As reported by Mediapost yesterday, http://www.mediapost.com/dtls_dsp_news.cfm?newsId=262413:

"In a milestone that signals a fundamental shift in the economics of the media industry, consumers now spend more money on media than advertisers do. The shift, which occurred during 2003, but is just now coming to light via a report released Monday by investment banker Veronis Suhler Stevenson (VSS), reflects that advertising no longer is the primary business model for most media content, consumers are. In 2003, U.S. consumers spent $178.4 billion buying or accessing media content, nearly three billion more than marketers spent advertising on media outlets to reach consumers, making consumer "end-user" spending the most significant contributor to communications industry revenues for the first time ever. "

Like the music industry, the advertising industry is also going through turmoil and grappling with existential questions. While I don't think advertising is going away anytime soon, it is surely going through some fundamental shifts as consumers, especially the younger generations, exert more control over their media. They are better able to tune advertising out both mentally and technically, and perhaps put a greater value on their time (meaning that they're less willing to 'pay' for content by viewing advertising).

I wonder what this portends for advertising and media...what do you think the media landscape will look like 10 years from now, and how will that impact digital music business models?

I am writing a book on The Future of the Music Business (Backbeat 2005). The book will discuss the new laws and business practices applying to digital music, analyze the labels’ battles with electronic piracy, propose a detailed solution, discuss how new artists and entrepreneurs can take advantage of the new technologies, and focus on new business models.

If I were to offer my prediction for the future of the music business I would start with where we are now: Income from recorded music has declined 20% throughout the world in the last several years. Many blame unauthorized file sharing. But others blame the bad economy, competition with other diversions such as video games, and finally, the diminishing quality of the music. My opinion is that, yes, file sharing is a factor contributing to the music industry's decline, but that it has been exacerbated by artificially high prices for CDs and the record companies’ slowness in embracing new business models made possible by the new technologies. In addition, rock & roll re-vitalized pop music starting with Chuck Berry and Elvis and growing into the era of the Bob Dylan, the Rolling Stones, Beatles, Madonna and Michael Jackson. During those years the music business grew 10-fold. The music became a more important component in our culture and our identity than ever before. Imagine the "sexual revolution" without the music! The music became part of the boomer's very identity and their vision of the world and their future. Rock and pop are not dead but they no longer are at the vanguard of our culture. We do not have a new Beatles or Rolling Stones. Not because new artists aren't as talented, but music is not as vital to the culture. This generation's kids have been brought up on video games and the computer. The music is just not as huge in their life as, for example, Bob Dylan was to the lives of their parents.

That said, the future? Well, Internet delivery of music will continue to grow, in both the legal and unauthorized formats. The real issue is when will the ISP and electronics industries will begin to cooperate in policing against unauthorized music. It's not the kids, it’s the huge corporations that control the pipe through which we receive free music (the ISP’s), and the machines that allow everyone to listen and keep free music (computers containing CD burners, blank optical discs, MP3 players). They have been able to resist liability for allowing people to use the Internet to get free music. And part of the reason they have been able to get away with it (in addition to their political and economic leverage) is the content owners themselves. If the labels' strategy included getting a reasonable royalty from the ISPs and the electronics business instead of, or at least in addition to, suing kids and grandmothers, the record companies might be able to get the voluntary cooperation of the ISPs and computer manufacturers. After all, the hardware and ISP companies could easily pass the cost on to the public. And since so many people buy these products and services, the cost could be quite small to each consumer and at the same time compensate the record companies for lost sales.

I think this will eventually happen, especially as a more Internet friendly and technologically sophisticated generation takes over the helms of the major labels. I see a statutory license or blanket license like those implemented by ASCAP and BMI allowing the legalization of file sharing. There will be more music for less money. New artists will make more money from this system as it usually includes paying artists 50% directly instead of the normal model of 10-20% of retail AFTER recoupment of production, video and other costs. Under the standard recording agreement, very few artists ever receive record royalties. On the other hand, there may be less money for the superstars and the top music industry executives under a blanket license system. They depended on "blockbuster" album sales of CDs priced at $18 dollars or more. Since the price of music will be less, they may make less money. But who cares if Mariah Carey doesn't make another 60 million?

Sound of Doom published on MP3.com

As some of you may know, Doom 3 came out this week, and it got me thinking. You hear a lot of talk these days about the fragmentation of the media consumer's time and attention, and a lot of people are blaming some of the record industry's slump on new entertainment forms like video gaming.... but hey, let's think about this for a minute. Any kind of media with sound is a potential opportunity for the music industry, right? Video gaming companies are taking this seriously, and not only have they abandoned the traditional "bleep-blip brrrr" carnival music, but they are seeking out popular music that fits with their concept. Just the other night, I was watching Six Feet Under, and Claire (the angsty art student) is in her room with her friends (doing drugs, of course), not only do you hear a Deathcab for Cutie song, but the actors all start singing it. Consumers may have their attention divided, but they are also demanding and appreciating better integration of the music they like into other mediums... so, the audience hasn't gone anywhere, its just that the business needs to adapt.

Music and fashion have never been so intimately connected. Recording artists such as Gwen Stefani are using their fame to sell apparel and handbags. Some have even initiated their own fashion lines. Take for instance Sean "Puffy" Combs' "Sean Jean" fashion line. His motto is “It’s not just a label, it’s a lifestyle.”

