Internet, making the rich richer

When preparing for Lift11, I interviewed David Galbraith (co-founder of Yelp) who came up with a point that was going against what I was thinking about the internet. He told me the following:

Laurent Haug: Another big change ahead?

David Galbraith: The death of the long tail. The idea behind the long tail is that all the little guys are worth more than the big guys. But mediums do one thing: they amplify celebrity. Since Rudolph Valentino, the world’s stars have always been bigger than all the little guys. The phenomena has been amplified by the internet. An artist like Lady Gaga is generating petabytes of data download for Google, Justin Biber is accounting for 3% of Twitter’s servers infrastructure. The point is that the internet is a place where the rich get richer. It is a story nobody wants to here but it is true. The left part of the long tail – the one with the big guys – is bigger than the right part – the smaller guys. This is not getting better, also because of global competition that forced a merger of niches.

Link

The internet was supposed to be making the amateur and the professional equal, to allow each of us access to our fifteen minutes of fame. That is how I was thinking until I looked at Youtube’s year in review, and the ranking of the top ten music videos of the year: five artists share the top ten spots, with Justin Biber taking the first, sixth, seventh and ninth spot. Eminem and Rihanna place three videos in the top 10, and lady gaga two. That’s four artists taking nine out of ten spots…

Two conclusions:

• Indeed, the internet makes the rich richer, at least in a domain like music that is still controlled by the majors. No indie band or amateur made it to the top of the rankings, and this should really make us rethink the notion of user generated content. Sites like Youtube don’t live off the home made videos, but from content generated by professionals – or hacked from TV networks.
• The most viewed indicator does not make sense unless you are in the dominant demographic of a specific site. Obviously, Youtube is populated with teenagers who will put Justin Biber on top of the rankings. If you are not in that demographic, this indicator is useless for you as it is for me. There is a need to separate audiences by demographics, and to come up with new ways to spot trending videos. Most viewed when measured on the full audience does not make sense anymore.

Engaging an audience (while making a strong point)

Superb demonstration by Bobby McFerrin (you know him, he’s the “don’t worry be happy” guy). This is great in many aspects: the interaction helps making a point, the audience has fun and feels involved, there is a story developing, the possibility of a new trick happening.

[kml_flashembed movie="http://www.youtube.com/v/ne6tB2KiZuk" width="425" height="350" wmode="transparent" /]

Thx Felix for the link!

And what was set to happen…

…happened. Majors and studios have been fighting piracy with their lawyers instead of asking their engineers to build alternative – and legal – ways to distribute their content. Because of the consistent asymmetry between the needs and the offer (how many people illegally download American TV shows in Europe? How many would pay if they could?), the “customers” became “pirates”, and learned to download what they needed the illegal way.

Governments reacted, and you read here and there about how there will be some crackdowns on pirates, probably as soon as somebody comes up with a smart way to jail thousands of ten years old. What was the logical next step? Anonymous peer to peer! Here comes OneSwarm, “privacy preserving peer to peer”, not yet fully anonymizing users (the concept is friend to friend rather than peer to peer) but a step in the direction of totally anonymous downloads.

What will the majors do when privacy peer-to-peer happens? They will have lost the war, with no possible way to track down pirates. Fighting an agile community of hackers frontally is not a good idea. They will always beat large corporations and governments, slow to react with a hand tied in the back by the need to stay within legal boundaries of obsolete laws. The only way to adapt to this kind of change is to go the positive way. Give customers a quicker, sexier, cooler alternative. This is finally emerging – browsing music on your iPod touch at Starbucks beats piratebay – but it has to accelerate if the majors are to survive this war.

Video game sells more music than itunes

The music business is finally getting headlines through innovation instead of legal actions. Motley Crue sold more tunes in the Xbox game Rock Band (a total blast, I can’t wait for it to be available in Europe!) than on iTunes (and therefore, than on CD).

According to data provided by the band’s management [...] the track was downloaded more than 47,000 times via the Xbox 360 version of the game alone in the first week after it became available. [...] By comparison, the same track received slightly more than 10,000 downloads via digital services like iTunes and Amazon

Link

A business based on something fundamental like music will always find a way to make money. It is all about following consumers, like Amazon and Rockstar Games who combined their efforts to offer players a seamless way to buy tunes from GTA4′s soundtrack:

As players cruise around the world listening to the in-game radio, they can at any point ‘mark’ a song by opening their [in-game] phone and dialing the number ZIT-555-0100. Gamers will then receive a text message with the song and artist names, and if they’re registered at the forthcoming Rockstar Games Social Club community site, they’ll find an e-mail waiting in their inbox with a direct link to a custom playlist on Amazon.com. All songs tagged “ZiT” will be stored here, available for preview and purchase at Amazon’s going rate of $.89-$.99 per track.

Link

After relying on one of the world’s most outdated and boring business model, is the music industry becoming a place for killer innovation?

