Digital Music Trends – Midem 2010 Special – Day 1

This week live from Midem/Midemnet 2010 in Cannes. Here’s a summary of the first day’s events including talks by Ted Cohen from TAG strategic, Owen Van Natta CEO of Myspace, Steve Purdham founder of We7, Pharrell Williams from NERG, Pete Wentz from Fall Out Boy, Gina Bianchini from Ning – everyone talking about the business of digital music and its evolution!

Please excuse typos and a couple of possible misspellings, didn’t have a great deal of time to write this down!

Digital Music Trends Midem 2010 special edition  – Day one – 23rd of January 2009 – from Cannes in France.

Hello everyone and welcome to the first of a series of Digital Music Trends podcasts dedicated to Midem 2010. I will be releasing one each day during MIDEM summing up the day’s events. This will hopefully make it easier for you to catch up with what has been happening here at the conference. The full streams of th   e sessions are available on Midem.com but I guess that the prospect of watching all of them can be daunting, so have a listen to this summary and if you think you want to delve deeper into one of the panels go and catch up!

From early this morning outside the Palais du Festival there were a lot of works going on to prepare the venue for the NRJ music awards that are happening right now and fans (see early teens in this case) were already gathering at the railings.

In this slightly odd scenario the conferences kicked off at 10AM, with a brief address by Ted Cohen, managing partner of Tag strategic and longtime advocate of digital. He started off by noting that this is 11th year of Midemnet – it marks the beginning of a second decade for this digital conference and once again everyone descended to Canes to talk about how to do business. Mr Cohen remarked that the industry remains in flux and continues to contract. He believes that we’re probably at the lowest point now and things should start to turn around soon.  In his opinion it’s important to move from thinking of music as a product to music as a service. 11 years ago at the start of Midemnet Napster was really scaring the industry – and now 11 years later the industry is still struggling but we are starting to figure things out. Pandora just posted its first profitable quarter which is very encouraging. Next week in San Francisco Apple might announce subscription service that might just shake things up. Mr Cohen also remarked that it’s important to experiment in digital music and that we need to create value in music in order to make fans see that it’s worth paying for. A deep catalogue, good personalization tools and recommendation tools play an important part in providing a rich music experience that can be converted into revenue streams.

After Ted Cohen’s address Ralph Simon, the CEO of the Mobilium advisory group took the stage to moderate a debate with Dresden Dolls singer Amanda Palmer and Hal Ritson from the Young Punks and also musical director of Dizzee Rascal Live.
The debate here centered around the role of the artist within the music space, how do you market yourself, how do you keep in touch with the fans and sell your product at the same time?
Amanda Palmer is often hailed as a really savvy new media user and her perspective is that it’s all about the fans and that any mean of keeping in touch with them and giving them your time (for example by stopping for autographs and photos after every gig) is a way to consolidate and build trust. Both with the Dresden Dolls and as a solo artist she cultivated a forum that how hails thousands of regular participants and have helped her to achieve better sales with her last album released independently than with her last release which had been supported by Roadrunner records.

Hal Ritson has experience in both the DJ world with the young punks and in the workings of label politics since he’s been working with dizzee rascal. Talking about the latter, he said that Dizzee is the first independent artist to achieve three consecutive number ones – the first that his label XL had rejected as not commercially viable. It used to be hard for bands to bypass the corporate structure but not so anymore.
In the DJ world Hal Ritson, as member of the young punx managed to get exposure in a number of different ways, even partnering with a German beer brand that wanted to get customers to drink beer in clubs rather than the usual Bacardis…

Amanda Holden concluded the debate stating that her revenue streams come from a variety of different sources but that the record sales are only a small part of that revenue and that there are ways for music fans to make things happen independently.

Third event of the morning was a stream of the second part of the interview recorded exclusively for Midem by Richard o’ Brien, it wasn’t enlinghtening – it gravitated around the need to experiment with the business models and the need for the labels to take risks, but it had a great quote which reads ” you disagree on it – he was talking about the three strikes law – and you’re typecast as a Taliban.”

Fourth event of the morning was a 15 minute lightening fast run-through a compelling survey on the music consumption habits around the world.This was presented by Jasper Donat, co-founder of Branded and president of Music Matters. Music Matters has carried out the survey interviewing 8.500 people around the globe. The results are exceedingly interesting for anyone working on international projects or for anyone remotely interested in the music consumption habits of our fellow earthly companions. Needless say that the news that Australians listen to the least music of all was met with widespread giggling.

