Digital Media Conference: Music Matters

(Notes from the DMC 2006)

This year's Digital Media Conference (DMC2006) was produced by Digital Media Wire and held at the Ritz Carlton in Tyson's Corner, Virginia. Below, are some notes from last Friday's event called Music Matters, which as you can see, had the industry's real heavyweights weighing in on the issues...I've also posted some photos on Flickr HERE!

Aydin Caginalp: The Industry Perspective - The sale of music downloads (online/mobile) has doubled in the last year and has helped to offset the 7% drop in physical CD sales. Most iPods contain files which are 66% ripped from CD's and most are only half-filled. The empowerment of the internet is the empowerment of the artist.

Ted Cohen: Unfortunately, differential pricing went out the window at Apple's iTunes for the next 2 years and the consumer basically loses in that decision. DRM is still a problem and needs to be more transparent, although it is still necessary to support a variety of business models. He disagrees with Jim. The imperative that every kid has to fill their device with paid content is not true. He likes the value proposition with subscription services such as Rhapsody, Yahoo, MusicNow...which gives fantastic choice, but they still need good recommenders, filters and editorial to deliver the best consumer experience. It's too hard to sift through all the content out there...We have the ability to produce and deliver content much quicker now...

Jim Griffin: The medium is the message, and MP3's have won. That war is over. The format has been chosen...The labels already sell unprotected wave files since 1983 which is the number 2 file format. The business model of a buck-a-song is flawed and there is no 1 business model that wins. We have to think our way through it for the prime demographic - which is teenagers. We're moving to a service business. The battle of the business models is a waste of time. Our competition now is a dwindling share of the consumer's wallet and a clock that moves fast on people's schedule. Charging by the minute is old news...tiered usage works. Our struggle is with other industries that already know how to do this. Keep government out of the interoperability legislation! (The judges barely know what happened when they watch a webcast...) In the past, we've licensed video extensively as a service model. People just don't have the motive to record and keep/re-use video on their VCR's and Tivo's. Attack the motive NOT the mechanism.

David Pakman: You have to go with the consumer's choice for MP3 and stop fighting it. The 80/20 rule has not corrected and democratized itself. But in reality it's a 95/5 hit-driven situation. The industry has got to get better at selling the long tail material...and find the sweet spot other than the top hits. I don't look at the industry as one big giant pod. The independent segment has doubled in the last 12 years. Our indie sales at emusic are doubling every month. Return rates on portable music devices are between 40-70 % because of the device interoperability problem. The major labels created the interoperability problem because way back when - they required Apple to use DRM and unfortunately the license agreement doesn't allow the sale of music without it. Consumers are very smart and they make value propositions every day; so there is no right way or model...

Gary Cohen: I don't have a major issue with DRM, the problem is the implementation of it. The reason for the DRM has got to change and we can't wait for the politicians to do it. Nothing looks great on the horizon. We have 2.2 million songs on AOL's Music Now that are protected. In addition to the subscription model, we also offer the dollar-a-song model too...We're trying to become business model agnostic (i.e. a la carte, subs, ad-based). The problem becomes that once you get the content on your device - how are you going to access it? Having a flat-fee will grow the pie as music is everywhere. I'm a Mac fanatic and I love Apple and what they did, but I really believe that it's incumbent on them to open up the device and model in the near future. The interoperability thing is what's really holding things back. Everybody has to play nice...There's never been a better time to be an artist now...(i.e. record a sonically superior song for $200 and upload it to CD Baby)

Dave Ulmer: It's a phenomenal time for this industry, i.e., you can listen to practically anything that you want to - when you want to. Consumers are in control and they're actually paying for content. One of the problems though is that we don't know about the "non-hits." Most people buy new portable music players every 14 months. It's amazing when you think about that the total dollars of ringtones is three times what Apple generated from iTunes. Looking at the mobile space, purchasing over a phone is not free, compared to your always-on internet connection. The OTA distribution costs have come down, but they haven't come down to "0." I think we're moving to a multiple delivery system; i.e., one low bandwidth version for your phone and one .wma for your PC. This combination of OTA delivery and sideload capability will proliferate. Apple is the only game in town because they put it all together right. New hits are being created with no radio play because of online discovery.