BOSTON - How can the music business grow instead of fighting over slices of a shrinking pie? Make a better mass market experience, said Thomas Hesse, president of global digital business for Sony Music.
That means following consumers to smart phones and tablets and creating ubiquitous cloud storage for their music collections across those devices, Hesse told the Rethink Music conference here Tuesday afternoon.
Some 500 people turned out at the Hynes Convention Center for the two day conference hosted by Berklee College of Music and Reed MIDEM, to hear top executives, internet entrepreneurs and a smattering of musicians like Mike Mills of R.E.M. talk about where the industry is going next. The Berkman Center for the Internet and Society and the Harvard Business School were also sponsors.
(Check out our reports on Tuesday's Rethink morning panels, and a panel that explored ways that audiences can become patrons rather than consumers.)
Digital is half the music business now, and about 30 percent of those downloads already go to smart phones and tablets, Hesse said. Consumers increasingly prefer the device experience to the model where they first download music to their computers and then transfer it to an iPod or other dedicated device.
"I think the music-buying proposition today is pretty clunky," Hesse said.
The second half of his recipe for growth is moving consumer music storage to the cloud - which was discussed at length at a separate panel at the conference.
"When everybody accesses all their music in the cloud, the experience becomes more intuitive," he said, meaning it's seamless regardless of where they buy music or where they listen to it. And that works whether the consumer accesses the cloud via a subscription or an ownership model, although "the subscription model is particularly powerful when it comes in a social networking environment," Hesse said.
Much of the day's talk centered on matters invisible to consumers, like licensing difficulties and the business challenges new services such as streaming music present. It was the rare gathering where "We'll simply update the copyright law" was a laugh line.
"If we want to empower new business models, then we've got to find a way to offer them licensing that makes sense, and that's a big challenge for the industry," said David Israelite, president and CEO of the National Music Publishers Association.
"The fundamental database issue is very challenging," Stephen Block, senior counsel to the Harry Block Agency said in one panel. "Licensing opportunities are being missed."
Block and others encouraged artists to tie their information to the work they create, via metadata and registration. The task has typically been left to the record companies, but in the new world of digital and independent media, that doesn't work anymore. "That information, from creation, needs to flow upstream," said Patrick Sullivan, CEO of Rightsflow. "It's easily transferable. It's not like we need a megabyte."
Even existing licensing information can be difficult to come by. Consolidation and downsizing at the record labels means smaller staffs managing rights issues for larger catalogs, making the process "tremendously difficult," said Jay Fialkov, deputy general counsel for WGBH in Boston, a major producer of both documentaries and dramatic programming for public television.
There was also a debate over business models for licensing services.
"I think the solution is for-profit businesses," said Sullivan of for-profit Rightsflow. "You'll figure things out really fast, you'll innovate."
"Sometimes the non-profit route is the way to go," insisted Michael Huppe, president of non-profit Sound Exchange. For example, he cited the expensive and important yet un-profitable business of tracking down rights holders of orphaned content.
Getting labels and publishers on the same page in shaping deals for new digital services will help, said Sami Valkonen, head of international music licensing for Google/Android. The trick is reaching agreement on a total content cost model rather than having them trying for two bites of the apple, he said.
"I don't think the consumer is going to let us not head in the right direction," said Jon Potter, CEO of RPG Strategies.