The FINAL Blog: Future of The Business

The conglomerates that run the music industry have two options; further embrace technology, realizing that tangibles will become obsolete and creating newer innovative business models. Or lose their artists to the creative use of the Internet and mislay the savvy consumers who utilize newfound ways to illegally or legally download music. In the past five months the music industry has changed rapidly, and in the next five years everything will be altered. Every week there is a new announcement from a label, a merging of efforts, “thoughts on music”, or a buy out of some sort. This is due to the fact that the Industry, as we know it, is in big trouble.

Trouble does not mean that there isn’t hope for a brighter future in the music business. Take the 1984 rental acts for example. In 1984 the movie business feared its complete destruction and fall out due to the new technology of ADR and the “Rental Acts” passed, enabling consumers to rent movies and watch them in the convenience of their home. In the midst of the woe and fury, the film community had no idea that the rental acts would save their business; and it did, forging a whole new market within the scope of selling movies.

If the record Labels quickly partner with diversified businesses that engage in more relevant ways of connecting the Internet-user-world to the main stream music world, they can find untouched revenue streams and make up for losses of CD sales. This seems to be the trend with the labels, as they have been considering the inevitable decline of their CD business. They have felt the pressure of removing DRM protection and making their copyrighted material more readily available to the demanding consumer. It all depends on when they will act upon that pressure.

There are many more creative means of production and the record companies have not touch into them yet. They need to change their mind set, focus and means of operation in order to obtain newfound revenue streams and capture larger audiences.

Steve jobs might have created the biggest waves in music history with a little ripple called the iPod. There have been various MP3 players introduced to marketplace, however Steve Jobs and Apple figured out that aesthetics alongside a user friendly design -sell. They have designed their MP3 (iPod) so well it has virtually monopolized the market of digital MP3 devices- forever changing the way people listen to music. The top rated sellers are the Toshiba Gegabeat, Apple Ipod “fifth generation”, Zen Vision, and Microsoft’s Zune. (http://reviews.cnet.com/4323-6532_7-6509081.html?tag=dir), but overall no one can compete with Jobs.

The future marketplace might behold “newer” music-only MP3s, but it seems with the onset of the MP3cell phone, in the next five years that colors and new spoofy devices will not be needed. MP3 music only technology will be outdated and “MP3 player-phones” will rule the market share. Apple is already prepared to launch its iPhone. The iPhone combines three products the cell phone, iPod, and personal Internet device/ desktop. (apple.com) Verizon has its “Chocolate”- and every celluar competitior will have its own version of a phone/MP3. The “Chocolate” and other versions from Samsung have been rated low on the Consumer Report, but bottom line the technology and practicality of listening on demand is here. It is here on the phone – so why would any consumer want two devices? The future is moblie, mobile, moblie.

Once a luxury is introduced and embraced by consumers it is hard to revert back or change the interests of the market. Expectations are created and people want what they like- they will drive the market through demand. It seems as if an all-inclusive MP3- phone is the future of mobile music.

Online Music stores have replaced Tower, Wherehouse and Virgin Megastores. Online music stores will continue to put tangible retailers out of business until they are extinct. If music is digital, consumers need a store wherein they can browse and buy digitally. The Apple iTune Store is steadfast number one retailer with access to 65,000 free podcasts, 20,000 audio books, 200 TV shows, movies and much more. (http://www.apple.com/itunes/store/) Microsoft has its own way of downloads and focuses on a sharing community of music listeners. However its interface isn’t as user friendly, and easy as itunes layout. (http://www.zune.net/en-US/meetzune/) Zune sales display that lack of interest.

Emusic is second largest online retailer in the market and ranks first for independent music material. Emusic downloads are compatible with both the iPod, and any other MP3 player. (Just as itunes, and other sites may be in a few months, with the “off-set" of DRM).
Emusic has over 2 million songs, which sell for 33 cents per song. Their emphasis is catching the independent listener on a subcription-based service that allows consumers to own music at an extremely lower fee. Emusic is unique in the way they help the labels increase a sales of non-mainstream niche music. (www.emusic.com) This model is very successful and could be a way of the next two years.

