Making Money with Music when the copy is ‘free’

by Gerd Leonhard

‣ Futurist‣ Strategist‣ Author & Blogger

www.mediafuturist.comtwitter.com/gleonhard

My job is to understand things and develop ideas

for my clients.

So what is the new framework (1)

So what is the new framework (2)

So what is the new framework (3)

Enormous Value Shifts

2.5

5

7.5

10

Sales, Distribution & Marketing CostsContent Ceration Costs

Traditional, Offline Content RevenuesRevenues of Offline Content Formats & Models simply moved OnlinePotential Revenues of Web-Native Content Formats & Models

We must urgently divorce ourselves from the old shapes of music delivery, and from looking at the distribution of music as the

most important money maker.

“A new Social Contract”

If distribution is indeed uncontrollable we will need

to legalize, bundle and integrate it - all else will fail

Embodiment

Experience

Access

Embodiment

Experience

Access

From Copy to Access + + +From Product

to Service

We don’t pay to eat all the food... we pay for access

The irreversible shift in Content Perception

Content

ContentContext

Curation

CommunityInterface

Timeliness

Convenience

The past: revenues based on Controlling Distribution

‘Free’ SocialMobile

OpenThe Future: Revenues based on

Converting Attention

Content Commerce 2.0: don’t try to sell what is Ubiquitous - sell what is

ScarceSource:

ReadWriteWeb.com

Content owners can’t, shouldn’t and don’t have to compete with Free Copies

Instead, content owners can compete with:Authenticity

Unique experiencesAdded Values

Packaging and Embodiment Timeliness (Real-Time)

CurationContext

Personalization & CustomizationWeb-Native Values

Content Futures: where is the value?

100%

Content / Copy

5%15%

15%

10% 20%

15%

20%

ContentContextCurationTimelinessEmbodiment / PackagingRelevanceOthers

The Success Formula: Content + Context + Connectivity - Community + Convenience + + +

Why I have spend $1000+ on iStockphoto

• Good quality images• Finding the right photo is quick and easy• The rights (licenses) are cleared• The price is right (well... mostly)

• I don’t pay just for the content - I pay for ease of use, peace of mind, the interface, service & curation...!

Direct, immediate, certified, personal content delivery

How much of a premium would you pay to receive the new song the very moment it

is finished, from the creator, himself, certified, personalized... guaranteed?

Relevant, customizable, time-saving Curation

How much of a premium would you pay to get the 50 best chapters from the 50 best business books, in a single new eBook?

Bundling music services within Social NetworksHow much of a premium would you pay to

have instant sharing of your peers’ playlists and favorites build-into your

mobile, your TV, your car-radio...?

Attractive, unique, premium PackagingHow much of a premium would you pay to

have your preferred content uniquely available on your favorite mobile device, at all times?

0

25

50

75

100

Was Will be

Price of legal copy’Number of legal, known, engaged UsersPremium Buyers (i.e. converted users)

Music Pricing Futures

Getting Paid for Creation *Hat tip to Shelly Palmer

I payYou pay

3rd party pays

I pay

3rd party pays

You pay

I pay

3rd party pays

We must get much better at these 2 things:

3rd Party Pays

A fact: flat rates and bundles often work best

Source: STLPartners / Telco20.net

DownstreamUpstream

Getting the vortex to spin...

Upstream Revenue Opportunities: Some Examples

•High-Definition Content (Classical, Jazz, Concerts...)•Concert downloads (after attendance, or without)•Virtual concerts, events, clubs•Virtual goods (e.g. wallpaper, icons, greetings etc)•Fan packages (direct connection to artists, pre-

releases, customized editions, special privileges etc)•Special products 2.0: compilations, audio-video

packages (see SoundWalk), mobile applications etc•Next-generation physical products (e.g. 2 TB

interactive & connected DVD+)•Custom-made, on-demand merchandising (see Nike+)•Many more that are yet to be invented...

New Packages and providing new Experiences will be the Key to Success

Rights holders and content owners now have the choice between:

A) The Illusion of Control - and declining Revenues

B) ‘Open’ - and new Revenues

Content Futures: Copy $ down, Attention $$ up

0

2.5

5.0

7.5

10.0

Was Is Soon Near Future Mid-term Future

Copy Based Revenues Attention Based Revenues

•Provide value for up-stream entities and related providers

•All kinds of Up-selling•Attention-Transfer (aka Advertising)

•Crowd-funding of new productions

Attention-based revenues...???

Attention Transfer is $$ Osmosis

The Mission: Converting Attraction into Real $

Please: forget most of what you know about Advertising

Yes, there is serious $$ in Advertising

•~ $ 900 Billion USD Global Advertising Spend in 2012

•30-50% shifting to digital media / interactive / mobile

•Opt-in, personalized, targeted Advertising = Content

Why Google is willing to ‘pay’ for music - in China

Why ISPs will be willing to ‘pay’ for music

The next music format is... Software

Such as

The Music 2.0 Model

Artist / Creator

Business ModelsBusiness Models

Business Models

The Mobile & Social ‘Consumption’ of Music is the

#1 Growth OpportunityDeep Collaboration with Telecoms & Operators is

the #1 Mission for the Music Industry

But: the content pricing & licensing issues cannot be solved without the solid

engagement of Telecoms, ISPs and Operators (as well as the Advertisers)

We urgently need either a voluntary, collective license

proposal by the rights-holders, or legislation that legalizes and monetizes the use of Music on

the Internet.

Image: TelecomTV

Just like...

Source: Techcrunch UK

Advertising (2.0)

Social Networks

Public, open and standardized Content Licenses

Telecom

The creation of a new Music EcosystemTV

Internet Mobile

Telecom

Media

Advertising

Step 1: Permission

Step 3: Collaboration

Step 4: Co-Creation of newBusiness Models

Step 2: Lubrication

email me at gerd@mediafuturist.comtwitter.com/gleonhard

facebook: gleonhardmore presentations at

www.mediafuturist.com

Thanks for your time