So this starting to look like a marathon?? wait ’cause there were two more events in the morning…

So I was asking myself – what on earth is the Chief Marketing Officer of Kodak doing being interviewed at the MidemNet conference? And this was exactly the point Jeffrey Hayzlett started on. After just a minute it made complete sense. Kodak in the past few years has had to undergo a huge transformation. The most impressive figure he gave is that the company was selling 15 billion dollars in films just five years ago, a figure that is now 200 millions. These are truly nerve wrecking numbers and were all brought on by the digital camera revolution. Jeffrey went on to detail the steps the company took to ensure its survival. I think that putting aside the great differences between a label and Kodak – the latter never had to deal with musicians – this is a great story of quick thinking and survival. Over 60% of the company’s staff has only been hired recently to respond to the new digital demands, the company operates in a way that gives employees the opportunity to develop new ideas while listening to the needs of the public and the inevitable failures are viewed as a great way to learn and make things better. But this is really a discussion that you should go and check out on the Midem site as mr Hayzlett was really a character and it was a shame that he didn’t stick around for a couple of days as i’d have really liked to interview him.

Last conference in the Morning was the interview with Pharell Williams the famous producer and NERD member – this for me was not a highlight as very little came up about the business itself in the discussion, it mostly about his inspiration and drive and about the necessity to have a trusted team in place to execute projects. Pharell is a really talented producer and also an entrepreneur but I didn’t feel like I gained much from this outing.

The discussions resumed at 2:30 with a spirited panel that focused on the way in which streaming models are likely to evolve in the future and on what kind of deals are going to have to be done between rightsowners and companies to make money out of these ventures. Digital income was only up 12% in 2009 and this means that it had not yet made up for the loss in digital sales. The panel was moderated by Paul Brindley from music ally and included :

Simon Wheeler, director of digital – beggars group – vampire weekend is the first indie label number one in the uk for over 25 years.
Steve Purdham – founder and investor of we7, one of the oldest streaming services, the third year going. How many users 2.5 million monthly users.
Michael Epaull from sony – main focus to building a digital channel for monetization of sony’s music.
Richard Gottehrer – founder and chief creative officer of the Orchard. He and his partner will bve making an announcement on monday which is more creative-focused. – ask for interview monday or tuesday?
Stephen Bryan – responsible for deveoping new channels in the digital space around the world at Warner Music.
Paul brown – svp strategic partnership at spotify in the UK.

Paul Brown started by outlining the history of Spotify, Launched in Sweden october 2008 and in the UK in february 2009 – the company was founded by Daniel Ek  is doing well having reached over 250.000 subscribers paying monthly fees between its 6 markets. Spotify relies on these subscribes and on a 40 strong ad sales team that is generating millions of euros in advertising revenue. The real aim for spotify right now is to grow a strong sustainable subscription model and the mobile application has definately driven a lot of traffic and new subscribers.

Steve Purdham from We7 explained that the company was created three years ago but the first year was about building the tech, the second about doing the licensing deals and last year at launch it was about building the audience. 2.5 million users use the site without having advertised it at all for fear of scaling too quickly. The audience is the driving force and whilst primarily ad-funded at the moment Mr Purdham announced that they will be introducing a subscription next week in 2 forms – one for use on PC and for use on both PC and mobile. I can personally only imagine that the former will be cheaper than the latter.

The labels (Warner Music and Beggars group) seem to agree that they are happy for consumers to find the service that is right for them but that the streaming services need to find the right business model underlying user-friendly technology because they believe that however you monetize a streaming service you are never going to get the same amount of income that you get from selling music.

Stephen Bryan from Warner said that it’s great to have a wider amount of streaming models -= since that reaches the 50 per cent of consumers that are more laid back and would not purchase the music outright.  The ability to reach this 50% is expanding and in 2010 with the smartphone market still booming there is the possibility to get a lot of revenue from mobile subscription services.

According to Steve Purdham the climate has changed and the lables are more open – the premise is still for him that every single track that is played on We7 should be paid for but you need to work out how that’s going to happen. It’s not a single bullet in the economic model, it’s a matter of being flexible around the model. At we7 they pay for every song that they deliver, there is a minimum fee and 1) payment to the label 2) payment to the publisher 3) cost to deliver the track to the consumer. This was seen as about a penny per stream a year ago but Steve said that the actual figure does not really matter but the key element of this is for there to be a revenue stream to make it work.

one of the main challenges of streaming services remains the recommendation process – often the user is at a loss on what to listen to once confronted with an empty search box.
Michael Epaull  from Sony said that sometimes having so much available is almost like having nothing because it’s hard to choose. It seems like you get the on-demand without the programming – now the challange is to take the two and putting them together. If they could successfully get people to stay and explore new music all the time then they would not have so many subscribers leave after the first few months because they don’t believe they are using the service enough.

