MediaFuturist

MusicNetwork Interview on the Music Business "The Future of the Future"

The Future of the Future: Gerd Leonhard looks ahead (published today in TheMusicNetwork)

16 August 2010

The main shift is going to be away from the downloading of content and owning of CDs and more towards music in the cloud. That is going to happen with most media, starting first with music and then going into films and books. This is not just a music business issue.

We are moving away from the copy to access. This is a very good model for the artist. In the past, most of the money was spent on the physical product – so the reproduction, packaging, shipping and retail store.



The artist basically got nothing in most cases. Skipping that whole process now means that the brand of the musician becomes the most important thing. This is very good news for the artist, the producer and the creator but less so for the industry as it’s much easier to sell a copy than it is to sell access.

The idea that the artist just gets, say, 10% of the sold product is now out the window. Now the artist will give his agent or service agency some kind of fee – say 25% just as Nettwerk Records and other companies are already doing.



The issue is to get attention and clicks from consumers. If that attention is converted into a revenue share based on advertising, a subscription fee or an upselling process, then as soon as you have attention, you participate.

We are still in the old system of counting on revenue per use. That won’t work in the future. The bigger your brand, the bigger the attention you will get and the more clicks you get, the more money you’ll make.

I believe that consumers will ask for the access models to be free initially but then after they use it for a while they’ll be quite happy to pay so they can remove the ads or increase the quality of the stream for example.

Music online will feel like free. There is plenty of money to be made from ads, but it’s just not there yet. It’s coming, though. We have seen that advertising just doesn’t work on the Internet.

It’s so easy to click away the ads or avoid them altogether. Advertising was essentially useless until now as today we are starting to see social advertising, such as on Facebook. Plus we have mobile advertising. Finally advertising is becoming more useful. The brands are no longer looking to spend 1% of their budget on social or mobile; they’ll be spending 10% or more. 

There is a total disconnect between the way a new business can be grown and how a lot of rightsholders perceive how the business will be paid for by Google or ISPs, for example.

That’s a very bad approach because it makes it impossible to legally grow a new model. You will be much more successful – like YouTube and Last.fm – if you don’t have the right licence and you just do it. That’s a real irony.

I don’t think we’ll be able to support new services without a compulsory licence.

We need a compulsory licence for music use on the Internet so that companies like Spotify, MOG and we7 can use a licence rather than just bang their heads against a wall like they have in Germany and the US.

A cloud-based model has to win out in the end, as the costs are so much lower, the sharing is so much easier. You can put all sorts of ads into cloudbased systems because you always know what the user is doing. There are lots of great benefits there. But the industry hates the cloud-based model as they lose control over distribution.

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Complete video and audio from my appearance on Roda Viva / TV Cultura (Brazil), April 2010

This is the complete, 75-minute video of my appearance on Brazil's most popular talk show on Public TV, called Roda Viva (on the TV Cultura channel). I was delighted to be invited to the show, and really enjoyed being 'grilled' by the super-smart journalists and Brazilian media experts in the studio. We could have talked forever! The show was originally broadcast on April 26 (on Brazilian TV as well as online, see the Twitter buzz here) but unfortunately the webcast did not work very well so this is the first time I have seen the video, myself, and thanks to Roda Viva / TV Cultura I am delighted to be able to share this recording with you, as well.

More information about the show is here. Duda Groisman made some great photos during the recording of this show, embedded below. Related activities on this trip include: my presentation for NBS Brazil "The Future of Communications and Business", and my presentation at Fundacao  Dom Cabral (one of Brazil's best business schools) on "The Open Network Economy". Please note: the video is half Portuguese (the questions) and half English (my replies)

Here is a 9-minute version via Youtube (their 10-minute limit really bugs me!) Audio:

Gerd Leonhard Roda Viva TVCultura Brazil

Gerd Leonhard Roda Viva No Intro

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A must-watch short film: When Copyright Goes Bad

Last year, I was interviewed by Consumers International's Luke Upchurch for this really powerful film, during the 2009 TACD / Paris Accord meetings (see this presentation on the Future of Content), and a couple of snippets actually made it in here. Along with a few juicy snippets (incl. one by John Kennedy / IFPI), this film outlines the latest developments in this space really well - in fact, it's outright scary what is happening here - watch this movie!

