@ SxSW: A Rowdy Discussion On Ad-Supported Music

Of course a panel on online music business models was going to degenerate into a food fight. The only surprise was that about 45 minutes into it, all of the thrown detritus managed to reconstitute itself into something resembling an edible meal. Technically, the topic of the panel was Ad-Supported Music, A New Hope For The Industry?. If what this question means is “can ad-supported music replace album sales on a dollar-for-dollar basis”, then the answer is a resounding no. Nobody on the panel held this view, and nothing in the history of the digital media migration would suggest this is possible. It’s never that easy. If the question is more open-ended and vague, then opinions vary wildly.

Label perspective: Starting off on a non-committal note, Interscope’s Ted Mico suggested that it’s too early to say anything definitely: “As far as ad-supported, it is a very, very new business. It’s got to mature.” Representing an indie, Simon Wheeler, director of digital at the Beggar’s Group, laid out the challenge (or at least the common label mindset): “There’s a certain value to music rights… when we negotiate, we’ve got a fairly clear idea of what that value is.” And because the labels have a clear idea of that value, there’s not a lot of wiggle room with digital music startups that can’t meet that value: “At this stage, it’s proving quite difficult… the CPMs don’t generate enough to cover the value of the rights.” At this point, Mico trashed the idea that music should be thought of as just a a promotional tool: “I need more marketing and promotion on the internet like I need a root canal without anesthetic.” Ultimately, both Mico and Wheeler felt that ad-supported songs do have some undetermined role to play. Lots more in extended entry…

The startup perspective: Representing the ad-supported model were Steve Jang, CMO of iMeem and Peter Rojas, founder of RCRD LBL. (Note: RCRD LBL is basically a music blog offering DRM-free tracks with payment to and support from various contributing artists). Of the two, iMeem is obviously the less threatening. Jang explained how the goal of iMeem was to create a site that mirrored the way fans listen to music, without putting them into constricting boxes, but which also honored intellectual property rights. It was only when the discussion finally got to Rojas (after 20 minutes) that things started to get a bit unhinged: “I’m not interested in the music industry at all in the traditional sense.” Rather than seeing RCRD LBL as a, well, record label, he sees it as a social media, blog site with music as the glue: “It’s not about trying to attract revenue out of each download. …You’re creating a relationship with an audience.” As for the ‘old’ digital model, he suggested that the only people he knows who buy tracks from iTunes are people who get giftcards from grandparents for Christmas. By this point, audience members started getting agitated. One screamed out something about Rojas disregarding intellectual property.” Mico suggested that it was silly for Rojas to disclaim the traditional model since he called his site RCRD LBL (it’s pronounced ‘record label’) “It’s obviously a bow to the past.. The idea that oh it’s a blog and oh it’s radically different is b*llsh*t.” Then Rojas returned with: “The different is is that we make money.” (Zing!) Mico: “You’re (still) selling music!”

Subscription music: The back and forth continued for awhile. Mico turned the discussion to subscription music: “Someone will crack the subscription nut… the trouble is, nobody that hasn’t experienced it wants to experience it.” The biggest shocker of the panel: Peter Rojas is a Rhapsody subscriber (disclosure: so am I). But, of course, he finds the device limitations frustrating.

A free market: The Q&A from the audience got things pretty agitated (think: the comments on a blog post about DRM and the major labels and then imagine that being acted out live.) There were more complaints about Rojas’ perceived denigration of intellectual property, with an audience member likening it to slavery: “What if you didn’t pay your widget makers?!” On that question, even the label-reps admitted that RCRD LBL exists in a free market and that no artists who have their music there are compelled to be there. Plus, they are paid. Another audience member asked how RCRD LBL can compete with other music blogs that don’t put in the effort to pay musicians or get exclusive content. Rojas admitted that this is one of the key issues keeping him up at night.

Just like high school: Near the end, Jang hit the nail on the head when he described music as “The most divisive thing in our lives.” How true: Back in high school, we used to make fun of people based on the bad music they listened to. Now we fight over business models. Embarrassing.

Note: There’s no picture cause I forgot my camera in the press room. But a few minutes after I left, I got an email, SMS, twitter, phone call, and Facebook message from different people telling me that I’d left it there. Just kidding: only got the email and SMS.