As some of the biggest figures in the music business weighed in on the future of music this week, there were very mixed views on its future.
“If Ford’s revenues were down 40 per cent, the shareholders would be revolting,” said Tim Clark, former Island Records MD and co-founder of management company IE Music, whose roster includes Robbie Williams.
The latest CD revenue figures suggest 40 per cent declines in some markets. “Their model is fucked. It is. Physical revenues are going down like nobody’s business and it’s cataclysmic,” Clark told a panel at the London Calling music expo at Earl’s Court.
Clark hears the sound of pigeons are coming home to roost, and outlined a post-major label future that would be a lot more flexible.
“Deals have been struck with ISPs, but I’ve yet to hear of a single penny going back to an artist. Leaving aside the black boxes, is it anybody’s surprise that an artist doesn’t trust the record company?” he asked.
“Record companies deserve to be attacked for many of the things they’ve done,” he added. “There are great A&R people and great marketeers at these companies, but they haven’t been serving artists [or] fans over the years.”
Industry veteran Clive Rich, making one of his first panel appearances since leaving Sony BMG, cited one big label practice that wouldn’t be mourned: bonuses.
“These bonuses are for their mates. It’s a little club passing around these monies. It’s amazing that their shareholders allow it – it wouldn’t happen in any other business,” said Rich. “Except maybe the film business.”
Don’t panic… just yet
John Kennedy, chairman of the IPFPI and Alison Wenham, head of the indie labels, publishers and managers association AIM, shared the event’s keynote. Without the crippling cost base of the major labels, independent labels are better placed to face the face future. But they still share the same problem: getting people to pay for music.
“The old model is not working,” said Kennedy. Japan gave the business cause for optimism he thought: 90 per cent of music was acquired and enjoyed through phones, rather than PCs. It was the first large mature market to show growth, he said, calling it a “Holy Grail”.
He said large holes needed to be plugged: there were no performance rights in Japan, and no broadcast rights in the USA. Kennedy cited a recent deal in China to license karaoke bars, however.
DRM was still needed for today’s services, said Kennedy, although he left the door open for new models.
“Rumours of the death of DRM are exaggerated. A subscription remains a subscription and should not become a download to the rest of the world.” The final decision to DRM or not-DRM should lie with the artists themselves.
“I applaud AT&T’s decision to take action to clear their networks of infringing material”, he said, “and I look forward to seeing how this will work in practice.”
Wenham doubted if Japan really was growing, noting that it’s one of the few Western markets that hasn’t adopted the iPod.
“The iPod is one of the biggest problems we have in monetizing our music,” she said.
Both agreed that the iPod had encouraged people to dig into their record collections, and reinvigorated interest in music.
“People are re-familiarising themselves with their old record collections and not buying new music,” said Kennedy. “I hope there will come a time when people say, ‘enough old music, how about some new music?’”
Wenham said that we were seeing “the first generation of kids who didn’t see music as a generational weapon. In my day music was definitely used to divide us from our parents.”
Wenham was more explicit than Kennedy in how to tackle piracy.
“You can fight piracy valiantly on the beaches and in the trenches, but you can’t win it. The average file sharer has as much chance of being caught as they have of being hit by a meteorite.”
“We need to monetize the usage of our music – whether or not we delivered it in the first place.”
“We are not in control of these new business models, we live in a technologically advanced era and these models are growing up whether we like it or not.”
Live music kickback
Asked about the growth in live music, Kennedy cited a report (entitled Megastars play to empty seats after fans balk at ticket prices) in The Times to warn promoters and artists not to get too greedy.
The report describes poor ticket sales and show cancellations of concerts by some of the biggest performers, in reaction to astronomical ticket prices.
“The artists have lost 40 per cent of their revenue in four years so they are getting back by stinging the public,” concludes a Paris-based music journalist.
Said Kennedy: “At one time, artists would work and perform live for a low price to drive records sales. Now that records sales are damaged they are trying to drive ticket prices higher – and there’s a kickback. This shows the overall ecosystem is severely damaged. Damage to one part of the industry has an impact on another.”
“No other industry anywhere puts 20 per cent pack into R&D”.
Kennedy said he was ultimately optimistic for a few reasons.
“The biggest problem in the industry is competing with free. We are going to get better performance rights and better broadcast rights, they will be good enough … if you’re in China and Russia and Pakistan, that’s revenue we didn’t have before.”
“The new model is going to be made up of a variety of different models. One mobile phone operator came to me and asked if you can make this happen, and we can get 2.5 per cent of our customers to use it, that’s 10 per cent of your current revenue. And I thought to myself, ‘if I can get ten of these, that would blow away the doom and gloom.’”
“I worry about music industry revenues in the short term, and short-to-medium but term; but we are going to turn the corner. The music industry shares I have, I’m not selling.”