
What were the results? Twenty-five great bands. Beautiful outdoor concerts. TV cameras to film intimate crowds.

"Packaged Tours" have become increasingly more common: combining bands from different parts of the country on to one bill and trying to create a regional or national buzz. Labels of all sizes follow this model - smaller labels may actually combine more bands on a bill. The reason for this is that the costs of touring are rising, and well known bands can't even pay the bills (let alone make a profit, which is tough since touring is often a young band's only source of living). So the headlining bands extract "placement fees" from the support bands to cover the bills. Such a situation creates an exploitive centralization where the headliners extract rent from the support bands who hope to someday be tribute-receiving headliners themselves.

By contrast, GarageBand is as much local as it is independent and therefore can structure a large tour that is far more decentralized. Since bands participate on a voluntary basis, the opportunity for cooperation is much greater. In a sense, all the bands act as if there were no headliners. Economically, there isn't the same risk of taking bands to localities where they don't have a natural draw. But the potential is still there to capture the economies of scale of a larger tour (for instance, this time around we had the same sound equipment and staff travel from venue to venue). Each band band gets a smaller piece of a larger, more efficient pie.

Time was when musicians were designated members of a community: like the medic or the milk man. As with many professionals, they decreasingly have a sense of place. They used to live within community and sang songs for and about that community. With the nationalization of pop culture through outlets like MTV, the soundtrack for life in Columbus increasingly comes out of Los Angeles.

By having free concerts in public spaces, I hope ChoozaPalooza went some way towards reversing this trend. Usually these public spaces are used for high profile national touring acts, while local bands are sequestered in dark clubs. It's a hard sell to both bands and fans, but those that participated seemed universally pleased with the results. People that wouldn't have gone to a club, discovered a a new band they liked. And bands mostly saw the concert as an act of civic-mindedness (we brought in non-partisan local voter registration groups) as much as a career opportunity.

I've always been of the opinion that attendance at local events has two key drivers: the number of times and variety of ways people hear about an event. Assuming your promo material adequately speaks to the audience of the event, you compete with other events in creating the appearance that your event is the place to be. Perhaps the riskiest test of the tour was seeing if media publicity could translate into people at the shows. Considering the short time frame and small staff, we did a remarkably good job of attracting media attention. We were covered in three newspapers, two radio stations and one TV station. Measured in publicity the tour did quite well. Measured in people it did worse. The attendance at shows varied from ten to thousands, but on average it was probably less than one hundred. The good news is that we're not in the business of finding novel ways to promote local events and we can fall back on tried and true methods next year.

And yes, we do plan on next year being less smelly.

Wednesday, July 07, 2004

The GarageBand/Live365 experiment is getting some serious attention. Unfortunately you need to register to see the full article, but the gist of it is there in the summary. What's missing are highlights from a few top bands who credit part of their recent success to GarageBand.

Anthony Rodriguez, recently returned from a tour of Ireland with Pet Project (formerly Sci-Fi Lullaby) said "If it weren't for GarageBand.com, I would have quit music and got a day job. GarageBand is what KROQ was 10 years ago and what KCRW was five years ago. I can't say there is anything more pure and honest yet public left to speak of when it comes to new music."

Anne Heaton currently on tour with Jewel said "Everyone's music gets reviewed, and a lot of times the reviewers are other musicians and songwriters, so the feedback is really helpful and right on,"

I'm really excited to help break these artists and prove the promotional capacity of the internet in the process.

You can see the original press release here:

Monday, June 07, 2004

I've mentioned Creative Commons before, but today I'm pleased to mention them in an official capacity. My company, GarageBand, now offers the Creative Commons license as an option for songs hosted on our site. So far the response has been positive. 

At GarageBand, nearly 100 thousand bands can choose from 5 different levels of download permissions, now including the option to offer their songs for *sharing* in a legally clear manner. A few of our members (presumably proponents of "free" music) have even suggested that we force all uploaded songs under this license. However, we have opted for the more grassroots process of voluntary action on the part of the people creating the music.Still, just because of the size of our catalog, GarageBand may now be the largest source of P2P safe music in the world.

