The discussion featured FMC board and advisory board members Bryan Calhoun and Sandy Pearlman, the brilliant Eric Garland from Big Champagne, Mike McGuire from Gartner Research, Wayne Marshall of MIT and WayneAndWax and Peter Biddle, one of the first authors to describe the "Darknet" — a closed private network of computers used for file sharing.
The conversation was a continuation of a breakout session hosted by legendary rock producr/manager Sandy Pearlman at our most recent Future of Music Policy Summit. Consider this our "executive summary."
If you follow music biz trends, you've probably heard people talking about "the cloud" — a term that basically means how you access music digitally. Think of it this way: a download is taking a file from somewhere and storing it on your local device, like a computer hard drive or iPod. With cloud-based music, you'd be accessing that file and playing it on your devices, but instead of being stored with you, it would live on some server (or several). A lot of industry folks, like labels, are cautiously optimistic that cloud-based access will allow them to deliver music to consumers in a way they're comfortable with, while having more control over their copyrights (and therefore more opportunities to monetize).
Sandy's "Paradise of Infinite Storage" takes a completely different view. Essentially, Sandy says that "monetizing the cloud" isn't going to work. Why? Because increasing data storage capacity and (and falling prices for storage) will make the cloud irrelevant. Sandy suggests that a sci-fi future is upon us, where a user can have all of the world's recorded music on a thumb drive. Need newer stuff? Pop back on the web to grab more. After that, he envisions implants that are updated by RFID chips. We know it sounds sci-fi, but Sandy is a sci-fi kind of guy.
It should be noted that Sandy's vision annoys the hell out of a lot of copyright owners, which he certainly knows. After all, he does refer to the bigger rightsholders (like major labels) as the "copyright overlords." (Now there's a band name!)
There was so much fascinating stuff in this conversation that summarizing it is difficult. Much of the discussion centered on the monetizing of digital music, and if it's even a practical aim, given the state of technology and user behavior.
Eric Garland says that users control what "goes in and out" of the web, and they always will. Sandy echoed this sentiment, throwing in some sobering technological factoids. "Right now, you can buy a terrbyte drive for about 70 bucks," he said. "For around $1500, can get something that holds all recorded music in history. And you'll be get that as an implant soon." Peter Biddle had a great zinger: "What will the porn industry do with that?"
Our own Bryan Calhoun talked about the need to have better music-related data as a means to ensure compensation, at least where it can occur. "At SoundExchange, we see this all the time," he said. "Name of song: Unknown, by Various Artists." Doesn't exactly sound like a hit.
Biddle said that, while "the web is terrible for money," there are ways to make commerce work online. "The web offers more control in the means of delivery in regard to shaping and framing. What are we willing to trade off in terms of control?"
So should artists have any expectation of getting paid for music online? "Not if they want to stay sane," Eric said. "They can try to get it, but they shouldn't expect payment." Everyone agreed that monetizing all other aspects of your "brand" as an artist is key to economic survival. But Eric was also highly sympathetic to those musicians, who, in the past were able to make their living by recorded music. "What about Andy Partridge of XTC? What if you can't tour, but you're really great at producing and arranging these incredible, immaculate pop songs? What does he monetize?"
That's a great question, and we've been asking it of ourselves. For better or worse, this panel didn't provide any clear answer.
From there, the conversation moved to the possible need for a centralized copyright registry as a means to better track the way digital music moves across the web, and facilitate payment. Of course, the question then becomes: who controls the data? Is it open-platform? The panelists seemed to think it wouldn't be difficult to administer from at least a technological perspective, but they wondered openly about the industry-wide will to undertake such an endeavor voluntarily.
Pearlman suggested that the government would eventually step in. "They don't want these big industries to go away, for various reasons," he said.
One possible remedy to the problem of monetization that was touched on was the idea of "music access charge," which could take the form of a small fee on users' ISP bills that would allow them to consume digital music across the web in any way they saw fit. "The industry wants to lean on Comcast and AT&T to get some money from delivery, cuz the ISPs are getting rich, and they're not," Garland said. All panelists seemed to think that implementation would face some major hurdles, because the big labels don't want to set a permanent (and possibly low) price threshold, and artists actually prefer "discriminatory pricing" because they think their stuff is worth more.
Sandy said that the music industry blew their chance at a big digital payday they didn't adopt his "5 cent solution" earlier in the decade. His proposal was to charge a price for individual tracks that seemed free to the consumer, in this case, a nickel per tune. "Our research showed that the industry lost like 40 billion dollars by not buying into this," he said. He thinks that due to increased storage capacity and rampant filesharing, it's now too late. He says that people will be trading music device-to-device, completely offline or via darknets in which copyright enforcement is difficult-to-impossible.
By this point, the discussion wasn't really about the cloud anymore. Wayne Marshall did a good job of putting the focus back on music. "The apocalyptic view based on monetization ignores the actual health of music culture, which in my opinion is actually getting better," he said.
The perfect recipe for making money in music remains something of a mystery, but Biddle's partial solution was pretty direct. "You can't just throw your product over the wall and wait for the bag of money to drop," he said. "You've got to create scarce content. You see fans lined up here in Austin to see a band at a tiny little venue. What makes them stand there? That's what you've got to find out. And you can use technology to get that ten percent of people to pay."
Seems as good advice as any...