Last up at Midem today was a keynote talk from Marc Geiger, head of music at WME, with a no-holds-barred speech challenging the music industry to stop complaining about streaming payouts and big tech giants, and to start embracing the changes, and in particular streaming services.
Geiger talked about how to avoid “wave two of the revenue chasm… because files are kinda over, and we’re transitioning into the next stage of the system, which is streaming”.
He continued with some history lessons: including some of the big corporations that have fallen over the years, because they didn’t embrace change. The Southern Pacific Railroad, the original AT&T, IBM, the major US TV networks (the ones bought by the cable networks, anyway) and MTV. “When it came time to get a video on your computer on demand, they said ‘nah, nobody really wants to get that’, and then Yahoo took that on, and YouTube finished them off.”
Geiger’s warning: this could happen to the music industry now, if it doesn’t embrace change. And he pointed out that there has already been plenty of change: formats, companies, business models, the recording process, DJ equipment, and above all consumers. “Now you carry a camera and a flashlight in your pocket and you don’t even realise it,” he said.
Geiger added that another change: artists had it “easy” in the old days, because labels did most of the work. Now? “If you’re an artist, you’re a manager, you’re a label, your workload and the confusion of what you have to manage has gone up a lot,” he said. But back to the theme of transition: “Each year, there’s a new set of stories on what’s happening. This year to me, files are over. First of all: they’ve always sucked…”
And in YouTube usage alone, he noted that “most people are streaming most of their content” even if they don’t think of it as streaming. Meanwhile, Netflix and other services are getting people comfortable paying for entertainment with monthly subscriptions, as an alternative to a la carte purchases.
“Files are becoming obsolete, because our devices are full. We’re taking more photos than ever, and videos are taking up your memory,” he said. “The big change is when you abolish units, and you abolish price.”
Geiger said that we are also in “the age of giants” – platforms with more than 500m customers will rule the next 10 years in his opinion: Facebook, YouTube, Amazon, Netflix, Google, Yahoo, iTunes, Baidu and Android being the ones he suggested.
“We are in the age where most of the innovation, people are looking to the Apples and the Googles and the Facebooks.. That did not used to happen… The question today is will Spotify and Pandora even survive? They certainly don’t have 500m customers…”
So what future music models will survive? Geiger said subscription and access models, better packages to enhance the physical value of CDs and DVDs, file-by-file stores like iTunes, premium radio, artist channels and direct to consumers, and advertising, where artists and labels share in ad revenues with media companies.
How? Geiger made his pitch for the future “music service provider” (MSP), where all labels license their music, it costs $10-$15 a month “minimum” for consumers. “The history of subscriptions say they start cheap and go up. Always.” Geiger said streaming services will provide the interface, curation, billing, customer service and accounting, with SoundExchange and other organisations collecting from a lot of distributors, with the distribution split of 75/25 plus 50% of the advertising. So music rightsholders get 75% (or perhaps 70%, he conceded) of revenue from streaming services, plus 50% of their ad revenues.
“If this is right, it’s going to mean a lot more money,” he said, suggesting that in 10 years’ time, 500m paying customers paying a minimum average of $12 a month could make the music industry $6bn a month – $72bn a year, with labels and publishers taking a 75% share of that (so $54bn). But if those subscriptions go up to $15 by 15 years’ time, the labels’ share will grow to over $135bn. “That’s the holy grail. That’s nirvana.”
How will subscription services raise their pricing over time? Geiger suggested that $2.99 a month for each additional family member is one strategy. $5.99 a month for “audiophile-quality” streams would be another possibility. And he also mooted an “additional $4.99 a month for an attached peer to peer” service, with exclusive content.
After a slide breaking down how much money Geiger sees in the various new services (above), he delivered a blunt ultimatum. “You’re either going to believe in more money in streaming, and what I call the supplier-led revolution… If we don’t say ‘no, don’t buy the file, don’t buy the CD, actually sign up for Spotify’, I think we’re dead… If you still believe it’s about files, I will talk to you in 24 months. You will actually deny to me you ever said it.”
Geiger talked about the challenge of the future of music being led by companies whose leaders didn’t come from the music industry. “I can tell you Sergey Brin didn’t grow up in the music industry. Neither did Steve Jobs. Neither did Daniel Ek, even… They didn’t come up knowing what we know. We have to educate them,” he said. And a final thought: keep putting out great music.
“After we all have access to all the music in the world, the quality bar for music goes up, not down. In a record store you have a finite collection. If you have X file, it’s easy to rank what’s good, what’s bad. In a library of 10, 20 million, it’s much harder…. so as an industry, we have to push the artists to make greater music to stand out. The competition is one click away.”
The speech was followed by a debate involving Emmanuel de Buretel of Because Music and Horst Weidenmueller of !K7 Records, moderated by Ralph Simon.
Buretel talked about changes he’s seen in the music industry, and the fact that he uses a lot of his original training as an engineer in his current role. “You have to be extremely good at optimisation of networks, you have to be able to deal with downloads, know how to stream, and know how to still sell records – and even now, go back to vinyl… You can still sell 30,000 to 100,000 on vinyl,” he said, before segueing into his view that “the future is about management of rights… it’s extremely difficult, and that’s the role of a music company – not a record company – to know how to manage it.”
Weidenmuller next, disagreeing with Geiger, and saying labels are being very innovative already. “In the heyday, I think it was very boring. Everything we did was pressing CDs, pressing vinyls, and bringing them into the market. It’s quite boring. So then the crisis came, and everyone said ‘how the fuck am I do deal with that’. And now we have 4,000 different labels in Europe, and each of them have a different business model… We have created a completely robust sector!”
Geiger said this wasn’t a disagreement: suggesting that this evolution of labels is simply “Darwinism”. And Buretel said that such evolution is unavoidable for labels: they had to take on new responsibilities and business activities beyond releasing music, in order to survive and do the best by their artists.
The conversation turned back to Google, Facebook, YouTube and the other big technology platforms. Simon wondered whether these companies should be paying the music industry more than they are. “Once they’re in the game, and once they’re generating dollars off our music, version 4, version 5, version 6, I believe we will have a new economy,” said Geiger. “It’s an evolution. I don’t think software companies ever think they get something right on version 1.0… And I think that happens in business as well.
Buretel agreed, but suggested that “the approach is wrong… I like the model of Google, even though we were suing them in the past… They never paid the indies. So they occupy territories. The approach of occupying territories… I agree I like the evolution, but sometimes when you occupy territories and make the deals after, sometimes as a creator you still have frustration… But now they have a model. In Europe a lot of indies made deals with Google and YouTube, and made money.”
But he said there is an attitude problem. “They don’t treat us well because we are small. They have to consider the indie world as the future,” he said. But Geiger pointed out how small music is for Google – “the ad business from music videos, they gave away to YouTube,” he said, before suggesting that the reason “Steve Jobs fucked over the music industry so hard” was because he was angry at the major labels’ negotiating tactics.
Proof? The lack of a label field in the metadata for iTunes songs. “Steve Jobs purposefully left record labels out,” he said. “Because he was angry at them, he stripped them of their identity. Because the labels understandably went at him hard.”
Back to Weidenmueller: “I am concerned with YouTube entering the market because for YouTube everything is about dominance. And dominance is connected to destruction,” he said. “That’s what I am concerned about, that it’s more about market dominance… I am more concerned than happy. I would rather prefer perhaps Google not being in music.”