To coincide with the second annual publication of Consumers International’s IP Watchlist, CI is launching this short online film, looking at the renegotiation of the relationship between copyright and consumers. This is a film about how copyright has become one of the most important consumer issues of the digital age; why corporate lobbying risks criminalising the actions of hundreds of thousands of people; and what the future holds for the fight for fairer copyright laws.  When Copyright Goes Bad is for anyone interested in how copyright is affecting consumers.

Apart from my 20 own seconds of micro-fame, the movie also features: Fred Von Lohmann - Electronic Frontier Foundation; Michael Geist - University of Ottawa Law School; Jim Killock - Open Rights Group; and Hank Shocklee - Co-founder of Public Enemy. @Shocklee @michaelgeist @sunil_abraham @eff

Please share, embed and pass on.

For a variety of film formats, blog commentary, language versions, additional footage and more, go here.

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Immediate Media Futures: my preso at the Guardian CMS: data is the new oil; forcing to buy is like... forcing to love

I really enjoyed being at the Guardian's Changing Media Summit in London, last week. Not only is the Guardian one of my favorite online news-sources but I also got a chance to talk to Wikipedia's Jimmy Wales, during the event, and I met tons of great and inspiring people - London is always a goldmine for that.  So, as promised, below is the slideshare version of my presentation as well as the direct link to the low-resolution PDF download; feel free to download and re-use as you like (under the usual creative commons, attribution / non-commercial license).

Some of the bottom lines from my presentation:  1) in content and media, we are rapidly moving from just selling 'stuff' i.e. copies of content, to selling services and experiences 2) EGOsystems are rapidly becoming ECOsystems; i.e. because we are all (well, most;) connected now we must create and implement mutually beneficial business models that are based on market-making and revenue sharing 3) Trying to enforce control when trust is crucial is a very bad idea, i.e. the quickest path to failure in this new content economy 4) In the content industries, the concept of mostly 'selling copies' is becoming 'toast' - "New Generatives" based on access must urgently be created and delivered 5) The future is in selling -and bundling - access, not (just) copies, and the ecology of selling access is totally different - we must get used to it! 6) The content 2.0 economy will work only in conjunction with a new approach to what telecom companies, ISPs and mobile  operators will and can do, going forward. The creation of a new telemedia ecosystem is needed to really solve the key issues that the Internet has made even more urgent to solve 7) All content is shifting to the cloud, and Media As A Service (MaaS) will become a standard, very soon 8) therefore, as I have said many times before, data is the new oil (!!) 9) Value, Reason, Price, Ease of Payment and Packaging are the main success factors in selling content online 10) Most business models in the content industry will be based on a constantly changing mix of 'I pay, you pay, they pay' 11) A message to Murdoch et al: Forcing to Buy is like Forcing to Love!

Download Future of Media Guardian CMS Public Gerd Leonhard Low Res blog (3.8MB PDF)

Immediate Media Futures (Presentation at Guardian Changing Media Summit 3/18 2010)

View more presentations from Gerd Leonhard.

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TelecomTV: the Foolishness of Hadopi 2, the French Internet Law

Martyn Warwick from TelecomTV news has some very nice and succinct comments, as well as some recent stats, on the bizarreness of the French HADOPI law. The juiciest stuff is excerpted and commented below. Enjoy.