There are so many more online music stores. Snocap for example allows artist to sell his or her own music via digital social networking sites like Myspace. (www.snocap.com) Burn lounge (http://burnlounge.com/default/index.htm) is another smaller retailer that tries to earn sales for participating artists at a low price. However the problem is iTunes represents a hundred pound gorilla and is extremely hard to beat.

The future might mean free music and never having to pay for music. Thus the online retailers will disseminate or have to morph into free web sources--once again have to find newer revenue streams. If there is a savvy Internet user who can crack a code to make music free, then online protection will never work. When there is a will there is a way. Singles will drive sells, unless labels and retailers can decrease the pricing on albums and a trend is started in buying albums rather than singles. This would be better for the artist in return too.

Starbucks is a peculiar retailer potentially a big player in the future. Starbucks is launching their own label and “Starbucks shoppers were responsible for one-third of the CD sales -- more than any other retailer.” (http://www.businessweek.com/magazine/content/04_47/b3909094_mz017.htm) If Starbucks uploads a web page and provides the ability to download in store, they are golden. The store on 3rd St. in Santa Monica is very successful in satisfying customers with a coffee/tea and a unique musical experience.

This online and in store experience hilights the attention to video demand. “Video on Demand (VoD) is an interactive multimedia system that works like cable Television, the difference being that the customer can select a movie from a large video database. Individual customers in an area are able to watch different programmers when they wish to, making the system a realization of the video rental shop brought into the home”. (http://www.doc.ic.ac.uk/~nd/surprise_95/journal/vol4/shr/report.html)

One can already watch videos on their iPod, phones, aiplanes, cars, etc. In five years people will be able to watch video and movies anywhere and everywhere they choose. The record labels might want to take note that streaming music videos could bring “My MTV” generation back to market. Everybody likes good videos- look at the recent success of YouTube and viral video websites. People want and love to make and watch videos, even more so than TV. Isn’t there money and opportunity to be made there? Videos will be a hobby for everybody in the future.

The band Ozomatli was progressively innovative in allowing their fans to participate and create their professional video. They awarded a fan the opportunity to become a director- Brilliant! This is the future, bringing artist and fans together via video. Look at the success of American Idol, consumers like to establish relationships with stars and watch them perform. If consumers can watch videos: music, news, and movies in their cars, airplanes, train, and automobiles- they will- so Labels and film companies should make them readily available.

A good reference is the gas stations; notice how we already watching the news at the gas station to divert our attention from the guzzling penny eating machines. The question is how much money will the labels or the artist make money form videos? It all depends on content. “Content is king”. (Jerry Colliano) If the industry can provide a demand for unique and previously unavailable content – then they can spur a demand and a cash flow.

Where does that content and demand come from? Guaranteed the next five years will be solely based on live performance, and the ability to stream everything to the consumer on their phones; the future of live content and interaction via social networks is key for musicians, labels and consumers. If labels can tap into the social networks, provide ways for musicians to tour and connect with their audience they will make money. Either from selling merchandise, taking a cut from booking fees or ticket sales dividing the revenue with the service providers.

Labels will act like managers and take a percentage cut of an artist’s total net gross income. We already see a trend of this happening. Warner just last week aligned itself and acquired Frontline Management. (coolofer.com) There are many more speculations of who will merge next. Warner was smart because they will now be able to keep capitol within their company and receive a percentage cut from musicians’ total inclusive revenue.

In the next five years live performance will be so important. Content will be created to transfer, artist-fans relationships will be created, and the world will seek live entertainment. People are bound to spend their money somewhere- they always have. People want to be entertained- once again they always have.

If television is becomes obsolete and music singles are free – audiences will need to receive content that will give them an inspirational and unique experience. Technology is numbing us- people are human and need to connect outside of the Internet walls. The Internet is not real life; and the "need" to reach outside “the box” will eventually arise. Humans are not computers, we are moved by emotions, and do not operate in numbers. Live music will allow us to feel alive and remain filled with emotions. The music industry needs to relax about money and revert to their attention to “meaningful content” and a “baby boomer generation” mentality. Music is the number one global connector. It reveals a generations mindset, depicts the time and much more- music is important. Make good, meaningful content and consumers will want it.

