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Speaker 1: Okay, so please welcome Bob left Sets and music industry

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Speaker 1: analyst and critic and the author of the left Sess

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Speaker 1: Letter and someone who I think is a legend in

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Speaker 1: his own mind. Just kidding. We love you, Bob, Come on, yeah,

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Speaker 1: I mean he is on insecured heart and I feel

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Speaker 1: like I'm a ship hit in my own mind. So

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Speaker 1: that ultimately works. This is a panel about change. So

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Speaker 1: the music business, it's not your father's music business anymore.

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Speaker 1: What does that mean in them to the year two thousand,

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Speaker 1: we lived in a monoculture. If MTV showed it, it

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Speaker 1: was successful. So the goal was to get on MTV.

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Speaker 1: Then Napster comes along and disrupts freething amongst people on

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Speaker 1: this side of the fence in the music business, all

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Speaker 1: the customers were labeled as thieves, they didn't want to pay,

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Speaker 1: revenue was going down, etcetera. What we've learned is change

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Speaker 1: is constant and the customer is always in control. If

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Speaker 1: you're not appealing to the customer, you're doomed. So the

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Speaker 1: example I always use if we look at eighteen years

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Speaker 1: worth of history since of Napster is some of you

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Speaker 1: may be too young to remember this, but on Saturday morning.

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Speaker 1: They used to show Westerns okay, and the bad guys

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Speaker 1: would rip off the bank. Now no one said, let's

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Speaker 1: build a really big megaphone, put it on the roof

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Speaker 1: of the tallest building and yell for them to bring

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Speaker 1: the money back. That's what it's been happening in the

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Speaker 1: music business until Spotify. So what do they do in

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Speaker 1: these old Westerns. They say, we're going to form a posse.

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Speaker 1: We're gonna cut them off at the past. One of

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Speaker 1: the great things about streaming music at this late date

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Speaker 1: is many people do not understand it. The example I

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Speaker 1: use on a regular basis, I get emails saying, uh,

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Speaker 1: I'm not gonna have a streaming service. I need to

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Speaker 1: own it because what if I'm out of a cell range.

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Speaker 1: Whereas everybody here probably knows, you can sink approximately two

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Speaker 1: to three thousand songs on your hairndheld device, so as

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Speaker 1: long as you have juice, you can listen even if

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Speaker 1: you're on the top of Mount Everest. So in the

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Speaker 1: music business, which is the canary in the coal mine

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Speaker 1: for entertainment tech, we have figured it out. We live

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Speaker 1: in an on demand culture. Everything has to be your fingertips.

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Speaker 1: Everybody say what's after Spotify? What's after these or Apple Music? Nothing? Okay,

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Speaker 1: as long as you can get it on demand, we're here.

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Speaker 1: What does that mean? A We're not like the movie business. Now,

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Speaker 1: if you followed yesterday's news, Disney said, we're Disney. We

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Speaker 1: don't really have to compete with Netflix. We don't have

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Speaker 1: to make as much product, which, of course, if you've

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Speaker 1: lived through the last eight years, your eyes are rolling. Okay,

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Speaker 1: So there's consolidation. Fox was sold to Disney in order

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Speaker 1: to compete to Netflix. And if you're following the CBS

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Speaker 1: Viacom story, it really isn't about less Moon Vez and

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Speaker 1: uh me too moment. It's about Sherry Redstone saying, we

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Speaker 1: gotta sell this stuff before the bottom falls out. If

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Speaker 1: we look at label business that's talking in the green room,

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Speaker 1: Universal Music is worth somewhere between twenty five and fifty

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Speaker 1: billion dollars, okay, and it's by far the largest company

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Speaker 1: in the sphere. But if you look at Warner Music,

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Speaker 1: the guy who doesn't run Warner Music anymore, Dick Parsons,

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Speaker 1: who came from American Express, he blew out Warner Music

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Speaker 1: for a couple of billion dollars. That's the music business

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Speaker 1: we're in. It's all short term thinking. You might have

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Speaker 1: seen yesterday of the day before, the big news was

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Speaker 1: that Warner blew out their Spotify stake. That's like saying

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Speaker 1: the people were in business with we don't belo, we

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Speaker 1: don't believe in, which is nuts. Then they're proud of

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Speaker 1: themselves saying we are going to put one point six

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Speaker 1: billion dollars worth of the five billion dollar cash up

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Speaker 1: from Spotify towards artists. I'm getting email all day today. Go,

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Speaker 1: that doesn't look too good. But before we get deep

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Speaker 1: into the nuts and bolts, what we have to realize

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Speaker 1: is we are now in the era of content. Tech

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Speaker 1: and distribution have been figured out. You'll remember five six

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Speaker 1: years ago, every month there was a new rage, turntable FM,