It is largely technology that is responsible for this increasing convergence between music and fashion. It was television, specifically music video services such as MTV that brought together the performer’s look, that is style and fashion, into the same place where pop rock and hip hop music is presented.

But what about the future? Is further convergence between music and fashion possible? YES. Again it is technology, this time the internet, that will drive an even deeper convergence between music and fashion. If websites such as CD Baby for independent music and iTunes for the major labels and established artists become the new music stores, why can’t cutting edge fashion labels whose websites also reach a worldwide audience, and whose customers crave new music, as well as new fashion, produce and create their own music and sell directly to their customers? Well this has already happened!

Diesel, the Italian based retail clothing chain and fashion label, is a brand that is a fashion brand actively engaging in the music business in an original and significant manner. Diesel has launched its own a music label, Diesel-U-Music. According to http://www.diesel-u-music.com/, the website for Diesel-U-Music, which is linked to the general Diesel site, “Diesel-U-Music represents a challenge to voice the most talented new artists' creativity.”

Diesel-U-Music sponsored an international competition of baby bands, DJs and producers. The label solicited over 6,000 demos and fully mixed recordings through their website and Diesel.com. Both websites are elegant and easy to use, and both enjoy a large and worldwide audience.

Next, Diesel took the best of the submissions and pressed four different CDs. These CDs are now available for purchase through the Diesel-U-Music website and Diesel's retail stores. Each of the 4 CDs represent different musical styles: Rock, Urban, Electro and Dance music mixed by the internationally recognized DJ Claudio Coccoluto. Each CD contains the best selections of the contest winners. In all, the CDs embody 48 tracks representing new sounds from UK, USA, Italy, Benelux and Switzerland. Diesel also collaborated with Stefano Cecchi Records which sells the CDs b mail order on their site.

Diesel is acknowledging the convergence of music and fashion by giving their customers what they want -- new fashions and new music. They are harnessing the power of the Internet to sell music directly to their customers. The traffic on Diesel’s sites is huge because the demographics of their customer base represent kids who are not only fashion savvy but Internet savvy as well. Why not use the traffic on their sites to sell their customers what they crave -- new music as well as new fashions? Diesel is doing it!

There were a few blurbs in the news the other day about MustVote. It's a site that offers a free exclusive download from artists including Pearl Jam, Radiohead, & Talib Kewli for every person that someone registers to vote.

It's interesting how downloads are becoming a form of currency used for barter transactions with consumers unlike CDs, tapes & other music media (yes people do use CDs for giveaways, but not like consumer brands and companies are using downloads).

While I'm on the music & voting trip: My friends at GarageBand are currently on the road for the "Choozapalooza" tour that they created involving indie artist gigs in swing states (www.choozapalooza.com). So be sure to check them out if they come to a city near you.

Finally, the hotornot.com guys thing are doing another brilliant thing: www.voteornot.org. The 2 founders are giving away $100 K of their own money towards the voter registration cause. The first $100 K goes to the person that registers the most voters. The 2nd $100 K goes to the person that referred the first person. A stroke of genius if you ask me...

Clear Channel claims to have stopped taking payments for independent promotion in April, 2003. Check out

http://www.clearchannel.com/documents/press_releases/20030409

Does anyone have any facts that would disprove this? Frankly, I don't know one way or another. However, it would seem to me that CC would be asking for real political trouble if it continued to take promo money after publicly declaiming it. There is a potential threat of legislation vs. radio that CC and other chains would rather avoid.

I need some information here.

Clear Channel claims to have stopped taking payments for independent promotion in April, 2003. Check out

http://www.clearchannel.com/documents/press_releases/20030409

That would seem like a considerable data point to be examined.

Does anyone have any FACTS that would disprove this? Frankly, I don't know one way or another.

However, it would seem to me that CC would be asking for real political trouble if it continued to take promo money after publicly declaiming it. Congress is looking hard at radio and CC does not need the aggravation.

-Good turnout in terms of quantity and quality with people representing film/video, music, tech & software industries.
-Panels generally well attended with a good mix of speakers from large well known companies to smaller startups.
-Panel on DRM that was dominated by discussion of the Induce Act was one big love-in (he writes with tongue planted firmly in cheek). Even Microsoft's rep (Brad Moss) seemed to diplomatically register misgivings on the Act.
-Consensus seemed to be that mobile phones are poised to also become cameras & portable music players. The evolution of mobile is availability, then reliability, then speed (of data services), then content
-Speaking of convergence, more than a few people commented to me how they felt that the panels blurred together (check out the panel topics as case in point)
-Booths dominated by set-top box/media center devices on display
-HP speaker had interesting things to say around how they’re in on the democratization of technology, putting it in people’s hands and seeing what they can do with it (e.g. their sponsorship of Project Greenlight & photo essays)
-Someone on the video game panel claimed that there is more time spent playing video games than watching movies, listening to music and reading books. It’s plausible but I’d be interested to know the source of this.
-Amanda Marks of UMG made the comparison of where we are today to the birth of cable (i.e. people had no idea that they’d be willing to pay $20/mo for cable TV, let alone the $50 to $60 / mo that they currently pay)
-Labels thinking of releasing DRM’d CDs in the next few years