joegratz.net

I’m at the Bandwidth Conference, at a conversation with Terry McBride, founder of Nettwerk. (I’m omitting the questions, since they’re implied in his responses.)

We sued the P2P downloaders, and that felt good for about nine months, but then we realized that those people are our marketing and promotions team. They’re passionate music lovers. We developed street teams. We’ve taken the behavior of these kids and made them into street teams. We’re mobolizing them, sure, but also monetizing them through recommendations.

You should never tell the consumer how to consume — give up control, let them decide how to do it.

We sell more digitally than other labels because of our philosophy of making music available. Sarah McLachlan fans aren’t on Myspace, but The Format fans do. But also, the Barenaked Ladies are selling single instrumental tracks for kids to remix in a pseudo-creative-commons way.

Pricing started being an issue with the CD — with filler songs. What if we take away the control — the DRM? You’ll see the price of music drop to 25 to 49 cents a song. The kid who’s really good at downloading 10-20 songs an hour could make more working at McDonald’s instead. When the price comes down, P2P disintegrates for music — at least music you can find. That, combined with the ability for fans to sell music to other fans, will completely change the marketplace.

I don’t believe in fear. The use of litigation in anything is negative energy. The RIAA is using fear as a tactic to push kids ot use legitimate systems, but fear doesn’t work in the long run. I didn’t like that they were suing a fan for sharing an Avril Lavigne song, so you have to stop using the names of the artists I manage. I want the fans to build the brands of my artists. The lawsuits have hurt the business and have hurt my artists. This is my attempt to stop the litigation. I like copyright, but I think copyright hsouldn’t be controlled the way it is. It’s wrong. It’s manipulative, and it’s not where copyright law came from. We need to stop these lawsuits. I’m hoping it’ll get to the point where the RIAA backs off because losing is too costly in the larger picture. I’m hoping, with the changing attitudes toward DRM, that we can change things. They’ve gone down the DRM / lawsuit rabbit hole, and they don’t know how to get out. We need to help.

In 10 years, there will still be physical CDs. The majority of music consumption will be digital portable — interoparability issues will be gone. Most music will be sold fan to fan. Tou’ll have 2 million web sites selling music. Music will finally be consumed in the market the way it is in the real world — everywhere, all the time. The behavior of the public will be monetized in a fair way. The artists will be back to writing good songs and not releasing the filler. Build the brand and the sound — the album cycle will be gone. You don’t need to do an album before you tour. The connection between the artist and the fan will be more direct, and anything that gets in between is a deterrent to growth.

The big labels have found it difficult to break big bands because radio formats make it difficult to introduce new styles. Zeppelin could never happen today. But when artists pull, there can be huge artists, and they can be artists that wouldn’t be played on any existing radio format.

Artists who sell fewer copies are getting bigger crowds. Howbig a band is should be the total value of what the band brings in, not how many CDs they sell.

Streaming is growing faster than digital downloads. The most effective way to use the P2P marketplace would be to take a huge band, put out an MP3 with an ad on the beginning and the end, get some metric, and the single all of a sudden generates millions of dollars, given away free.

I’m telling my artists to keep their copyrights together, and not split them up into masters, publishing, etc. This allows greater innovation in ways you can allow listeners to get the music. Divided copyrights in a single song is an incredibly economically inefficient way to operate. Labels will be bankers and facilitators, not owners. They’ll be forced to give stock options to artists. The tax code was recently changed to alllow artists to sell copyrighted material for stock options, and then be taxed for the capital gains rather than straight income. [Sounds interesting. I'll have to look that up.] I look at Korea, where 60% of music sales are digital. Mobile phone companies are buying record companies and signing artists. Radio is going to be programmed by the listener. Those running the labels now are all about control, and that has to change.

Band-to-fan is great, especially when you collapse the copyrights in a single owner. We just own the majors for physical distribution — we can do the rest with street teams and online.

The only thing we’re missing is A&R, but it’s been a bad job for a while — finding the hit single. Business. The creative team of A&R, promotion, production, and artist has been gone for a long time if it ever existed. The artist is still surrounded by people — now including the fans — who will call a shitty song a shitty song.

We’re inviting fans to make the next Barenaked Ladies video. We’re selling 16 multitrack stems for each of the first 5 songs. The best mixes are going to get put on a charity EP and sold on iTunes. We sell music in open source. The fans make their own mixes and give those mixes away. Only 40% of the money they generate on these copyrights will be from their physical CD sales — the rest is from selling the content in other ways, especially selling the multitrack stems. The majors can’t do this, they’re scared, but it’s so much fun. This all comes with the artist owning all of the relevant copyrights. They made $3 million on their little Christmas album. You get your creativity back, you get the same financial reward as playing the selling-millions-of-records game, and it’s a hell of a lot more fun.