There are no indications so far that digital streaming are cannibalizing digital downloads yet, but that is bound to change as services become more seamless and easier to use.
A key developements recently is the unlimited download model – there is no service yet but virgin media and universal have signed a deal. Paul Brindley asked the panel if  they thought that this will happen and what impact it will have.
Most of the panelists agreed that it’s inevitable, Simon wheeler from Beggar’s group expressed his concern that such a service would attract Beggars largest customers that would jump at the chance but not penetrate enough in the mainstream to make up for this loss of premium customers that would otherwise spend up to $1000 per year on Beggar’s music.
Michael Epaull from Sony had a different perspective, for him it’s about making the streaming experience as rich and seamless as possible – he does not think that people want to negotiate with an unlimited amount of music files in their computer and that it would be strange for the industry to release a product that the public is not asking for in great numbers. I think I kinda agree with him on this point.

The second session of the afternoon was a very informative chat between Owen Van Natta, CEO at Myspace ad Bill Werde, editor in chief of Billboard.  Owen was named named CEO of myspace 9 months ago and has implemented a lot of of changes to the site in that time to try and get users to spend more time on it. When asked about the difference between Myspace and Myspace Music Mr Van Natta replied that after the massive disruption to the music space created by the digital revolution there was the need of deep and strategic direct partnership with the labels to be able to turn things around. Myspace Music is a separate company and it’s a joint venture with the labels because myspace needed the partners to be also part-owners.

Myspace music has now gathered the largest collection of playlists – they have over 180 million – also partly through the time they spent importing the Imeem playlists after the company folded and was acquired by Myspace. But how do you monetize this huge amount of playlists? Owen said that he believes consumers want a holistic experience in relation to music – they want the place where they interact with other people to be the same as that where try listen to their music. Myspace music is one pillar that is needed to build this seamless experience. At Myspace they believe that the future of content distribution is going to be through people and not through portals.  Owen said to be pleased with the progress made on the business side and that they are continuing to grow. The economic downturn had caused a number of brands to reevaluate online as a cheaper option on and myspace has been very imaginative in introducing brand into the experience. Myspace have started selling a selection of concert tickets on the site and are looking at alternative revenue models other than advertising.

One of the most interesting things he mentioned is that they partnered with collection society soundexchange in order to distribute money amongst the bands. Soundexchange raised over 15 million dollars from Myspace streaming pennies but they don’t know who to give this money to – with this partnership have already identified 25000 artists who will be able to get paid for the streams that happened on their page. This is one way in which Myspace is trying to keep not only the viewers coming but also the bands unsigned or otherwise. Another way is the dashboard functionality that allows for bands to receive free metrics about the people who are visiting their page – where they come from, what they like and what the demographic is.
Myspace overall saw a 7 per cent increase in unique users last month and this is very encouraging as it’s the first growth in the site’s traffic in over 12 months. Myspace Music has also been a great success with the site growing 92% in a year.

And finally – I’m getting to the end of this I promise was the session with Ning’s founder Gina Bianchini and Fall Out Boy bass player Pete Wentz. Ning allows people to create their own social platform for specific interests an passions. It has millions of users and entertaimment is one of the key areas for the site.  The discussion focused on how to relate to fans on a day-to-day basis and Pete Wentz who is an avid twitterer and social media user maintained that it’s all about the authenticity of the artist and putting yourself out there for the public. He said that social media are like a door into the artists life but that the artist has the power to decide how much to open that door. The discussion was quite funny, with Wentz saying that you cant’ be in the music business if you’re not prepared to shoot someone every now and again and likening the music industry to a post-apocalyptic giant armadillo that is only now evolving into something more practical. Gina Bianchini talked mostly about the business side of things and how artists are using ning to channel the fans to their own social network so that they can create a compact community out of all the fragmentation created by the myriad of social networks out there.

Ok so this was the end of the first day – and it was very nice to walk out of the auditorium and hear Amanda Palmer sing the entirety of creep with her Ukulele. Now gearing up for a second day that looks even busier than the first,
till tomorrow then!

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