EMI drops DRM in itunes....

[Guest endymion]

OK, here's a scenario for you. What if Apple said "screw it", and just had no DRM? I know ITMS would fall apart, but what if?

That's the power play that's happening right now, and it looks to me like iTMS will survive.

And beyond that, every little indie record label will want to put a no-DRM music store on their own web site because they will finally realize that they're better off making $.75 on a $.75 track sale on their own site than they are making $.72 on a $.99 iTMS sale, or a fraction of that $.72 if they made the mistake of doing a major distribution deal. Right now the tiny indie labels are the ones who are most fearful of no-DRM sales because the major labels have managed to spin a reality distortion field around their heads and convinced them that the only way to distribute music digitally is through the major labels with DRM.

[Guest coach]

You are still making the big mistake that many newbie music people make. 100% of nothing is still nothing. You want to sell your no-name music on your own website? Go right ahead. But nobody is going to buy it. It is like the point from Saintjohn's earlier thread, "Do We Need Record Labels?" The reason that artists need places like iTunes and eMusic, or even Wal-Mart, to sell their music in is because customers are human. They don't have infinite time nor patience to be wading through the preposterous enormity that is the worldwide web to find some little bit of music they might want. It is the reason that iTunes and Amazon works so hard to categorize their customers' likes and suggest new stuff to them. Being able to sell music on your website is actually a relatively pointless endeavor. It's cute, but not particularly useful. Being able to *market* your music to a wider audience, that is the important issue.

[Guest endymion]

That is extremely true and you're agreeing with David Byrne that going forward, music companies need to be focusing on marketing. But why would retailers like iTunes, eMusic and Wal-Mart have a strangle hold on marketing? They don't. Especially in a world where the importance of the retailer is diminishing.

New music companies that do marketing more effectively will be solving the root problem better than the major labels. There are a lot of new ways that the little guy can use to attract a lot of eyeballs now. It's wrong to think that you have to have connections in order to attract eyeballs, that's what the Internet changed.

We attracted hundreds of thousands of eyeballs to CoolJunkie with a marketing budget of exactly zero dollars. Lily Allen did her own PR more successfully than her label. There are zillions more examples. Three guys in their garage started Beatport and effectively marketed that, so why can't Naked Music or K7 Records or any of Beatport's labels do the same thing? Why can't groups of artists cooperate to share marketing resources without signing their souls away to labels?

They can't right now because:*

1) they're afraid to release DRM-free music and

2) because they don't have the new tools that will be necessary to do it.

* and 3) often also because of contractual restrictions imposed by the labels that they signed with.

[Guest coach]

You're forgetting the 4th and most important reason, because they do not have the skills, natural talents, training, or inclination to do so. I will grant you your few exceptions. Sure, the geniuses of the world can do a LOT of things. That ability does not necessarily apply to the rest of us.

But why would retailers like iTunes, eMusic and Wal-Mart have a strangle hold on marketing?

Because that is their *job*. An artist's job is to make art. A retailers job is to sell. Now, perhaps an artist is so talented and has enough passion and time available (by giving up things like a social life and sleep) that they can manage to make art AND sell. And that's cool. And that is what a DRM-free world does open up. But the VAST majority of artists will still need to partner with someone who has selling experience and skill. Hopefully that will look a lot differently in the future, but do not expect that just because distributing music becomes easier, that it will negate the need for conglomerate retailers.

Think about this. When you are shopping for music, even at T1 speeds, do you want to have to go to every little website on the planet to find what you want? Or wouldn't you rather just go to one and be able to pick out the stuff you want and pay for it all at once? You may prefer to spend hours searching out music, but I, and the majority of the country, do not.

[Guest endymion]

Everything that you're saying is true, but it's true yesterday. It's barely true today and it won't be true tomorrow. You no longer need to "partner" closely with anybody and sign away your soul to gain access to skill sets that you don't personally have.

For example, you write an article about the future of music and post it to your blog. Say hypothetically that blog authoring is the only skill that you have. Your blog is RSS syndicated, which is something that your tools do without you understanding anything about it. Google, Digg and Technorati are content aggregators. Three of them are wildly successful and operate by directing you from the aggregator to the original site to access the actual content. Technorati reads your RSS feed and publicizes your article if you're credible enough. Maybe Digg picks it up. Those entities, not affiliated with you, are driving your marketing. But when people read your blog post, they do it on YOUR site, not Technorati. If you have AdSense on your blog then both you and Technorati made money on the deal, kind of like a record deal. Unlike a record deal, there is no evil lock-in contract between you the blogger and Technorati. There is no exclusive agreement that your content will appear through Technorati and not any other aggregator.