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Speaker 1: you can have your own radio station. There hasn't been

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Speaker 1: a new rage in forever. In addition, there hasn't been

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Speaker 1: a viral video. Everybody here remembers getting hum style. That

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Speaker 1: hasn't happened anymore. Because as we've gotten into the modern era,

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Speaker 1: what we've found is the i'd say the clock isn't

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Speaker 1: working here in case, you know, I could talk forever,

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Speaker 1: but I want to make sure I don't so. Uh

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Speaker 1: In the modern era, what we've found is that I've

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Speaker 1: lost my place, but I remember where I'm going. So

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Speaker 1: the uh so Netflix, as I say, is all about distribution,

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Speaker 1: and in the modern era we found there's cacophony. Everybody

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Speaker 1: is spreading messages. One don't listen to the people yelling

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Speaker 1: loudest about royalties and other changes in the music business.

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Speaker 1: They tend to be old and uneducated and non players.

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Speaker 1: The number one people I get email from bitching about

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Speaker 1: Spotify royalty rates don't make records. They just hope that

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Speaker 1: at some point they can get a good deal. Okay,

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Speaker 1: And then you have old sers like David Crosby who

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Speaker 1: seems to have lost the ability to do algebra, never

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Speaker 1: mind regular math, and can't really figure out what's going on.

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Speaker 1: But these are always the headlines. I'm sure you're emailed

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Speaker 1: there was the big story today is from the City

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Speaker 1: Core uh research. People like these people know anything about

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Speaker 1: the music business. But then even they say twelve percent

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Speaker 1: of the dollars ends up with acts, and then people

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Speaker 1: email me that sounds terrible. It's a really big business.

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Speaker 1: Everybody here has to get paid, the venue has to

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Speaker 1: get paid. Twelve percent is not so bad. In addition,

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Speaker 1: it's larger than what it used to be. So my

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Speaker 1: point is, now is the time to focus on content.

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Speaker 1: What do we know? To a great degree, the major

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Speaker 1: label record business is running on the same paradigm it's

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Speaker 1: been running since nine, which is chase what's popular. If

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Speaker 1: you're aware of your record business history, in the seventies

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Speaker 1: and late sixties, the foremost label in the business, with

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Speaker 1: Warner Brothers Records, they did something called artist development. Artist

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Speaker 1: development is over the career of an artist. It doesn't

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Speaker 1: mean you took a record from zero to a hundred

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Speaker 1: in a year. That's not artist development. That's record development.

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Speaker 1: But there's none of that here. Okay, major labels only

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Speaker 1: want to sell what's what there's there's a reaction to

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Speaker 1: already someone comes in, well, what are your socials? We

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Speaker 1: want to know you can get the word out. It's

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Speaker 1: not an evaluation of music. So right now, hip hop

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Speaker 1: is the dominant force. Why has hip hop the dominant force?

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Speaker 1: Because rappers embrace the Internet before everybody else. If you

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Speaker 1: go on Spotify where all the numbers are regularly, you

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Speaker 1: know Spotify is the largest player. But I also use

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Speaker 1: it because it's an open platform to the degree if

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Speaker 1: you are on the desktop application and you hover over

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Speaker 1: in the right and we'll tell you how many streams

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Speaker 1: the track has, where you can't get that information from

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Speaker 1: competing services. But we see that the main thing that's

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Speaker 1: played is hip hop music. That's great. Just like when

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Speaker 1: we went to sound skin and we got an accurate

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Speaker 1: kind of sales, we found that country music was much

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Speaker 1: bigger than we thought of it is. But the business

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Speaker 1: at large right now is excluding every other sound. Okay,

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Speaker 1: so the biggest act in the world, okay, time has

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Speaker 1: gone by. Three biggest acts in the world are Adele

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Speaker 1: Drake and Taylor Swift. Let's start with it, doll, what

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Speaker 1: is she selling. Well, she's not doing any of the

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Speaker 1: traditional hype, and she's not selling it on glamour. She's

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Speaker 1: selling on songs that people can sing along to, that

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Speaker 1: something that you know. It's not like a unique person.

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Speaker 1: It's not like an athlete, and we can't clone Lebron James,

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Speaker 1: but we could clone that sound. We're not doing that.

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Speaker 1: So as we move forward, as the rest of the

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Speaker 1: audience comes to streaming, which is country, which has come

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Speaker 1: to a certain degree, Okay, rock which is still rebelling

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Speaker 1: because if people in rockers such streaming haters, they're gonna

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Speaker 1: be other genres. So it's your job to find those

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Speaker 1: acts and literally find an audience for them where someone

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Speaker 1: else will beat you to it. This is the story

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Speaker 1: of Chance the Rapper. This is the story of Spotify.

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Speaker 1: Now a lot of this stuff is piety and plain site.

