Rebirth, Wind and Fire:
Reviewing the MIDEM and MIDEMNET Panels

This year the whiff of revolution was in the air at the Midem and MidemNet panels. 2005 should be the year that digital music graduates with honours and, like a compressed format Atlas, props up the whole music industry on its broad shoulders. The true dawning of the digital utopia or just hot air?

Introduction. The end of the Great Depression?
The panels at Midem in 2003 could almost have been chaired by Nostradamus, telling how the skies would be aflame and the end of the music industry was nigh. 2004 was less pessimistic but equally noncommittal about the industry turnaround. It would be nice, was the theme, but we’re not holding our breath, thanks. 2005 had that rare commodity in abundance – optimism. As digital gets airborne this year, the music industry will put the last five years of slipping and struggling sales behind it. The subtext of many panels was that the days of music on a physical format are numbered, although few panels actually picked discs as their core focus. In the 21st Century, are the old ways of doing business archaic and the old soundcarriers just so much landfill?

Where next for the indies?
Martin Mills of Beggars Group suggested in his keynote: “It’s not cheap for companies to get into digital. There are not the same costs for digital as there are for physical, but there are other costs. I don’t think that digital is overpriced. It is compared to ‘free’, but we need music to be paid for.” This was a theme that was picked up by the Digital Indies – Making Their Own Way panel. Richard Wheeler of Sanctuary Records stated that the company controlled a catalogue of 150,000 tracks but the hefty investment into digital has meant that they can only currently focus on digitising, marketing and selling the most popular 20,000.

Dilip Mehta of Saregama argued that simply having catalogue on download services was not, in itself, enough. Niche acts and genres were underserved by the main download services as the populist and the mainstream drive them. For the small players, especially those outside the UK and the US, “it’s all about marketing and creating awareness” which involves a significant financial commitment that many labels can ill afford. In terms of niche music being ‘buried’ on the main download services, Steve Beckett of Warp Records/Bleep.com suggested this is not necessarily such a bad thing. He identified blogs and fansites as an effective way for small labels to build a following at a grassroots level in a relatively inexpensive manner: “One-to-one marketing is the really exciting thing about the Internet. HMV is always going to have Britney in the window over Autechre and iTunes is always going to have Britney in the window over Autechre.”

Wheeler added that, in certain cases, it makes sense to exploit catalogue digitally rather than physically. He chose the example of Trojan, stating that a sufficiently large consumer base for physical reissues of some of the catalogues might not make financial sense, but it would be viable digitally. Beckett – tellingly from a record company that started life in a specialist vinyl shop in Sheffield – said that the need for indies to be ready to embrace digital was pressing by stating that, “I can’t see in 10 years’ time the bulk of music sales being on CD”.  Getting from the situation now where (at best) digital makes up 3% of the total market to one where it makes up 50%+ will be a massive challenge for all players, not just the indies. As John Kennedy of the IFPI noted, there is a need for perspective in terms of where we are now and how this will shape where we go from here: “All the good things we are saying about the digital market – it’s still in its infancy. Costs are very high. At the minute there are no margins in the digital market for anyone. They have to invest in the future.”

Addressing P2P and DRM. The “nicest litigators” following the “music industry’s biggest mistake”?
Kennedy used his keynote to outline the findings of the Digital Music Report (see p. 7) and state that, as long as piracy over P2P continued, so too would industry litigation against file-sharers. He argued, “the war against piracy can never be won. But if you don’t fight the war, it will get even worse,” adding that, if the lawsuit route is to succeed, “we must be the nicest litigators in the world”.

Martin Mills, however, took a diametrically opposed position on this issue in his keynote. While Kennedy asked, “What other industry has had to break into and sell its product in a 100% pirate market?”, Mills argued “we will see the killing off of the original Napster as one of the music industry’s greatest mistake”. Asked if he saw P2P as digital theft, substituting sales, he said: “We can’t tolerate consumers not paying for music … [but using P2Ps is] … like listening to a track on the radio rather than stealing it from Tower Records”.

Asked if P2P represented a threat or an opportunity for his company, Mills stated that there was a clear division between how the majors saw P2P and how indies viewed them: “We always thought it was both. We saw it as a way for fans to talk to each other. While the majors rely on TV advertising muscle, we rely on ‘P2P’ in the old sense; people talking and getting excited about music.” In terms of explaining these diverging views, he argued: “Majors have traditionally worked on controlling their marketplace. P2P threatens that domination. We have to legalise P2P. People love using it. We have to find a way to monetise it. P2P is all about being enthusiastic about music which is what we need.”

