Here’s a great article about the new marketing methods we’ll be seeing in 2008.? We will begin to see large scale experiments in subscription based music distribution and other models which eliminate a pay by the track model (such as Imeem).? The death of DRM may come this year, as three of the Big Four labels are already in the process of abandoning it.? There are rumors of deals in the works between major labels and ISPs (internet service providers) to offer unlimited downloads or more bandwidth, and we can expect to see multiple collectible versions of albums released.

As the shift in music sales hits overdrive into the digital realm, 2008 is shaping up to be the year the major labels begin to adapt to environment.? The big question left is: how will artists break into the big time?

Bottom Line:? The Big Four are finally entering the digital revolution.

Mega online retailer Amazon is preparing to offer their MP3s in every language.? The company cites an overwhelming demand from customers for their DRM-free music downloads (which includes titale from all of the major labels).

Given the size and power Amazon carries on the internet, they are poised to set a new precedent for selling music digitally.? The largest online retailer of music by far is iTunes, and it will be interesting to see how Amazon’s shift to DRM-free music changes the playing field.

Bottom Line: Amazon offering their MP3 catalog worldwide will shift the landscape and methodology of digital music sales.

The way the major labels are adapting to the transforming music industry is strange. Somehow, the four largest music labels in the world seem to be the last ones to understand what people want. From the perspective of an onlooker, it seems like they wait till the last second to adapt to everything.

DRM is officially becoming a thing of the past. According to Business Week, it appears that Amazon’s DRM free service and billion MP3 Giveaway has brought the Big Four around to a DRM free world (at least for some albums). Sony BMG, the last of the big four labels to cling to DRM like a liferaft, has announced they will stop using it sometime early this year.

This is the magic moment when the major labels have all given up on the wildly unpopular copyright protection. Sony is using a gift card service, where listeners can buy cards at retail outlets (such as Best Buy and Target) and then redeem them for MP3 albums online.

Considering the 15% drop in CD sales last year, it’s refreshing to see that the major labels are adapting to the desires of their audiences, even if it is forced by pressure from iTunes and Amazon. DRM was instrumental in iTunes gaining dominance in the music download market, and now even they are beginning to offer DRM free tracks, and at the same 99 cent price tag.

Bottom Line: DRM will finally be relegated to where it belongs, on subscription services.

As if throttling Bit Torrent, blocking access to sites like AllofMP3.com and PirateBay, and endless industry litigation aren’t eroding net neutrality enough, the IFPI is taking it a step further.? The IFPI is an international version of the RIAA, and the recently sent a memo to the European Union about file sharing.

The IFPI wants to see Europe’s internet monitored, managed, and controlled.? They are presenting a “complete solution to piracy”.? This three step process looks something like this:

1.? Scan the entire internet for audio files, and block files that don’t match up to a database of music.? This practice is called content filtering.? Although it seems benign, the practice of monitoring the entire internet is a slippery slope toward full scale surveillance.? Aside from harming commerce and academic research, having a huge government database of people’s web activity can be used for more malicious purposes then chasing down people who are illegally downloading music.

2.? Blocking peer to peer protocols.? A protocol is a standard for connecting and sharing data, and p2p networks have their own protocol.? If ISPs systematically ferret out and block these protocols, academics and businesses won’t be able to share large files, either.

3.? Blocking websites that offer illegal content.? Although the practice of blocking sites that offer pirated music is a method of controlling the practice, it is a legal precedent that governments can block web sites.? The power of the internet is its freedom, and blocking sites is a step toward censoring that freedom.? Once governments are free to block one kind of website, where will they draw the line?
Consider that a corporation is lobbying a government to restrict and monitor the internet airwaves.? If the IFPA has their way, they are setting the stage for full scale internet controls and censorship. While the intention of protecting their corporate interests isn’t truly malicious, the methods they suggest pave the way for an internet that is no longer open and free.
Bottom Line:? Setting a precedent for government control of the internet is a precursor to full scale internet censorship.? Considering the human tendency to use any means at our disposal, creating this kind of monitoring and control apparatus is a disturbing action for personal liberty.

In the wake of the announcement that Universal and SonyBMG are uniting to start a new download service to compete with iTunes (which will offer 75% of all music sold in the US), Doug Morris, Universal Music Group’s CEO, was profiled in Wired Magazine the other day.

