(?/) Ryan Tanaka | Disrupting the Music Industry (Pt.1)

?The more things change, the more they stay the same.? ? Someone

This has been an interesting summer so far ? I?ve gotten a few requests to review a few music software projects that are currently in development by a number of startup companies. I?ve been noticing some common patterns among a few of these projects, so I wanted to write an article that sums some things up from my point of view, in order to save some time. (It?s ?free? advice, but honestly speaking I?m trying to clear up more time in preparation for the fall.)

So my intuition has been proving to be correct in that there seems to be a huge opportunity in the intersections of art and tech, and most of these will probably be happening in the Los Angeles area. (Not Silicon Valley, woop.) Thanks to a few lucky breaks, I?ve managed to develop skills and experiences in both, but due to my current situation (Ph.D program) I?m no longer really affiliated with either at this point in time. I?m a psuedo-academic right now, running up and down the ivory tower every day of the week.

What I can offer is a vantage point as a musician/artist, combined with an objectified perspective as an academic/researcher for longer-term trend analysis in the areas of culture and entrepreneurship. I don?t claim to represent any or all musicians in any way, but I know a lot of very good ones doing very interesting things, and the struggles that they have to go through in order to keep their art alive. For those people interested in collaborating, founding, managing, or working for art-tech types of ventures it?s important to keep in mind that combining the two worlds will probably be a process messier than they might think. (Some people have found this type of consulting helpful for their projects, so I?ll probably be doing more of them as time goes on.)

Surprises are unavoidable in any type of startup venture, but it?s important to be mindful of some of the differences mentioned here in order to avoid being taken off guard, especially in regards to the interests and motivations of artists and engineers. Right now there exists an echo chamber of sorts saying how ?great? it is to be an artist in this day and age, freed from the ?shackles? of the old Hollywood industry giants. Since anyone can now upload their songs and sell their music direct-to-consumer, everything must be great, right?

You won?t find anyone more pro-technology than myself, but when these arguments are coupled with a thinly veiled ?you should be thanking us? attitude it tends to rub artists the wrong way. Not only because of its tone of voice, but because the above point of view actually lacks a proper understanding of what musicians have to go through now in order to survive in this day an age. The reasons for this are complicated, and rarely articulated well enough for industry leaders to have a very good idea of what?s actually happening on the ground, so it?s good practice to be wary of assumptions that you may be harboring on either side of the isle. The gap between the Valley and Hollywood doesn?t help either ? the two cultures are worlds apart, even though it happens to be only a few hours away in actual distance.

If the brightest minds of both worlds can come to a consensus of some sort, then the potential for accomplishing something great is still there. But the air needs to be cleared in regard to a few issues before things can realistically progress any further in a positive direction. A few of them will be explained below:

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Are You a Miner or a Pickaxe Seller?

Game of Pickaxes by Venkatesh Rao (http://ribbonfarm.com)

Last week?s pickaxe lecture by Vankatesh Rao at Lean LA was pretty timely because it gave me an easy metaphor for explaining the situation that we now have in Los Angeles today. It?s no secret that, thanks to SOPA and CISPA and the like, Hollywood and Silicon Valley now hate each other, at least on paper. But this resentment comes from their similarities, not differences, in how their business models have been operating as of the late.

Using the Gold Rush metaphor from Rao?s lecture, business endeavors can be split into two main categories: mining expeditions and pick-axe vendors. Miners are looking to ?strike gold?, which can be seen as a metaphor for artists looking to ?hit it big? with a song, product, or ?movement? that catches onto the rest of society. Pick-axe sellers on the other hand, make a living selling the tools that miners need in order to aid their journey. The potential returns may not be as high for the sellers, but the advantage of playing that role is that the returns are more consistent and less risky since it?s not reliant on the outcome of actually finding gold.

The vast majority of music software/websites that have been made by the tech industry during the last few decades fall under the category of ?pick-axe sellers?, mostly because of how the idea of risk plays out within these business models. Myspace Music, SoundCloud, Tunecore, CD Baby, etc. have made doing certain tasks easier for some musicians, but in all of these cases, the artist still burdens 100% of the risk of the content that they create. Essentially these sites are ?tools? that musicians use in order to ?solve? certain problems that might exist in their creative projects. In these situations, the artists are the customers and are treated as such.

Hollywood is mad at the tech industry for encroaching on their distribution channels, not because they?re afraid that the Valley will suddenly start making music better than what they can produce. And the reasons why they can rest easy about this particular fact is because the tech industry is not in the business of cultivating artists? talent. It?s not to say that programmers and engineers aren?t creative people (they are), but they simply haven?t participated in the messy, often subjective process of content creation since their experiences revolve around the engineering of systems and platforms. They create platforms (social media being the most popular as of now), while assuming that the content will somehow ?fill itself up? through an audience-participatory type of process. It?s like performance art, except applied in real-world situations and sometimes there?s ads and subscriptions involved.

