Build a Community to Build a Music Business - What I Learned From Cliff Ravenscraft

 

For the past two years, I’ve been immersing myself in a totally new world, online and off.  My new online world has taken me to places I never knew existed. Meetups, Second Life, the Blogosphere, Twitter, and to PodCamps.  And I’ve learned some amazing things.  And I’ve met some wonderful people, many of whom are friends today.

At this year’s Podcamp NYC, I met the delightful Cliff Ravenscraft, and his energy, enthusiasm and kindness were nothing short of infectious. Cliff gave up his day job in the family insurance business and he now he makes a living completely on podcasting and consulting.  Cliff runs GSPN http://www.gspn.tv, which is a network of 17 Podcasts.  The main podcast is about the TV show, Lost. And he has tens of thousands of loyal listeners who tune into his podcasts regularly. Podcasting has changed the course of Cliff’s life completely since he’s become involved.  

Cliff and I have very little in common and in the real world we probably never would have met (He’s from Kentucky, for goodness sake! And I have never watched Lost) But all kidding aside, we share a very similar philosophy on the merits of social networking and why it’s so powerful.

He gave an inspiring talk at Podcamp NYC and what he said has been with me for weeks and I wanted to share it with you.  Here is what he spoke about.

How To Build a Community Online
Cliff spoke specifically about how to build an audience for a podcast but I believe that is VERY similar to building an audience around your music and yourself as an artist.

Core Purpose
Behind Cliff and GSPN is a core purpose:
To inspire, educate and be in community.  

From his core purpose, he does exactly that.  He could never have made such a popular podcast without his community of listeners.

If you do not have a core purpose it’s like trying to navigate an unfamiliar place without a map.  Your core purpose is the reason you make music… is it to inspire?  Make a difference?  To empower?  To connect?  To Help?  To Heal? Choose a verb that motivates you.

Then what is your desired outcome?
To connect?  To bring peace? To create community?  

Here’s mine for inspiration:
To support and empower visionaries to further their careers.

You Cannot Pay Anyone to Build Your Online Community
Your community and the connections that you make in it has to be a very authentic thing that comes out of a core purpose, like his, but people can be shown the answers and the avenues on how to build relationships.  I think you can pay someone to help you find the right people to connect with but in the end the true expression has to come from you.

Community Building is a Time Investment
Building a real community that supports you as an artist takes time, effort, and skills and you have to build it one person at a time. The more transparent you are and the more you share, the more people will be open to you Cliff says that when he shares himself and when he shows love to others, he appeals to people on another, deeper level.  This is key. Take the investment of time.

Listen to Your Community - It’s About Them; Not About You
This is critical – listen to your community. They have voices and they want to speak too.  Make it easy for them to speak to you. Leave a feedback number or ask they to post feedback on your Facebook forum (this saves having to answer individual emails). Invite feedback in every episode.  Include your e-mail address and respond to absolutely everyone that responds to you.  Read the e-mails in your podcast or share them on your blog, get people engaged.  

Cliff Recommends:
K7 - http://www.k7.net
J2 - http://www.j2.com
Talkshoe - http://www.talkshoe.com

Be Consistent
Be consistent in your communications. If you are releasing a podcast, writing a blog, or updating your Twitter account (or anything you’re doing in the new media space).
Also, communicate when you are going to be there - be regular and consistent about it, weekly or daily or monthly.

So, there you have it, amazing community building advice from Cliff of GSPN, someone who I never would have had the pleasure of meeting had he not come to his first trip to New York City.  

Cliff: It was a real pleasure to meet you and I was very, very touched by who you are in the world. Please keep playing huge!

The moral of the story is, people are out there with similar interests and we as humanity have a very deep need to connect with one another.  

What are you waiting for? Go make your connections.

Looking Ahead Into The New Music Business (aka What I Learned From Terry McBride, Again)

Terry McBride & Ariel Hyatt I had a distinct honor and privilege to be in the audience where I saw the unflappable music business icon Terry McBride of Nettwerk Music Group (Avril Lavigne, Dido, Sarah McLachlan, Barenaked Ladies), be interviewed as the keynote for the Le Recontres conference in Montreal last Thursday.