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Speaker 1: When Spotify did its road show in the spring, just

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Speaker 1: to get a little bit into the nuts and bolts.

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Speaker 1: At this particular point in time, it's a bad business

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Speaker 1: because it doesn't scale. One of the great things about

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Speaker 1: music business, once you make the record, doesn't cost much

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Speaker 1: more to sell ten million copies than one million copies,

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Speaker 1: or to use today's lingo, it's not that hard to

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Speaker 1: get a billion streams as opposed to a hundred million.

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Speaker 1: Where Spotify they continue to have to pay royalties. They

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Speaker 1: have a very low margin in the neighbor of thirty

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Speaker 1: the neighborhood of thirty odd percent. So what they said

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Speaker 1: in their road show is we are going to make

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Speaker 1: direct deals with artists. One thing you have to know

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Speaker 1: is today's artists are sophisticated. It's not the fifties with

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Speaker 1: Ahmed Er again and the other labels saying, oh, you

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Speaker 1: want to have royalties, Let's go to dinner. Let me

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Speaker 1: give you a Cadillac. You know, there's so much information

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Speaker 1: out there. Don Passman's book. When you make a deal

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Speaker 1: with somebody, they have a music business attorney and they

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Speaker 1: know what's going on, and they're not always saying yes,

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Speaker 1: what do they want from a major label? Which this

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Speaker 1: is they want money and they want awareness. Let's go

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Speaker 1: back to distribution. You'll hear all the time content is king.

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Speaker 1: That is complete horseship. When anybody ever tells you that

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Speaker 1: know that they have no idea what they're talking about.

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Speaker 1: They have drunk the kool aid. To use the expression

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Speaker 1: distribution is king. It's a very simple example. If we

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Speaker 1: sit here right now, we make the best movie of

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Speaker 1: all time and there's nowhere to see, it doesn't make

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Speaker 1: any difference. It's all about the distributor. So how did

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Speaker 1: distribution used to work in the physical era? It was

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Speaker 1: about relationships with the retailer. Okay, so what you had

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Speaker 1: is you ship product. Sophisticated people know here, they didn't

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Speaker 1: pay for the product. They paid for the product when

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Speaker 1: you had new product, and you were always behind when

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Speaker 1: each other blew up. The labels were always losing millions

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Speaker 1: and millions of dollars in revenue. They hadn't been paid.

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Speaker 1: There's a famous story of Bobby Walmack was on a

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Speaker 1: record coming called Beverly Glen. They had a million seller.

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Speaker 1: It put the company out of business. Why they could

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Speaker 1: just never get paid. Those days are done. You can

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Speaker 1: get paid from Spotify. There may not be anybody listening

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Speaker 1: and there's no money there, but you can go to direct.

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Speaker 1: This is a very important thing. So what is the

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Speaker 1: advantage of the traditional player, the major label. Well, the

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Speaker 1: main advantage is they wield their catalog and they've been

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Speaker 1: doing that for twenty years. But we're at the end

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Speaker 1: of the road. If you notice, Spotify is going to

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Speaker 1: go into India and there's some hesitation and there's some

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Speaker 1: scuttle but saying well, the hesitation comes as a result

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Speaker 1: of the major labels are pissed that Spotify wants to

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Speaker 1: sign people direct. The major labels can't back out of Spotify,

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Speaker 1: and prior to being involved with Spotify going public, they

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Speaker 1: actually lowered the percentage that the major labels are paid

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Speaker 1: because they're the number one account. It's like going to Walmart.

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Speaker 1: If you've ever sold to Walmart. They pay the lowest

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Speaker 1: price to the manufacturer, so an act can go directly

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Speaker 1: to Spotify. So what do you have? You have terrestrial radio.

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Speaker 1: This is a business that has run ontorestrial radio to

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Speaker 1: its detriment. We've known forever that radio isn't about music,

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Speaker 1: it's about selling advertising, and the power is going down.

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Speaker 1: The people in radio, or like the people who are

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Speaker 1: Trump fans, they're just built on disinformation. If you say

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Speaker 1: anything negative about radio, they will wow, it's better than ever.

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Speaker 1: But I ask you to talk to someone between the

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Speaker 1: age of ten and eighteen and asked them if they

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Speaker 1: ever listened to the restal radio, and you'll find no,

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Speaker 1: they never do. Okay, this is the history of what's

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Speaker 1: going on at large. This is like kodak Oh digital cameras,

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Speaker 1: they're never gonna come there to come whoops. In one year,

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Speaker 1: everybody got a digital camera. Okay. So the major label

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Speaker 1: has an advance, okay, and it's a really big thing.