The internet is an ideal world based on the idea of equality and equal access, but in vast majority of cases what ends up dominating media platforms are items that were created by the older, more established studios. Occasionally a video or meme will skyrocket into stratospheric popularity, but then, almost predictably, will drop into oblivion, never to be heard from ever again. YouTube star Justin Bieber wouldn?t be anything today if he hadn?t signed with Usher, and you?ll see a similar pattern among musicians who happen to ?make it? through the channels of the internet. What is their definition of success? Get hired by Hollywood. YouTube was the means of getting there, not the cause, in other words.

So in a lot of ways, things actually haven?t changed all that much. Hollywood still controls the narrative and holds all of the keys to the culture industry, because at this point in time there?s no reliable way for musicians to earn an income through the tools of tech industry alone. (Emphasis on reliable.) There are (and will continue to be) lots and lots of talk about how great the future will be for musicians ? the potential is there, the numbers are there, the trends are there ? but these articles and press-kits will all be done in future tense because they haven?t really managed to prove themselves in this arena as of yet.

If you put yourself in the artist shoes and think about how much risk music site/app X is burdening of a particular project, then the relationship between the two parties becomes very clear. If the risk (financial, time, legal, etc.) that the platform itself burdens is zero, near zero, or negative, then the company can assume themselves to be part of the ?pick-axe seller? equation, because they?re there to sell the artist something to aid in their journey, not go along with them for the ride.

(A pick-axe that falls off the handle and into the miner?s skull would be an example of a negative risk burden ? the miner pays money to get additional risk! More commonly known as: stuff that doesn?t work.)

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Who Burdens the Risk?

This can be seen as a metaphor for a developer looking for that elusive ?hit rock-star? algorithm.

Music being a field with an high amount of passion, it?s easy to get caught up in the idea of creating ?the platform? that will ?make? the next big rock-star/cultural icon/movement, and I get a sense that a lot of engineers have a genuine desire to ?help? people in this fashion. But if the product doesn?t burden any of the risk of the journey itself, then it?s unrealistic to expect any of the glory or the gratitude to go their way. I don?t thank AT&T whenever I have a meaningful conversation on my phone, because I did all of the work of making that event happen. Likewise, my internet service provider or hosting company never really crosses my mind when I get a boost of traffic or I manage to land a client through my website, because they?re ?tools? that were paid and done as a transaction a long time before. Unless the process itself is more involved and personal (i.e. a partnered relationship) serious and professional musicians won?t come to see music sites/apps as anything more than that. (If you?re looking to make a site for amateurs and vanity projects, then none of this really matters.)

So it?s important for any music startup to have a very good understanding what their relationship is to artists uploading content into their servers ? whether the company and the musician can be said to be ?mining? for something together, or if the company is functioning as a ?pick-axe seller? for the artist, treating them as customers of their product and letting them go on their way. Even if companies decide not to make their path a matter of public knowledge, having a good understanding of this relationship will undoubtedly help with making more effective decisions in regard to product features and future directions. There?s nothing wrong with either approach, but founders are likely to run into problems if they start confusing the two.

I?d say that most of the music sites out there right now ? even the successful ones ? have some type of identity crisis going on somewhere in their product/services for the reasons pointed out above. Most often it?s the advertising/message that conflicts with what the platform itself is able to accomplish, leading to an mismatch in expectations and result. (e.g. ?become a rock star!? + no examples of musicians having becoming rock stars.) These mismatches turn into disappointment, disappointment into apathy, apathy into indifference, and indifference will lead to people leaving the site altogether. Entrepreneurs usually warn startup people not to promise anything they can?t deliver, and for the most part, the tech industry has been fairly good about sticking to this philosophy. Music sites, on the other hand, break this rule so often that it makes you wonder if they?re really part of the same culture. The issue is not that things have failed or are currently failing ? but that the same types of mistakes are being made over and over in different forms.

Part of the problem is that there has been very little documentation done in regards to these endeavors, which makes learning from past attempts a fairly difficult process. Bloggers lack impartiality, journalists rarely cover the important issues, and these turn of events are too recent for academics and scholars to really get their hand on at this point. (This is something that I?m looking to contribute more to, though.)

The other problem is that there hasn?t been any real shining beacons of success that can be called ?sustainable? or a permanent alternative/replacement of the current record industry. Napster, Kazaa, Myspace Music, Mp3.com, all fell to the wayside in the long run and the future existence of currently running sites seem tenuous at best. There?s iTunes, which will probably be around for a while, but the profitability of their model tends to be questionable and there?s a possibility that Apple is using that branch as a loss-leader as part of their overall branding strategy.

