• by Brian Kelly , July 22, 2008

Industry insiders discuss the current state of music in a global and digital marketplace

Change is inevitable. Just because things appear to be falling apart doesn't always mean they are. A series of potentially devastating downturns in the music industry due to the proliferation of illegal downloading and pirating has knocked it off its stride. The major record companies and independent artists will continue to suffer losses until an effective business model replaces the increasingly obsolete one where artists and labels survive largely off of record sales.

The scramble to revive the industry has everyone involved in a state of keen awareness. Our panelists, all industry veterans, are just that sort of people. Robin Kent, former Universal McCann CEO, has been in the trenches of ad-supported music services since launching SpiralFrog in 2005 and now stays on the front lines with a new venture, Qtrax, a legal peer-to-peer (P2P) file-sharing service. He's joined in discussion by three of his counterparts from the creative end of the spectrum: Grammy Award-winning producer "Bassy" Bob Brockman, who's worked with everyone from Debbie Gibson, Al Green, Santana and Sting to Korn, Biggie Smalls, Herbie Hancock and Faith Hill; Shane Stoneback, a producer and engineer who has been in the studio with Vampire Weekend, the White Stripes, Britney Spears, Perry Farrell, and many independent artists; and Mike Clink, a Grammy Award-winning engineer and producer who has worked on records from the likes of Aerosmith, Metallica and Guns N' Roses and has more than 70 million record sales to his credit. They hash through some key issues relating to music marketing, production and the digital dawn.

The proliferation of social media opened up new corridors in music marketing. What changes with a more diverse global audience?

Shane Stoneback: It depends. I'll use hip-hop as an example. Originally it was written and produced in a way that made strong connections to urban people and their struggle, victories and desires. It was unfiltered, unpolished and something nobody had heard before. But someone realized if it were cleaned up and polished a bit, you could put it on the radio, in movies and commercials. Many would argue [this] has seriously affected the depth and sincerity of the music.
Robin Kent: When the Red Hot Chili Peppers played in China, they didn't perform in Chinese. We have to be mindful of local culture, and it's important to have the right mix of global and local content. The beauty of a music product is consumers' habits are very similar - be it Shanghai or Milan.
Mike Clink: A good song resonates across most cultural and geographic boundaries.
Bob Brockman: The artist's job is to produce the highest quality music with as much emotion and inspiration as they can gather. Period.

Does a social network like MySpace, which recently announced a partnership with major labels to offer free ad-supported streaming music on its site, have an advantage over a music-only service?

RK: MySpace is a powerful medium backed by a global-media powerhouse. Offering equity and becoming partners rather than being just another vendor should be a huge advantage. I'm looking forward to seeing how it does. That said, there are other models offering equity, so MySpace won't have it all its own way.
BB: MySpace has an advantage and a disadvantage. They are big, so they have a massive footprint, but they are also pretty awful as a site as far as navigation is concerned. Everyone I know hates MySpace. But they have to be there, just like you have to tour New York City.

Lily Allen has garnered much attention and respect for her inventive way of marketing herself in the MySpace community. What distinguishes her from others?

BB: I'm not sure. Lily's music is really good, she has a cool image, and she works really hard at staying in touch with the media and fans.
RK: I applaud artists for their innovation in marketing themselves. They are simply using the tools available to them in this digital age. Some are better than others. I like what Radiohead did. For new bands it's still going to be tough; establishing a fan base is very hard, regardless of the MySpaces.

Does the independent artist now have as good a shot at success as the established artist?

BB: No. The dice are still loaded because of the media companies' lock on broadcasting and advertising outlets, but it's letting up a little. AI-driven preference networks like thefilter.com, Peter Gabriel's company, are a good first step.
SS: Well, it's more equal than ever, but good marketing costs money, touring costs money. The possibility of exposure is now available to anyone, and unique talent pops up every day, but I think [success] will require more than just a downloadable album.
RK: The independent artist does have more tools available in this digital age to punch above their own weight. MySpace reportedly has 5 million artists. Where would they have gone in the past to get noticed?

The full-length album is becoming a lost art. But singles lend themselves toward easier monetization in terms of ringtones and endorsements. How does this change things?

MC: Music makers will continue to search for new and inventive ways to present their craft.
BB: There is a continuing path to make ever better mixed and produced music. Unfortunately, there is a lot of laziness, especially in hip-hop, which is my first love, and that is disappointing. Too much money and too many blunts, and not enough inspiration.

Does artistic integrity suffer when artists opt for commercial endorsement and licensing?

BB: Not if the product is well-aligned with the concept of the artist; i.e., tree-hugger artists should be sponsored by tree-hugger companies. Contextual advertising and plinking will go a long way toward making the marriage between art and commerce a good fit. The Beatles, Aerosmith and many, many other amazing bands have been used in commercials. TV-commercial pandering is the current model.
RK: That ship has sailed. Fans understand the need for financial survival. With so many artists trying to make a living, it's inevitable that they will become more commercial.
SS: Not as long as the music stays pure and unattached to [the] source of the money. Many of society's greatest pieces of art have been created on commission, but years later, the art itself is what we remember.

There has been an influx of services that provide music for free by means of ad support. Will this model prosper?

