We are pleased to welcome emininent crystal ball-gazer Gerd Leonhard, author of technology blog Media Futurist. Enjoy!

Greetings everyone. This is my first blog post as guest contributor to the MidemNet 2009 blog.

I will be posting here regularly, from now on until after MIDEM 2009, and I will also be contributing to the MidemNet conference program – details will be announced shortly. You can find about more about what I do at my Media Futurist blog, here. My new book, Music 2.0, is available via this site (free PDF or dead-tree version, as you see fit).

I have recently been busy reading Kevin Kelly’s ‘Out of Control’ book (the re-issued PDF) and his very insightful ‘Technium’-blog as well as Yochai Benkler’s great book “The Wealth of Networks” and wanted to share a few key findings with you – the Future of the Music Industry is very much related to what Kevin and Yochai are writing about, whether you want to call it Music 2.0 or not.

First and foremost, I believe that it is fairly certain that in the near future we will see Attention Revenues eclipsing Copy Revenues. Attention revenues can be described as either revenues that come from licensed and monitored public performances (radio, concerts, broadcasts of any kind) or from more indirect sources where music is receiving a revenue share in returning for adding value to something else (such as a revenue share from sites that run advertising).

New attention-based revenue streams will come from many flat-rate offerings that will be rolled out in the next few years, next-generation advertising, commercial sponsorships and product placements, up-stream selling and cross-marketing, contextual sponsorships and branding, linking and referring; and they will indeed surpass the traditional copy & unit-sales revenues once permission is given and revenues can be shared. This quote, by Google China’s President Kai-Fu Lee summarizes it very nicely “… mutual interest, rather than monopoly, is the key to sustainable growth”.

The recent launch of Myspace Music already drew comments that sound a lot like the model I am describing here – read this column ad Adage.com. I forecast that during the next 3-5 years we will continue to sell less music products (whether digital / downloads or physical / CDs) but will witness a constantly increasing number of access-based services (i.e. streams, public performances, concerts, synchronization etc) that will be paid for ‘with attention’ i.e. 3rd parties will pay for the music in order to have direct access to those users.

This future will bring many new and expanded kinds of attention-based revenues; albeit not really – and this is crucial -from the advertising-as-we-knew-it, i.e. interruption-based advertising, pop-ups and 30 second commercials. Nobody would tolerate this kind of advertising on their iPhone or IPTV channel or YouTube or the PSP – the new kinds of ads will feel and look very much like content, themselves, and as a consumer I will want to see / hear / read them. But more on that soon…

The timeframe: I would say it will be 3-4 years for attention-based revenues to amount to more than 50% of the total amount of revenues for the music industry (defined as recorded music companies andpublishers – but that distinction, of course, is quickly out-moding as well.) Note that this will probably happen much sooner in Asia (look at the Google Music deal in China for example) where ‘selling copies and no much else’ has never been the chief money maker for the music industry.

In this future many music creators of around the globe are very likely to generate more income based on what they and their brand stands for, based on their fans / listeners / users having real, meaningful experiences with or through them, and based on who pays attention to them, when and how.

Many of us in the music industry have always been aware that the concept of selling enough ‘units’ to make selling copies the sole source of our livelihood has in reality always been reserved to those very, very few that are at the top of the heap and manage to stay here, i.e. not in the so-called longtail… or even the upper body! But those hits are much harder to come by now since people have a lot more choice and are therefore making more diverse choices – this goes for music just like it does for restaurants, holidays and movies.

In our immediate future – both as actual content creators or as the companies and industries that serve them – it will be all about gathering, keeping and then converting Attention.

In a web-native music business – and since there is no other option, this is where we are headed, kicking and screaming – most musicians and songwriters will, again, make more money with attention and performance-related activities (i.e. not just concerts but also web-casts, live-streams, on-demand and regular Radio, TV, synchronization, sound branding, music in public spaces, etc) then they used to with selling actual copies of their songs or albums.

Soon, of course, it won’t even matter anymore whether a use of music is deemed to be a copy or a stream (performance) since all content will need to be legally available in the network ‘cloud’, anyway, and it will be access that counts, not if it’s a copy or a ‘listen’.

We can already observe this trend by looking at the steadily increasing revenues of public performance organizations (such as ASCAP, BMI – see this chart from eMarketer) while the rest of the recorded industry’s unit-selling revenues (and the so-called echanical revenues) are headed for the vaporizer. eMarketer has some ood comments on that trend, here.

Let’s take a look at how artists (and their representatives, in turn) can convert attention into real cash (Kevin Kelly lists some imilar points in his brilliant essay, here, calling them the New Generatives):

  • Public Performance (whether in person or through an increasing hoice of media types – remember: the Internet is indeed the next Radio and TV!)
  • Contributions to other people’s work and productions (contract work, licenses, remixes etc)
  • Endorsements by brands, companies, sponsors, and fans (that’s pretty much how the music industry in China already works I think)
  • Referring, linking and connecting to others that gain from the connection (generating affiliate and referral fees)
  • Lending Credibility and adding value by their participation (events, campaigns etc)
  • Generating an increasing number of new up-stream revenues – once you have attention there are many ways to upsell your users to the next level of engagement!

So what is the future role of music companies i.e. publishers, labels, agents… the ‘industry’, if it’s all about the creators‘ brand and his/her increased attention?

The answer may sound simple but the current paradigm switch-over phase is tough, no doubt: future music companies will facilitate, syndicate, amplify, contextualize, catalyze, administer and most importantly provide scale – anything that can repeatedly generate more attention and harnesses those new revenue flows will be highly valued.

I personally think much of this will be done by SMEs (small and medium size companies) that will provide agency-like services to the creators – but of course, once the web is actually ubiquitous and always-on, everywhere, scale and speed will matter, no doubt, so yes – size can be an advantage then, too.

Need more? Watch or download my Music 2.0 slideshow here, or download my free book “Music 2.0″ here (7MB PDF), or read it on your iPhone or iPod Touch.

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