Terry was, of course, engaging, interesting, and controversial. I have long been following his career, and was moved deeply by his profile in Wired magazine in 2006 which got many music business entrepreneurs like me really thinking…

This talk was so perfect and it so succinctly summed up this point and time in the music business, I don’t think I need to insert my opinion here, I for the record agree with everything he said.  I would also like to point out that during this time of complete music business turmoil Terry McBride’s company is doing extraordinarily well.  So without further ado:  Here are some highlights from his interview, I think most traditional record industry people probably find Terry a bit on the radical side he is outwardly pro artist and anti mainstream industry mentality. It is my genuine hope that all independent artists and music business professional take a page out of Terry’s insight and apply just one nugget –

On why Nettwerk was structured the way it is:
“Artists are inherently lazy, so we had to do everything for them.”  

On the 360 deal & The Barenaked Ladies:
“To control aspect of an artist’s career of a 360 deal is a disaster. It’s not a solution. It’s a paradigm created by fear.”

Terry says he thinks he’s got his artists somewhere between 180 and a 270 deals, but he believes that a 360 deal is fraught for disaster. He talked about his experiences with Sarah McLachlan. “At first with Sarah we had a 360 deal, but as she grew, we gave her publishing back, and she owns half of her merchandise company. There is no business without the artist.”  

Barenaked Ladies started their own label called Desperation. They own the masters and publishing, and so far they’re on $10M in sales using only Nettwerk as their label and management firm – Nettwerk’s team manages all of the aspects of their career and leverages them through their own management company and connections.  

Bands are brands and emotions
Terry talked a lot about artists being both brands and emotions. Consumers attach their own life experience to every song. These songs become the fabric of the people’s lives who listen to the music. With the advent of the CD and computer, we went from pushing to pulling, and it created a change of behavior with having the “repeat” button on all CD players and listening to the same track over and over, which was something that was not possible with cassette tapes or LPs  

Music is free
Terry has always believed that music is free. Back in the 1930’s, music companies were terrified about radio and it took an act of Congress to get music played on the radio. His question is: How do you monetize free now that the fan owns the song, and the fan is part of a tribe?

Wherever there is fear, there is always opportunity
You will never change the behavior of tens of millions of teenagers, but you can monetize that behavior. If you shut down one avenue of dispersing free music another opens. Terry asks: “How many tens of millions of songs are being sent via IM?” and points out that we are so focused on suing the kids that we forget that they’ll just go around us, and I’m not about that type of negativity. Litigation is an awful thing to do.  Terry also made a great point: There are millions of hackers versus thousands of programmers.  Kids will always find a way around the system.

The consumer does not understand copyright. They never have and they never will. So, educating the consumer on “why it’s wrong” will get us nowhere.

Bury the suing paradigm and figure out how to monetize.

The new paradigm = more profits
A CD in the old paradigm of traditional printing and distribution used to cost something like this: $3 for the disc, $2 to get it on the shelf, $1 for marketing, $1 for the publishing royalty, and maybe $2 went to the artist, then you get 20% to 40% of those CDs returned on top of all of this.

In digital, there is no manufacturing, no distribution, and no return. The profit on digital is so much higher. When you go digital, you will be more powerful and more profitable.

Digital profits are currently up 300%.

Controlling intellectual property worked for between 30 and 40 years, and it does not work anymore. All of his peers disagree 100% with his philosophy. Terry thinks from their standpoint, they are right. Trying to control music is right. However, Nettwerk has another vision.  They see a lot of opportunities and they are having a lot of fun.

If a share of the profit from cable companies could go directly to artists
music industry profits would double overnight
Terry is always looking at who is making money from this and are they sharing it?  Cable companies, tool manufacturers like Apple and iPods, blank CD manufacturers — that’s where laws and litigation should be pointing their fingers. Litigation and legislation should work in the realm of business to business, but litigation should not be business to consumer.

Now kids are getting sued for something that we’ve been doing for years. I used to make mix tapes and share them.

Terry also thinks there should be a compulsory license, and if there was, the music business revenue would double overnight.