Let’s start with my favorite quote from the article: “There’s no one in the record company that’s a technologist, That’s a misconception writers make all the time, that the record industry missed this. They didn’t. They just didn’t know what to do. It’s like if you were suddenly asked to operate on your dog to remove his kidney. What would you do?” (quoted from Wired article).

Answer: I would find a veterinarian. The head of the world’s largest record company claims ignorance of the fundamental shift in the entertainment industry over the last decade. I find it interesting that the largest music company on the planet was unable to prepare for the digital revolution. Ignorance may be bliss, but you’re still dead when the falling piano you don’t see hits you.

As if that isn’t ironic enough, Morris goes on to say “We didn’t know who to hire… I wouldn’t be able to recognize a good technology person, anyone with a good bullshit story would have gotten past me.”

Perhaps this is why you have twenty VPs, Mr. Morris. What good is an army of executives if they are incapable of determining who to hire and what to do? Mr. Morris makes it obvious how major labels have destroyed their business model and viability.

For years, Doug Morris has been railing for stringent enforcement of copyrights (the ones his company has been taking form artists for decades), and he was at the source of Universal attacking Yahoo, YouTube, and Myspace for their flippant distribution of corporately owned content. This powerful industry insider has the pull to force companies to give him what he wants: licensing fees, commission on Zune sales; the most powerful man in the music industry calls the shots. And now he’s changing his tune, embracing digital technology. It isn’t for the benefit or convenience of audiences though, it’s an attempt to consolidate the digital realm.

The article discusses how iTunes pulled the wool over Morris’ eyes. Since Universal could not find anyone with a technology background to advise them, they (and Morris) never saw the power Apple’s iPod would have to control the industry. Considering how much music is sold on iTunes, that can only be played in iTunes and iPods, this is probably the first time anyone successfully put the Big Four on the defensive. Major labels had free reign to do whatever they wanted and completely controlled the market, one day they woke up and realized out they weren’t in control anymore. It was a conscious choice not to hire anyone who knew about the internet, and not to adapt to a shifting industry. Controlling massive catalogs and marketing muscle isn’t enough. They want every penny, and they don’t care if we know it.

Here’s another great quote: “It was only a couple of years ago that we said…an album that someone worked on for two years, is that worth only $9, $10…?” People never really understand what’s happening to the artists. All the sharing of the music…Is it correct that people…fill up these devices with music they haven’t paid for? If you had Coca-Cola coming through the faucet in your kitchen, how much would you be willing to pay for Coca-Cola? ….That’s what happened to the record business.” (quoted from the Wired article).

While this is a noble sentiment, in reality artists are not making a ton of money off of these deals, at least to compared to what the record companies reap. While we all want to support hard working artists, it’s difficult to find compassion for a seven billion dollar a year company. Sometimes audiences forget that artists are human beings when faced with the behemoth of major labels squeezing us for every penny they can. It’s even more difficult to feel sorry for these companies that own and control the rights to artists like Jimi Hendrix, Bob Marley, Pink Floyd, Miles Davis, and timeless artists that sell with or without marketing.

Doug Morris started out as a producer and a songwriter. Considering his roots, it’s surprising that he has such scorn for the future of music, and the satisfaction of audiences.

If the CEO of the largest record company on the planet is only interested in a fast buck, and is indifferent to the long term future of the music industry, what hope do the Big Four have?

The article concludes with a picture of Doug Morris’ frustration. Hhe considers his job to be developing new talent, not providing convenience for audiences, or adapting his company to the current environment. The CEO of Universal Music Group doesn’t want to be bothered with the transformation of the music industry. And that is the culture of major record labels. They don’t care whether we enjoy the music we have, or that it’s delivered to us in a format that works. They are merely interested in a fiscal bottom line for this quarter, and controlling the media we have access to.

Now that the Big Four can’t even count on multi-platinum talent to stay with them, the end is near. I’m not sure why Doug Morris allowed himself to be profiled. This article is a clear picture of how major labels have destroyed their own credibility, their business model, and their future.

A special thank you is in order to Wired Magazine and Seth Mnookin for this fantastic article. You have allowed us see the man behind the curtain, and he’s everything we’d expect him to be.

CD sales are dropping, set to be a small fraction of overall sales – and sooner, rather than later. A recent survey of high school students showed that there is a downward trend in music downloading in that age group. This is the next generation of music buyers. Perhaps their actions are pointing to something.

