Lecture 1

Music, the Internet and Convergence .

Without a doubt the Internet has become the transforming  technology of our time. The up side of this is that you have the ability to set up a shop display visible to the whole world . You have the same display abilities as Sony or General Motors. The playing field is finally level.  You have the ability to reach billions of potentential customers. You are particularly blessed if your product is itself data.  Sound is data, books are data, pictures are data an so on ad infinitum.

The downside is so does everyone else. with a computer and an Internet connection. Putting up a website guarantees you nothing. You still have to actively develop a following and sustain it with regular targeted updates. This course will be about how to do this.

  • How many of you already have a website?
  • Has it increased your business?
  • Has it made you any money and if not why not?
  • Making money in principal is quite simple. In action not so much.

Here is what you do:

  • Find someone with money who would like to make more money
  • Figure out what their core business is.
  • Identify what they need to expand their core business.
  • Make a convincing demonstration of how you can increase their business.
  • Negotiate your price and get a contract.
  • Do it.
  • Collect your money

Sounds simple doesn’t it?

Let’s look at some business models beginning with the music business.

The old music business.

In the 50′ s and 60’s radio stations played songs with breaks for advertisers. Most people were moving to the suburbs to escape the inner city and they spent a long time commuting in their cars. It was an advertiser’s dream. A captive audience with an identifiable demographic. Also around that time ASCAP (The American Society of Composers, Authors and Publishers)  and BMI (Broadcast Music, Inc. ) paid monitors to listen to the radio and write down which songs the radio stations in their area played, when they played them and how many times it was played. These monitors then sent their lists to ASCAP and BMI who calculated the royalties that each song accrued and billed the Radio Stations. The Radio stations in turn billed the advertising companies for on air exposure and ASCSP and BMI passed on the royalties to their respective members. It was an excellent model for the time. Rock and Roll was king and the baby boomers commuted  with blaring radios and every body got paid. It is easy for a musician to look at the results of that model and conclude that when his songs got played they got paid .

My generation grew up with the idea that music should be free by taping off the radio. Boom boxes in the 70’s made it ridiculously easy to “steal songs”.  But  I think no songs were ever stolen because that was not the core business – advertising time was the core business. The money came from the ads beamed into radios across America.  Music was just the bait hiding the hook which captured the attention of potential customers. The only thing being bought and sold was the attention of the customers. Attention of a customer is still the only valuable thing in commerce and it is as true today as it was then. The attention of a qualified customer, one who is demonstrably interested in what you have, is worth ten times more.

So what happened?

MPEG-2 Audio Layer III better know as MP3

In 1894, the American physicist Alfred M. Mayer reported that a tone could be rendered inaudible by another tone of lower frequency. In 1959, Richard Ehmer described a complete set of auditory curves regarding this phenomenon. Ernst Terhardt et al. created an algorithm describing auditory masking with high accuracy. We know this as the “masking effect.”

All sound is composed of only two things sine waves and noise The spectra of a complex sound might look something like this.

chapmanfig1I

Since it is possible to recreate a sound using only sine wave generators and noise the factor that influences file size of a recording is how many harmonics (spikes in the above) are needed to recreate the sound accurately.  By applying the algorithm that shows how the human ear masks sounds they found that it was possible to eliminate many harmonics which would not be heard anyway due to the masking effect. Suddenly the file size of a song dropped from 67 Megabytes  to 3 Megabytes making it possible to download the song even on the very slow modems in the 90’s.

Napster

Napster was co-founded by Shawn Fanning, John Fanning, and Sean Parker.Initially, Napster was envisioned as an independent peer-to-peer file sharing service. The service operated between June 1999 and July 2001. Its technology allowed people to easily share their MP3 files with other participants. Although the original service was shut down by court order, the Napster brand survived after the company’s assets were liquidated and purchased by other companies through bankruptcy proceedings. But the cat was out of the bag and downloading took over as the premiere method of obtaining music.

iPod

In 2001introduced the iPod, an MP3 player that would connect with the iTunes software on the apple site.  Apple forged a very favorable deal out of record companies and publishers which enabled it to sell songs for 99 cents. Steve Jobs had prophesied that future wealth would come from micro transactions and the iPod brought that vision to reality.

The internet deeply changed the focus  of customers. The popularity of video games in the 70’s was followed by the massive proliferation of home computers in the 80’s. Recreation was shifting away from radio and into the computer.

CD sales.

CD sales overtook vinyl in 1988 and cassettes in 1991. The 12cm optical disc became the biggest money-spinner the music industry had ever seen, or will ever be likely to see. “In the mid-90s, retailers and labels felt indestructible,” says Rob Campkin, who worked for HMV between 1988 and 2004. “It felt like this was going to last for ever.” It didn’t, of course. After more than a decade of decline, worldwide CD income was finally surpassed by digital music revenues in 2014. With hindsight, it’s clear that technological changes had made that inevitable, but almost nobody had foreseen it, because the CD was just too successful. It was so popular and so profitable that the music industry couldn’t imagine life without it. Until it had to. Now you have to be able to show a verified following if you want to get the attention of a record company.  Hits on a website don’t count. It is too easy to write a bit of code that will rack up your hits counter into the millions. However responses from a periodical newsletter you send out is persuasive because that has to be read by an email being opened – a surprisingly easy thing to do.

Concerts

Concert tours are very expensive. When the records companies had money to burn that was no problem but with the precipitous decline in sales they could no longer afford to launch the careers of untried talent. These days to get the attention of a record company you have to be able to sizeable sales on iTunes, Spotify, Rhapsody, Pandora etc..  Once again thoug a proven track record is the key. Sales on iTunes, verifiable emails read and responded to are needed to light that fire.

So what is the future going to be?

Two things have not changed in business- the need for the attention of potential customers and if possible their email addresess. Let me state right away that you should NEVER sell or give away the email addresses of your fans but you should develop the means to rent them. Just as music was the bait that trapped the attention of radio listeners music can again serve as bait to people in their computers.

The public appetite for music remains at great as ever. Just look at the membership counts for the streaming my services. At the end of 2014 thirst seven million people were listening to streaming music. The demand for your product has never been higher. The only thing that has changed is how’s ought the music to them. Streaming has recently surpassed  downloads and is expanding at a geometrical rate. But you need to drive your fans to where your music is.

 

Surviving on the Internet