SS: It's been the working model for radio and television for years.
RK: In the past year I've seen business plans for over 50 music models - not all free, but all looking to monetize music via a digital ad platform. Most will fail because they do not understand the economics of the digital ad space, and those who are relying solely on the ad-supported side to make a profit will also fail. With what the music companies are asking for their content, it simply doesn't work for an ad-only model.
MC: I think it's too soon to say. It's certainly worth looking into for an artist or label, but at this point the amount of money generated for an unknown artist is almost insignificant. The notion that using an
ad-supported site to support an artist being a bad thing will slowly disappear. I think that you will find that as this concept becomes ubiquitous, no one will pay attention. How many people using Google think about their impact on ad-generated revenues?
BB: It's a good first step. There are a lot of kinks to work out, and of course, the big guys are trying to figure out how to take 90 percent of everything as usual, but we have to fight back, just like singers and actors.

What can a P2P ad-supported server offer that something like a pirate server or a BitTorrent simply can't?

RK: Assuming one could license a P2P model with the major publishers and labels, then an ability to offer a broader reach of content becomes a realistic proposition. No one really knows how many songs exist on the P2P networks, but it is a substantial number. Qtrax has access to 40 million fingerprints of songs; iTunes boasts a catalog of 8 million. Who knows what will become legally available to the consumer?
SS: If it is set up right, it can offer quality and speed. I think these are things people will pay for. Torrents can be slow and are sometimes total crap quality. A good-sounding file that can be quickly downloaded, easily moved from device to device, as well as played and archived by its owner is worth paying for.
MC: As a consumer, do you have the time to sit and scour the Internet in order to find a song that might be the one you're looking for? Does it have a virus attached? What's the actual quality of the recording that's been uploaded? Any legitimate site that you know protects the consumer has a lot to offer. As you get wiser, you realize that your time is worth more than the few cents you're saving by getting something for free.

Do many of the ad-supported sites expect to take big initial losses?

RK: I don't believe an exclusive ad model will work under the current conditions the labels and publishers are seeking, so the answer is a casualty-strewn battlefield once investor money runs out.

How have these companies been able to get cooperation from the labels, artists and producers?

RK: Not many have so far. I suspect the price they are paying is extremely high. For many, once the investor money runs out, they'll be out of business. Already last.fm had a run-in with Warner Music Group, also EMI and MySpace.
BB: The ad companies have the money; everyone always follows the money.

We7, a UK-based site, has grafted advertisements onto each of the songs that are free to download. Does a service like this take away from the actual experience of the song?

SS: Yes. I think the music needs to be its own entity. Otherwise it's like viewing your favorite painting on a soda can - it's not really the same experience.
RK: From all the consumer research we have done, this isn't an attractive model. Getting free music today, albeit mostly illegal, isn't difficult. Adding ads to songs isn't an attractive proposition if there's an alternative - and there is. There's plenty of choice with satellite radio.

How long can an audio ad be before a consumer starts to cringe?

RK: Zero seconds. This type of intrusion could keep the consumer at the illegal sites that come without advertising.
BB: More than 30 seconds is getting offensive.
MC: How badly do you want the music, and are you willing to sacrifice your time listening to an ad you care nothing about in order to save some money?

In the future, can we expect a composite model, one that includes an ad-supported system and a flat-fee monthly system?

MC: A payment plan to your ISP for all the music you can consume, similar to a payment you might pay to your cable provider for added-value channels like HBO or Showtime, has been kicked around for years.

Consumers seem resistant to DRM. Will the industry move away from it?

BB: They have to. It doesn't work - look at Rick Rubin and Neil Diamond with Sony [disclosing spyware linked to DRM]. It was a total disaster, just another legal scheme to control the pipe.
RK: If you buy a song, it should be DRM-free. You should be able to play it anywhere on any device. Even Apple doesn't allow this. The consumer doesn't want to pay for something they don't own. Why should they? If it's free, that's a different proposition. Free ad-supported [music] needs DRM to check the plays so the artists can be fairly paid. The consumer can accept this.

Sound quality has diminished in the past decade due to digital formatting. What is being lost in the process?

BB: A lot. Music doesn't sound good at 128 or 192 [kbps].
MC: The archival quality of the recording is compromised. There will come a day when quality matters again, and we should look to the future.
RK: For the purist, sound quality is being lost. But let's face it - most of us have grown up with various levels of sound quality and survived. The Internet should offer the best quality it can.
SS: There is no reason the move to digital has to be a loss. But most people don't seem to notice the difference.

Does the average consumer care about degraded sound quality?

SS: I used to think yes, but now I'm not so sure. I see kids on the subway clustered around a cell phone speaker like it was a jukebox.
RK: Yes, but only to a point. As I said, it should be the very best that can be delivered regardless of the type of service - paid, free or subscription.
BB: I'm not sure, but I hope so.

Is music becoming commoditized?

RK: If you look at the habits of the youth today, they like Led Zeppelin as much as their fathers did. Add all the new music to the old and you have an ever-expanding base of content. The best will still stand out and have a value way above a simple commodity.
SS: Music is art. And art has always been a commodity. The artwork and artists don't need to be a reflection of this. Just keep focusing on making good music. Music's unique interests often supersede these things because of the emotion involved in listening to music.
BB: It's always been a commodity; it's just being sold differently now, and the lines between advertiser and artist are getting blurred. But at least advertising companies pay on time, and at least pay, unlike many labels.