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The Future of Music: Dave Kusek  (8/2005)

    by Douglas Dixon

New Formats
Music Commerce
Investing in the Future
References

What is the future of music? Has it become a business of lamentations and lawsuits against electronic sharing, foretelling the end of recorded media as we know it? Or is there something much more interesting happening here that offers exciting new opportunities?

This is the subject of the new book, The Future of Music: Manifesto for the Digital Music Revolution, by Dave Kusek and Gerd Leonhard, published by Berklee Press (January 2005, www.futureofmusicbook.com). Kusek and Leonhard show that the larger music market (beyond the record business) is alive and vibrant, and look ahead to a future where music "flows like water," ubiquitously available as part of our daily lives, paid for by a flat fee much like a utility.

       
        The Future of Music book                        Dave Kusek

Gerd Leonhard is a music futurist and visionary, a music industry executive and music business entrepreneur, a strategic adviser, and still a performer, writer, and producer. A native of Germany, he has spent more than twenty years in the U.S. music, e-commerce, and entertainment technology industries. During the dot.com period, he was the founder and President/CEO of LicenseMusic.com.

Dave Kusek is a musician who was an early synthesizer and electronic music pioneer, and was a co-developer of the Musical Instrument Digital Interface (MIDI) standard. He is currently an associate professor of Music Business at Berklee College of Music in Boston, Mass., and vice president of Berklee Media, the college's continuing education division, where oversees the Berkleemusic online extension school and Berklee Press (www.berklee.edu).

New Formats

Kusek argues that the industry needs to develop new formats for music distributed in physical formats. "Dual Disc is certainly a pointer in the right direction," he says. "You need to create something that has great value in order to continue to compete."

For example, in the movie A Clockwork Orange, says Kusek, "even before CDs were out, they played music on a disk that was a little bigger than a silver dollar. It reminds me of the idea that perhaps there are other formats that could be developed, nontraditional formats, from what we have seen so far. If you had a recordable format that was more convenient than CD, and held more data, and was faster to record, then perhaps you could have a system where the recording could be inside the stream of commerce."

The other critical trend, he says, is that "the price of these physical products needs to come down. I'm encouraged that Dual Disc seems to be priced around $18 to $20, and discouraged that CDs continue to hover in the $15 to $18 range. I don't know how much control the manufacturers have over this, but to the extent they can encourage their customers to be more realistic about pricing CDs, the longer they will be able to stay in business. I really do believe the price point for an audio CD is south of $10 at retail."

But will MP3 players obsolete recorded media, and will streaming eventually replace personal music libraries? "You have a couple of new models," says Kusek, "files can be distributed and sit on a local drive, and protected so that they will play as long as the subscription is active. This gets back to the notion of putting recordable media in the middle of the commerce stream."

"If you look at the iPod as the first step in a new direction," he says, "you can imagine little earpieces that just sit in your ear, that have the recordable media right in there, and are wirelessly connected to a network. There is no iPod, there is no computer. You can certainly see it going that way at some point in the future. You see these Bluetooth headsets for cell phones, and you can see a similar thing happening for music. To the extent recordable media can be embedded in players, that is another business. I think there will be a lot of demand for that."

Music Commerce

But isn't piracy destroying the industry? "There are two forms that are currently labeled piracy," says Kusek. "You have the wholesale replication of CDs and DVDs. To me, that's counterfeit products and is obviously not to be tolerated. It is certainly evil and criminal, and bad for business."

"But the other kind of behavior that is labeled as piracy -- downloading files and trading files with your friends -- I'm not sure that I would put that in the same camp. Often there is no profit margin, there's no distribution network, other than yourself and a handful of people that you know. Generally, you are not selling files to your friends."

"You can measure wholesale piracy and replication in many billions of dollars, whereas for downloading and file sharing, it's hard to quantify whether it has had any negative impact at all in terms of real sales. I actually think that is good for music, as painful as it may be for to the record companies."

How could recordable media be embedded in the stream of commerce? "Another way to look at it," says Kusek, "is if you had some really cool recordable media, that held a lot of data, and was very easy to record and erase, and portable, and kind of hip, then you could charge a premium levy or a tax on sales of that product, and have that tax flow to the copyright owners, like they do with tape."