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Speaker 1: People are looking for money to make a record, which

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Speaker 1: is cheaper than ever before, to live on, to go

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Speaker 1: on the road. But it's also the relationships put the

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Speaker 1: traditional relationships mean less than ever before. Radio comes last, okay,

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Speaker 1: and television is relatively meaningless. Sunday Morning CBS counts for

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Speaker 1: an older demo and Saturday Night Live. As a manager

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Speaker 1: put it the other day, it just creates buzz later

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Speaker 1: in the week. It's not like someone is actually watching that, okay.

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Speaker 1: So all the tools in the box of the major label,

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Speaker 1: the bottom is coming out, okay, So you have to

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Speaker 1: be aware of that. So the key is to look

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Speaker 1: to the future because the past is never coming back.

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Speaker 1: One of the foremost business educators is like Clayton christiansen

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Speaker 1: Clayton Christians and said, you build your competitor across the street,

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Speaker 1: and then at some point you then join with your competitor,

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Speaker 1: you move your business. So what do we hear in

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Speaker 1: this business? No one's gonna want to listen to an

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Speaker 1: MP three. Okay, we all heard all these things people

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Speaker 1: didn't want to do. It doesn't sound good enough. Listen.

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Speaker 1: I've got more stereo equipment, probably the people in this room.

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Speaker 1: Oftentimes I'm listening to the echo. It's just so convenient.

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Speaker 1: And staying on that point, okay, the voice control is

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Speaker 1: totally where it's at. If you don't have one of

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Speaker 1: the disease devices and I would say to get an

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Speaker 1: Echo as opposed to a Google Home because ultimately they're

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Speaker 1: more options because people can tie you into it. Google homes,

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Speaker 1: I mean, Apple's a closed system, dead on arrival. Let's

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Speaker 1: say open it. You can make Spotify the default, but

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Speaker 1: if you use Amazon Music, it'll give the lyrics, which

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Speaker 1: is really good. So it's not about sound. It's about reaction.

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Speaker 1: It's about the music cliche and the hip hop role

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Speaker 1: that may not apply. You know, three chords and a

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Speaker 1: chorus had a good beat, that's what you're selling. All

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Speaker 1: this other stuff we focused on recording quality, etcetera. They

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Speaker 1: don't really matter anymore. So how do you reach the audience.

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Speaker 1: So we hear all this stuff about playlists. I'm not

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Speaker 1: going to underestimate playlists, but let's not forget playlists are

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Speaker 1: primarily for passive listeners, and this business, more than ever,

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Speaker 1: is built on active listeners. Okay, if you talk to

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Speaker 1: a music fan, they say, oh, yeah, I picked my

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Speaker 1: own music on whatever service they use. So the point

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Speaker 1: is what can the label do that no one else

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Speaker 1: can do. It is a relationship business. But the more

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Speaker 1: you try to extract an announce of flesh from the

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Speaker 1: acts the more that they react, they can make the

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Speaker 1: music in their living room. People say, oh, it's not

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Speaker 1: like you can cut for a hundred thousand dollars, but

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Speaker 1: very few people are getting a hundred thousand dollars to cut. Okay,

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Speaker 1: you can promote it yourself. So we go back to

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Speaker 1: the playlist. It's about creating a hit song. Hit song

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Speaker 1: is something you have to play more than once. However,

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Speaker 1: now more than ever. If it's great, that doesn't mean anything. Now,

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Speaker 1: if you talk to people on the street, they have

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Speaker 1: to leverage their fans. Your key is leveraging other people's

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Speaker 1: audience to get something exposed. If it's exposed to audiences,

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Speaker 1: then it can react. We're all inundated with messages all

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Speaker 1: day long. People send me a record, they go listen

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Speaker 1: to it five or six times and tell me what

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Speaker 1: you think. Are you fucking nuts? I mean, babies are overscheduled.

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Speaker 1: I'll listen for thirty seconds if it doesn't hook me,

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Speaker 1: not because I'm an asshole. That's what everybody does. We

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Speaker 1: hear this. The kids have short attention spans. They don't

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Speaker 1: have a short attention span. They have an incredible ship detector.

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Speaker 1: So it's about great, Okay, something has to be great.

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Speaker 1: The other thing you have to realize, like the world

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Speaker 1: at large, music business is and will continue to be

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Speaker 1: a business of winners and losers. If you go on Spotify,

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Speaker 1: if your new rock band is not that good, I

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Speaker 1: can listen to led Zeppelin all day long, you're competing

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Speaker 1: against the history of recorded music. But in addition to that,

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Speaker 1: it is it's not like the old days. Well, if

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Speaker 1: I got a local market and everybody in South Dakota

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Speaker 1: they got the five hundred channels, they got the hundred

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Speaker 1: gigabye down Internet, everybody's on the same page. Thanks for listening.

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Speaker 1: M can think of in the reason I don't know

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Speaker 1: me exactly. One must be