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Recap of Digital Music Forum (East)

By Pamela C. Jones, Esq.

Last week I attended the Digital Music Forum (East) in downtown New York City.

Panelists and speakers included Rio Caraeff, President & CEO, VEVO; Russ Crupnick, VP & Senior Industry Analyst NPD Group; Michael Doernberg, CEO & Founder ReverbNation; Ted Mico, EVP Digital at Interscope Geffen A&M, Rich Bengloff of President, A2IM and more than 60 other ‘players’.

If you’ve been in a martini-induced stupor – ah, the good old days – you may not have heard that the old music business model is dead. Ted Cohen of TAG Strategic (former VP of Digital Development and Distribution at EMI) assured us “it’s not coming back”!

Setting the tone in his opening remarks, Cohen cautioned that the biggest risk facing today’s ‘digital music group’ is to not take a risk. He complained that legal and business affairs are bottlenecking deals, but walls are breaking down and some risk-takers are becoming overnight sensations, including “Lady Gaga”, the most-mentioned artist of the conference.

“Massive Exiting of Music Buyers In The U.S.”

Russ Crupnick of the NPD Group reported that there is a massive exiting of paid music buyers in the United States. He provided the following compelling evidence:

In 2009, 24 million fewer people purchased music in the United States over the prior year. There were 1 million fewer digital download purchases and 25% fewer P2P illegal downloads. Last year, Americans spent $34.6 million in digital download purchases of music, a decline of almost $2 million year over year. However, those that did purchase music spent more. In 2009, the average downloader spent $50 buying music downloads, compared to $33 in 2008.
Crupnick described 2 primary music-buying groups: (a) The “UberFan”, which represents 9% of music revenues and (b) the “Traditionalist”, accounting for approximately 40% of revenues. Traditionalists consist of an older demographic and include GENXers and ‘late boomers’. As a group, they represent 1/3 of all revenues from music sales. Crupnick warned that if this group is ignored by music strategists, “we’ll all lose our jobs”.

“The Democratization of Media”

Ted Mico, Executive Vice President of Digital for Interscope, Geffen and A&M, told the audience, “Big media is getting smaller” and “All media is getting democratized”. Today, 70% of all music revenues are digitally generated. In Mico’s opinion, the job of recorded music companies is to ‘discover’, ‘invest’ and ‘connect’ talent with consumers. He reported that music companies are redirecting their efforts to establish direct relationships with consumers. Today, the key commodity is the single track of music.

‘We live in a new world driven by singles” said Mico. “Lady Gaga sold 35 million single tracks globally” and “the Black Eyed Peas have sold 25 million single tracks globally”. Mico explained that if care is taken to create, develop and market the single track, then the album will take care of itself.

Mico’s mantra is “Attraction, Retention, Monetization”. To be successful, Mico’s strategy involves (1) building the best technology to connect artists to consumers and (2) aggregating the data collected from music consumers. Mico’s colleagues argue that this data is the keystone in developing the ‘new relationship’ between the artist and the consumer. IGA collects a staggering amount of data to use in the creation of ‘predictive analytics’. In fact, in one day alone, IGA engineers collect 23 million bits of social-listening data, which is then aggregated into metrics that digital music executives told us is crucial to the health of the ‘new relationship’ between artist and consumer.

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This page contains a single entry from the blog posted on March 2, 2010 9:23 PM.

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