We’re here for the opening session at MidemNet, a debate between Topspin’s Ian Rogers and former EMI chairman Eric Nicoli. Rogers is stepping in to replace Michael Robertson of MP3tunes, who pulled out this week. He will apparently be joining the debate via Kyte around 15 minutes in, though.Moderator Ted Cohen kicks off saying that recommendation is a key part of the music industry’s future – “helping curate the experience, and I really believe that without this curation, it’s just not a good experience”.However, he says there are still problems, including the recent lawsuits against search engines – the Playlist and SeeqPods of the world. “These are sea-change technologies, we have to get past litigation and look at monetisation,” says Cohen, who goes on to say mainstream ISPs need to come to the table, and mobile music needs to shape up.”We need more innovation, we need more experimentation, and we need to communicate,” says Cohen, setting up the debate. “We need sustainable agreements, it can’t be about large advances any more. We need the labels and the services and the technologies talking to each other.”Nicoli fields the first question about Napster – would it have changed everything if the industry had licensed it back in 2000? “It was a pity that a solution couldn’t be found, but it wasn’t decisive,” he replies. “While recorded music sales have been in decline, the industry is not in decline. Publishers are doing well, live is doing well. Demand is increasing.”The problem is that people are acquiring music without paying for it, or paying less than they used to. It’s all about high-quality music for good value. “The industry was not providing this earlier in the decade, so they [consumers] went elsewhere to get it.”Now over to Rogers, and a question about the stuff he’s done in the past. “The industry was always a difficult morass that we didn’t want to wander into,” he says, of his days at WinAmp and Gnutella. The latter was “for us ideologically the result of labels suing Napster” he says. “To us, suing Napster was not the answer – it clearly wasn’t going to work. Clearly this was how consumers wanted to experience music – they wanted to get files digitally. So how are you going to give it to them? And the industry said no, we’re going to sue them…”Cohen points out that the labels would say they were held to entrenched business models and couldn’t change as quickly as they would have liked. “It’s not a fair defence,” says Rogers. “In the past, the media 1.0 world was limited distribution channels, but suddenly you had this unlimited distribution that suddenly empowered consumers to experience anything they wanted to, whenever they wanted to. And the big companies were set up to control the distribution and marketing.”Back to Nicoli – why did EMI drop DRM? “Just the belief that we trusted the consumer, and the belief that locking it up was no defence to acquiring it for free if people were minded to do that. It was like having a house with six doors and just locking one of them.”Ooh, and: “It was clear that Apple weren’t ready at their end to take DRM off, so we did it.”Has it played out how they expected? The evidence was apparently “very positive” in the months after EMI went DRM-free. “We didn’t get universal approval – a small ‘u’, or even a big one actually! – to go DRM-free. One or two face to face moments that were entertaining. It was clear that not everybody agreed with that decision, but we had huge pubic support for what we did, and most people have seen that’s the way to go.”So what were the big mistakes made by the major labels back in the day? Nicoli says “clearly, mistakes were made, as they are in most industries – most recently I guess banking”. Essentially, the labels were “change-averse and technophobic, which were unhelpful traits when the digital opportunity arrived”. Not least because that digital opportunity also increased piracy massively, including physical piracy.So, the mistakes? “We did find it incredibly difficult – impossible – in the first years of this decade to collaborate. It was a function of most of the majors aspiring to be the gatekeeper of digital music, so they found it very difficult to embrace the notion that they should license their music to others.”He points out that at that time, AOL owned Warners, and Vivendi owned Universal – and they all aspired to being the gatekeepers, so weren’t keen on collaboration.”And of course we had the ill-fated MusicNet and PressPlay, which was bound to fail because it split the industry in half,” he says. “And then Apple came along, kind of to the rescue, I suppose.”Now Michael Robertson appears on the big screen, via Kyte. Why’s he not here? He starts by talking about his history too, MP3.com and MP3tunes, and EMI suing the latter and Robertson personally. “It’s because of that legal situation that we’re in today that precludes me from being there,” he explains – he’s been in a court hearing today.So what are his learnings to retain from this decade? “One of the things that hasn’t changed unfortuinately is the industry’s propensity to sue nearly every new technology that comes down the pipe. And when you sue that, you lose the opportunity to turn it into a positive opportunity.”But he says Apple going DRM-free is a “hugely positive benefit”, not to mention new devices from a wide range of manufacturers plugging into the music ecosystem. He talks about Clarion’s device that syncs music in-car from your MP3tunes locker as one example.What about the next decade? Will we get past the litigation issues and focus on innovation? And is there room for innovation beyond the dominance of iTunes? “Oh, undoubtedly,” says Robertson. “When I started MP3.com, people thought I was crazy, because at the time, RealAudio was the deal with 85% market share. It was hard for anyone to imagine a different world. That’s where we are today with Apple.”But he says “it won’t be an Apple-dominated world in the next ten years – other companies will catch up”. He also predicts the “complete collapse and decline of recorded music sales” on every format. “The way the revenue is generated has to radically change – more subscription, more blanket licensing models…”What are the ISP’s roles in all of this? Robertson says they should be a conduit – but the industry needs to show ISPs a way to “make more money” rather than just face sanctions. “People don’t understand today that you can go to Pirate Bay and with one mouse click get 1,000 hits from the 90s. As long as piracy has more advanced products than the industry, as long as the industry is not keeping ahead of the pirates, it’s going to be tough to channel that in a positive direction.”Nicoli comes back. “We’re not suing technologies, and I’m on record saying about 1,000 times as saying we won’t sue our way to prosperity.” But he says people shouldn’t be shocked if they’re infringing copyright using technology to face legal restrictions.”I agree with Michael that in future music will be sold in different ways. Any business model that relies exclusively on the sale of records will be challenging.”And he also points out that music is being used as a means to an end – e.g. by Apple – rather than just being sold. “Mobile and online communities are going to play a major, major role in the future.”Over to Rogers. “It’s important to understand the path that innovation takes – Apple has taken advantage of this time when there wasn’t clarity. They had a great leader who could rally everyone around one price…” But he says that disintegrated technologies will become more important, particularly now that DRM-free is becoming the standard.Last question: who’s doing cool stuff? Rogers says that there’s “a lack of innovation at the moment – VCs are scared, and the digital music space is not terribly attractive to entrepreneurs. We have to create an environment – and in particular major labels who are holding a lot of the licenses – need to create an environment in which innovation can thrive. There are not enough interesting companies out there…”And back to Robertson. “I wouldn’t say innovation is stifled, but the commercial side is stifled. The innovation is not coming from the commercial companies – they’re either having to go to the labels and get licences, which is a painful process, or they’re having to go to court.”He asks “why can’t I buy 50 of the best love songs with one mouse click?” as one example. “You have to look underground – the industry should spend some time on Pirate Bay, and see what people are doing” – then offer them a legal alternative.Now a question from the crowd, from music consultant Debbie Newman. How does the management of the labels change when the technologists become the future of driving the business?Nicoli: “A word of caution. We have spent much of the last ten years discussing how to distribute and monetise content, but if the content is not good, it doesn’t matter. One of the mistakes we’ve potentially made is to be distracted – and I include the lawsuits in that – from the fundamentally important activity of creating fantastic content. So we have to get back to focusing on artists and creating an environment where they’re motivated to create great content.”And one last question from the crowd: the role of the ISPs again? Rogers says “the ISP is a conduit between here and there. I don’t see ISPs as needing to be the police or gatekeeper in this. The money’s gotta come from somewhere, so if the place you want to access it is the ISP… it’s a solution, but I don’t think it’s THE solution.”And Nicoli says “clearly the ISPs can contribute to the effort to maximise legal traffic and minimise illegal traffic” – he actually messes up that phrase twice, saying “minimise legal traffic”, which gets a big laugh. And that’s a wrap.
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