And for the most part, people go to iTunes in order to browse and download music that they?re familiar with, so Hollywood still ends up exerting itself in these situations. This is because even iTunes and Apple as a whole ? are ?pickaxe sellers?. This situation may confuse some entrepreneurs, most of whom would consider themselves to be one of the more ?daring? miner types, taking massive risks and venturing in to the unknown. And they are, at least in regards to technology. But in many (and most) cases, their relationship to the artist becomes a different one once they step into the world of content creation.

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Hollywood vs. Silicon Valley or Hollywood = Silicon Valley?

Gold, mmm.

Somewhat ironically, since the internet disrupted Hollywood?s distribution channels, the industry has begun to imitate what the tech sector has been doing more and more ? the picture looks a lot more homogeneous now than it was several decades ago. The entertainment industry, at one point, could have been considered to be one of the ?miner? types, taking large risks with new technology (phonograph, radio), along with the promotion of ideas and values that ran counter to existing social norms (jazz, rock, electronic music) of its time. Today, Hollywood has come to resemble a ?pick-axe seller? more and more, repackaging, reselling, and recycling ideas that they already have in its stock. This practice has become so common that it?s become a movement in itself ? also known as ?retro? or ?retro-futurism? (the past is the future), which almost everyone is familiar with at this point. This aesthetic is a reflection of Hollywood?s current confusion, pessimism, and nostalgia about itself and its future, seemingly made bleak by the turn of events in the last decade. The tech industry, for the most part, has been echoing these trends through their platforms and distribution channels ? in some ways you could say that they simply gave us greater access to Hollywood?s vault, which includes its failures and mistakes that they didn?t release but never had the heart to discard.

The entertainment industry has also become ?pick-axe sellers? in the sense that they?ve been pushing the risk of content creation more and more away from themselves and toward aspiring artists looking to create new works. It?s become common for record labels to sign contracts where individual artists burden most, if not all of the risk of an album release. In these situations, there is no room for failure or experimentation ? studio and marketing costs are given to the artists in the form of a loan, and if the album doesn?t sell, then the artist gets stuck with its repercussions as a liability (usually in the form of debt). This is where most of the stories of musicians getting ?ripped-off? comes from, but nowadays artists are seemingly getting into these types of agreements willingly, even while being aware of its poor conditions. This self-awareness does not lead to better results, however, because the incentives are still the same as before.

Most music sites have a similar relationship with its artists, at least in regard to its risk. What saves it from the scrutiny that Hollywood receives is that its costs are usually pretty low ? in many cases the use of the site/app is free, with most paid services being under $100 or less. But there?s kind of an uneasy attrition that happens whenever these tools are used, because it never quite goes over the hump and into a situation where progress can be see and measured in a positive light. (And when it does, it rises and falls very quickly, like a star that you never hear from ever again.)

So if you?re coming from a tech background, it?s probably wise not to expect much optimism or gratitude coming from aspiring artists or entertainment industry expats, because most of them honestly can?t see that much difference between what Hollywood and the tech sector is currently doing in areas of content creation. And you?ll have to acknowledge that many of these concerns may be in fact valid, even if you happen to disagree with their stance. Every music-based startup will, at a certain point, have to make a decision if they really want to collaborate with artists or go the default route and treat them as customers for whom to sell ?tools? to.

Remember that you?re playing with people?s hopes, dreams, and aspirations ? it?s not the same as selling a database or credit-card processing system to a potential client or another business. Treat these endeavors like fire, and you might be able to avoid getting burned.

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Unless there?s a radical shift in direction in Silicon Valley?s approach, it?s looking like its contribution to the world?s culture will be lolcats, stupid YouTube videos, and The Pirate Bay. That might be good enough for people in the Valley, but I get the sense that people in Silicon Beach are looking for something more meaningful in their endeavors. But as said in a previous post, the real opportunities lie in the road less traveled: content creation. Both Hollywood and the Valley have largely shied away from doing anything that resembles the ?miner? approach in recent years because they?ve become fairly risk-averse. (Video games can be considered an exception ? not coincidentally, most of the major studios exist in Southern California, not the North.)

If current trends stay as they are, most music-based startups will probably continue to approach things from the ?pick-axe seller? standpoint, because its lower risk and clearer path will be much more appealing to investors looking for rapid gains and quick scaling. The downside is that competition in those areas are likely to be fierce, because everyone and their moms are going to be looking to get a slice of the pie. The market is likely to saturate very quickly, and conditions may turn very ugly once that happens.

The ?miner? route will be less competitive due to its inherent difficulty, higher risk, and necessity for a longer-term perspective. But because nobody is there, the potential returns and the possibility for sustained success is much higher. Either way, it?s good to know which route you?re more comfortable taking, because it will shape both the approach and means of approaching your business and potential customers.

Pt. 2 will feature a few companies trying to buck the trend, along with historical examples of attempts that have been made in the past. Let me know what you think!

Related posts:

1. The Future of Music Tech: Content Creation

Source: http://ryangtanaka.com/disrupting-the-music-industry-pt-1/

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