Video games also are a growing market, capturing a young and aging generation. Games do not spurn our emotions they way music does, but can allow an unique interaction. Consumers can be thrown into a virtual world, movie-like realm and experience sensations thought patterns, and develop skills through video games. Music labels should continue to make and create more deals with game makers. Emi is in the forefront making their catalogue available to Electronic Arts (for the game: Rock Band) and furthering a musical generation on video games.

There are so many changes that in five months the business will not be the same. There will probably be two majors left in the end of three years, solely because they own catalogues and publishing. Wal- Mart says that it will remove its CD section and replace it with iPod accessories. DRM free music is “suppose” to triple online sales, but who knows? Most likely music will be free and money will be made in other untouched areas.

The industry is “at risk of collapsing under its own weight." The industry must “reinvent the discovery process and take advantage of the smaller networks that already exist around the country. Online and wireless is changing how labels find and promote artists”, and the world of music will never be the same. (coolfer.com)

FINAL: The Rappers Speak Out

Recently since the Don Imus issue, there has been more focus on rappers and their degrading lyrics. Rappers have been stepping up to differentiate themselves from the, if not before definitely now, famed radio guy. Some of the justifications for rap’s lyrics have been the fact that unlike Imus, rappers are describing the neighborhoods and life they experienced growing up. MSNBC’s article on this subject said that some rappers have described rap lyrics as “…reflections of the violent, drug-plagued, hopeless environments that many rappers come from.” Rappers are urging complainers to take a stance and help change the reality the lyrics are describing.

Russell Simmons worries that the finger-pointing that Imus has done will fuel unnecessary censorship of music. Snoop Dogg’s response was that rappers are talking about money-hungry women in the slums that do anything to get money, whereas Imus was speaking about successful collegiate women who are trying to better themselves.

This is not to say that rappers should be let off the hook, but I do see the difference between rappers’ lyrics and what Imus said, especially when you look at the intention of the people speaking the words and whom they were referring to. Although Imus may not be aware of it, there have been women speaking out against rappers too. In 2004, the students of Spelman College in Atlanta, were upset over Nelly’s video “Tip Drill.” Nelly had turned to the school to ask for bone marrow donations for his sick sister. The students did not want to help without having Nelly lead a discussion about the video and how degrading the images were. The rapper however, refused.

The music industry is not ignoring this issue either, thanks to Imus’s comment about rap lyrics. A large group of music executives met in New York to discuss sexist rap lyrics, and their possible regulation. The meeting was called by Russell Simmons of the Hip-Hop Summit Action Network. Simmons also spoke on Oprah’s two-day town hall meeting for her show. He mentioned, “Whether it’s our sexism, our racism, our homophobia or our violence, the hip-hop community sometimes can be a good mirror of our dirt and sometimes the dirt we try to cover up” (USA Today Article).

Essence Magazine has also started a campaign called “Take Back the Music.” The site allows for opinions from both sides. One view I found interesting was that of Melyssa Ford, an ex-video model. She claims that her start in the business was to pay for tuition. I am not sure if I can relate to her reasoning, but she claims that she recognized that she was being exploited, so she decided to exploit herself, by making as much of a profit as possible off of her images. A rapper, Talib Kweli, stated a similar argument to what was mentioned in the MSNBC article, where he does not believe that rappers should be required to uphold society’s morals, but that it is more important to reveal the truth. Other rappers state that the women in the videos are there by choice, and if not in their video, the women would be in someone else’s video. I guess the choice is up to these women, but the audience for these videos should be considered. For example having “Tip Drill” air in the day is not a good idea. If rappers want to make these degrading videos, they should make sure that they are reaching appropriately aged audiences. The same should go for degrading lyrics, but I suppose there are already parental warnings on a lot of the CDs. I am not one to vote for censoring lyrics except for when they can be easily heard over the radio or on the television, where minors can access the content.