So where is the music business in 10 years?
Terry thinks music will be available everywhere. You won’t pay for it
10 years from now, music will be in the clouds. You will be able to audit one company to get all of the numbers. It’s not going to be Bell, it may be Google. Consumption of media knows no borders.

I believe the price of music has to come down. The millennium generation looks at value, and the value of music is not 99 cents a track.

Music is the connective glue between the fans and the artist.
People love artists, they love what artists stand for. They don’t love all of their songs. We need to re-evaluate free.  We need to understand that music is the connective glue between the fans and the artist.

We must ask: What causes that artist is related to? What causes is that artist supporting? What does that artist stand for? Who is this artist? Using those pieces of information, we can put ads on websites and links on websites to monetize the fans’ behaviors. Everything you do around or about needs to be directed back to a lifestyle and back to that artist.

Last Advice?
If I were a long-term investor, I’d buy servers and the buildings that all the servers are going in.  The millennium generation does not care about ownership. They go where the data is.
http://www.digitalmusicforum.com/mcbride_bio.html

And, if you have been living under a big rock and did not see the article on Terry Mcbride in Wired:
http://www.wired.com/wired/archive/14.09/nettwerk.html 

Crowdsourcing for Hits - is it a Mistake?

Two weeks ago I wrote a post titled Create, Validate, Sell.  I have been wondering since - could there be a fundamental flaw in the crowdsourcing methods I described to commercially validate music?  This may not only be a problem for me, but it could be a serious problem for the record labels and festival operators that are relying upon technology that enables crowds to pick the next “idol”, artist, band or opening act.

Crowdsourcing is the practice of enabling a group (usually a large group) of people to pick a winner, a direction, a strategy, or crowdsourcing can even be used to design something (for example).  Faith in crowdsourcing rests upon research that has shown that groups can make better decisions than individuals, even when the individuals are experts.     

In 2004, James Surowiecki wrote a book titled Wisdom of Crowds.  Just about every venture investor on earth has read this book, and it has been the bible for numerous startups that have wrapped crowdsourcing into their business models.  In the music industry you can experience crowdsourcing at work by visiting OurStage, Amie Street, SliceThePie, SellaBand, TheSixtyOne and on many other sites on the Internet.  Investors that have been seduced by the potential of the efficiency and effectiveness of crowdsourcing for the next U2, have funded many of these sites.

Here’s the problem - crowdsourcing really works well when the sum of the crowd possesses more knowledge than the expert(s); after all, an expert can never know as much as one thousand people (for example).  However, when it comes to songs, ISN’T ALL YOU NEED TO KNOW in the package?  Everything - melody, harmony, tempo, pitch, octave, beat, rhythm, fullness of sound, noise, brilliance, lyrics and chord progression - is in the package.  If we are moving toward a world where people are more interested in single songs than albums or artists - what else do you need to know about a song to pick a winner?  Does the expert have all the knowledge he or she needs to make a decision?  Can the sum of the crowd possibly possess more knowledge about a song than the expert(s)?

So, I’m asking your opinion: should those investing in music/songs (like I have) rely on a small group of experts, should we use technology that enables crowds to pick the next hit single, or should we use both?

Never have a limit on your income

A wise man said, “Never have a limit on your income.”

Example he gave:

If you sell pens for a living and someone orders a million pens, no problem! You just place an order with your manufacturer for a million pens, get them to the customer, and celebrate.

But if you do hands-on massage for a living and a recent spot on Oprah gets you a waiting list of 10,000 people, “you’ll wish you were in the pen business.”

Point being : if you make a living only providing an in-person (hands-on) service, you are limiting your income. If you were in a “while you sleep” business, there is no limit to how much you can make.

So… what about musicians?

For the last few years, many people have suggested that the products (CDs, even downloads) are now just the free giveaways to get people to go to the show - that musicians are only in a hands-on service-provider business now.

Of course I disagree because I watch CD Baby pay more and more to musicians every month (while they sleep).

Musicians MUST NOT buy into that “only earn by performing” belief because it limits your income.

I spend a LOT of money on music, but haven’t been to a live concert in years. The recorded music has great value to me, whether MP3s, CDs, or even subscription services.