As a side note: allow me to comment of members of the free content movement who call for the legal dismatling of tyrannical media corporations. This "I want my MTV for free" attitude amounts to tyranny of a different sort. If people really want free music, and free music is a morally valid thing, then they should have no problem convincing independent musicians to offer thier creations freely. Most of the music being created right now, in fact most of the music ever created, is not in the hands of the media corporations. So the challenge is to convince these currently independent music makers that CC is better. GarageBand and Creative Commons have given them the choice, but it is up to individual listeners to convince them it is a good thing.

ADDED: Some links to the other blogs on the subject

Joi Ito

Saturday, May 01, 2004

I just offered my encouragement and enthusiasm to the DJs at the Live365 Broadcaster Conference. That's me in the center green.

For those who don't know, Live365 is doing for radio what GarageBand is doing for musicians: creating a community that empowers individuals and evaluates their creations. They've aggregated the third largest internet Radio audience by broadcasting user programmed stations exclusively. This differs from AOL Spinner (number one) who broadcasts staff programmed stations and Yahoo! Launch(number two) who broadcasts computer generated personalized streams. In each of their own ways, these top three stations draw a sharp contrast to ClearChannel/Infinity Broadcasting dominated terrestrial radio. Over the years a handful of mega corporations have consolidated control over thousands of radio stations under one roof - creating a small target for people who would want to homogenize the airwaves. AOL has a large number of diverse stations programmed by independent PDs. Launch replaces the PD with a personalization algorithm (no channel switching). In a way, Live365 is using the Internet to take radio back to its roots: thousands of stations built on the personalities and tastes of real people. There is real potential in Live365's model for communities to emerge centered on the radio stations or for existing communities to start their own radio stations. As Blogger has done for print, Live365 has put the power of radio in the hands of anyone. What this means, is now anyone can be a tastemaker, and only the best at forecasting future hits will gain a committed audience. As opposed to the current terrestrial radio situation where a few people have the power to "make" a hit and continue to have that power despite their dismal track record.

I should note, that my company garageband.com is looking forward to a partnership with Live365, but my enthusiasm for them pre-dates both the partnership and this article.

Wednesday, April 28, 2004

Happy Birthday iTunes. There are a number of new features in this release that exhibit Apple's willingness to break down old paradigms they can't benefit from. For instance the new "publish your iMix" meme (a copy of Napster's playlist sharing, but not as community oriented as their Inbox), is another stab at cutting down the per transaction cost from single song downloads. Of course it also blows away the traditional album meme that the traditional music industry depends on, but I think that was just a second effect. Similarly, Radio Station charts, builds on the celebrity playlist meme to encourage buying of multiple tracks at a time, except now based on favorite terrestrial radio stations.

On the other hand, there are some hoped for things missing because they would cut into Apple's bottom line. The radio station charts actually highlight one: there's no affiliate program. This impacts a whole bunch of people. Independent artists who drive sales to their songs (cuz Apple sure isn't) would get a bigger cut of the sale. Radio stations (internet or terrestrial) are still the most common means of discovering music and drive sales to the iTMS without compensatio. Finally, there is a whole new class of tastemakers, the people who publish their iMixes, whose talent Apple fosters and the profits from.

Similarly missing is support for other brands of music players, probably the single biggest restriction to the growth of the iTMS. But then again, Apple doesn't really care about digital retail market share. They care about selling iPods. Likewise, an affiliate program would cut deeper into the loss-leader digital single sale, so Apple has to be careful about who gets to participate and how much they get. When they do release an Affiliate program, I'm guessing it will only be for the sale of iMixes, since paying out for single sales would worsen an already bad cost structure.

No one can deny the impact the iTMS has had on the music industry. It is also hard to deny the impact they haven't had...and probably won't.