If I like a track from Salted Music and I Google them and find the track at Beatport for $1.50 and the same track on the Salted site for $0.75, then why would I buy from Beatport? Under your reasoning, I would go to Beatport first and search for "Salted" there, rather than just doing what I normally would do and Google them. But Beatport never did any kind of marketing magic that Salted couldn't do, and the function of a label in the new economy, as you pointed out, is marketing. It's their job to make their music show up in aggregators.

All of this is pretty short-sighted because we're still talking about selling music as a product. The revenue from per-track sales will drop soon to such low levels that an artist's revenue model will shift toward live performance, sponsorships, and other advertising. Then Amazon and iTMS will have even less control. It's already happening, and the Mayday video was a great example. Who made money from that video? Mayday? No. Their label, Southbeat? No. It was Google who made the money off of the 2.7 million views of that video. By my calculations GoogleTube made six figures in advertising revenue from that music video, far more than the artists made. Their contract with their label makes them responsible for production costs on the video but they didn't make any revenue from the video getting popular. So the marketing was a success but the business venture was a failure.

[Guest coach]

So, you are still talking about large organizations (RSS syndicator, Digg, Google, Technorati) doing the marketing for you. Sure, you are not exclusive to any one of them. And I guess if that is your point, then I would agree.

Yes, I would absolutely go to Beatport first, or more likely bestbuy.com. It would not occur to me, or much of the country, to go to Google first to buy music, though it may eventually *if* they market themselves that way.

But calculate your time spent. You buy 1 track off Salted's site. 5 minutes of your time. Then, say you might want more than 3 minutes of music. So, back to google, another search, paging through more results, to another band's site, another checkout procedure. Another 5 minutes of your time. Do that for a full CD's worth of 22 tracks, and you've burned nearly 2 hours. Instead of that, you go to an aggregator, say Beatport, pick out 22 different tracks without having to sift through a lot of the non-music nonsense that comes up on a google search, go through the checkout process all at once and only once, rather than 22 times, and how much time have you saved? Not only that, but if Beatport is good at their gig, you have likely discovered more new music you like because they suggest different tracks based on the ones you have searched previously.

[Guest endymion]

A year ago, it used to take me a long time every day to go and read through all of the posts at Slashdot and Wired and all of the other places that I wanted to scout out before I sat down to write a bunch of code. Now I use NetNewsWire and get it in a glance. You have to expect similar advancements in music-finding technology. The primordial versions of them are already here, Last.FM and Pandora.

If music itself is free and nobody charges for the download at any point, and if there's no DRM, then the aggregators of the future that help you to find your music will be far more functional than Amazon or Beatport, and you'll use them instead.

None of this requires artists to do anything other than what they're already doing: make music. In fact all of this will make it easier to make music. When you sit down to make a track right now you have to do it all yourself. I'd like to be able to crack open a Beatport that's full of beats and loops and samples that are all free and start screwing around in the studio by messing with those. It could make the music production process faster and more efficient for plenty of people, which means more food for those aggregators, and more high-quality stuff coming out of them when you go and peruse the Top-10 lists on each niche aggregator that you're into.

[Guest coach]

Ah, now that's where we needed to end up. As long as people understand that the artists still need the salespeople (what you call aggregators).

[Guest pod]

This is true. Unless you're one of the "geniuses", as an artist you need a salesperson.

Someone told me I have sale-able material (as a fine art) in my collection. I hate sales. Hence, I need a salesperson.

[Guest endymion]

Well I'm looking forward to the point where tools replace what people do now.

It used to take a department full of career nerds to program a computer to make it do something simple, like put an artillery shell on its target. (That's the problem that computers were originally invented to solve.) Now you buy Turbo Tax, it comes in a box, it does high-level things like getting updated tax tables over the network, and it gives you the result of far more complex calculations than targeting an artillery shell, with no army of nerds.

The same thing will be happening with music production and music marketing. The Internet revolutionized music listening, but it has barely yet touched music production and music marketing. The music industry doesn't want innovation but it's happening anyway. Linux was born in the middle of a totally proprietary computer economy and it disrupted the power structure by giving away what used to be locked down. The music industry hasn't seen its Linux yet but it will soon.

If it were as easy for a music producer to release a track as it is for him to jump on an Internet message board and post a flow-of-consciousness forum post, then there would be more music in the world. If the music Digg aggregator sites of the future are fast and efficient then music will be easier to find than it is right now through Amazon or iTMS. If the whole thing rewards artists automatically then people keep pumping out music. If people don't have to ask permission first before using samples, loops, beats and tracks in remixes and new tracks, then the overall quality of all of it gets better. Each individual person doesn't have to work any harder.

[Guest coach]

Yeah, that'll be cool. And I expect that to happen, as well. Though, I do not see how abondoning DRM will help. I mean, you need some simple way to identify whose track is whose.

Interesting how iTunes is sowing their own seeds of destruction, though. I mean, once you have musicians hosting their own tracks and aggregators like Digg providing the search and sales for customers, then why do you need a retailer like iTunes?