The Freakonomics blog posted an editorial recently with analysis of the record industry by five people who ought to know. Koleman Strumpf, an economics professor at the University of Kansas, had this to say:

“If file sharing hurts record sales, then albums that are more heavily downloaded should experience lower sales than comparable albums that are less downloaded. But, after controlling for the role of popularity, we found that downloads had little effect on album sales.” He wrote a whole paper on the subject, if you want to find out more.

In other words, file sharing is not the source of the drop in album sales. A powerful insight like this is the last word on file sharing for me (although not for the RIAA).

Audioholics.com posted a great editorial on whether CDs are approaching the event horizon of obsolescence. They include a buffet of statistics showing that while physical sales are slumping, digital sales are growing with velocity.

As the digital music market overtakes physical sales, CDs will become less available (relegated to major chain stores like Wal-Mart). We can see this shift with the demise of? Tower Records. When people can get all the music they want without going to overpriced record stores, they will. This trend has yet to infect mom and pop record stores, like Orlando’s own Park Avenue CDs, and since most of these stores are seen as boutiques rather than purveyors of the lastest industry tripe, most of them will likely survive (don’t forget that most small record shops deal with smaller and indie labels, and used CDs and vinyl).

People are still buying tons of music, and if digital music sales are any indication, music will continue to be a commodity. Although most commentary is still focused on what major labels can do to revive sales, the real issue is becoming what can artists do to empower themselves in this new realm.

People are exposed to a larger variety of sounds than ever before. Demand for music has skyrocketed, while profits are shrinking. The idea that music has lost much of its monetary value in the current market is a two fold effect: the novelty of file sharing and mega hard drives, and the price difference between a digital single or download and a CD.

We live in an era of convenience, and audiences consistently choose the format which is most user friendly (think audio tapes in the 80′s). The shift toward digital libraries has been predicted for years, and even with DRM, digital is already the industry standard. I’m still surprised that such a well-known and predicted phenomenon can cause such panic among executives. It’s almost as if upper management in the record industry has been ignoring the experts.

The quality of the music is a major factor in sales when people have access to massive catalogs, too. Hip Hop is a great example of this trend. Collapsing under the weight of violence and misogyny, some hip hop artist still enjoy huge mainstream and underground success. And the cause of this slump seems to be the choices made my industry executives over the last ten years.

The reality is this: The fate of major record labels has nothing to do with whether or not musicians will be able to create fulfilling careers, absolutely nothing. With unlimited access, people aren’t compelled to buy any album unless they absolutely want it.

And in case you wanted to know the secret to success in the music business in any climate:
Make Great Music!

This is an absolute amazing interview with Peter Jenner. Peter is a world famous rock promoter and manager, who helped guide the careers of Pink Floyd, Billy Bragg, and a bunch of other awesome acts.

This interview is Peter’s take on what the future of the music industry looks like, and to him, it looks like a community.

He also goes into great detail about how royalties are dispersed. Basically, there’s a bunch of money paid to collection societies for licenses and performaces of music. Groups like ASCAP and BMI collect the money for their members, and then pay out the money quarterly.

So what happens to all the money that isn’t paid when artists can’t be found, or it’s unclear who the money goes to? Peter tells us about black boxes, or a big bucket where all that money sits. Now, in the real world, this has worked out fairly well for almost everyone. Plenty of artists are able to receive small check of less than dollar for what they’re owed. No one in the industry will admit these black boxes exist. Now that digital licensing is moving toward a post DRM (we hope) phase, the conversation is shifting toward how the money will be collected, and distributed.

The major news mongers report that major labels want to set up a structure for collection and disbursement of royalties through them, because they own so many copyrights. Where will that leave the independent musician, who has no right to audit a major label they’re not on?

Peter is an absolute genius, and if you haven’t seen his interview yet, check it out. His insights are profound, and he clearly knows what he’s talking about. My favorite insight form his article is his observation that unbundling albums online (selling singles) has ahd mroe of an impact on the death of record sales than any other factor. His thoughts on how major labels have “raped their own business model” are absolute genius.

So if you haven’t read it yet, check it out.

“Would you consider paying $1.09 for a single, unrestricted MP3 download that would have absolutely no limitations on its use and could be transferred to any portable audio player or computer?”