Friday, April 16, 2004

Thanks very much to Eric Von Hippel of the MIT Sloan Innovation Lab for inviting me to speak this week. I was very glad to share my thoughts of how garageband.com is riding and pushing a tide of democracy and innovation on the creative side of the music industry. The preparation gave me a chance to wax philosophical that perhaps the only thing separating art (especially performance art)from other human endeavors is that innovation is constantly required for success. That sort of incessant need to create something new, while exhilarating for the song writer is scary for the industry. Having sunk capital into an idea, the industrialist wants to squeeze out as much profit as possible from that idea. If it weren't for competition, companies would ride on their laurels for as long as possible. Is it so surprising that many companies sacrifice the good of society by stifling competition in numerous ways? However, it is also true that society is not prepared to handle the same amount of innovation in toothbrush making as their is in music-making. The trick is for society to communicate preference for an idea to corporations, *before* they invest in them. This is exactly the model GarageBand is taking with music. The people tell us what they want to hear, and we produce, promote and distribute it. IT keeps our capital costs down, and speeds the time to market significantly. Perhaps most importantly it takes full advantage of the innovation and perceptiveness of the independent musician community. Yes, it's moments like these when I most clearly see GarageBand as proof of concept for a much bigger paradigm shift

Friday, February 20, 2004

Now here's an interesting development for the RIAA's anti-piracy strategy...a New Jersey woman is filing a RICO lawsuit against the RIAA. This isn't the first time the comparison has been made. At Tech:Knowledge, Mike regularly refers to the RIAA always in conjunction with the phrase "thugs and goons". And most of are now familiar with the whistle-blowing book Hit Men. But this is the first time I've seen a legal accusation of the same. Obviously it's not fair to say that the whole industry is essentially organized crime, but there is an interesting legal question here: is the RIAA's piracy initiative equvilanent to racketeering? What would a less dubious alternative to protecting artists copyrights be? Maybe there is a problem with the monolithic "All Rights Reserved" system of copyright. The folks over at Lawrence Lessig insipred Creative Commons are working on an alternative.

Monday, February 09, 2004

What are you supposed to do when everyone starts using your bread-and-butter as a loss leader? Suffer and recapitalize, apparently. Venerable Tower Records is filling for Chapter 11 bankruptcy. The company is well run, well loved, and profitable for years, but has come under intense price pressure from multi-product stores such as Wal-mart and Best Buy that price their CDs at a loss in order to get foot traffic in the stores. This problem has been exacerbated by the simplification of music taste created by consolidation of formatted radio stations. If there's only five CDs people even consider buying in a month, why do you need a whole store full of CDs?

Despite the futurists promise that the internet inherently democratizes the proliferation of music, this "old school" phenomenon is creeping its way into the new school. Is there any doubt that Apple's reason for launching the ITMS is to sell more iPods? There aren't solid numbers for this, yet, but the paltry 35 cents Apple gets per sale, likely translates into a loss. Then why do it? It makes the high margin iPod so much more attractive.

If music retails is going to become a comparably profitable business again, the pricing/cost structure would need to change significantly. Furthermore, the prospects for a music-only store depends on increasing the diversity of music that is out there, so the store provides the service of helping the customer sort through their choices. Tower isn't dead in the water. Due to forces way outside their control (or ability to predict) the company can't be worth as much as they once thought it would be.

Thursday, February 05, 2004

Just found this, but thought it was worth bringing up...Doc Searls suggests Apple's iLife products are "Turning Consumers into Producers" and draws a parallel with the open-source development paradigm. He takes it up one level of abstraction to a supply-side versus demand-side analogy. This is very astute, but doesn't go far enough. What's been happening in the music industry much longer than the open source movement has been around, is a democratization of the market. Pro-Tools (well before Apple's GarageBand) made high quality music production possible for anyone with talent. More recently, Napster, Kazaa, and the ITMS opened the door to a distribution mechanisms with a low barrier to entry (i.e. democratic). What remains to happen is a decentralization of the power for discovering, promoting and marketing the music that can now be created cheaply and sold cheaply. My company GarageBand.com offers one model for a democratic and meritocratic discovery mechanism. The next stage in this evolution would combine our discovery method with a democratic promotion network: radio, video, and what ever newly created parallels arise. Basically, anyone could play any role in the industry with reasonable effort, so the truly talented (no matter what their means) may rise to prominence.

Incidentally, the result would be a music market characterized by something close to free and equal association, an economics alternative to both socialism or capitalism one might call "cooperative individualism".