What other ways can music be a “while you sleep” income-earner for musicians? (STUPID BRAINSTORM WARNING:)

• write songs for others to perform
• creating commercial-use music (that businesses will use in advertising, for example)
• getting your music into film/tv
• paid-area access to your web-archive with all your music, even works-in-progress
• make it easy for fans to donate
• create a recognizable brand once, then license the name or model to others (like “Chicken Soup for the Soul”)
• franchise your band: train multiple bands how to sound just like you, then all can go tour, while you get royalty when they do
• creating music-education programs used by many schools
• release your unmixed tracks for fans to remix, letting them sell the remixes on a 50/50 split

WHAT ELSE?

Update on April 21, 2008 by Bob Baker

Great post, Derek. This is classic passive (while you sleep) vs. active (while you work) income. The key is to grow your passive income streams while lowering your reliance on hands-on revenue. Artists should always put a focus on live performance (if that suits them) but not have to rely on it for their survival.

There's a growing sentiment that recorded music is now like a business card. Give tons of them away free to build recognition and exposure among your core fans. I agree that can be effective, especially early in an artists career. But as the fan base grows, an artist has a lot more options to profit from his or her music, as well as live shows, merch, etc.

One passive income model I like is what Trent Reznor did with the recent indie Ghosts release. He made it available at five different price points: from free to a $300 Ultra-Deluxe edition. Smart move. Instead of a new CD available for $15, he gave his fans a choice. And 2,500 people took him up on the $300 option.

This is basically the PBS pledge drive approach. Ask people for their help, and let them choose their level of support. Don't assume all of you fans are looking for free downloads. Many of them may actually want to support you and will send money your way -- if you only ASK. And you won't have to lug in and set up equipment to get paid that way!

-Bob 

Back Catalogue To The Future

For the last few days I’ve been listening to Bohemian Rhapsody and I’ve been having a lot of fun. I must have heard this song hundreds, if not thousands, of times since I’ve been alive but now I’m listening with fresh ears. Why?

Surely there can be nothing left to know about this tune. Anyone that wants to own Bohemian Rhapsody surely already does so in one format or another. If you don’t own it then you could easily go and buy a legitimate copy online in less time that it would take you to read this article. However, the more likely scenario is that if you did want it then you could go online and ‘find’ it without having to use your credit card. The problems this causes the music business are well known and oft bleated about, and particularly in terms of back catalogue as this has traditionally been a stone-cold money spinner for the industry.

Think of any classic album that is over 35 years old. It doesn’t matter whether it’s Dark Side of the Moon or Astral Weeks…any ‘classic’ album will do….

Got it?

Ok..

A completist could conceivably own this album on vinyl, tape cassette, 8-Track cartridge, common or garden CD, DAT tape, Mini-Disc, 180g re-issued vinyl, DVD, any number of enhanced or remastered CD formats (5.1 etc) and, with very few exceptions, digital download.

That’s 10 different formats in the 35 year history of that ‘classic’ record, and this in turn means that fans (old and new) can have bought it brand new and at full retail price once every 3 and a half years since it was released. This is why Mick Jagger looks so good for his age.

Formats have, of course, been driven by the availability of affordable technology and this technology in most cases has been developed and sold by different arms of the same companies that were/are the major recording companies. It wasn’t so long ago that CD players retailed for over £200 yet these days you can pick one up for less than £20. As for buying a half-decent vinyl turntable on the high street, forget about it. CD discs themselves are cheaper than they were 15 years ago, and vinyl releases are rare as hen’s teeth. Meanwhile, everyone wants an MP3 player but no-one seems prepared to pay for the music.

There are many reasons for this. There can be nothing limited, special or desirable about an individual digital release file since each ‘copy’ is a 100% accurate representation of the ‘original’. In fact the concept of a ‘copy’ is pretty much redundant; as is the need for proprietary technology to play your copy on (I’m treating DRM with the disdain it deserves). Additionally, since no-one has yet managed to crack the problem of cool or desirable packaging to accompany a digital release there really is nothing to distinguish the commercially available MP3 file from the one you can make / find for yourself. You can - and probably have - filled your new MP3 player with music that you’ve already purchased in another format, or else with music that you’ve ‘found’ on the interweb. You’ve got a £50,000 record collection on a £300 device, and that’s bad news for Mick Jagger.

