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music industry

Is Spotify the Darth Vader of Music?

by Walter Naeslund on September 8, 2009

As Spotify launched their iPhone app, the crowd cheered. The talented SEO-expert (and comedian) Simon Sundén publishes the follwing graph of Spotify Premium sales that went viral amongst us nerds. Half us us thought is was true, and who knows, it may be.

But even if this graphic joke isn’t true, it illustrates something quiet scary. Something scary that starts with an “M”.

Let me tell you a story to explain:

Chapter 1 – The Music Industry

Think for a minute about how the music industry works. This is an industry that has built it’s entire business model around their monopoly on information distribution. Largely, the monopoly has been built on the control over distribution of plastic circles. In recent years, as silver became the new black in the plastic circles industry, the information started to find other ways of distributing itself over the internet, and the monopoly of distribution started to break down.

Desperately, the record industry tried everything to stop these new an superior modes of information distribution by trying to sabotage them with destructive and inefficient “inventions” like DRM. When that didn’t work (because Darwinistic innovation always gravitates towards the efficient), they cried foul, and tried to persuade their friends “in Washington” to legislate and punish anyone who had the audacity to use these new and efficient modes of distribution instead of using theirs.

Why so desperate, you may ask? Well – this was all they knew. It was not them, but the musicians who created the music. What they, the record industry, had to offer was marketing and distribution. And when their monopolized mode of distribution was suddenly outdated, and marketing was suddenly taken over by the music itself, it’s own viral distribution, communities like MySpace, and crowdsourced services like LastFM, the music industry was suddenly cut out of the loop, unable to provide value. And like the dinosaurs before them, their fate looked sealed.

Chapter 2 – The Innovators

But the file sharing systems, though hugely more efficient than the plastic circles, was not perfect. Billions of redundant copies of the information had to be kept on harddrives where you wanted to access the music, sharing the music meant sending over entire files, and meta-information was incongruent. Instead, thought a group of innovative individuals, one would like to take the route of the semantic web and have ONLY ONE instance of every file, with congruent meta data, stored in ONE place so that we could share it by only sending links pointing to the specific files. Then each of us could have access to all information and create a hugely efficient market for sifting out the very best. A more efficient model to be sure, and as we know, Darwinistic innovation always gravitates towards the efficient. The group of geniuses created and productified this new and superior mode of distribution. And they named it – Spotify.

Chapter 3 – The Cartel

And here, the music industry saw it’s chance. In one of the weekly meetings of The Cartel, the organisation they had set up together “to act for the common welfare of artists everywhere”, one executive stood up and said – “we can’t stop every single individual on the internet, but we can stop one company! We can threaten to destroy their new value, and claim part of it as ransom! We can regain our distribution monopoly by using their own value against them! But we have to act quickly! If more inventive companies emerge and compete, like Chilirec for instance, we will loose this last chance for survival of our kind. Sure, Chilirec will try to sue us, in fact, they already did, but that’s no match for our lawyers. We have our own people in the courts”.

One young assistant’s assistant, who had observed them in silence from the end of the table, mumbled quietly “but what value will we contribute? How will we make things more efficient? Will this not stifle competition and put an end to innovation?”? BE QUIET! Roared an executive at the end of the table. THEY NEED US! THEY WILL SUBMIT OR BE DESTROYED!

Said and done. The Cartel cheered and applauded. “If we all agree to let Spotify use our music, and let Chilirec use none, we can cut any deal we want. They have no chance to do this without us. We can use their new invention to return to the times of the distribution monopoly! We can be rich! Maybe we can even keep all new releases within Spotify and NEVER NEVER NEVER release the files to anyone else! Trying to hack Spotify and batch down these files will be easy enough to stop! We couldn’t control the data on the plastic circles, but we CAN control the data on the Spotify servers! We can even demand to own part of Spotify“! The room went silent as his words resonated through the spines of The Cartel directors like a chilling wind. Own the only source of music… on the planet.