• A new study carried out by the University of Rennes and focused on the illegal downloading of online music and video in France reveals that it grew by three per cent between September and December 2009 - despite the noisy and bad-tempered passing of a contentious law designed to outlaw the practice.
• The report shows that 30.3 per cent of all Web users in France illegally downloaded content over the quarter. Over the period 1 July to 30 September it was 29.5 per cent.
• What the Rennes University work throws into stark relief is the feebleness and structural shortcomings of an ill-conceived piece of legislation that was foisted on the government by intense lobbying by vested interests within the content industry. It was conceived in a panic and rushed through without any real analysis or understanding on the part of the legislators of the way the Internet actually works. That's because Hadopi 2 only targets P2P file sharing networks and completely ignores streaming sites. (My comment on access versus copy is here)
• However, the numbers of people who watch and/or download video, film and music via streaming is growing rapidly, while the numbers who do so via P2P networks is in equally rapid decline.
• The Rennes Report shows that the percentage of French Internet users who favor streaming sites rose from 12.4 to 15.8 between September and December last year. At the same time the percentage of those using P2P networks declined from 17.1 to 14.6 over the same period.
• Even more interestingly, the study also shows that those who routinely and frequently buy and download content legally also use illegal platforms. It also comes to the conclusion that the suspension or permanent removal of an individual's Internet connection will be  counterproductive as many who do pirate content also pay for stuff as well. Thus legal video and music sales would fall.  My comment: I think this is the most important point: disconnecting those that are looking for content, those that are fans and interested in music, is a ludicrous idea if you actually want to sell to them! Protection is in the business model not in technology or the law. Regulatory capitalism will fail (quoting James Boyle here).

Get my new iPhone & Android mobile apps, here.

via www.telecomtv.com

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And again: Compensation not Control (video)

One of my best presentations, still, from Midem 2009 (PDF here).... not much else to say about this, really;)

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Google kills some music blog sites - another story from within the dysfunctional music industry

Good coverage of this latest twist in 'change to digital' confusion, via Paid Content, below: Google has killed several blogs - hosted by the Google-owned Blogger platform - that were allegedly infringing on copyright by posting MP3 files.  A long-standing tradition of music journalism online is severely endangered. To me, this is yet another example of why we urgently need new legislation in digital music, i.e. the creation of realistic, web-native standards and reliable permissions. Because this is the problem: while the marketing people at the labels love these blogs because they clearly spread the word very efficiently and reach the perfect target groups, the legal people at the labels file DMCA claims and want the sites to remove all MP3 files.

But to me, it also looks like Google is now, increasingly being forced to police blogger-powered sites for unlicensed music postings because executives across many sectors of the traditional media industry are now pointing their fingers at Google for the use of content that is not based on a clear-cut license, i.e. exists in what I call a gray zone - some use of content that is legally uncertain (yes, based on pre-Internet laws, mostly) but has become accepted social-cultural practice. Check out the debate via the Twitter Hashtag. Image: Gorilla vs Bear music blog.

"In what critics are calling “musicblogocide 2010,” Google (NSDQ: GOOG) has deleted at least six popular music blogs that it claims violated copyright law. These sites, hosted by Google’s Blogger and Blogspot services, received notices only after their sites – and years of archives – were wiped from the internet..."

via paidcontent.org

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Umair Haque on Google, China, Control and 21st Century Business Paradigms

Another brilliant post by Umair Haque via the Harvard Business Review - he spells out a lot of stuff that keeps coming up in my presentations, as well; so here's a bit of a remix of this juicy post, my comments are [...]

"On one side is the old high ground of the industrial era capitalism; on the other, the new high(er) ground of next-generation capitalism. The yawning chasm in between them is the gap between the 20th century and the 21st" [I call this the EGOSystem vs the ECOsystem, see more here and here]

"Currency intervention, breaking Copenhagen, crackdowns , collusion, corruption, coercion, and censorship: China's ongoing bad behavior as global citizen is, when we connect the dots, the gigantic elephant in the world's boardroom. What's driving it? The quest for monopoly, monopsony, and control" [I wrote about something quite similar in my 2007/2008 blog-book "The  End of Control", check out the free online chapters here, and a related presentation, here]