Digital as the new, prevailing format has moved the goalposts to such an extent that companies now sign artists based on a slice of future touring and merchandising revenue, rather than that artist’s (continual) ability to shift (the same) units. Jay-Z is the very latest artist to do so, hot on the heels of Madonna and U2. So, where does this leave back catalogue in the digital age? Where does it leave your back catalogue?

Well, the copy of Bohemian Rhapsody that I’ve been having so much fun with has got me thinking. Yes, it is a digital copy that came with no fancy packaging whatsoever and it was indeed ‘found’ rather than purchased - I was given it by a friend, since you ask. What is different about this zeros and ones version of Bohemian Rhapsody is that it comes in 24 different pieces, each part being a copy of one of the original 24-track studio tapes that go to make up the song.

I have been able to import these files into Logic Audio and have been mixing the song myself. I’ve been able to isolate Freddie’s voice and add my own effects, I’ve been listening to Brian May’s guitar on its own and have been messing with the volume settings. Essentially I’m making my own mix and consider it to be a massive musical jigsaw puzzle that I have to solve. Unlike traditional jigsaw puzzles I don’t need the picture on the box because my brain already knows what the picture should look like. I’m trying to make it sound like the song that is ingrained in my memory after thousands of listens - and herein lies the FUN.

Now, you may hate Queen and Bohemian Rhapsody and it’s certainly true that one man’s classic album is another man’s dinosaur tosh. For example, I don’t get Pink Floyd in the slightest but I’m willing to wager that there are thousands (if not millions) of people who would love to play with “Dark Side of the Moon” in the same way that I’m currently playing with Queen….and moreover they’d not only pay for that opportunity, I reckon they’d pay a premium.

Ok, not everyone has Logic Audio or the necessary skills to use it, but what if consumers were able to purchase a package that contained the component audio files of a song or album along with some rudimentary audio mixing software (Garageband, perhaps?) and helpful information and tutorials on mixing? Off the top of my head I can think of several albums I’d love to get my hands on.

So, how does this relate to the independent artist?

Could artists with small fanbases charge a premium for their raw files? Could giving away raw files increase your fanbase? What if a stranger on the internet makes a better job of mixing your tunes than you did? I realise I’m throwing up more questions than answers, but that’s kind of the point as I can’t think of answers to any of the questions that would involve an artist making less money or generating less interest, whatever their status.

User-generated content and online mixing tools are of course not necessarily new things, and I hear that Radiohead and Nine Inch Nails both have similar ‘premium rate’ ideas in the pipeline with their future releases, but the crucial point is that so far no clear market leading process has emerged for this - there is no ‘Killer App’ to speak of, and certainly nothing that could become the online equivalent of the CD or the 7” single and therefore sweep all before it.

I genuinely miss buying records. I stopped buying them when the industry made it too hard (impossible) for me to get what I wanted on vinyl. Since I never liked CDs I now ‘find’ my music online and buy vinyl second hand. How about something that might make me feel connected with the music and willing to start parting with my cash again?

I’d like to hear your thoughts on this.

Bismillah!

Update on April 3, 2008 by Laurence Trifon

There are indeed thousands, if not millions, of people who enjoy playing with songs in the way Craig has described. Many artists – the most notable being Nine Inch Nails – have recognized this segment of their audience and started making their studio tracks available for remixing. Sites like ccMixter, an online remixing community, make it easy for independent artists to offer their multi-tracks for free to a large pool of producers, DJs and others who like interacting with music.

One of the biggest challenges in offering audio for interactive use is determining who owns what rights in the remixed work. Let’s say I’ve produced a killer remix of Bohemian Rhapsody… now what? Can I post it on my website? Can I let people download it? Can I sell it? Can Queen sell it? Do I own the recording, or does Queen? As you can imagine, this could get quite complicated from a legal standpoint.

One popular solution has been to use Creative Commons licenses to spell out what users can and cannot do with their remixes. For example, an artist could choose a CC license that would let users create a remix and let anyone (the user, the artist, and others) share it non-commercially. In this scenario, if either the artist or user wanted to use the remix commercially, they would have to get permission from the other party.  