That's a different model," he says. "We went through similar things with videotape and cable television, where the industry fought it until Congress had to step in and say that we are not going to make it illegal; we are going to force you to license it, but you also need to get paid. So they created these compulsory licenses. The studios did not like it at the time, but the business grew, from that moment to today, and everybody made tons more money. So why not do the same thing for music?"

"I don't think that file sharing and downloading of music is going to stop," says Kusek, "until there is something easier, and better, and cheaper, and more appealing. So as I argue in the book, why not embrace that behavior, license and tax it, and somehow derive money from it? Make it easier to find music, improve the quality of the files, and make it easier to record, instead of trying to fight it. It seems a completely losing battle; People are never going to stop doing it as long as the price of CDs is too high. So why not go with the flow and embrace it?"

Investing in the Future

For Kusek and Leonhard, this is all part of the larger music business. As they write in their book, "More music has been enjoyed over the past two or three years than ever before. Music fans can thank the inventors and purveyors of new technologies-in particular, file-sharing services such as the original Napster and Kazaa. They also owe their good fortune to consumer electronics companies, the creators of computer games, DVDs, cell phone ring tones, and CD technologies that allow users to rip and burn their own CDs on personal computers. Music fans are completely awash in music, and digital music has become the new radio for the Internet generation. Digital technologies have been totally and unobtrusively integrated into the lifestyle of new generations of teens and young adults."

But, says Kusek, "by and large the record companies are not in touch with their customers at any significant level. They thought that their customer was Wal-Mart. They are out of touch with their ultimate customer, and their customer shifted away from them. They are still selling a ton of CDs, but the whole file sharing thing was off their radar screen until someone told them about it. So then they decided, let's just go sue all these bastards."

"That bothers me as well," he says. "I ran the numbers, and somewhere between 30 and 40 million dollars is being collected in the settlements from the RIAA. But none of that money is going to the artists or songwriters. It is going to the attorneys and the courts to process the papers, and whatever is left is going to fund more lawsuits. It's incredibly wasteful. The numbers I see show file sharing growing on a monthly basis, ever since they started the lawsuits, so it is not working. Imagine if they took $40 million and invested it in a new way of delivering music that is attuned to the way people want to buy."

To help people in the industry examine these options, Kusek runs an online course on
"The Future of Music and the Music Business" through the Berkleemusic.com online extension school. "The course is for people at any level of the music business," he says, "from artists, songwriters, managers, record company, publisher, promoter, venue. We have had a lot of people sign up from those areas trying to figure out what am I going to do in the future: I own a record label, and how I get into this digital thing, or I am a manager, and I can see that the labels are not really servicing my clients anymore, so how can I grow my business in an appropriate way. A lot of the work we do in the class is class projects or personal projects where you apply what we are talking about to your situation and try to figure out what the next step might be."

From his classes and consulting work, Kusek also sees differences in the music business across the global economy. "One of my online students runs a CD and DVD manufacturing company in India," he says. "They're finding that sales are actually quite healthy because the computer thing has not taken off in the way it has in other parts of the world. I think there are many areas in the global economy where there are lots of legs left to the existing physical media, and those folks have more time to figure out alternatives."

So the future of music may be bright after all. "I would really encourage the manufacturers to try to develop new formats," says Kusek. "I think that is the only way they are going to be able to survive. DVDs will sell for quite a while, but they are going to run into the same issues. New formats are the key, and trying to really understand people's behavior shifts. This Internet, digital networks, cell phone, wireless thing is not going to stop. It's just going to grow and get more pervasive. I don't think that it has to be an either/or choice, if the formats are right, and they are in the middle, and are married to that network. In one form or another, I think there is lots of potential."

References

The Future of Music: Manifesto for the Digital Music Revolution
    by Dave Kusek and Gerd Leonhard
    Paperback: 197 pages
    Publisher: Berklee Press (January 1, 2005)
    ISBN: 0876390599
    www.futureofmusicbook.com

Berklee College of Music
    www.berklee.edu

Berklee Media - continuing education
    www.berklee.edu/berkleemedia

Berkleemusic - online extension school
    www.berkleemusic.com

Berklee Press - music instruction books and videos
    www.berkleepress.com

Berklee Shares - free Berklee music lessons
    www.berkleeshares.com

Dual Disc
    www.dualdisc.com