"That's yesterday's high ground, and China's focused like a laser beam on it. China's moves are the textbook stuff of b-school's blackest arts. Through larger distribution, fiercer litigation, greater exclusivity, cheaper and faster production, a bigger cash pile, advantage is gained. But the high ground has shifted. The new high ground is an ethical edge. It's not about having more; it's about doing better. It's not about protecting exports, pressuring buyers and suppliers, price discriminating against the powerless, and programming consumers to buy, buy, buy — it's about making people, communities, and society authentically better off. It's not about caring less — but caring more. It's not about ruthlessness. It's about mindfulness" [Couldn't have said it better, myself; here are just a few things I would add: in this new ecosystem that Umair is describing, we will need to develop web-native economic models and entirely new metrics for  evaluating them, friction will indeed be fiction (to a very large degree) and the importance of control will be utterly eroded by the steadily increasing power of trust, engagement and transparency]

"The old high ground was built for 20th century economics: sell more junk, earn more profit, "grow" — and then crash. An ethical edge operates at a higher economic level. It is concerned with what we sell, how profits are earned, and which authentic, human benefits "grow." It's a concept built for the economics of an interdependent world" [A key term, imo: an interdependent  world, i.e. not a broadcast world but a connected and networked world]

"An ethical edge just might be the ultimate cause of advantage. It's how better distribution, production, marketing, and pricing — all just proximate causes of advantage — ultimately happen. Jim Chanos's investment thesis says: without an ethical edge, new value cannot be created — old value can only be shuffled around (hi, Wall Street)....So here's the single question everyone should be asking. The old high ground is the new low ground. Yesterday's mountain is today's valley. Are you ascending to the new high ground?"

via blogs.hbr.org

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My presentation on "TeleMedia Futures" at BLPLaw in London

Here is the PDF from today's session in London. High-res and Slideshare version below - and stay tuned! 3.5 MB PDF: Telemedia Futures BLPLaw London Gerd Leonhard

TeleMedia Futures: the next 5 years in Media, Content and Telecom

View more documents from Gerd Leonhard.

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Via the official Google blog: the meaning of Open (a definitive must-read)

There are a ton of really great kernels of wisdom and learnings in this open letter by Google's Jonathan Rosenberg. Be sure to read the whole thing; but here is the most essential part:

"Closed systems are well-defined and profitable, but only for those who control them. Open systems are chaotic and profitable, but only for those who understand them well and move faster than everyone else. Closed systems grow quickly while open systems evolve more slowly, so placing your bets on open requires the optimism, will, and means to think long term. Fortunately, at Google we have all three of these"

via googleblog.blogspot.com

Coincidentally, in 2008, one of my my most popular speaking topics was "Open is King". Check out these resources, below.

Open is King (video), presentation at the Experience Economy Lab in Amsterdam (January 25, 2008, get the pdf / slides here)

Gerd Leonhard Futurist At Jakarta Broadband Summit "Open is King - The Future of Media

View more documents from Gerd Leonhard.

Futurist Gerd Leonhard on Open is King - The Future of Music, Canadian Music Week 2008

View more documents from Gerd Leonhard.

And here's a German video (Telekom Trendforum 2008)

Link:

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Some eBook industry 'leaders' are starting to sound exactly like the music industry 5 years ago

I just read this very interesting piece in PaidContent.org (one of my favorite sites): "Steve Haber, president of Sony’s Digital Reading Business Division... at the MediaBistro eBook Summit... decried the emphasis on the $9.99 price point for e-books. “The $9.99 price point is not a money-maker,” he said. “Certain bestsellers are sold at that price for retail, competitive reasons. But you need to have a range. You could go from $10 to $20 even to $100 for an e-book. There’s no sweet spot and it’s certainly not $9.99. When you walk into a bookstore and there are a range of prices. It should be the same for an e-book store.” Haber went on to defend the use of DRM, which he doesn’t see going away for awhile. “You need an orderly process to sell books and DRM makes that possible, mainly because it allows content creators and distributors to make money from that content"

Ouch. Have you not learned anything from happened in digital music during the past 10 years - where have you been hiding? Let me summarize it for you:

