Musicians Looking To Let Internet Replace Record Cos

[Dave Farber <dave () farber net>]

Delivered-To: dfarber+ () ux13 sp cs cmu edu
Date: Tue, 27 Jan 2004 11:45:29 -0500
From: Barry Ritholtz <britholtz () maximgrp com>
Subject: Musicians Looking To Let Internet Replace Record Cos
To: dave () farber net

Hi Dave,

For IP if you like: Fascinating story out of Davos -- Dow Jones ran a very 
different headline than the rest of the media on the AP Peter Gabriel story 
(it actually shows up under news for AAPL on the Dow Jones Newswire).

I think this is an EXTREMELY significant development, and should be of 
great concern for the labels going forward. I haven't done a mathematical 
analysis, but I did put up a quick post regardimg some of the potential 
developments going forward.

This is definitely an intriguing issue worth watching. My quick take is below.


Cheers,


Barry L. Ritholtz
Market Strategist
Maxim Group
405 Lexington Avenue,
New York, NY 10174
(212) 895-3614
(800) 724-0761



Musicians Looking To Let Internet Replace Record Cos
http://bigpicture.typepad.com/comments/2004/01/musicians_looki.html

At least, that's the headline which Dow Jones ran for this story. Most 
everyone else who ran this AP story used the tamer headline: Musicians 
Unveil Digital 'Manifesto'.

But I suspect that Dow Jones got the basic premise correct: A highly 
respected and intelligent pair of innovative musicians are making a power 
grab on behalf of artists. They are taking advantage of the general chaos 
in the space, and the apparent cluelessness of the big labels vis-a-vis the 
internet.

In other words, the music industry's Hell just got a lot hotter.

Consider the players: Gabriel is an extremely bright and creative musician. 
He has been a major innovator in his entire career, from recording with 
Genesis and on his own to live performances to social activism (on both 
Human Rights and the Environment, and is also associated with WOMAD) to his 
music business savvy. Gabriel owns recording studios, is a co-founder of 
the digital downloading service "On Demand 2" (OD2), and founded his own 
label, RealWorld.

If you followed Gabriel's career -- and his music -- over the years, than 
you know that he is not a mainstream thinker. I have a sneaking suspicion 
that Peter is a disarmingly charming and formidible (if not clever) 
negotiator. Now, along with his cohort, Brian Eno, the Music Industry's 
nightmare may have just gotten much worse.

Gabriel & Eno present an opportunity to turn the classic rocker cliché on 
its head: Think of a group of stoners, signing anything their label 
presents to them, while corrupt agents and business managers bleed them 
dry. Now imagine the polar opposite of that vision: That's Gabriel & Eno. 
Long term survivors of the industry, they are smart enough not to confront 
the industry head on -- they certainly do not want to turn this into a holy 
war. Instead, they are proposing a set of changes -- incremental in 
appearence -- which will gradually reduce the power of the record labels in 
favor of the musician. Gabriel is smart enough to retain a role for the 
labels, primarily that of marketing. That makes their model a compromise 
between the anarchy of P2P, and the disintermediation of a "labelless" pure 
internet model.

This may ultimately change the economic dynamics of the industry, reducing 
the role of the labels. Eventually, the changes could be dramatic.

CANNES, France (AP)--Peter Gabriel and Brian Eno are recruiting other 
musicians for a provocative online experiment: Since the Internet has 
changed the way fans buy and listen to songs, they say, why not transform 
the music itself?
The two independent musicians have dreamed up an online alliance for 
musicians, and they hope to launch within a month. By taking record labels 
out of the equation, artists could put downloads online themselves, 
becoming their own retailers and setting their own prices. They call it the 
"Magnificent Union of Digitally Downloading Artists" - or MUDDA for short, 
which has a less lofty ring to it. On Monday, Gabriel and Eno handed out a 
slim red manifesto at a huge dealmaking music conference in southern France.


Do you have any doubt that what these gentlemen are proposing is anything 
short of a major revamping of an industry? Than read on:

Gabriel, who has his own label, Real World Records, said he isn't trying to 
shut down the record companies - he just wants to give artists more 
options. "There are some artists who already tried to do everything on 
their own," he said, adding that they often found out they didn't like 
marketing or accounting. "I think we believe there will be all sorts of 
models for this."

One band that has found its niche online is the jam band Phish, which sells 
downloads of its concerts at www.livephish.com. The band's relationship 
with its devoted fans is often compared to that of the Grateful Dead, and 
the site is another chance for close contact. But it also made money: $2.25 
million in sales since 2002. What's driving the movement is the success of 
legitimate download sites such as Apple's Internet music store, iTunes, 
which sells songs for 99 cents a pop in the U.S.

Gabriel co-founded a European company, On Demand Distribution, which runs 
legal download sites in 11 European countries. The company would provide 
the technology for MUDDA, though Gabriel and Eno are looking for online 
partners.


Stay tuned . . .

Sources:
RealWorld
http://www.realworld.co.uk/index/flash/

Musicians Unveil Digital 'Manifesto'
Associated Press, 1/26/04
http://abcnews.go.com/wire/Entertainment/ap20040126_1514.html

What Peter Gabriel gets out of Davos
By Tim Weber, Monday, 26 January, 2004, 09:04 GMT
BBC News Online business editor in Davos
http://news.bbc.co.uk/1/hi/business/3428437.stm

Gabriel to launch musicians' union
By Tim Weber Friday, 23 January, 2004, 17:19 GMT
http://news.bbc.co.uk/2/hi/business/3424483.stm

Musicians to Use Internet To Bypass Record Labels
Associated Press
http://online.wsj.com/article/0,,SB107516464904012346-search,00.html

Musicians Looking To Let Internet Replace Record Cos
DOW JONES NEWSWIRES
http://online.wsj.com/article/0,,BT_CO_20040126_006186,00.html




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