Thoughts From 51 Hours In SF: @iTunes, @Google and Angry Little Clouds
Thoughts From 51 Hours In SF: @iTunes, @Google and Angry Little Clouds

You didnt have to read between the lines to hear the frustration on the part of Google execs when they launched their locker on Monday but were unable to launch a proper Google Music service with major label licenses.

Top Googlers including Zahavah Levine and Jamie Rosenberg both gave a handful of interviews in which the usual "we still hope to land deals so we'll be polite" protocol was abandoned, and instead they called the labels "unreasonable" or worse in virtually every press op. In a day and age when every top exec is media savvy and thoroughly sanitized, Google's comments were either ruthlessly strategic or a glimpse of honestly -- either way they were jarring in their tenor.

On the ground at the well-attended, high-energy SF MusicTech conference, everyone seemed to have just started their own company, and everyone was ready to crucify the majors. As I tweeted that day, the gulf between the tech realms in SF and the music business centers in LA and NY has never seemed greater.

So what of it? This is a business negotiation, and it isnt always supposed to look pretty. Its fine for 800 programmers, coders and entrepreneurs to snort derisively and say "Fuck the majors then, we'll just build apps for indie music." And indeed, some great apps that do just that are floating around out there. But the simple truth is, if you want to build something that the masses will use, you need that major label, major publisher content. You don't have Gaga? Then you're a niche product. Did you make sure to explain that to your Angels and A Rounds?

The entrepreneurs need to speak the language of the major rights holders: convince them that they will make more money by charging less and getting higher volume. And frankly, plenty of entrepreneurs need to be reminded that there is neither a deity-granted nor constitutional right to distribute someone else's IP. If you cant make money -- and real money -- with your service, why would anyone give you their content? The major labels are "flying too close to the sun," as Lucian Grainge told me once years ago. The pressure to NOT set the WRONG precedents is what often drives the decision makers in the music industry. Fear is an awful perch for governance.

And so the major rights holders need to recognize that the rest of the world knows that they arent a sustainable business on their current path. D-Day is a question of "when," and not "if," even if "when" is still a couple of years (and a thousand cuts) down the road. Anyone who's been covering the digital music space for more than couple of years -- and Lord knows, I've been covering it long enough now that I stop owning up to it -- is Sick. To. Friggin. Death. of the static nature of the pricing dispute. Digital services say five bucks a month is the magic number to get mass subscribers. Labels and publishers want 10 to 15. And the world has been frozen at this exact point for at least 2 - 3 years now. Which is why if you talk to any of the players in media investing in Silicon Valley, they all say exactly the same thing: if a company has exposure to major label rights, run screaming in the other direction. That standstill only wastes time and hurts the customer, who doesnt get to experience the new products and services that investment allows.

It's clear the Google negotiations ended badly, and Ive had a bunch of connected sources tell me a bunch of different things: it was Google who was being unreasonable and changed their demands right at the end; it was Sony and UMG that held things up; etc. At the end of the day, I'm left watching the Apple cloud play. The majors didnt play ball with Amazon or Google. Maybe they felt they'd get their payday -- either directly, or in the form of better cooperation and considerations from the iTunes store - from Apple.

I hope it's true. Contrary to popular belief in the tech industry, most of the executives making digital distribution decisions at major labels today arent luddites or imperialists. Most are smart people, but smart people beholden to quarterly pressures. The majors shoul det what they can from these services and from their customers, just as any other industry would and does. But I'll say this: it seems pretty clear to me at this point that the future model will be an access model. And it seems pretty clear by now that music fans -- at least the masses -- wont pay 15 or even 10 dollars a month for it. So how long do both sides want to forestall the future?

Billboard's FutureMusic conference will be held in San Francisco on October 5, and will be focused in part on working to achieve resolution of the above questions. Save the date and watch this space or Billboard.biz for updates.

Questions? Comments? Let us know: @billboardbiz

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