DRM is a total - and much discussed - nuisance and significant deterrent to legal consumer behavior, and it does ZERO to prevent sharing of copyrighted content online. DRM just turns users that have legal, fair and honest intentions into guinea pigs for digital rights protection schemes thought up by people who still have their emails printed for them. Wake up: protection is in the business model - not in technology. I may even concede that DRM may work in some (but increasingly rare) cases, but for books and for music...? No chance. Imho, you have to be kidding if you think these kinds of remote-controlled-rights schemes will make you any money in the future. In my opinion, anyone that still talks about DRM being a chief part of their eBook strategy should consider taking a longer vacation, and do some serious reading and thinking (sure... you could start with my own new book "Friction is Fiction" - ask me for the free PDF if needed; )

Face it: the price point for digital books has to be lower - much lower - than the price point for a real i.e. dead-tree, printed, shipped, physical book. Just because you can't seem to figure out how to reduce your costs across the board, start to add significant value in new areas and still turn a profit, that does not mean consumers will massively adopt eBook-reading at those price points (Kindle etc) or even above (as seems to be suggested above).

This looks like a very lame 
rerun of the classic and most disturbing mistakes of the music industry: the incumbent market leaders really thought they could actually increase their margin as well as their ability to control the usage (!) when selling music online, i.e. have much lower distribution and marketing costs, keep the artists down to the same old, tiny percentage, and - yes ! - increase the prices on a per-track basis.

Ask yourself this simple question: what would have happened if a download had been priced at $0.20 or even 10 cents per track (or even, yes, a flat-rate), instead of $1 - would anyone still have bothered to try and download it for free, somewhere else? Could the value of those active, engaged and happy buyers be captured, and then be extended to other things you can sell them? Clearly, the answer is YES. 

This is my message to the eBook industry and the publishers: do not head into the ill-fated direction of wanting to sell digital content for the same price as the physical content (or even above...ouch) - it is a pipe-dream!

Instead, make eBooks drastically cheaper, offer unique bundles and compilations, add new values all the time (cross-media anyone?), invent new packages (think mobile), and stop focusing on just selling UNITS. Flip the pricing logic before it flips you: lower prices, infinitely more engaged and legal users, and new Generatives on top!

Finally, here is something that wasn't touched on at Paid Content but that is crucial: If you think that the traditional deals with the authors will carry over into the eBook environment you are deeply mistaken. Witness what happened with Random House's eBook initiative, here. The authors (and their agents!) will need to be brought in as PARTNERS not minor players, as they have been in the past. Accept, adapt and move forward.

 

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Announcing my new book on Lulu: "Friction is Fiction" - write a review and get the free PDF!

I have been very busy compiling my best essays, blog posts and other writings from the past 3 years, and have finally uploaded the most recent version to Lulu (my favorite print-on-demand book store). The new book is now called 'Friction is Fiction' and is available in 3 versions:  1) 158 pages, 6x9 inches / U.S. trade format, full-color, for $60.40, here (yes, it's quite pricey because of the cost of printing 4-color, on-demand)  2) the same dead-tree version, but in black & white only, for $19.98, here (much cheaper but a lot less cool;) 3) as a PDF, for a token price of $7.50, here.

I would be delighted if you would consider buying whatever works best for you - what better Christmas present could you possibly think of!   Please note that this book will be updated every 3 months, to include my latest writings. If you want to share the book page please just send people to www.frictionisfiction.com - thanks.

As to giving away the free PDF, here is the deal: you can contact me anytime (via email, Facebook or Twitter) to request a free copy of the PDF if you just don't want to (or can't) spend the $7.50, and I will send you the download link. In return, what I ask from you is to pay me with attention, i.e. to write a review on Lulu, a blog-post, or a tweet about my book, with a link (all 3 is best;). Deal?

As to the title: I used to simply call this compilation 'The Best of Media Futurist' but while looking through all those posts - and spending a lot more time revising them - I found an important thread that goes through almost all of it and which therefore has become the new title: Friction is Fiction. So what does that mean? It means that if you are currently basing your success on maintaining or even constructing hurdles, difficulties or other bottlenecks somewhere in the system - i.e. if there is something that impedes the flow of information, or a transaction or purchase so that a higher price point or some other form of control over the can be obtained - then you are very likely to face diminishing revenues in the next few years. Building obstacles for users (fka consumers) used to work just fine but... no longer. Building walls is the fastest road to suicide in the digital economy.

