As another follow-up to yesterday's post on a speech by Ian Rogers (Topspin Media, ex-Yahoo Music) about, for lack of a better summary, the future of music, here's a link to coverage today at TechCrunch. Skip the post and go straight to the commentary. You get everything from (paraphrasing loosely here) "Technology will kill labels -- Kozmo.com should have been the next eBay" to "Less popular music is less popular because it sucks." And plenty of opinion in between. Rogers even left a comment.

What is missing from the discussion is the competitive role technology will play for music's middle class. Forget any Utopian ideas of a growing, more self-sufficient middle class. I understand that may be difficult when we're frequently presented with success stories big (Nine Inch Nails) and small (Josh Rouse). But don't forget the stories of mediocrity and failure. There are plenty of them. Case studies and success stories sell a product and a vision. They do not accurately represent the entire marketplace.

The best assumption is -- short of the emergence of government endowments and grants for everyday musicians -- the middle class will stay about the same size, and consuming spending on music will stay about the same. Given those assumptions, middle class artists will use digital technologies in heightened competition with other artists. New tools aren't about growing the middle class, they're about enabling a portion of artists to divert money away from other artists. Today's ease and low cost of production and distribution have lowered the barriers to entry. Naturally, the market will see an influx of new entrants. The barriers to success, however, even modest success, are still there.

Posted by Glenn at 5:50 PM | Link
|Topspin|

Foundry Group invested in Topspin Media, a much-hyped media technology company that provides tools to artists. From the way Foundry talks (at a post at the Foundry Group's blog) you'd think this music business is a piece of cake.

Thanks to technology, the physical world scarcity model has been upended. The costs of recording and producing world-class music are nearly zero (though, arguably, talent is still required) and the costs of distribution are also near zero, which has eroded the traditional advantages enjoyed by the major labels: exclusive access to high-end studios, a lock on physical distribution and marketing through proprietary access to radio and MTV, channels which are becoming decreasingly important.

It's no piece of cake, but some aspects of it are getting much easier. One such aspect is selling music outside of the distributor-retailer channel. Another is selling music in different packages and bundles, and selling music in new ways like direct-to-fan subscriptions. Topspin, from what I can determine at this point, is building the technologies to allow for all of the above.

(But, c'mon, world-class recording costs aren't near zero. Recording quality is currently a race to the bottom. Listeners can tell the difference, and in some cases a poor recording will limit the song's potential.)

An important part of this discussion is building demand. Tools can enable commerce, but something has to first trigger the demand. Otherwise you've set up shop at the end of a dark, one-way alley without giving people a reason to visit. In a blog post, Topspin said, "We are about demand creation, not demand fulfillment." What we've seen thus far, though, shows far more demand fulfillment than demand creation. (Judging from some things I've read, demand creation could be part of the next phase of Topspin's offerings.)

Nine Inch Nails, Josh Rouse and the Dandy Warhols, all Topspin clients, already had considerable fan bases to work with. I don't see how Topspin has created demand for them. Jubilee, another client, is booked by William Morris and is signed to Buddyhead Records (Buddyhead co-founder Aaron North is in the band). Their publicist, agent and record label are out there creating demand. Topspin is there to capitalize on it.

Topspin's Ian Rogers knows how hard it is to create demand and build a community. He spoke about fan acquisition with Listening Post.

"That really is the hard part that I don't think anyone has a killer solution for yet," said Rogers. "How do you go out and acquire new fans, and do it intelligently with a measurable return on investment?"

If Topspin or its competitors -- a collection of companies that is growing quickly -- can just fulfill the demand that has already been created, there is a lot of money to be made. The more a service is a commodity the lower margin in will earn, but a ton of music sales could easily be displaced from existing retailers in the next few years. (Not all sales will be displaced. Consumers will shop where they like to shop. Retailers will continue to play an important role.) Give artists and labels the right tools and it will happen.

In a quiet corner of the music industry, this is already happening. Read this post by Echo co-founder Mark Montgomery. It's an open letter to Bob Lefsetz, who quickly became a Topspin fan.

As the co-founder of echo, I can tell you that Ian’s ideas are not new, and that we as an organization have been doing what Ian is talking about doing for the past 5 years. We manage over 400 artist platforms (including your fav Keith Urban) and have been helping our clients grow their businesses as the web for quite some time. ... In the last 30 days, we have served out 125mil pages to our clients audiences, and served 20 terabytes of files (including selling digital files directly to consumers).

I like what Topspin and others are doing. I really like the idea of selling subscriptions and packages of digital goods. Their tools will help artists -- even the ones signed to a label -- to sell items and build relationships with fans. And when more purchases come from higher-margin sales from artist websites, more of the music's value is captured.

Posted by Glenn at 3:14 PM | Link
|Topspin|