Monday, February 02, 2004

*Another one for the smart and innovative category*

A full stocked digital music retailer started by a pair of psychologists is experimenting with dynamic pricing. At MusicRebellion.com prices for well-known tracks start as low as 5 cents (e.g. Blink 182's "Feeling This") or 30 cents (e.g. Outkast's "Hey Ya"), but increase as more people download the track. The price can also decrease as demand drops. It operates much like the stock market. This is in sharp contrast to the iTunes model where all tracks are priced at 99 cents and the BuyMusic model where labels can set their own prices. The big shift here is that MusicRebellion uses technology to decentralize(democratize) the pricing decision.

Friday, January 30, 2004

This is very clever on the part of both KFOG and Apple...

"The exclusive digital EP From KFOG to iPod by The Thrills is available now on Apple's iTunes Music Store, less than 36 hours after the band recorded the tracks at a KFOG-FM Emerging Artist Concert...The entire EP can be downloaded for $4.95 or single tracks are available during a limited four-week period for 99 cents each."

They've combined two strategies that I have long been a proponent of. I'll elaborate on each of them separately in a future article, but let me mention them both briefly here.

First, KFOG has had a long tradition of releasing true recordings - as Ani Di Franco calls them "a record of an event / the event of people playing music in a room" - with their Live from the Archive series. The product is as much memorabilia as music, a "take away" for the experience of listening to special live performances just for KFOG listeners. In this sense the Live From the Archives CD and the new Thrills Live EP muddle the boundaries between CD and merchandise. The purchase is made as a marking of a personal experience which greatly increases the value of the product. This phenomenon is illustrated when people buy CDs and T-shirts after seeing a live band. KFOG, has replicated the experience (perhaps improved upon it) on the far broader medium of terrestrial radio.

Secondly, this release does not face the quandary of cannibalizing CD sales. Effectively, Virgin can fully sell out the demand for digital version of Thrills without worrying about sunk costs in CDs. Based on the success or failure of the digital downloads, they could subsequently release the EP on CD, without worrying that ripped versions of the tracks would circulate on the net. Why? Because anyone who would have paid for a digital copy has likely already bought it. Futhermore, anyone who really wants a CD will still pay for it, especially if there was some sort of trade-in or upgrade path. In essence, the Thrills would have issued a free minimum quality version of the performance in the form of radio, a medium quality product in the digital downloads, and a high quality product in the form of CDs. Releasing the music on those formats, in that order, they gain piece of mind about piracy and a low-cost retail test market (iTunes).

You can read the original text on http://www.kfog.com/

Wednesday, January 28, 2004

Lifestyle brand sponsorship of digital music are bubbling over. Three services now have soda pop brand to bootstrap usage in the early stages

* OD2 has Coca-Cola and is already live.

* iTunes and Pepsi will launch at halftime during Superbowl XXXVIII.

* MusicMatch has teamed with Sprite.

We've officially entered the primary season for the new retailers. I contend that whoever is unable to secure a corporate sponsor will fall far behind the others in this competition. The strategy of using someone else's money to make legal music essentially free is what will give digital retailers monetary parity with P2P services and allow them to quickly increase usership.

It remains a question whether corporate sponsorship of music purchases becomes the norm.

Monday, January 26, 2004

Now this is interesting. Lyor Cohen is leaving Island/Def Jam to take the top spot at Warner. Lyor is an interesting blend: truly opportunistic creativity and the ability to play power games as well as anybody. He had to be remarkably savvy and determined in his youth to end up being a the only white kingpin in the black-dominated rap industry. He's not prefect and had a barely publicized, but still major, slip-up in December. And, now he's head of the second largest music company in the world at what may be the transition point between old-school and new. I wonder if he can see that the newest trend has nothing at all to do with what goes in your ears.

Friday, January 23, 2004

According to Bernhard Warner, the global music industry has only lawsuits, lay-offs, and laziness planned for the year ahead.

* They plan more P2P lawsuits: "a zero tolerance philosophy against online piracy will see the industry take its legal clampdown on individual song swappers...to Europe and elsewhere"

* With or without consolidation, lay-offs are the only plan to improve margins: "Cash-strapped music companies have vowed to continue cutting staff and B-list artists"

* The laziness is apparent in their "growth" strategy: "The record labels are betting on first-half releases from reliable chart-toppers U2, George Michael and Norah Jones"

Bernhard also reports token nods to online stores ("The "fight-back" campaign also calls for a massive roll-out of new online music stores"), new artist development ("are promising to promote more guitar-edged rockers to boost sales"), and optimism ("There are high expectation that iTunes and Roxio's Napster (news - web sites), which are expected to launch in Europe by summer, can turn music downloads into a vibrant international business").