The web has been utterly ruthless about finding these glaring points of friction, such as paying for eMail (remember that?), paying a ton of money for long-distance phone calls (remember those pre-skype days?), or consumers not having any access to travel booking systems, flight information or seating. These hurdles are being removed, one-by-one, and those 'people formerly known as consumers' are getting more powerful every single day. Banking on friction to increase your revenues has become like throwing matches into the river and asking it to stop - it's useless.

Friction was, of course, the main money-maker in the media, entertainment and content business, for a long time: certain CDs were only available in certain stores at certain times in certain countries, DVDs with those movies you really wanted were only available in certain countries and within certain 'windows', books had to be printed and shipped, and ring-tones could only be purchased from your operator.  Basically, at every turn the consumer encountered have-to's  and must's which essentially allowed a substantial level of control by the media and content companies - and thus, higher prices. In many cases, the more friction the higher the price you could ask for.

No longer. Read the book!

Related: my blog-book "The End of Control": download the first 6 chapters here. Also: My Music 2.0 book is available via Lulu, here

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Announcing my presentations and workshops at MIDEM 2010

Once again, the global music industry will come down to Cannes / France, January 22-27, 2010, to debate the future of the business at MIDEM. I have been involved with MIDEM / MIDEMNet and their conference programs for quite some time now (see last year's talk here), and will be contributing again, this year, see below.  If you are in the music industry I do hope to see you there, and to connect. In the meantime, check out the MidemNet blog (I am a guest blogger there, too), and take a look at the 2010 conference program.

Sunday, January 24th, 2010 Monday, January 25th, 2010 Tuesday, January 26th

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Content: the past, and the future - we must challenge our assumptions

In the past - i.e. pre-web, pre-mobile, pre-social-media, pre-twitter, pre-facebook, pre-realtime - most larger players in the content industries were focusing on controlling distribution, production and marketing;  it was all about scale and domination, and about achieving hit-driven, repeatable mass-market success.

The Internet has completely changed this (or rather, it is changing this). Yes, it took much longer than we thought, back in the late 90s, but it turns out to be a much deeper and much harder change (or...reset?) than we ever anticipated. Right now, we are in the middle of a major paradigm shift across the entire content industry framework - not just within some of the 'scenes'. Future success in content can no longer be based on control and domination (and I am saying this without any critique), rather, it has to be based on attention, trust and engagement. And much of it will start with 'free' or more precisely 'feels like free', making the challenge of getting and then converting i.e. translating that attention in actual income, even bigger. 

The bottom line: we must really question our assumptions if we want to stay ahead (see the video below).

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The Future of Digital Content and the coming Tele-Media Ecosystem (my presentation at Telco2.0 conference)

It was a pleasure and a privilege to be invited to the Telco2.0 Executive Brainstorm event in London, today, and to address a roomful of telecom  & media executives that were - as it says in the conference tagline - looking for a way to 'reduce the friction in the digital economy'. After having to listen to some rather bizarre and, sadly, rather 'retro' justifications about why those pesky Internet users and Digital Natives (i.e. our kids) really do need to be threatened with disconnection from the Net if they don't comply with the rules of yesterday's game, delivered with great pathos by the usual lobbyists from UKMusic and Universal Music Group executives (see the list of panelists below), I tried to get down to the bottom line of what the workable alternatives to their Control & Enforcement paradigms could be.

Funny thing is, that in the subsequent vote most people in the audience seemed to actually agree that disconnection and punishment are not going to change anything and are not a suitable path to new revenues... I always wonder why there seems to be strong consensus if people vote (or talk) individually, but if you hear them 'in public' everyone always delivers the good old party line of wanting more control and protection. Why is that? Whose bread we eat whose song we sing... is that it?

I will post a summary here, shortly. In the meantime, here is the slideshow (download the PDF via slideshare).  A

Enjoy and spread the word.

The Future of Tele-Media and Digital Content (Telco2.0 Conference)

View more documents from Gerd Leonhard.

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