I agree with Sharpton “…airwaves should not be used to commercialize sexism and racism” (MTV article). Many rappers would respond that they are not promoting sexism or racism, but merely telling what they have observed in their communities. In this case, I would add that the airwaves should not even allow for observations told through lyrics that could imply the promotion of sexism or racism, because minors may misinterpret the lyrics. According to Parental Advisory Music Censorship In America, music fans tend to look past lyrics that go against their own morals (161). If this is true, then the above worry about youth hearing degrading lyrics is not a major concern. The problem is that in households where parents are not there to teach their children what is morally right, the children can turn to their favorite artists’ actions for advice. Perhaps a form of uncensored radio could be offered that allows for the uncensored lyrics to be heard by people over 18 years of age. On the Internet, or premium television channels, the artists should be allowed to express themselves. In a statement defending hip hop artists, Russell Simmons reminds the public that rapper’s “…messages are a mirror of what is right and wrong with society. Sometimes their observations or the way in which they choose to express their art may be uncomfortable for some to hear, but our job is not to censor or silence that expression” (Businesswire article). It is unfair to censor lyrics completely because they are offensive, but those offended should at least be able to avoid watching or hearing the content on regular television channels and over the radio. It seems that someone could always write a counter song against any lyrics in some of the more degrading rap songs that could also be shown or heard over the Internet, and many have.

The most bizarre argument from the Essence website was that the degrading videos help young girls. Russell Simmons claims that by watching degrading videos, young girls can learn about the mindset of the boys they are going to school with, and learn how to deal with them. Simmons fails to touch on the fact that young boys are also watching these videos, and seeing how these rappers are treating women.

Parental Advisory Music Censorship also mentions rap as a teaching instrument, a cultural history, and even comedy. It urges listeners and video viewers to look beyond the language and realize that “…rap is a wakeup call to mainstream America” (115). It is only a wakeup call when interpreted properly. When asked reasons why class members still listened to degrading rap, some mentioned only for the catchy music over the lyrics, which proves the earlier point about people ignoring lyrics that do not follow their own beliefs. Others mentioned that videos are comical. Maybe there is a point that could be argued that the shock value of these degrading videos makes the acts seem so ridiculous that they are funny. Viewers look on and wonder how anyone could think to show something so degrading, and the viewers are instantly aware of the problem of how women are treated in certain communities. Policing Pop mentions the fact that mainstream culture in America tends to be Eurocentric. This means that not all of America can relate to the problems in some of the inner city communities that many rappers rap about. The book goes on to mention “…even when these musics seem loud, raw, and unpleasant to Eurocentrics, they often provide the truest expressions of this young, polyglot culture” (235). Others in troubling communities can relate. The fear is that young viewers, who have not been told that the acts are to surface issues in certain communities, see the videos as insights to a favored rapper’s glamorous daily life.

To prevent this problem, degrading rap videos and songs could be made less accessible to minors. It would be hard to completely prevent the content from reaching the youth, but at least with the Internet, minors would have to search for the content rather than having it pushed at them by the radio or on popular regular television channels like BET. Hopefully this would prevent some misinterpretation by youth. There is obviously a large fan base for these rappers, considering the music sales, so it is hard to completely censor something that still has such a high demand. As far as the women depicted in the videos, that is their choice. The women are aware of the lyrics and the fact that they are being described in a negative manner, and they are not forced to be a part. At least here, the lyrics match up to the way the women are portrayed in the video with their provocative dancing. With the Imus issue, his comment has no relation to what he was describing. The sexist part of the comment may be frequently used by rappers, but not to describe well-educated athletes who did not choose to be a part of the commentary, and were not acting in a manner that implied what was said. The racist part of the comment is not found much in rap. There is also the important fact that Imus’s show can be heard by anyone tuning into the radio, where often degrading or sexist videos are shown late at night or over the Internet. Degrading rap could use some regulations as far as the audience it reaches, and Imus, although I think unintentionally, brought the issue to the front line.