Up to this point, most artists have chosen to offer their multi-tracks for free. Nine Inch Nails, for example, set up their own remix site where users can download audio for free after they register. The publicity and goodwill generated by offering multi-tracks, as well as the opportunity to build interactive fan communities and collect demographic data, are obviously of great value.

Radiohead, on the other hand, has gone a different route on both the legal and pricing front with their Nude remix offering. The terms state that all rights to the remixes will belong to Radiohead and their label/publisher. And they are selling the multi-tracks (5 total) on iTunes for the standard $0.99 each. I’m curious to see how many fans are willing to pay $5 for the chance to create a remix in which they have no ownership. Even if Radiohead can get away with something like that, I’m not sure the majority of artists can.

1,000 True Fans to Make a Living

When Seth Godin calls something the “best riff of the year,” people notice. And lots have.

I’m talking about Kevin Kelly’s blog post titled “1,000 True Fans,” which has struck a powerful nerve online. He puts his own spin on what I and many others have been saying for years about succeeding in the arts in this modern era.

This concept of attracting what Kelly calls True Fans (a diehard subset of a larger group of Lesser Fans) is very intriguing and deserves some serious consideration. Here’s an excerpt:

Assume conservatively that your True Fans will each spend one day’s wages per year in support of what you do. That “one-day wage” is an average, because of course your truest fans will spend a lot more than that. Let’s peg that per diem each True Fan spends at $100 per year. If you have 1,000 fans that sums up to $100,000 per year, which minus some modest expenses, is a living for most folks.

One thousand is a feasible number. You could count to 1,000. If you added one fan a day, it would take only three years. True Fanship is doable. Pleasing a True Fan is pleasurable, and invigorating. It rewards the artist to remain true, to focus on the unique aspects of their work, the qualities that True Fans appreciate.

The key challenge is that you have to maintain direct contact with your 1,000 True Fans. They are giving you their support directly. Maybe they come to your house concerts, or they are buying your DVDs from your website, or they order your prints from Pictopia. As much as possible you retain the full amount of their support. You also benefit from the direct feedback and love.

Again, this all dovetails with the indie message I’ve been hammering home for years. You don’t have to be a household name to be successful. Thousands of musicians, authors, artists, photographers, filmmakers, bloggers and more make a nice living serving their unique slice of the population. I proudly count myself among their ranks.

These self-empowered creatives work outside the traditional structure and usually make smart use of the Internet to bypass middleman roadblocks and take their craft directly to the end user: the fan. Reach enough fans in this manner and serve them well … and you will eventually have a solid list of True Fans — people who will reward you often with their time, attention and money.

Read Kelly’s entire blog post and the reaction to it around the Net. Then get busy building your fan base … and serving them well!

Update on March 21, 2008 by Andrew Dubber

I have to say, I'm a little skeptical of the thousand true fans solution. There's a great post enumerating the problems with that idea and they're all quite convincing arguments.

But here's the thing: It's not important whether Kevin Kelly is right about this - or whether you can pick holes in the proposition. The important measure of the idea is how useful it is. 

I don't for a second believe that the idea works in practice in more than the most unusual of circumstances, and I would lay money that the Thousand Fans Proposition is not true in your individual case.

But if you act as if it's true - you will get far more satisfying results than if you act as if it isn't. 

Update on April 21, 2008 by Bob Baker

I encourage people not to get distracted by the numbers: 1,000 fans times $100 per year is not the heart of this topic, in my mind. 500 fans x $200 a year, 2,000 fans x $50, 5,000 fans x $20 ... it doesn't matter. It's hard to categorize fans anyway. Some will only support your free offerings while others will spend thousands to hire you for a live show -- support is all over the map.

The main point for me is that this is an era when artists need to reconsider their definitions of success. Widespread notoriety is only one model -- and it's a model of the past. Artists cling to it because it's what we've known for decades. There's nothing wrong with thinking big and having grand goals. But you can also make a living catering to a small sliver of the overall population and serving your most supportive fans well.