Epilogue

When Apple realized what hit them it was too late. A year earlier, soon after The Cartel’s spirited meeting, Apple had given away their last line of defense and allowed the Spotify client on their iPhone. As the power of the iTunes store faded away, Apple tried in a last attempt to launch their version of Spotify, called iTunes Unlimited. The service was impeccably polished, integrated into their brand new Wild Cat operating system, and could play songs while texting on the iPhone, something that the Spotify client couldn’t. But what was the use of all this if they had no music. Or at least, just enough music not to be able to compete with Spotify. The number of Spotify exclusive songs and artists soared and left the rest of the industry in rubble. A lot of people said that “we should have seen this coming when Spotify restricted the iPhone app to paying premium users”. But now it was to late. The war was over. They won.

At least until the rebels on the far moon of MySpace started their indie music rebellion. But that is a whole other story.

5 Questions and 9 Answers About The Future of The Internet – My Hyper Island Interview

by Walter Naeslund on August 27, 2009

A couple of days ago I was contacted by students at Hyper Island for an interview about the future of digital communication. Here are their questions and my answers:

1. What do you think will happen in the future regarding digital media? For example real time applications, Flash, Adobe Scene 7, Motion Graphics, Mashups?

Innovation Will Gravitate Towards the Efficient
It is always difficult to say anything about the future. Even the inventors themselves can rarely tell how their inventions will be used. Remember for example that Twitter was created as a way to let people know via SMS where the party was. Their invention then took on a life of its own in the hands of the users. On the other hand, this kind of “Darwinistic” innovation is a key feature of the digital technologies. Especially when it comes to innovation in the realm of open source and open APIs.

What we can say is that innovations will gravitate towards increased efficiency in different fields. And this realization is useful. Whenever you come up with an innovation or a campaign, ask yourself: will this make things more efficient? If the answer is yes, the innovation will stand a chance of succeeding, if not, it may at best become a short lived hype. In particular, innovations making collaboration and coordination more efficient are interesting when it comes to the internet since they promote themselves.

Good Bye Flash, Micro Sites & Poor Indexing
Real time applications will be important because they’ll make things more efficient. “Awesomely cool” but utterly useless Flash-based micro sites have always been a bluff and will increasingly be called as such by clients with a deeper understanding of the internet. Such sites make nothing efficient. Perhaps some people will disagree with me here and start arguing that I’m way too rational and that people buy with their emotions, but my bet is that these critics don’t understand the social web. What is often inefficient about these Flash-porn sites is that they are SOCIALLY inefficient. There is no way for me to efficiently share and discuss the content with my friends.

Recently we have started seeing “share”-buttons thrown into the mix, but these usually don’t tap into the actual behavior of people, and are just there because “social-media-is-the-new-hip-thing-and-therefore-we-need-share-on-Facebook-button“. Again, ask the question – will this make things more efficient in some dimension? They are also often inefficient in that they’re not indexed properly by search engines. The question then is, what are they good for? For inspiration? As some sort of interactive film? Very recently (like, right now) I saw one such campaign where they were actually showing commercials for the campaign on television! Making advertising for advertising must be the ultimate proof of failure and inefficiency.

Flash in general will get fierce competition as we will want sites to be more application-like, fast, optimized and useful. HTML5 will be a primary technology and may well put Flash and Silverlight in the shade.

Mashups & Commoditization
Mashups will continue to be super important because the idea of mashups resonates with the basic idea of innovation: take the best of what’s around and make it better. Since the costs of interacting with other open API innovations are so low, the total value of all parties in a mash up interaction will increase. We all benefit from mashups. If somebody has made the best map, like Google Maps for instance, there is not much point in using energy making a copy of that, but rather put our energy into innovating a new service and use their map. They win, and we win. More than anything, users win.