"Down Under" Downloading

Australia revealed its incredible successful year in regards to CDs and legal downloads this past week. The “Australian Recording Industry Association announced …shipments increased 7.9%, though the value of the shipments dropped about 5%. Digital album sales increased 250%; digital now account for 5.5% of music industry sales (up from 1.5% in 2005). Australian repertoire accounted for a greater percentage of the singles and album chart”. (Aria.com) These sales seem to reveal that success is with local bands that nurture a strong fan relationship and reach their audiences through local groundwork. It has been discussed in prior blogs both the importance of content, and performance. If the record companies reach the artists and the artist reach out to their fans a little more, guaranteed people would buy more CDs. The Internet and downloading seems so removed and from a personal fan based connection. If artists are constantly reaching out to the communities and performing their stuff live or on shows like “American Idol”– they will build connections with all types of ages and various social groups. The artist has the powerful influence to sway sales, more so than then labels and Steve Jobs. Look out how many people buy People Magazine and In Touch – people want to be in touch with Hollywood and desire to know what their “stars” are doing. What they are wearing, eating, drinking and who they are dating. If artists were advocating to buy CDs- wouldn’t consumers be more inclined to buy “under the influence”?

There is however there is an opposing statement in an article on “Coolfer.com” claiming that the Australian record industry has declined since 2006? “The Sunday Mail reported the value of first quarter 2007 sales were down more than 20% versus the same period in 2006”. Bottom line there is so much contradicting information and quotes out there, it’s hard to know what really is going on, and who is really telling the truth. Another important note – piracy is ramped in every country not just the US. If there is music- down-loaders’ will find a way to get it for free.

The article in the “Sunday Mail” described a proposal that Australia is planning to cut off possible phone and Internet service to people who illegally download music. Now that is a definite measure to keep money flowing.

The Labels Are Still Trying To Make Money

Will he agree? Steve Jobs that is. The labels are going to beg him next week to add a music subscription service to iTunes. Universal Music will be the first to start negotiations, and the rest are going to follow the lead.

The labels are hoping to make more money off of subscription services, since customers would ideally be consuming more music. The labels would each take a portion of the monthly payments, and would receive money from licensing fees each time the songs are played. There are also thoughts about approaching Jobs with ideas for variable pricing with songs.

Whatever Jobs decides, the labels basically have to follow, due to the fact the iTunes is responsible for 75% of online music sales. This could be a favorable opportunity for Jobs though, considering it would be one more way to sell his iPods. There is also talk of giving a discount to subscribers who use iPods.

I still have an issue with not owning the music though. Subscription music is nice for songs that are a trend for the week, but there are some songs that I genuinely like and would want to purchase. I do not see the subscription service as an either or situation, but if Generation Y does latch on to this idea, I see us as paying for both the subscription service and still buying favored songs. There is still the issue of what happens if for some reason iTunes decides to start this service and then stop it. Customers would lose all of their music that they rented.

Sex is Calling

Music is said to reflect the mindset of a generation. Then what is going on with Gen Y ? There is Nelly’s “Tip Drill”? Akon’s “I Wanna Fuck You”… what are these outrageous sex forward songs saying and proposing to today’s culture? Ironically they are saving the music business. Could this be the truth? Sex, Sex and more Sex sells… at least in selling “radio hits” and the ever savior to the industry- “ring tones”. Jody Rosen of Music Box explain how songs like Akon’s and Nelly’s are “not really proper choruses so much as advertisements for ringtones, which, as any music-industry analyst will tell you, is where the real money is these days. Between Akon and rapper Mims (another breakout rapper of 2007), there's reason to suspect that we have arrived at a historical tipping point—the moment when the cell phone replaces the record as the central icon of popular music culture.”- Music Box

It is not new news that the industry is relying on ringtones for income, but has anyone given thought to why such unmelodic and underdeveloped songs do so well? Could it be that the catchy phrasing is perfect and short enough to be heard and played through an entire ring cycle? Could it be that theya re encouraged by the labels to ensure revenue? Let think about the youth culture for a minute. Could this be the reason children are running around these days singing “smack that on the floor…smack that and give me some more… till you get sore”. They possibly don’t understand what they are saying- but you know they are hearing it from somewhere. Videos are played on iPod’s, phones, and the Internet; it’s not hard to realize that censorship is a joke? If people can break DRM laws- children can definitely get around their parents security locks. There is something disturbing about the messages that are bombarding innocent youth and infiltrating the streets though or mobile media devices. It will only get worse it seems, when sex and “wet pussy” is a rappers dream—you are bound to see it anywhere you please. Good luck to parents out their trying to protect their childrens' onnocent eyes.