The Blanket License Debate

Ahead of the actual discussion led by Jim Griffin at SXSW Friday, Wired has posted and overview of a notion that has been whispered about in the hallowed halls of the major labels for years…a fee imposed on ISPs that provided end users with an “all you can eat” music service.  Read Music Industry Proposes a Piracy Surcharge on ISPs for additional details, but the idea is pretty basic.  All ISPs would put a fixed amount (for example, $5 per month per subscriber) into a pool, and that pool is then divided up between the various rights-holders (performers, songwriters, labels and publishers).  An independent third party would be responsible for dividing the pie according “popularity”.

I’ve been a proponent of figuring out the details on such a model since the early days of Napster, but such a notion was blasphemous back then and is only starting to gain some interest now that its clear the toothpaste can’t easily be put back into the tube.

There are unquestionably a multitude of issues that would need to be worked out…would this require Federal regulation of ISPs in the U.S.?  What is are the global impacts and requirements?  What technology would be agreed upon to determine the exact content of the traded bits & bytes?  What privacy issues would arise from the implementation of such technology?  What about the technology itself?  What are the development and deployment costs?  What about advertising and marketing plans/committments in a world where “street date” ends up being whichever day the music leaks?  And what about the enormous hurdle of getting all of those stake-holders to agree on the raw dollars, the allocations, the methodologies and a manageable audit pathway?

These questions are just a handful that represent the tip of the iceberg.  And while plenty of folks at the labels that I’ve discussed this with have balked, myself and plenty of others believe that resources put into figuring this out will prove to be well allocated, and with the right solution will more than outweigh the current resources being put into anti-piracy (both technology due diligence and legal fees).  In fact, should this become a reality it only makes it easier for many new music business models to gain traction.  But make no mistake about it…the notion sounds interesting but the necessary legwork and underlying platform are enormous tasks to undertake, and likely years before they could be reasonably implemented.

Feasible? Folly?  What do YOU think?

Update on March 13, 2008 by Bruce Warila

Syd,

This is an interesting debate.  It reminds of talking to my mechanic about fixing the transmission in my car, when I know the problem is with my engine.  If the last digital product the music industry ever builds is the MP3, then maybe we should be discussing an ISP tax.  

I believe we should focus on the engine first - to see if we can get the car to run properly.  The engine problem the digital music (MP3) industry has is inadequate gross margin.  There is not enough profit in selling digital music (as MP3s) to adequately compensate everyone in the value chain.  

I absolutely believe that innovation can solve this problem.  The sharing of music can still occur, margins can be restored, consumers can receive more value, exciting new digital products can energize the marketplace, and best of all - governments will not have to be involved.

If innovation is not the solution, then the vertical integration that’s happing in the marketplace will be.  Chopping out redundant links and squashing various segments of the industry into efficient businesses is another way to fix the engine…

An ISP tax is seductive to those that are focused on fixing the transmission.  If you move the debate over to the engine compartment, the problem with the transmission will go away.  

This is a great post and it’s a great time to be discussing this.  Thanks!

Update on March 14, 2008 by Andrew Dubber

I can see how the apparent simplicity of a blanket licence across ISPs might be an appealing solution to the record industry - and I can see how that simplicity falls apart when it comes to implementation. I think Bruce is right when he says we're focusing on a symptom rather than the problem, but I think there are two fundamental conceptual problems when it comes to the blanket licence debate.

It does address some real issues, and this has been best expressed (at least to me) by Cory Doctorow, who is really pretty convincing on this stuff. But it overlooks the ways in which music consumption works, and it takes the position that when you fix the problems of the record industry, you solve the issues of the music industry - and I don't believe that to be the case.

People don't just buy music (or download it free) and listen to it. They do a whole range of things that can be broadly categorised as consumption. In other words - it's complicated, and the ways in which music creates value extend far beyond 'format' and an exchange of cash for an artefact - whether physical or digital.

In other words, I don't believe for a second that a blanket licence will solve anything more than a cashflow issue for major record labels - and it will certainly reveal more complex problems elsewhere.

And I'm not convinced it's the responsibility of the Internet industry to be the police force and revenue collection agency of the Record industry. In fact, I find it slightly alarming that one industry can make those demands of another industry - and it strikes nobody as untoward or unusual.