Wednesday, January 21, 2004

I'm not sure if the record labels should be happy or not that they can continue their strategy of suing "egregious" file sharers. At the end of last year, ISP's won the privacy of P2P users on their networks. Today the RIAA issued 532 "John Doe" lawsuits where the accused are only identified by IP addresses. Previously, the RIAA claimed a right to get the names of ISP customers before filing the lawsuits. Now they will subpoena the names from the ISPs after filing the lawsuit. This is a much more expensive route to take and I worry (if this wasn't true before), that the RIAA is spending way more on the prosecution of these cases than they can hope to receive in settlement/decision money and increased sales. According to Pew half as many people are downloading music now, but the NDP report showing increased activity clearly indicates that the trend is far more complex than the RIAA thinks. A portion of the much-touted drop might be attributed to kids going home for the summer and coming back to school networks that prohibit P2P usage - an effect that would disappear as soon as kids managed to arrange a private ISPs. Also, the people who stopped file sharing didn't start buying CDs again. Yes the drop in CD sales was smaller than in past years, but not in proportion to the reduction in file sharing. Instead of looking at the nuances of their situation, the RIAA has adopted a potentially costly ideology - file sharing is bad and lawsuits can stop it, period, no matter what the statistics say.

Tuesday, January 20, 2004

Let's put the proposed Warner Music Group (WMG) restructuring in perspective. Warner posted revenues of $4.2 billion in 2002 about 10% of its parent company's (TWX) numbers according to the annual report. Let's assume that the $24 billion cost of revenue is proportional across all segments of TWX. That means WMG would have had approximate costs of 2.5 billion. By this estimate Brofman's task force goal of $225 million is approximately a 10% reduction in costs by the time the deal is closed (60 days). There are about 5000 people working at WMG, so the average per employee reduction is 50K and they claim to have already identified ways to do it. The short term benefit is obvious, WMG will enjoy a 10% increase in profit margins, but I have to wonder if the move will severely curtail their ability to continue producing good product. If the restructuring results in long-term health, I just have to marvel and how much fat the company must have had! Good luck, Edgar.

Friday, January 16, 2004

Maybe the guys at Goldman know something I don't (that wouldn't surprise me) but, the increased rating on EMI doesn't make sense. Perhaps it's an after the fact coronation, since, "EMI's stock has soared more than 40 percent since the beginning of the year, bolstered by a report that discounted CD prices pushed UK album sales up 7.6 percent in 2003." If so, it's a sad exhibition of irrational exuberance, since the reasoning behind the 40% stock price increase seems faulty.

Okay, so record companies have perhaps taken off their blinders and recognize lower pricing can increase CD sales. Of course, they'll still complain about the downloading menace, but maybe they'll also fess up that most people and even some downloaders like buying music, they just don't want to spend $20 on CDs. Surely, part of that 7.6% increase is probably pent up demand by purchasers previously discouraged by the $20 price. But the biggest reason this is just a one-time sales bump is that label cost structures prevent any future price reductions. Since it is doubtful EMI will be able to use the same trick next year, I don't think a 40% stock price increase is justified.

This year's positive numbers do not derive from a deep systemic improvement in the industry's economy, but there is a major shift afoot that is not good for business as usual. Let's introduce two other key facts. First, EMI enjoys consistent popularity for it's $15 "Now That's What I Call Music" series of hit compilations. Second, unit sales of digital downloads have exceeded all expectations. The simple explanation for both is that consumers want to pay $1 per song only for the songs they want. That's the straight deal with digital downloads and the implicit deal for purchasers of the Now compilations ($1 per song multiplied by 15 songs).

This $1 per song premise also explains the increase in full length CD sales. For most people, downloading isn't an option (no iPod) and the Now compilations are a bad fit (they don't like all the songs on them). So the option they are left with is buying a 15 song CD with only one song they definitely like (the one released to radio). Let's say they bought a $20 CD and learned they only liked 9 of the other songs. From their perspective, they just paid $2 per song. In fact it's impossible to get down to the $1 per song levelwith $20 CDs, so it's no wonder fewwer and fewer people risked the money. If CDs are priced at $10, however, the chance of a satisfied customer is much higher. If they like 9 other songs, they're acheived the $1 per song nirvana. Anything on top of that is gravy, so I'm not surprised consumers were 7.6% more likely to take the risk.

