Music 2.0 Conference: Funeral for the Record Industry?

That's Gary Churgin, the CEO of the Harry Fox Agency at the podium in the above photo, reading a prepared speech that had the crowd, well, resting their heads on their fists. (I saw Churgin afterwards, waiting outside at the entrance to the hotel. He was pacing around talking to someone his cell phone, saying "I'm pissed off" several times.)

The first panel of the conference was called "Rising from the Ashes: The New Music Business" which was hopeful phrasing but probably not very accurate.

At the start, the moderator mentioned how Apple was conspiculously absent from any participation at the conference. "I begged them, I offered flowers," we were told. Apple didn't show. It wasn't too hard to see why. The conference was not important. Like the proverbial tree falling in the forest for no-one to hear. I doubt anything changed as a result of this conference.

The first panel consisted of mostly label people, music producers, and attorney Fred Goldring. The labels tried to paint a hopeful picture but nobody was buying it, particularly Goldring, who was particularly biting and blunt in his assessment of the music industry. "CD sales continue to drop off dramatically," one label person lamented. The Universal label guy said he was "concerned." The Warner Records guy tried to sound more hopeful, but Goldring rebutted with "...and we're winning the war in Iraq too."

Other Goldring quotes: "We're playing the side show, we're not in the main tent." The main tent being file-sharing. "We're competing with FREE." "Consumers want music by the pound." He used a water analogy -- people pay for water but they don't think about it. Tap water is assumed to be free, and yet there's a booming parallel industry full of Evians, Fjis, Arrowheads, and Perriers.

He thinks there's going to be a major shakeout in the next 12-18 months. "If you look around, a lot of our friends are going to be out of jobs." And, "Artists are going to go, what do we need a label for?"

The Capitol Records panelist, who other panelists congratulated for surviving a major corporate reorganization at Capitol/EMI just days earlier, offered this grim assessment: "The water level has dropped and all the rocks are showing."

Universal guy: "Our survival and success depends on these new revenue streams."

Capitol guy: "OK Go made more money on their video than from track sales" in 2006. That's pretty astounding if you think about it.

DRM: A Fixable Usability Issue, or Should We Get Rid of it?

Another theme of the conference was DRM.

Terry McBride of Nettwerk had lots of interesting things to say. "Once we get rid of DRM, we will have growth," he announced. "The next big retailer is the fan themselves." He described a world where a fan downloads some music, and then distributes it to friends, collecting micro-payment commissions along the way.

Albhy Galuten of Sony was semi-bullish on DRM, but he wasn't very convincing. "DRM is inevitable," he said. "Whether or not it's in the music space is in question, but there's no question that in the physical world where you used to have physical friction to stop people from stealing stuff . . . " He went on to say, "Whether it happens in a fashion in a time that rescues the music industry remains to be seen. DRM is not the enemy -- very few people except John Perry Barlow and Cory Doctorow complain about the copy protection on DVDs... DRM is not the problem, DVDs are very successful." He said that the problem with DRM in the music space is "a terrible user experience and lack of interoperability." "They don't work in the home, they don't work on the same devices.... the holy grail is if I can purchase a song and it was available to me and my family and my rights lived online, my rights persisted ... consumers wouldn't have a problem with DRM.... it's the bad implementations that are making people rebel against it." But then he added "We may see, i expect we will see some experimentation with unprotected audio, but I don't expect any wholesale rmeoval of DRM in the forseeable future."

David Goldberg of Yahoo! Music called DRM "a tax on content." He spoke of DRM-free MP3 download tests Yahoo! Music has run with Sony, Hollywood Records, and EMI, and found the tests were "very successful in terms of proving that consumers would prefer content without DRM."

But then he made this statement: "We think a significant portion of our music will be available for sale as MP3s by Christmas [2007]."

Makes me wonder about the widely-read Steve Jobs open letter on DRM that made the rounds yesterday. There is clearly strong sentiment already in the industry that DRM may go away. Was Steve's open letter a way to appear to be leading the charge, even though the industry's already thinking about it?

Posted by brian at February 7, 2007 08:25 AM