A lot of what required coding before are now commodities that you can pick up and just connect to something else through an open API. Smart people can thus create quite cool innovations by just putting pieces together. An internet-innovator friend of mine said that he’s very reluctant to try anything that he can’t build a first prototype of within an hour. He’s one of the most interesting and successful innovators of the new web in Sweden.

Real Time & Concurrent Editing
Technically, real time and concurrent editing will be important. I don’t know exactly which implementations of this will be the killer apps yet, but true real time collaboration is efficient and will become very popular. Not least by means of Google Wave. But we may well see other applications than these. For example live use of scripts for different purposes. There are a gazillion imaginable uses for such live scripts, but to get an idea, imagine a script being uploaded and run on a users iPhone returning different data depending on conditions such as position, battery status, orientation, in call status, who else is around, etc…

Real time and social search is very interesting and is an area where Google is lagging hopelessly behind. Here, Facebook and Twitter rule.

Mobile
And of course, mobile will be important, but there will be less difference between mobile and non-mobile. What is non-mobile today anyway? The iPhone is not a mobile phone with computer capabilities, it’s a computer that you can make calls on. And it has very comprehensive sensory systems like camera, video, positioning, integrated internet connection, gyro, accelerometer, compass, etc… Laptops have most of these too, but are lacking a few things like positioning and true mobile internet. The next generation of MacBooks will have a SIM-card slot and positioning. Mark my words.

Short answer: Real time. Mash ups. HTML5. Mobile.

2. What is the next big thing? (The new Facebook/Twitter for example)
The next big thing is Google Wave and all the amazing applications that will be built on top of it. Twitter will probably tip over and become mainstream in Sweden, but I’m not sure of it. Facebook with their aquisition of Friendfeed and their new search functionality is becoming very powerful as well.

3. Which trends do you see in digital media?
See question 1.

4. What qualifications will the media industry require?
Great rebels. Great thinkers. Great designers. Great writers. Great system designers/programmers. Great digital networkers. Great storytellers. Amazingly great leaders who can make all these other people love to work together. People who are not afraid to fail. People who can make the current Swedish labor legislation go away. Howard Roark.

5. What is the biggest challenge for the future in the media industry?
There are a lot of people today with power, who’s power relies on a monopoly of information and information distribution. These people will fight hard to stop anything that will remove their power. It’s very natural. They will eventually loose, but they will destroy a lot of value as they fight in increasing desperation. The music industry is the obvious example of this. It will be a perfect rerun of what happened when free-to-air radio was introduced.

Another challenge is our labor laws. Many agencies today have to fire people, but the law forces them to fire the newcomers, and the newcomers, on average, know more about digital communication. Also, for the same reason, they won’t be able to recruit the people their clients demand. This will create a downward death spiral. In nature, those who are able to change in accordance with the changes in nature survive. We are no different.

For me and for Honesty, this is good news of course, since we will be able to recruit the right people from the start.

A Guilty Pirate Bay Verdict Will Make us Look Like Idiots in The History Books

by Walter Naeslund on April 17, 2009

In about an hour we will know the verdict in the Pirate Bay-trials. Let’s hope that people are being smart about this. Because a guilty verdict would not be good for anyone. Especially not for art and artists.

A guilty verdict would do little to boost sales. I believe we’ll see the opposite result. Darknets and stealth services (like Pirate Bay’s own would evolve quickly. Innovation incentives in the legal realm would be smaller. We would do little but slowing down inevitable change. From a wider perspective, it is just not intelligent.

If they are found not guilty however, it will be considered a future oriented statement. One that would benefit artists, culture, our country, and eventually the world. The music industry will have to come up with something better and more useful than Pirate Bay, and to be honest, they already have. Though Spotify would perhaps need some healthy competition. Spotify is just one small step, but it is a step in the right direction. This type of evolution is where we are going. A guilty verdict would just make us look dumb. Especially in the history books.