[Guest endymion]

Yeah, that'll be cool. And I expect that to happen, as well. Though, I do not see how abondoning DRM will help. I mean, you need some simple way to identify whose track is whose.

Yes, the new economy does need a way to assign a unique global ID to each piece of music. But DRM is not the solution to that problem. DRM is just a cryptographic lock, not an ID tag. A cryptographic ID tag that isn't a lock is called a hash. The new music economy will be built with hashes, not with locks.

Interesting how iTunes is sowing their own seeds of destruction, though. I mean, once you have musicians hosting their own tracks and aggregators like Digg providing the search and sales for customers, then why do you need a retailer like iTunes?

The answer to that one is pretty simple. Apple makes very little money on iTMS. They make money selling computer hardware. 100 million iPods. Increased computer market share. They basically give away music to create a market for the music gadgets that they sell.

Apple's loss-leading on music in order to make money in other ways is exactly what I'm saying the new music economy will look like. Apple puts a value of about $0 on each track that it sells, but the effort is worth it because it makes them money in other ways. New types of music companies can give content away and make money from the eyeballs that quality music attracts, like YouTube. Viacom is pissed that YouTube (and Apple) are making money in new ways and cutting them out.

From the artists' point of view there is a smaller pool of revenue, but they get a bigger percentage of it by cutting out the middle men who have screwed them over for the last hundred years. The RIAA wants artists to believe that they are married to the existing recording industry and that no other way is possible. But look at how much money Apple is making from giving away music. Look at how much money YouTube is making from giving away content. The Internet came along and opened the barnyard gate but the artists are still standing around like dumb cows, unaware that the gate is open now and that they can just walk out to freedom. They're so brainwashed that it doesn't even occur to them to walk through the gate.

[Guest endymion]

Interesting how iTunes is sowing their own seeds of destruction, though. I mean, once you have musicians hosting their own tracks and aggregators like Digg providing the search and sales for customers, then why do you need a retailer like iTunes?

From AppleInsider:

Reacting to Apple's announcement Monday that it will soon begin selling music tracks from EMI without copy protection, PiperJaffray analyst Gene Munster advised investors to look out for an increase in iTunes music sales, explaining that the removal of DRM abolishes one more barrier to entry into the iTunes+iPod ecosystem.

"This effect could also result in more iPod sales as consumers have positive experiences with iTunes+iPod and the overall move to the digital music world gets easier," he wrote.

The analyst, who estimate that less than 5 percent of the music in the average iPod user's library includes music purchased from iTunes, said he believes the success of the iPod is dependent upon the total experience of the device and the music store, not the fact that iTunes music only plays on iPods.

"We believe DRM free music will have a positive impact on iPod demand given DRM free music should result in more usage of digital devices," he wrote. "The impact of increased iTunes downloads will outweigh the impact of some customers using non-iPod players with iTunes downloads."

The next paragraph illustrates my point about how Apple's model is to profit from the sales of quality music gizmos, not from the sale of music itself:

Munster noted that there may be some short-term perception that the move could form a negative impact on iPod sales, as consumers will gain the ability play EMI's iTunes downloads on any digital music player. However, he said it's important to note that non-iPod MP3 players will not sync with iTunes the same way iPods do.

"Our belief is the success of the iPod is not because consumers are locked on the iTunes platform, but its success has been because of the total device and iTunes experience," he reiterated.

Coach, your impression is that Apple profits from proprietary lock-in. My impression that Apple is betting that they can profit even more from providing better quality gizmos in an open market. If every other company (like Microsoft) is attempting to secure market share through proprietary lock-in while providing crappy (Zune) products, then Apple can provide better value in the form of better products, and open markets without lock-in allow customers to migrate more easily to the better products. If you're the guy with the better products in an open market where customers are free to choose, then you win.

[Guest coach]

If you're the guy with the better products in an open market where customers are free to choose, then you win.

Not always true.

However, I do very much agree with their business model. Give away the content, charge for the content manipulator.

Of course, I've never had a "positive experiences with iTunes+iPod", but maybe I'm in the minority.

I wouldn't buy a Zune, either, for sure. If I were to buy a digital music player, it would likely be a third-party. I like the Toshiba ones, for example. Does iTunes integrate with those?

[Guest endymion]

Does iTunes integrate with those?

You can sync just about anything with iTunes using third-party utilities.

It will never be as slick, because of the fact that the iPod and iTunes were designed to be two sides of the same coin. Yin and yang. You can put your iTunes music into a cheap Taiwan Special player but you lose a lot in terms of user experience because the cheap Chinese MP3 player was designed to solve a different problem than the iPod was.

iPod solves the problem of carrying iTunes around in your pocket. The Taiwan Special player solves the simpler problem of playing digital music. Different goals, different outcomes.

[Guest pod]

Taiwan Special! Heheh.

Well, iPods are sorta Taiwan and China specials.