Dolby: I make more money from sync licensing than anything else. If I’m trying to get something into a movie, I don’t want to be tied to an album cycle. On the other hand, I want my work to be a cohesive whole. Digital allows a lot more flexibility. I can put recordings on my website, check the response, and polish it if there’s good response. There’s a shift in the balance of power from musicians dependent on labels to labels as one small part of an overall business, shifting the power away from the labels.
Tim: CDs will become more like baskets — there will be a $15+ item, but it will include behind the scenes DVDs, great art, and other materials that add value.
Kurt: I wonder if it will become more limited. People are unloading their CDs. they’re becoming throwaways.
Jordan: I have trouble getting rid of stuff. And people put up with worse sound quality. Ont he other hand, people listen to the radio, and that’s terrible from a sound quality perspective, with the compression and so on.
Dolby: The problem is the necessary evils that go along with physical manufacturing and distribution. You’re paying for all the mistakes the music business has ever made. Ten years of business has tought me that there’s a limit to how far in front of the revenue curve you should be investing. I look very carefully before I press 10,000 CDs. Digital is great, since there’s almost no risk.
Kurt: Do you feel a loss of sond quality?
Dolby: Oh, yeah. I can’t listen to MP3s. But having “ears” is sort of a curse. Over time, they’ll sell high quality back — uncompressed, then 96 KHz. That’s the oldest trick in the music business.
Jordan: Pro Tools doesn’t sound as good as analog, but if it’s all going on iPods anyway, how does it matter?
Kurt: Mobile devices. How far can we go?
Tim: Muni WiFi will eventually be a reality, and sooner than we think. Then, every MP3 player with a wireless card will be connected to the internet. That might allow virtual collections, or online radio. There are 15 million iPods, 700 million mobile phones, and when those are connected to high speed internet connections, it’ll inevitably go there.
Kurt: Is the home stereo out the window?
Tim: The home stereo offers a great sound experience. We did a deal with SlimDevices that allows Pandora use on the home stereo.
Dolby: Once there are wifi networks, we can have subwoofers on streetcorners to help out tinny ringtones.
Audience Q: Why is music so important to us as human beings?
Tim: One of the things I’ve been doing int he last six months is having townhall meetings with Pandora users. What it has really reminded me is how universal and profound people’s connection is with music. You can get in a room with 200 complete strangers and have two-hour discussions about music. There will be 75 year olds as well as teenagers. It confirms for me that it’s a deeply held belief and passion that everybody has. Music draws people in, and we all get that feeling, when a song reminds us of something or makes us fgeel a particular way.
Jordan: I have no idea.
Dolby: If I could find the words to answer that question, I wouldn’t need to be a musician. The world is so fucked up that it gives you a giant migraine, and music is the aspirin. It beautifies the world.
Audience Q: Gaze deeply into the crystal ball. There’s a lot of hate, with the record company lawsuits. What will it look like in 10 years? Will the majors do intelligent things, or do we need to completely kick them out?
Jordan: I don’t know what the music business will look like in 10 years, but I’d guess major labels will still be partof it. They serve simple, specific functions. It’s people power, financial, and elbow grease. They’re starting to figure out already what to do. It’s great to think that music will come just
Dolby: I don’t think there will be major labels in 10 years. The major labels exist today because 40 years ago it was hard to manufacture a piece of plastic with music on it. When you take out the need for physical manufacturing and distribution, you take away one major function of the majors. You also take away the need for the investment up front. The capital required to make a record is so much less now than it was that the source of income you need can be found in more places. So the moneylending is out and the manufacturing is out. Not much is left. There’s no reason to sign over to a corporation anymore. If they don’t own the recordings, they don’t exist anymore.
Jordan: The reason to sign to a major is to be a superstar — sell 10,000 tickets in a major market. I worked with Death Cab’s move to a major label, and they’re happy. They’re making a lot of money. Will that playing field be level in 10 or 20 years? Maybe. But will book publishers and movie studios go away too? They’ll just serve a different purpose.
Tim: Labels will look more like management companies. Labels are like VCs. They throw a lot of money at acts and hope one hits. There are a number of approaches in Silicon Valley. Some have a lot of moeny and throw it around, and others are incubators — they give support and expertise. That’s how record labels should operate. They’re good at A&R, putting together tours, marketing. They should start iincubating bands. The bands can come to you with a finished CD — they just need a management support group.