From the angle of the artist, nobody has put it better than Paulo Coelho:
“I didn’t start writing to get rich, I started writing to get read”.

Read more:
Here, here, here, here, here, here, here, and here.

Or if you don’t feel like reading, listen to this interview with Mr Coelho:

High stakes (news.bbc.co.uk)
Pirate Bay trial – the music industry has its say (timesonline.typepad.com)
Disaster! No One Pirates Or Downloads Our Music For Free (torrentfreak.com)
Pirate Bay confident of trial win (news.bbc.co.uk)
The Independent: Why Sweden rules the web (independent.co.uk)
IPREDator, the Terrifyingly Awesome Privacy Tool Prepares to Launch (readwriteweb.com)

Viasat Pushing of Against Ipred Towards a Better Positioning

by Walter Naeslund on March 31, 2009

I‘ve written quite a bit about the Pirate Bay trials and how the music industry is undermining itself and its own business. As of tomorrow we have a new law in Sweden, the IPRED-law, allowing copyright holders to go after downloading youngsters. Any such attempt is of course entirely in vain. I’ve written about it here, and you can see this concept being popularized in recent articles here, here, here, here, or any of these. And these examples are only from 1 Swedish, very large newspaper.

Anyway – just in time for this new law, Viasat presents a study by Sifo showing that most people are sceptical to this new law. Not only that, Viasat, who are themselves “victims of piracy” state that they are NOT going to utilize this law AT ALL.

Now, this law is suddenly useful, though perhaps not in the way intended by the record labels. A brand like Viasat opposing the law may give them a nice position, branding them as future- and customer oriented.

Smart move.

Is This The New Music Industry?

by Walter Naeslund on February 28, 2009

I‘m not so sure record labels have a role anymore though. Artists need production, distribution and marketing. Production is cheap and easy today. Perhaps this “new production” will change the sound in some direction, but just like there is a sound of the 70’s for instance, this will be the sound of today. Distribution will soon be self service, and we’ll probably see marketing agencies specialized in music pretty soon. Come to think of it, that is probably what the labels have to become in order to survive.

Augmented Intelligence And 3 Other Ways of Saving The World (And The Music Industry) From The Internet

by Walter Naeslund on February 23, 2009

A few days after the fact I read this article on Realtid.se. The contents of the article are nothing jaw dropping. The comments on the article however, reflect the fact that so much of this discussion is taking place well outside the realm of relevance. People are talking about whether or not artists should be able to be artists, something that would require them to get paid for their work. Fair enough. But it is utterly irrelevant. Art will not dissappear. Neither will the internet. I will not waste energy on this discussion. Like most things, it will evolve Darwinistically.

To be productive we have to discuss value. The business model of charging for copies is obsolete. Some copies, such as physical books, have a certain value and will prevail. CDs are just a hassle. So are digital self hosted files really. So where can we add value? Here are some examples:

1. Hosting. Hosting music and syncing it between players is a hassle for the consumer. Especially if you have to authorize the player (In which case the stolen product is actually superior to the purchased one. Go figure).

2. Shareability. An effect of sharing a central database of music is that sharing music only requires sharing a tiny link. The evolution of sharing services is still somewhere around the stone age.

3. Upping the S/N-Ratio. There is just so much music! Finding the stuff you love could easily be a full time job. In my engineering days we talked about upping the signal to noice ratio. Last FM and Genious has scraped the surface of this field, but here you can create real value. And again, a centralized music database makes this much more effective.

4. Augmented Intelligence. Yes, Jan Guillou, I know you’re upset about your audiobooks and that I’ve been focusing on music. But here is an idea for audiobooks as well: If a centralized service keeps track of what I’ve “read” of what audiobook it can help me mine this data (since audiobooks are also available in text form) and help me draw conclusions that I would perhaps not otherwise have seen. I’ve personally co-developed a service doing knowledge clustering for the television industry. We could just as well do it with this data. Suddenly the person using this service is smarter than the person downloading on Pirate Bay. Again – this is real value. If anyone out there would like to develop this service, give me a call. I’ve made quite a bit of progress here already.

