It is 2010. You’re in San Diego, visiting a friend. He takes you to a hip little eatery. The neighborhood is filled with auto repair yards and unbranded coffee…but not for long. The condos are coming.
There’s a guy in his 50s sitting at the table in the corner. He is dressed casually, contrarily, anti-conventionally, but there is no concealing the fact that he’s got money. (Why is it that wealth always shows through, shines through? You’d think money would buy advice, wardrobe, camouflage, concealment, but, no. You can always tell.)
Your first guess is that the guy is a trust fund baby. But there’s no hint of self reproach, so that can’t be it. Hmm. Well, maybe he made his fortune in a conventional way, patio furniture, say, and then went bourgeois bohemian. No, the small signal of wealth aside, this guy is vastly more bohemian than bourgeois. This is no interloper. This guy fits in.
When there is a lull in the conversation, you ask your friend. He looks over, and says,
Oh, that’s Tom. He invested in Sarah McLachlan early. Made a bundle. Ran it up. Good choices. Worth a fortune.
This spring, President Bush signed into law a tax code change that will make it easier to sell intellectual property as stock. One of the people to seize this opportunity is Terry McBride, CEO of Nettwerk Music Group.
Once we have access to [the full range of] intellectual property, we’re going to offer shares in individual artists and take in equity investments. Eventually, a major band could be its own public company. (from Howe, below)
A stock market for music. McBride’s model says that "even a band selling 100,000 units a year becomes profitable."
Is this what the future looks like? Is this where music and popular culture heading? We know that the existing business model is busted on two sides.
First, there is the problem of plenitude. The producers of music are now apparently infinite. The tastes of the consumer are fragmenting spectacularly. The technologies for distribution are changing at light speed. The old model looked like a Mississippi delta with all the music running back up stream, from the few to the many in the hinterland. This is over. The new world of music looks a lot more like a telephone exchange of the 1940s, with the remaining studios now obliged to play harried operator (bright lipstick, hair net, smoking theatrically) desperately taking calls and stabbing at a match. Plug and play, feverishly.
Second, digital rights management continues to put the industry at risk. Sunday, the New York Times leveled its guns at DRM (Randall Stross, below). I was thinking that the problem with DRM is not that it protects the property of the music makers, but that it insults the consumer with barriers and inconvenience. And as I was thinking this, I just happened to be struggling to open a new CD and the hinge on the jewel case snapped off, as it often does. Insulting the consumer, let’s just call it a music industry specialty.
So the existing model is at risk. And this is precisely why the Nettwerk model, let’s call it, has a chance. (Actually, there are several experiments in the area, including Dimensional Associates, Ingenious Media and even Warner Brothers’ Cordless.) The world of culture has always had minority plays that succeeded at the margin without ever putting the mainstream at risk. But McBride’s innovation could work. This could be the future.
But how would I know? Asking an anthropologist whether a market can work is like asking a TV weather man to describe the science of a cyclone. "Well, I know the wind goes really fast. In a circle." [Spin finger in tight spiral to "demonstrate."] No, this is a job for Pip and Dave at Coburn Ventures. (And I hope they have a go.)
An anthropologist can comment on the cultural implications. The interface between musician and industry is not very mediated. The talent spotter, the A&R guy, might be a real fan of the music, but every successive link to the studio runs abruptly away from the music. It’s not mediation, really. It’s more like a series of damage control chambers, designed to keep the artist out and the money in. (And we thought it was fans committing the piracy.)
But what about Tom? What if there were a Tom on the scene? Now, the creative recruitment and the capital decision are being made by the same person. And Tom doesn’t need to make a fortune, so he doesn’t need to find the next bright light, the next Beyonce, say. He just has to make his numbers, and these can be as small as 100,000 units. Even these numbers can make Tom a very rich man. He doesn’t have to make a fortune to make his fortune.
Tom doesn’t have to communicate his decision up the ladder so he is freed of miscommunication or committee cowardice. He is not obliged to use a shot gun strategy, funding many artists to find the one who can pay for all the failures. He can risk more because he is risking less.
Tom’s world scales beautifully. If his choices are bad for the year or even the decade, he lives more simply. He doesn’t have a payroll, to speak of, or fixed costs. Well, he can always sell the place in Panama. Best of all, he doesn’t have to force the issue. He doesn’t have to manipulate taste or hand out payola. He just has to read taste well.
I think fans will like Tom as much as they now dislike Warner Brothers. The latter always took a big because it was going to keep a big chunk. Tom has a smaller foot print. In a sense, he is merely charging less to do what the studio does: spotting talent and funding it. (And that may be what the consumer is now telling the studio when they help themselves to intellectual property: it shouldn’t have to cost that much.)