Don’t get hung up on the price. To me that’s irrelevant. The fact that not only a major content distributor would consider MP3, but is willing to face down Apple and the Big 4 Labels is a major step forward. Though you could liken it to DRM poisoning the water supply and suppliers are now going to sell ‘clean’ water on the side, I consider this to be a bold move on their part, and since Polyvibe Records distributes music with them as part of a larger digital distribution deal, I am awaiting their next announcement concerning this with much anxiousness.

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1. The RIAA has sued more than 20,000 music fans for file sharing, yet file sharing continues to rapidly increase both online and offline.? When will you stop suing music fans?
2. The RIAA has sued over 20,000 music fans for file sharing, who have on average paid a $3,750 settlement.? That’s over $75,000,000.? Has any money collected from your lawsuits gone to pay actual artists? Where’s all that money going?
3. The RIAA has sued over 20,000 music fans for file sharing.? Recently, an RIAA representative reportedly suggested that “students drop out of college or go to community college in order to be able to afford [P2P lawsuit] settlements.” Do you stand by this advice? Is this really good advice for our children’s futures?
4. The RIAA said that it only went after individual file sharers because you couldn’t go after P2P system creators. After the Supreme Court’s Grokster decision, shouldn’t you stop going after music fans?
5. Major entertainment companies have repeatedly brought lawsuits to block new technologies, including the VCR, Digital Audio Tape recorders, the first MP3 player, the ReplayTV PVR, and now P2P software. Why is your industry so hostile to new technologies?
6. DRM has clearly failed to stop songs from getting on file sharing networks, but it does prevent me from moving lawfully purchased music onto my iPod and other portable devices.? Unlike the major record labels, many popular indie labels offer mp3 downloads through sites like eMusic.? Why won’t you let fans purchase mp3s as well?
7. The RIAA says that it doesn’t mind if I rip CDs to my personal computer and put them on my iPod.? Do I need your permission to do this or can I legally do it even if you object?
8. Recording off the radio is clearly permitted by copyright law and something Americans have done for over 25 years, but the RIAA supports legislation restricting devices that record from digital radio. Why are you against TiVo for radio?
9. Sony BMG recently implemented a DRM technology that damaged users’ computers.? But for independent researchers’ analyses, this serious flaw may have gone undiscovered. After this scandal, will record labels allow any computer scientist or security expert to examine these products and agree not to sue them under the DMCA?

Video

1. The major movie studios have been enjoying some of their most profitable years in history over the past five years. Can you cite to any specific studies that prove noncommercial file sharing among fans, as opposed to commercial DVD piracy, has hurt the studios’ bottom line in any significant way?
2. Is it legal for me to bypass CSS DVD encryption in order to skip the “unskippable” previews at the beginning of so many DVDs? Why should I have to be forced to watch these ads when I already bought the DVD?
3. Is it legal for me to skip the commercials when I play back time-shifted TV recordings on my TiVo or other PVR? How is this different than getting up and going to the bathroom?
4. Why are there region-code restrictions on DVDs? How does this prevent copyright infringement? Is it illegal for me to buy or and use a region-free DVD player, or to modify a DVD player to be region-free?
5. In several lawsuits, the MPAA has repeatedly said that it’s illegal to make a back-up of a DVD that I purchased.? Why is this illegal?
6. Is it ever legal for me to use software like DVD Shrink or Handbrake to rip a digital copy of a DVD I own onto a video iPod or my laptop? What if I want clips to use for a class report? Or if a teacher wants to include a clip in a PowerPoint slide?
7. Is there anything illegal about copying TV shows I’ve recorded off the air onto my video iPod?
8. If the MPAA-backed “broadcast flag” bill passes, I won’t be able to move recorded TV content digitally to my current video iPod.? Why should TV studios get to take away my ability to lawfully time- and space-shift?
9. Major entertainment companies have repeatedly brought lawsuits to block new technologies, including the VCR, Digital Audio Tape recorders, the first MP3 player, the ReplayTV PVR, and now P2P software. Why is your industry so hostile to new technologies?
10. Hollywood is pushing legislation to “plug the analog hole.” These restrictions won’t keep copyrighted video off of file sharing networks, but they will block me from excerpting a recorded TV show for a school report or using tools like the Slingbox to send recorded TV shows to myself over the Internet.? Why are you trying to restrict these legitimae uses?

Questions posed by the Electronic Frontier Foundation. Reprinted with permission. Spotted on Boing Boing and Digg.