The New Flatness

Warner’s move that they made with YouTube is the best deal the music business has made all year. This will go down as one of the first steps in an innovative direction that the industry has made. The most interesting thing to come of this is YouTube’s royalty tracking system. How does it work and does it work well? All of this cool stuff going on and what is the biggest record label doing with YouTube?…suing them!

picture originally uploaded by: me

I read a lot of Bob’s posts but this one stood out to me.  I was just having a conversation with someone about this same exact subject the other night.  At the root of the this issue, of making available copyrighted material on streaming sites such as YouTube and MySpace, is how to monetize it.  It is really very simple.  When in doubt learn from your piers in the same market.  What is the simplest way to make money on the web?  Advertising.  Wrap up the content in pre or post roll ads.  This will accomplish two vital things.  One being that the majors will start seeing some income from all their material they have available and two, it will at the very least be a step forward instead a lateral step or no step at all.  The music industry in particular, hasn’t made big steps in experimenting with monetization schemes.  These are times of trial and error.  But they don’t have to be that risky if you look around and learn from other’s mistakes.  Fred has a good post on his ideas for monetizing YouTube.  YouTube will look at Google for inspiration on how to make money.  Other industries should do the same.  The music business needs to pay very close attention to what services like YouTube and MySpace are doing because these services are the future of their content distribution.  There is no question that this is how content will be served up in the coming years.  All of these issues make me want to form a consulting team that would walk with music labels and other content owners as they navigate how to make money in an “everything is available all the time” world because its not going to come from the inside.  I should do that.

picture originally uploaded by: me

This subject is getting so much talk lately but I have to say one more thing about it. What MySpace should have done that would really put them ahead of the pack would have been to pioneer the mobile distribution of music downloads. This would have been huge and it would have put them far far ahead of anyone else in this market, even Apple. Apple is going to come along and do mobile distribution better than anyone else and it will be difficult for anyone else to catch up. However, MySpace does cater to the “unsigned and independent” niche and that is what separates them from Apple. This could prove to be how MySpace will win music customer market share over Apple. The bottom line is that there are more unsigned and independent bands than there are signed bands; MySpace and Apple respectively. MySpace is deeper in search when compared to the Apple store and is user generated where the Apple Store’s content is distributed like old media. These are growth stages that we’re seeing right now. Step one was the iTunes store, step two is the MySpace store, step three will probably be by Apple in the form of extensive mobile distribution. The next nine months will be interesting to see who makes big strides in mobile.

photo credit: me

Universal backs Spiral Frog.

Some are disagreeing with this because of its DRM usage. DRM isn’t the way to go.  However, it will fade out over time.  Who knows how long it will take though.  Look how long it took a major label to get hip to ad based revenue.
We’re out of the age of the rock star.  We’re in the age of quality production by anyone who is smart enough to make it.  No longer does it take a lot of money…the technology is available to everyone to produce quality material.

Eric joins the club. Just because its apple I included this link.

UMG usually seems more ahead than any of the other majors labels when it comes to pressing forward into using using new technology…not to mention they’re ahead of the pack in revenue.

Universal stands out when compared to the other major labels.  They are the only major that is making steps like this and its such a good thing.

AnySong is a new mobile music search and discovery service being introduced in Holland.  Universal partnered with Targetize to provide the technology solution.  And, it seems like part of the revenue stream is going to come from advertising sales on the service.  This is the right direction for mobile content providers.
This is the beginning of what will be common place in a few years.  What needs to happen in the states is a mobile search service for MySpace, TagWorld and the other big social networks that use music as part of their service.  Helio is trying to do this…but Helio is closed system.  You have to use their devices.

The search and discovery service for something like MySpace needs to be an open service that can be accessed by any device.

France is making some headway on the law to end DRM usage.

Their disagreement with DRM is a very valid point. In the physical world its the same as having proprietary CD players.

It is going to take time for creators and consumers to figure out how digital rights management is going to work best and most effeciently simply because it is totally different than the way things work in the physical world.
When the industry moved from tapes to CDs everyone had to reinvest in their collection and buy their music catalog again. This is what is still happening with DRM. Michael Roberts has good post that got me thinking. Material that is sold with a DRM is not what it seems.

Technology sped things up so much that formats can change so fast. So really what is happening is that the music player is changing again and again with every new DRM technology that comes out. What this is is the industry trying to incorporate old media practices into this new media environment. Even Apple, a unusually forward thinking company, is stuck in this old ideal. I think they are actually smarter than that…they are more concerned with selling the iPod music player than selling music. Selling music doesn’t make Apple any money but selling iPods sure does. So while Apple is being hailed as the saviour of the business it is only indirectly this.

The big picture issue is this…how to monetize, track, and retrieve digital files on the internet without being trapped in the old model where something physical, (CDs) is sold to be used on another physical something (CD player). We’ve become so accustomed to buying CDs and playing them in our CD players that that is how we expect it to work with digital files. The internet is open. Those proprietary walls don’t have to exist on the internet. By using DRM on music a wall is being put up between the creator and the consumer. These are the things that innovators need to be aware of.

YouTube made it simple for the a la carte video watcher.

Its interesting that the BEST clips from TV shows or movies can be found there. Forget all the other stuff no one cares about. The user is so in control that she is essentially telling the content creator what is favored and what is not when she puts choice clips on YouTube.

NBC is getting smart.

Doing business with something as powerful as YouTube is the best move.

It makes sense that TV networks are adopting this easier and quicker than the music business has because TV is an ad based business model. YouTube can easily facilitate that.

The revenue stream for the music business comes from CD sales…or at least they want it to.

How can music be part of an ad based model?

Advertising creates a huge platform to work from.

How can the music business wrap its content with advertising. Its a much better, and easier way to pay the content creators.

To shareholders of major labels it makes the most sense to turn to ad revenue as the primary source of income.

More revenue=happy shareholders=an environment to create

Music giants bid over each other in what looks to be even more consolidating of the industry.  Its gonna be down to three major music entities trying to decide what is worth marketing to you and I.

Analysts on the street say “the combined entity could generate $200 million to $300 million in additional cash flow by laying off employees and reducing the number of artists…”

Rupert Murdoch had the forsight.

He made the decision to aquire what is obviously a power player in this new media landscape.

If other industries haven’t been making moves to cement themselves in this wave of new media innovation then…well.