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Elizabeth Montalbano, IDG News Service
Wed Jan 9, 4:45 PM ET



LAS VEGAS-- At the Consumer Electronics Show this year it's clear that consumers are making choices that are driving industry changes, and nowhere is that more evident than in the digital-music business.

Music industry and technology executives convened for the Billboard Digital Music Live conference Wednesday to talk about what those in the business need to do to meet the needs of music fans who appear to be running the show.


"2008 has to be the year we get real or the business as we know it goes away," said Fred Goldring, an entertainment attorney with Goldring Hertz & Lichtenstein LLP. He said that consumers will access music regardless of whether artists, labels, publishers and digital-music distributors approve of the means or receive money from the exchange.


Since Napster turned the music industry on its ear in 2000, the digital-music business has been rocked by dissent among artists, labels, publishers and the breed of technology companies distributing and selling music online that emerged in Napster's wake. All of these parties want to derive revenue from their contribution to the business, but have been arguing for years about how everyone should get paid.


As this drama unfolds behind the scenes, consumers continue to find ways to bypass DRM (digital rights management) and emerging revenue models to download and share music, making it not just impossible for the music industry to make money from traditional means, but also difficult to make money at all. In the meantime, artists have embarked on their own revolution, using social-networking sites and other online means to get their music directly in the hands of fans and finding other ways to derive revenue from their work.


An example of the latter is the controversial and much-publicized move by U.K. rock band Radiohead to sell its new album "In Rainbows" direct to consumers without going through its record label or Apple's iTunes Store. The album first went on sale in October on Radiohead's Web site, allowing users to choose their price for the record; a few weeks ago, Radiohead released the record to iTunes and other retail channels.


Scenarios like this will continue to happen, both among major-label artists and independent or unsigned artists. Whether they work is not the point; it's what the industry will do to work within these models and support them rather than continue to resist that will decide how the industry will fare in the future, said Terry McBride, CEO of Nettwerk Music Group. Nettwerk is a Canadian privately owned record label and artist management company.


"The corporate side of it has to shift," he said. "The corporate people have not allowed us to do what we know we have to do. This is about the consumer, about monetizing their behavior and giving them choice. For all of the people that believe in controlling the IP and how [the music] gets to consumers, the game is over. It was over seven or eight years ago, and soon your business will be over."


Goldring suggested the industry focus on business models built solely around the networks that allow users to download music and find ways for everyone involved to make money that way.


"We have to stop trying to keep our old business alive.. and figure out how to monetize the pipes [music files] are going through," he said.


Barney Wragg, head of digital, EMI Music Group, said that in a perfect world, scenarios like the ones McBride and Goldring propose would exist. However, the needs of different artists vary, and there are still concerns about the integrity of their work and how they will be compensated for it as new business models emerge.


"I have artists that don't want to be involved in certain business models," he said. "I have to balance those conflicts.... There are a whole bunch of artists who are worried about how they're going to get paid, and what this is going to do about their representation or their art."


Allowing their music to be distributed through ad-supported online music services is a particularly hard sell for artists who worry that having their work be associated with advertising "devalues" it, Wragg added.


Subscription-based models such as Rhapsody that don't give users ownership of their music have struggled to take off. Wragg compared music fans' view of subscription models to the early days of e-mail, when people wanted files to be stored locally and were adverse to the concept of e-mail existing only on a remote server.


That concept changed over time, as will the perception of subscriptions if they are marketed to consumers in the right way, he said.


Another factor that should boost the popularity of subscriptions in the future is the increased spending of younger fans who are naturally more comfortable with the idea of not owning their music, said Matthew DeFilippis, vice president of new media and technology for the American Society of Composers, Authors and Publishers, a membership organization representing the rights of artists.


"Ownership is a generational thing," he said. "Even though kids today are buying from iTunes, I don't think they care about owning a thing. As they become the new generation of homeowners and bill payers, [music subscription] will be moving toward a cable [TV] model."

"Ownership is a generational thing," he said. "Even though kids today are buying from iTunes, I don't think they care about owning a thing. As they become the new generation of homeowners and bill payers, [music subscription] will be moving toward a cable [TV] model."

--end quote

Haha. This is their dream. But cable TV is moving toward an internet model, where I can watch programs online for free. They are aiming at a model that is going to disintigrate eventually, IMO.

Hey music moguls, keep up the great thinking!

...the increased spending of younger fans who are naturally more comfortable with the idea of not owning their music...

The younger fans I know all watch the Disney Channel. Even though they've seen High School Musical 300 times, plus the dance version, the karaoke version and the pop-up version, and know each and every song, they still want the album.

Ubiquity works better than artificial scarcity.

Re: all that talk about 2008 being the year of challenge, etc.
The problem for the music industry moguls (RIAA representing major labels) is that they've learned their lessons too late. And, for the sake of independent artists, I'm glad they did.
Bye-bye, irrelevant big boys.

(I'll be waiting to toast your demise.)