So what's the problem? Record labels have grown fat on the premise that people will pay $20 for a CD that contains only one song they like. Even now, they only need to guarantee that the one hit song released to radio is good enough to convince people the $10 CD is a good risk, therefore almost all of their production and marketing investment goes into that one song and they essentially bank on getting paid $10 per unit. More and more of the other songs on the album are filler. But, in a world where all consumers can buy just the one song they like, labels will suddenly only get $1 per unit - a 10x drop in revenue. It gets worse when the price point per song drops below $1. That's the source of the implosion.

Now the implosion isn't going to happen overnight, so the industry has some time to adjust, but the changes need to be structural. Albums, if they continue to exist, need to be listen-through experiences: all the tracks need to be worthy and the sum of them needs to be greater than the parts. If an artist has only one song worth selling, they'll need to do so with one tenth the marketing and production they get now or share a large budget with 10 other artists. Finally, labels need to find intelligent ways to increase their hit rate and diversely invest in more bands so they can capture the nine dollars they are missing per mega-hit by cross-selling similar acts. The tough part is: these sorts of adjustments can't happen overnight, and the labels are in a race with their own demise.

Thursday, January 15, 2004

Geez, wasn't it just yesterday that I was saying the existing industry structure would collapse? I didn't know my blog could be so powerful after just one post ;)

Warner Music Warns of 'Significant Restructuring'

This isn't the first time a music company has signaled the hatchet man, but usually he comes around after a merger or after a bad quarter, as happened at Warner less than a year ago. This time the company is just changing hands. Bronfman is no idiot, nor is he flippant about cutting more jobs from a company that already went through the wringer to make it attractive to buyers. He clearly bought the company with the intention of gutting it. Why? Because it was the only way to make it viable.

Many analysts suggest that the survival of record labels this year will depend on more mergers, acquisitions, and restructurings. That's a good strategy for increasing margins in the short term, but not a good way to grow a business. What's missing from this analysis is how to increase the productivity of the remaining people. Otherwise, the company is just prolonging the agony of dissolution.

There is one line of argument that says "if you can fire these people now, what were they doing there before?" That's a fair question. It suggests that either the company was fat before or the company is too thin now (neither is a good thing). I think the more important question is "what are the people you keep going to do now?"

If they keep on with the same way of working, Warner will just be a smaller company (even of the remaining people are on average more talented than the laid-off people). They will only have the hands to properly release half the records they released last year. In a hits business, this seriously spoils your chances at success.

Maybe Bronfman has some special sauce up his sleeve and I wish him the best of luck - if only because I have friends who work at Warner. My advice would be to find a way to release double the records next year even with fewer people. In fact, I've got a few ideas on how he can do it, but I'll save those for later.

Wednesday, January 14, 2004

Anytime I reveal that I work for a music company, I get a mixture of intrigue and pity in response. When I add that it's a start-up music company, shock and awe get added to the mix. People can't fathom the risk of starting a business in an industry that is imploding under intense margin pressure. And since it is a start-up, I don't even have the glamour of a rock-and-roll lifestyle as consolation. So, people are left with the impression that I must just love music so much I don't mind starving.

It's true that I love music, but perhaps the more relevant truth is, music is important. Of course, it's not as basic as the physical needs of food and shelter, or the emotional need of love. In fact, its value is that it transcends basic existence, as a universal source of inspiration and a reminder of what imagination makes possible. It's also fun: a reminder of what makes life worth living. I'm in this business to keep the people dreaming and dancing.

I also think there is a better way to structure the music industry: more music, cheaper prices, more longevity. I think few doubt that the current system is ill-fated. To that end I've devoted my work days and this blog. GarageBand.com is just one piece of an emerging puzzle and can't do everything that needs to be done. My hope is that my ideas will get picked up, circulated, discussed and maybe implemented by all the others out there who want to see a better future for music. To paraphrase a one-time boss of mine, we're either geniuses or idiots and history will decide which.