Tom helps to solve the plenitude problem even as he helps exacerbate it. He is prepared to take risks that the studio can’t afford, because he trusts his taste in a way a studio never can. And I believe that when he begins to make money, he will have to pour some of this back into the creative community (art, film, not just music) because he will need to augment the social capital that allows him to book talent in the first place. (In anthropology, this is called the "big man" model of reciprocity.) What he cannot do is the studio thing: take the money and run.
With many Toms in place, capitalism can no longer bend the world back into the mainstream. Recently, capitalism has made a habit of making money for the center by selling culture from the margin. Profits are used to fund the corporation, and the downtown towers, private jets, and stadium boxes thereof. Profits are used to fund senior manager’s pay packages and the gated suburbs that rise from them. Thus does capitalism sell one, alternative, culture to fund another, middle class, culture. Thus does capitalism take out profit and difference. Tom’s capitalism will fund difference. (I don’t believe this will ever be "long tail difference," but it will be much less chunky than it is now.)
So where will Tom come from? Some Toms will be naturally occurring and self invented. And this is as it should be. But some Toms will have to be brought along, in the same way, for the same reason, that any creative talent must be brought along. Someone will have to play selector and banker to Tom so that he can play selector and banker to artists.
And so who is that? It won’t be the conventional b-schools. It won’t be HBS. And it won’t be the big corporation as professional training ground. It’s won’t be UBS or UPS. It’s going to have to be a new kind of b-school, or perhaps one of those new fangled d-schools. And when someone decides to create one of these schools, they should call me. Oh and Russell Davies. Yes, and Pip, Virginia and Steve, Cheryl and Craig, Tom, Carol, Peter, Jens, Auto, Leora, John, Tim, Marc, Daniel, Jaynie… Never mind, give us the money and we will build you a business school that creates graduates who create businesses that create cultures. No gentrification required.
References
Howe, Jeff. 2006. No Suit Required: Terry McBride has a maverick approach to music management: Take care of the fans and the bands, and the business will take care of itself. Wired. September (Issue 14.09). here.
McCracken, Grant. 2006. Flock and Flow. Bloomington: Indiana University Press.
Stross, Randall. Want an iPhone? Beware the iHandcuffs. New York Times. January 14, 2007. here.
All of these models still depend on getting the music in front of people. The studios tend to be pretty good at that. I know that there is a vast culture of people zooming around the Internet, swapping stuff, sharing playlists, etc., and I know we have some services such as Pandora that try to analyze your tastes and feed you suggestions…but I still find that hearing a song in a store, or on MTV2 late at night, or occasionally in a commercial, is much more compelling than these alternatives. I don’t want to search for new music all the time, straining to be oh-so clever and eclectic. Put some good stuff in front of me and I might buy it. I doubt I’m alone. But then we’re back to a world of gatekeepers. Maybe a larger number of gatekeepers, but a recognizable world all the same.
Great post grant. I think you gave a pretty good analysis of the music industry. My thesis is focused on this very issue and finding new solution for the future of music. I think steve also made some good points and he touches on my area of focus which is selection. I think what is missing is those more passive was of finding music vs. the new more active methods like last.fm and pandora.
in more than one way the market for contemporary fine arts works like this… – and also produces quite a number of toms.
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well, maybe we are coming back full-circle to pre-modern times (to quote a dear and risky little thought that i am carrying around these days), where industries of managers and intermediates simply do not exist.
Fascinating idea here. I have to admit, my first impulse, given my lefty Haight Ashbury upbringing, is to recoil in horror at the thought of art being converted into a market commodity. My second thought, of course, is, “since when has it NOT been a market commodity?” Followed not long after by. “why shouldn’t the artists profit from a more direct connection to the revenue stream?” Heck, I’d much rather invest in someone whose creativity inspires me than in some company that generates profits without regard for impact. All this is not to say that it would eliminate distributors, at least not for a long time to come. SOMEONE’S got to make the product available for sale. Otherwise, who’s going to be able to generate even 100,000 sales of a single unit? And who will be able to sell albums anymore anyway? Aren’t the models showing that we’ll all be buying songs we like instead of packages of stuff that include filler that doesn’t move us? We all know that distribution is changing, but it’s important to note that all of the initial models that offered music for free have converted to sales, even if in a revolutionary way. Distributors won’t ever go away, but their face and methods are definitely changing.
All of this gives me pause for another reason, though. I work in the presenting industry, at a Performing Arts Center, and all indications are that the industry is on the verge of a cataclysmic shift away from old models. Does this new model of stock markets for art have a potential parallel in my world? I think it may, and it similarly involves recognizing that the centralization of sources for creativity is a dying model. Amazing art is going on everywhere now, not just in a handful of major markets, and rising urban costs are driving artists away from the traditional centers. I’ll have to think about this, but the potential for PAC’s becoming investors in the Arts to maintain a source of our “commodity” is very intriguing…
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Money and Culture are differnt things
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