Warner Yes, Warner No

AnywhereCD is a website developed by entrepreneur and MP3.com founder Michael Roberston. Basically the website sells both MP3 albums and a bundle of CD with the MP3 album at a slightly larger cost. For an example a MP3 album can cost $11.95 and the CD+MP3 album bundle would cost $14.95. Some albums have a standard album price even though they have many tracks and some are prorated. “Tracks are 192 Kbps MP3, and the site is very no-frills.” Just recently AnywhereCD made a licensing deal with Warner Music Group – entailing that Warner would represent a “variety” of music in the online store. Just to name a few; “Saint Etienne, The Shins, Iron & Wine, Pigeonhed and some from other bigger acts from more major labels like “Larry the Cable Guy, Static-X, Shadows Fall, Josh Groban and Fountains of Wayne”. The trick is that Anywhere CD has a help page which links to a Youtube video that demonstrates how to download your purchases etc. Neat idea. Sounded like a good business model for online incentives to buy CDs right? Wrong.

Just yesterday it was released that Warner gave notice of termination with AnywhereCD due to the fact that the “site sells Warner Music Group albums in the unprotected MP3 format”. A WMG representative (quoted in an article at

Billboard.biz) said, "AnywhereCD is selling Warner Music Group content in a manner that flagrantly violates the terms of our agreement. Accordingly, we have sent them a notice of termination and they are required to immediately remove all of our content from their site."- Coolfer.com.

Roberston’s response to the claims his site was helping the fans learn how to rip a MP3 versus sell an MP3 format was in defense that his thinking “was [that they] should give the consumers a reason to buy an album…"If you buy the album then I'll give MP3 tracks pretty much what you get with CDs anyway”. -Ruters.com

It seems strange that such a big company like Warner would have clearly understood the business model before signing an agreement. This demonstrates almost a desperate measure to jump on the next bandwagon and anything that can sell a CD. Warner might have been in a good position at AnywhereCD, most definitely a CD plus a download sold together is a consumers dream – and only for a couple dollars more! Who wouldn't buy?

A Buddy For Your Stereo System

Slim Devices has a new product to bring all of your computer music files to your next party. Since iPods are sufficient for personal listening, and computer speakers do not always sound the best, the new Squeezebox and Transporter are here to offer an alternative. Slim Devices is making it easy to give up the CD. With their new products, you can play your computer music files through any stereo system. The products use wireless networks or Ethernet cords to easily access your computer music files to convert them and play them through a stereo. Once the products are connected to your computer, they automatically find your music. The products also play multiple types of files, including MP3, AAC, WMA, and WAV, along with others. They can take music from your iTunes or Windows Media libraries. Like the iPod, you can shuffle songs, or choose by artist, song, or album. Squeezebox can also play music from Rhapsody libraries, and offers purchasers a 30-day trial. Internet radio is an option for Slim Devices users, and by downloading larger music files, the music played through these products can mirror the quality of the music on a CD. The price for the system is $299, and $2000 for the Transporter.

Whether Generation Y will run out to purchase these products is not guaranteed. There are so many iPod attachments that already allow you to plug in your iPod and play your music for a group of listeners. They are also often offered at a cheaper price. If you opt for iPod speaker attachments, you can still have the remote control, and you can take your whole system on the go. From this article, it sounds like you have to have access to your computer to use Slim Devices products, since the music is streamed from your computer to the products. This means you either have to take your laptop with you, along with the Squeezebox or Transporter, or you have to stay at home with your desktop computer. The quality difference from iPod speaker attachments and Slim Device products does not appear to be enough of an issue to me to make me think that Generation Y will even care. These products seemed to be catered to perhaps an older generation that want to stream their music throughout their house, but I wonder if the older generations are demanding this? Right now, the older generations are still buying the majority of their music on CDs.