"Haha. This is their dream. But cable TV is moving toward an internet model, where I can watch programs online for free. They are aiming at a model that is going to disintigrate eventually, IMO."

I use Dish Network and they have channel packages and pay per views and things like this. However, some of my friends in other states -- have full unlimited access to all packages and instead of "pay per view" they have something called "on demand" which is like an extra $10/month.

On Demand allows you to scroll through a vast listing of what would normally be PPV type stuff. You select the movie you want and it starts playing.

I think eventually all of the cable / sat channels are going to use this type of structure.

Instead of "watch this tonight at 8/7 central" you're going to get a listing of programming for that day on that channel.

You're going to be able to pick from the list, press play and voila! Complete with all of the commercials and crap that air exactly the way it works now, but with a few slight differences.

Being a dynamic service where you'd be able to play, pause and watch as many times as you want within a 24 hour time frame -- the commercials would likely be injected dynamically as well.

You play the movie segment once, you get one set of commercials. But lets say you really liked what you saw and you wanted to watch it one more time (or you didn't quite understand what you saw and wanted to run through it again paying closer attention to it). Each time you'd do this, would be an entirely different set of commercials for the intermissions.

This sort of system would also allow for a 15 minute commercial intermission dead center in the middle of the movie -- as opposed to watching for 10 minutes and just when things are starting to get interesting -- the annoying fucking cut to commercial.

They could also do their show previews right before the movie itself (ie: you're about to watch a new flash gorden episode but before that you see something about "next time on stargate: atlantis!")

THIS sort of thing is where digital tv is heading. Plus -- I'm sure as things like ADSL2 get cheaper and Cable Internet becomes more innovative -- for an extra small monthly fee on top of your regular service -- you get a username and password to be able to login and watch movies from ANYWHERE that a fast enough internet connection exists. So if you're at your buddy's house and they don't have cable or satellite -- but they DO have a nice fast broadband connection -- you can treat your friend to a night of movies just by logging into the website of your provider from your friend's pc.

THIS is where TV is heading, folks! Wait and see!

-Dave

LOL...younger folks getting comfortable with the idea of not owning music...

a frog can gradually be comfortable with the temperature of water increasing such that you can boil him to death.

we don't need a EULA (end user licensing agreement) by which you pay money and just get to listen to the music a time or two.

this is total bullshit.

web 2.0 a-holes have, for years, been trying to get us used to the notion of not owning software or music, but instead, paying for the privilege of "using" it.

that is total bullshit. i'm not gonna give up my hard earned money to listen to a tune once or twice when someone else makes it available to me, nor will i use software online like that.

F^CK that SHYTE!

Next thing we know, we will be paying someone to let us ride in a car (not a taxi, but ride period), talk on a phone that we don't own, etc, ad nauseum.

i don't rent anything but the place i live in, and if i had the bucks, i would buy one, but then, you still don't "own" your house or land because if you don't fork over protection money called "property taxes", they take your house and land, so you don't own it.

this is not, the last time i checked, a communist or socialist country. it is not "from those who have to those who need". we USED to be an ownership society, but slowly and surely, in the way you boil the frog, the powers that be are trying to get us indoctrinated and used to the following ideas...

Globalism
Cashless Society
New World Order
Newspeak (ala 1984)
An online world where you have to pay to use software, listen to tunes, watch a movie...all in such a way that you are paying for temporary use, and then, if you want to use it again, you get to pay again.

that is good for the person who is just renting out or allowing folks to pay to bask in the glow of whatever crap they are trying to get you to use, but it is victimization and exploitation of the consuming public to an intolerable degree.

if you agree to participate in this crap, you are enabling and encouraging this crap to continue and get worse. don't patronize or use these fee for use schemes.

they wanna turn the world into an enterprise rent a car or a NetFlix deal.

Right now, the broadcast channels allow you to choose to view programs that have already been broadcast, but to pay extra money on top of your cable fee, to view it when you want to.

i tend to agree with TWarrior (Dave's) comments about the digital tv...that's the logical extension of events as they are progressing.

and, if you watch SCI FI channel, you can't excape commercials even while you are watching their feature presentations...they stick little animated ads for upcoming shows in the bottom corners, irritating the crap out of me.

push advertising will be inescapable in the future, ala the building sized ads in Blade Runner.

He said that consumers will access music regardless of whether artists, labels, publishers and digital-music distributors approve of the means or receive money from the exchange.

those damn consumers.

(After we finally kill off the RIAA and dismantle the major label monopoly) I envision that for better or worse, music and other digital media will primarily be ad-supported.

Perhaps our NEXT goal should be to make sure the ads attached to our media are non-obtrusive to the consumer. (The "free market" will help take care of that. Folks will naturally gravitate to the "less of a hassle".)

But we also need to ensure that there are standards implemented so that the ad-revenue model fairly supports the creators/copyright holders on a level playing field.

YouTube, for example, needs to go ahead and start sharing the money with the independent creators/users instead of just giving all the ad revenue to the likes of CBS and the RIAA.