Mobile mobility
Ringtones have traditionally been seen as the preserve of the young, however many of the panellists detailed evidence that the older demographics were better represented than previously thought. For all the talk of mobile downloads, ringtones seem to have considerable shelf life. Could they now prove to be the SMS to full-tracks’ MMS? To grow the market further into this segment, operators and third party providers must focus repertoire, marketing messages and the navigation to purchase.

Whilst, as was true with Midem in general, there was optimism for business in 2005, to the passive observer these cross-industry get-togethers can be likened to marriage guidance counselling, with each subsequent ‘session’ a step towards reconciliation. However those niggling issues (which justify such a forum in the first instance) inevitably poke their heads above the parapet as the two industries struggle to understand each other. Still.  

Jeff Lieberson of KMZ Rosenman pointed out that artists object to their creative output being referred to as ‘content’ or ‘data’. Whilst this is perhaps a little over-precious, behind it lies a valid point. Music has already been commoditised by free distribution via P2Ps, those hoping to offer what could be seen by the consumer as an identical product need to be communicating this value through their language with all stakeholders. Lieberson also added that mobile operators do not fully understand record company release schedules while content owners do not fully grasp the intricacies of wireless delivery, causing a friction here. Meanwhile the mobile industry gave a clear warning that labels and publishers need to sort their house. “The bickering needs to stop,” said Vodafone’s Guy Lawrence. This was a recurring theme, seeded by the online fraternity during MidemNet and echoed through to the legal panels on Sunday.

Brand tie-ins, refocusing on the track and the importance of packaging Beyond the traditional revenue streams, the issue of non-music companies using digital music in their marketing and branding activities was identified as a growing area, but also one that comes with immense risks. Scott Hunter-Smith of The Coca-Cola Company argued his company wanted “a credible relationship. It’s not about jumping on the next hot thing,” suggesting that tie-ups can help artists and labels offset the high costs involved in recording albums. Simon Waldman of The Guardian, however, implied that it is beginning to get out of control with everyone now offering music: “Anyone in the UK with half a website is thinking about offering a digital music service.” He went on to add: “You need some initial credibility in the area for your involvement to work. If the brand looks desperate, the consumer can smell it a mile off; that whiff of desperation. There is a lot of it around at the minute.” As Chuck D of SLAMjamz argued in his keynote, music is much more than just a product and should not be treated as such: “That’s what separates music from cans of dog food. But I’m sure sales of dog food go platinum every two weeks.”

Chuck D went on to raise an interesting point about how digital is helping reconnect the consumer by driving an accidental refocusing of people’s attentions on music again. “The MP3 player has reintroduced the title of the track. In the CD era, you’d ask a kid what their favourite song was and they’d say ‘Track 11’.”

The Music As A Luxury Product panel, however, suggested that digital somehow made music less ‘warm’ and ‘tactile’ and discussed the importance of packaging and improved audio and audio-visual offerings for physical formats. Labels need to, they argued, invest heavily in making CD packaging attractive for consumers, although this is clearly a high financial risk for many cash-strapped independents. Physical is, after all, the dominant format and will remain so for many years, they argued.

Many labels are currently debating: should they grow the market by cutting down on packaging and selling CDs at a lower price or should they invest even more in packaging to make CDs attractive and worth paying for? Packaging can be used creatively to help sell music in a different way; for example having creatively-packaged CDs racked in specialist non-music retailers such as clothes stores. CDs should now be thought of and presented as a luxury item with the feeling that record labels should behave and present their products in the way that clothes designers do.

Conclusion. A ray of light or a mirage?
There was a clear sense of optimism snaking through Midem this year and traditionally the issues debated there have set the temperate for the year for the industry. While it is invigorating that the industry clearly believes that digital will pole-vault into the mainstream this year and pave the way for significant returns for all involved, poor old physical was left, sad-eyed on the shelf. It was almost as if the industry had unwrapped a new toy and it had taken the place of the CD as its favourite, meaning the shiny disc was cast into the corner, never to be played (with) again.

While digital looks set to take off, the CD will remain the key format for years to come and the industry does need to consider how it can be repositioned and improved rather than left to wither on the vine like eight-track and DAT. After all, a CD is for life, not just for Christmas.

Eamonn Forde and Dudley Ashton, Frukt