The current discussion about Pirate Bay is a joke. We will laugh at it ten years from now. If that.

It’s Not About Pirate Bay, It’s About The Bigger Picture.

by Walter Naeslund on February 17, 2009

I really think that the Pirate Bay trials are a big waste of money. Possibly worse. What is the music industry hoping to achieve? Will people start buying records again? Buying DRM-sabotaged (yes, that is what DRM is) digital files? Hosting them on their own hard drives? It’s the worst of two worlds.

In the unlikely event of a Pirate Bay defeat, things will just move underground. Technically, this is just a matter of time (not so much time). All of a sudden we’ll have a whole movement (huge because everybody loves music) creating great technology for anyone wanting to avoid detection, including terrorists and criminals. Stealth file sharing technology development will explode. In the long term not a smart move for our democratic world.

Instead there should be focus on development of the music industry. If the commercial product is better than the stolen one there is a real value that people will be willing to pay for. I think this is the case with Spotify for example. With Spotify I don’t have to host and structure a huge music library and sharing music is suddenly a breeze. That is real value.

Read more about the trials (in Swedish) here, here, here, and here.

The Labels Are Playing a Dangerous Game With Spotify

by Walter Naeslund on January 29, 2009

Yesterday Spotify announced that they are removing songs from their database, and imposing country restrictions on others. Again, we see the record labels showing off their power. But it’s really a dangerous game to play.

As I’ve said before, both in lectures and on this blog, the only way to properly fight piracy is to provide a BETTER service than the illegal one. And this is exactly what Spotify has been so successful in achieving. With Spotify you don’t have to host huge amounts of data yourself, and you have a shared library with your friends so that you only have to share links.

But there are potential weaknesses in Spotify. One important weakness is if the database of music is too limited compared to pirated alternatives. Then piracy will start gaining momentum again.

Thus, seeing the labels forcing Spotify into actions like the ones of yesterday is alarming. Are they aware of the long term risks of taking action in this direction, or are they blinded by short term greed?

Force-Feed Clay Shirky To The Music Industry

by Walter Naeslund on September 22, 2008

If I could do one thing, it would be to force-feed this speech to people in the music business. And this, mind you, is from 2005.

Ronald Jones at Identity Works

by Walter Naeslund on April 16, 2008

Last Thursday Identity Works invited former Harvard professor, and current Konstfack professor in Interdisciplinary Studies, Ronald Jones, to the agency to talk about creative work across disciplines. The talk was just jam packed with interesting stuff. We probably all see it as obvious that interdisciplinary projects run a much higher risk of failure, but did you know that almost NO breakthrough innovation happens in monodisciplinary projects?

That means that we need to work across disciplines to really achieve disruptive results. And when we do, we need to put major effort into handling risk. We also need to embrace failure and learn from our experiences. We need to have a learning culture rather than a performance culture.

The 9/11-commission concluded that “…don’t think we had the imagination to envisage such an attack”. But perhaps what was lacking, and that led to a lack of imagination, was interdisciplinary skills, both between the different American institutions and between cultures. When comparing the 9/11 attacks to the rise of companies like Linux or Napster you see similarities. Microsoft and the music industry didn’t see them coming either. I guess it’s a Trojan Horse phenomenon.

Fortunately imagination isn’t just talent, knowledge or luck. Institutionalizing innovation is a very real possibility. Sometimes it’s as easy as shifting perspectives, like when Black & Decker stopped viewing their products as power drills, and started viewing them as holes.

Professor Jones also had plenty of other perspectives and examples in store, from Bill Gates to one of my favorite visionaries Daniel H. Pink. If you ever get a chance to attend one of Professor Jones’ seminars, you should really take advantage of it. Inspiring and fun, and not least a source of hope for our business.

music industry