48% to 61% of illegal songs on ipods

The Times is reporting on an English study that found “the average digital music player carries 1,770 songs [with] 48 per cent of the collection copied illegally. The proportion of illegally downloaded tracks rises to 61 per cent among 14 to 17-year-olds.” (Link)

What the study does not mention is the usage of these tracks, and it should be considered. Downloading is free – despite of course being illegal – and a common behavior is to download many tunes one never listens to. Saying something like “the music industry is losing 48% of its revenues to downloads” would be a mistake. There is a grey zone here, for things you download but would never have bought. David Weinberger came up with freechasing to define a similar phenomena. You could call that “download and forget”.

An encouraging sign shows up discretely towards the end of the article, with the British Music Rights agency finally talking about positive measures, like “developing new legal services that make breaking copyright unappealing”. That is the only solution. Just like when Steve Jobs made legal download cool and convenient at Starbucks (only in the US and only in Starbucks unfortunately). People will start using legal services as soon as it’s cooler to be legit. What’s happening in France, with Orange working on providing downloads of more than a million songs to mobile phones and home computers for €12 a month might be a step in that direction, at least if the service does not contain loopholes like losing all your tracks if you close your account, etc…

“Of course, consumers won”

“We used to fool ourselves,’ [Edgar Bronfman, CEO of Warner Music] said. “We used to think our content was perfect just exactly as it was. We expected our business would remain blissfully unaffected even as the world of interactivity, constant connection and file sharing was exploding. And of course we were wrong. How were we wrong? By standing still or moving at a glacial pace, we inadvertently went to war with consumers by denying them what they wanted and could otherwise find and as a result of course, consumers won.”
Link

If I am working for Warner Music I wait 6 more months before printing my resignation letter, just in case this is finally the definite sign that this industry is waking up. The “inadvertently”part is a bit too much, not sure how you can sue hundreds of people without noticing but hey, at least the process started.

P2P Downloaders Buy More Music

Another study revealing the obvious: downloads are what TV is to DVD: a free teaser that actually increases sales in the long run. This one from the Canadian government:

• When assessing the P2P downloading population, there was “a strong positive relationship between P2P file sharing and CD purchasing. [...] The study estimates that 12 additional P2P downloads per month increases music purchasing by 0.44 CDs per year.
• When viewed in the aggreggate (ie. the entire Canadian population) [...] we find no direct evidence to suggest that the net effect of P2P file sharing on CD purchasing is either positive or negative for Canada as a whole.”

Link

Why? Simple: people who download love music, and they will buy CDs for artists who make a real effort in making the object appealing (the only context in which it makes sense, because in an iPod world a CD is an obstacle to my wish to listen to my music), reward their favorite bands with “donations” (I bought CDs I had downloaded a large number of times) and gifts to others. A tune is a teaser, and a teaser is an occasion to get in touch. In our economy of attention this is all that matters. Music has a bright future. It simply needs to change.

Free is a risky transition

Consumers are pushing the creative industries towards a free model, forcing a reinvention of monetization, a crucial element of the chain that “professional” artists obviously need. As more and more creators experiment free models, mixed reviews come in. This fascinating interview of Jean-Louis Murat, a French musician who is known for being very opinionated, gives a harsh perspective:

You have been one of the first French artists to open a web site in 1998 and to offer songs, exchanges, links, images on it. Is you current anti-internet stance in contradiction with that?

[...] At the beginning, I was putting an exclusive song on my site every week, downloadable for free. Then I stopped. These songs were downloaded without a “thank you”, without a “hello” , and eventually sold as paying compilations in conventions. I belonged to the idiots who believed in the mirages of the internet, and therefore to the inner goodness of people, to communautary exchanges.

Link (in french)

And now Scott Adams, creator of Dilbert:

I’ve been watching with great interest as the band “Radiohead” pursues its experiment with pay-what-you-want downloads on the Internet. In the near term, the goodwill has inspired lots of people to pay. But I suspect many of them are placing a bet that paying a few bucks now will inspire all of their favorite bands to offer similar deals. That’s when the market value of music will approach zero.

That’s my guess. Free is more complicated than you’d think.

Link

Free is not an option as it will be forced by consumers, so the question is not about wheter is can happen or not.The lesson here is that free is not something that can happen by simply taking money out of the equation. Both artists and listeners need to adapt and re-negotiate how they will interact. Artists having the longest way to go in their quest for new monetization channels, but consumers should also adapt their behaviors and change their outlook on artists who are more and more enhancing our lives and less and less pieces of a puzzle trying to screw us as much as possible.

Referendum against the Copyright act

If you are a Swiss citizen you need to act against a dangerous law giving abusive rights to the copyright economy, limiting freedom to create and share in the process. The copyright economy is dead, political powers simply need our help to understand it, and the Swiss political makes it possible with 50’000 signatures.

Sign the petition here.

Billboard changes rules

Billboard will finally start taking into account real figures, now counting online sales. Better late than never.

“it was inevitable that Billboard’s charts would ultimately widen the parameters to reflect changes that are unfolding in music distribution,” says Geoff Mayfield, Billboard’s director of charts.
Link

This means Radiohead or the Eagles get a shot at the rankings even if their record never or barely go into physical stores.