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November 1st: Torsten Jacobi, CEO of Creative Weblogging, joins host Anita Campbell. Sponsored by Six Disciplines. Show details.
Tuesday, April 26, 2005
Trend: The Record Industry as We Know it is Dying
Editor's note: From time to time we like to bring you guest columns on important subjects or industries. So we are very pleased to provide this two-part guest column by music futurist Gerd Leonhard. In this Part One, he describes the key trends of the music industry -- and their impact on independent musicians and small businesses in the music industry.

By Gerd Leonhard

The music industry is undergoing massive changes, and the next five-year horizon will open new doors for enterprising musicians and businesses servicing musicians. Here are some of the key directions I see:

Get "digital attention"

Tomorrow's music companies must figure out how they will get their tracks into any and all of the digital channels, and just how exactly they will get the user to pay attention to THEIR artists rather than the latest videogame or cell phone. So -- the question is no longer IF you need to make your music available, nor how much a track should cost, but just HOW the world's consumers will find them, and how artists and their modern-day representatives can get the attention of that perfectly-matched customer.

Exposure and discovery always leads to revenues

Exposure and discovery are the main milestones on the digital highway of the future. If an artist can get exposure, then 90% of the battle is won.

Music like water

Until just recently, it was virtually impossible to get a quick and affordable deal for a license to use a song for a flash video on your homepage. Now there are a myriad of companies offering that service, among them the latest professional offering by Apple. When the gates are finally wide open, music will become truly ubiquitous, and revenues will start to flow from previously little-known sources. Music will be everywhere.

Access will replace ownership

In three to five years, consumers will have access to "their" music anytime, anywhere and the physical possession of it will in fact be more of a handicap, or a pastime for collectors. Music will feel (and act) like water, and music providers will become utilities.

Mobile multi-access

Multi-access to music will be the default setting, allowing consumers to "fill up" their music devices at gas stations, train stations and in coffee shops, using wireless as well as fixed-media applications. Mobile phones as we know them today will be replaced by much more powerful "mobile communication and entertainment solutions" that network seamlessly. Flat-fee access deals, cheap international roaming and "content & connectivity" bundles will make mobile music offers virtually irresistible.

Use technology to re-ignite your music business

Technology has always driven the music business, and it will drive it this time too. Think back to the birth of amplification, the advent of radio, the invention of the player-piano, the gramophone, the Walkman, the CD....

Put your entire catalogues and all related information online (no, that does not mean giving it all away for free!), both for internal and for external purposes. In the future, "content" assets will only be truly meaningful if they are available as 1s and 0s.

Look for "feels like free" distribution models that get some exposure for your content, because exposure will inevitably bring you revenues. Pursue some secure means of delivery (such as for industry-internal purposes), but in general focus on viral dissemination and on reaching the highest possible rate of exposure. Liquidity is the name of the game!

Transparency wins

Do all your business online. Start by using online contract and royalty administration tools, integrate online payment systems for licensees and licensors, create online interfaces for your business partners, offer deep information archives for media and marketing purposes, and put online syndication tools to good use.

Transparency is the name of the game, today and in the future. The more transparent your business activities will be, the more loyal your customers and business partners will be.

Lower the prices and unplug the pirates

Drastically lower the prices for music products and you will see piracy disappear quickly because it cannot compete any longer.

Let's look at new ways to release music. Why is it that every new product must be released on CD, and join the other 3,500 new releases per month in the battle of shelf space and media attention?

How about reviving the singles format, but in a digital form (releasing new singles on the web, as well as on bundled media products), packaging new tracks into games, phone subscriptions and ad campaigns.... Abort the old way of thinking "product" -- think SERVICE.

Up-sell, cross-sell and re-sell

Let's unchain the music we already have. This means a solid "yes" to free music services, feels-like-free online radio and even free media products -- make it free if it has to be, and charge for it when, where and how you can. The new game here is UP-SELL (i.e. sell more and more stuff to your ever-loyal customers) CROSS-SELL (i.e. sell more stuff to someone else's loyal customers that were referred to you), and RE-SELL (i.e. sell the same stuff in a different package or bundle) -- already common practice in the software world.

Niches are golden

Look at the high-yield niche markets that are now, finally, reachable, using digital technologies. Promote and pursue diversity, not one-artist-fits-all. Take the emphasis off the good old "three artists selling 15 Million tracks each" model, and look at the idea of 100 artists selling 250,000 tracks each.

The future of music is rooted in giving the consumer what (s)he wants, in utter transparency and sincere collaboration, and with a deep understanding of the need to provide services that are user-friendly and accessible everywhere.

* * * * * * * * * *

Like this article? Be sure to read Part Two of this series (click here).
More news... more trends... more insight...

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