Jordan: That exists — Warners is doing that. It’s a little more evil than record label model, though, ’cause you’re signing bands for less money than before. Stardom is a carrot, always. I can’t figure out how a completely new process would work.
Dolby: If you want to be splashed across the media as a whole, there’s going to be a level you’ll have to reach, and that won’t happen through self-promotion, but what happened with Death Cab was like an incubator — no huge debt, and they proved themselves, and then they convinced someone to pull them up and take them to the next level. It’s less of a crap shoot now. They spent hundreds of thousands of dollars marketing my stuff with no idea what would happen or how it was working. Now, artists can prove they have an audience in an economically sane environment.
Tim: And when you sign that deal, it won’t be for a 6.5% royalty rate. You’ll be able to get more.
Dolby: You may see 50% rates back to the artist early on, then much less if the star trigger gets pulled.
Audience Q: What will the next big genre leap be?
Tim: The next big movement in the US will be the pulling in of international music. We’ve done pathetically little of that here. The rest of the world knows that there’s great music made in different places. There’s amazing music coming out around the world. The US audience is likely to welcome it, especially mixed with US artists.
Dolby: The middle eastern influence is coming in to rap records. I’m not the right person to ask. Kids are influenced in music choices by peer pressure, and it’s not terribly susceptible to conventional marketing and advertising. Every time I used to sit down at the piano, I had to think about what the hitmakers would think. Only if A&R and the retailers and the label bosses liked it did the public get it. Now, I’m freed up. the stuff that’s coming across my plate is quite eclectic and doesn’t fit into pigeonholes, and that’s because artists don’t feel that pressure. This is a fantastic time for music fans and musicians. I feel sorry for people in the industry, but there’s a lot positive that’s going on.
Audience Q: I just left a major label. Where are the majors at this conference? That’s crazy to me. I left because there was nobody with vision. There are these old guys — LITERALLY, old guys in khaki pants and polished shoes — trying to keep the CD alive. Everything that Thomas is saying — how can people not see how great it would be to have a spigot of music coming out everywhere. It’s so much fun.
Tim: People bitch and moan about the fact that their favorite radio station went off the air, or that the record store closed. But it’s their fault. We get what we ask for. The music business leads us, but also reacts to what we want. People don’t think about the effects of listening to Clear channel stations or buying at Best Buy.
Jordan: Are any indies doing it right?
Dolby: I’m here trying to meet them. I definitely need someone to navigate me through promotional opportunities, and I want to know what it takes to get on the front page. I want somebody to take care of distracting logistics. But I don’t want an manager and an agent and a label and all of these people, because you don’t need all of these people. You’re feeding a lot of mouths. I don’t want the people problems of a huge team. The same when I started a company — it was great until we had 10 employees, then I was dealing with interpersonal problems all day.
Audience Q: I’m an ex-VC. VCs PRICE risk; labels TAKE risk. In a VC portfolio, there’s a 3/10 hit rate. For labels, it’s about 1/20. As you think about the label model, there are a lot of challenges there. Is it possible to imagine a world with no labels at all?
Dolby: It’s not that we don’t need intermediaries; it’s just that th services they provide need to get consolidated.
Tim: A few years ago, Amazon had this thing called Amazon Advantage. They’d take anybody’s CDs, warehouse, them, make 30-second samples, and sell them. You can imagine a cartoon about what it’s like to be in that warehouse. How do you find your audience in there? That’s what labels try to solve. They’re inefficient about it, but somebody has to play that role. What does that player look like? A label? A management company? Certainly, a more competitive landscape than now. Anybody can be a label now, but it’s hard to do effectively.
Audience Q: VCs and labels are different in that they keep different stakes in the eventual product.
Tim: Most bands get their $200,000 advance and build a studio. They figured that would be the last dollar they’d ever see.
Dolby: There are entrepreneurs who see VC money the same way. It’s going to take a wad of cash to get someone off the ground now, and it used to take a lot of moeny to get a record recorded, but not anymore.
Audience Q: 10 years from now, where will my money come from, percentage-wise? Mobile? iTunes? Selling CDs from my website?
Jordan: I think it’s artist-specific and goal-specific. Artists will make more money per CD sold, but it’s hard to get noticed enough to get people to buy your stuff.
Dolby: If you’re going to sell your soul, there will be other corporations to sell your soul to, other than major labels. Phone carriers, for example.
Tim: Artists will keep a much bigger piece of the pie than they used to.
Dolby: My friends from high school, who quit making music to get a sensible job long ago, are now gigging again, and making a living.