Five questions about the future of music with David Pakman


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Traditional media companies are in big trouble. You may have noticed. You know who else has noticed? David Pakman, currently a partner at the prestigious Venrock venture capital firm. You may also know David as the former CEO of eMusic—a fairly disruptive media company in its own right. David has over 300,000 Twitter followers and regularly blogs here about the “undoing of big media.”

Today, we ask him five questions about where the future of music intersects with the open source way.

1. One of the beautiful things about the open source software revolution is it lowered the barrier to entry for developers who wanted to create useful software. Meaning, without going to fancy schools or working for big Silicon Valley tech companies, people in any part of the world with any level of experience could contribute, and if their code was good, they were in. Is the barrier to entry for artists trying to make it in the music industry getting lower too? It sure doesn't feel like it sometimes.

I think the barrier to entry to write or make music has always been pretty low. Provided you can learn how to play an instrument, you can write songs. The encroachment of technology into every facet of music making has lowered this barrier even further. An entire album can be recorded at great quality in a basement with a Mac and some bundled software. DJ equipment isn't even needed anymore --- you can do it all on your Mac.

The challenges have always been around marketing and distribution, and the internet changed all that. Anyone can launch a site or a myspace page and offer downloads of their music. In 2008, more than 38,000 new records were released. This was the most ever.

Becoming commercially successful by selling music or touring has never been harder, and that is because fewer people are buying music and consumers have more entertainment choices than ever before. So while it's easier to make music, it's harder to make a living making music.

2. A friend of mine has a saying: “revolutions are never started by landowners." Yet in the technology industry, some of the oldest "landowners," companies like IBM, embraced the open source software movement early, giving up some control in the process, and they have greatly benefited from doing so. Which "landowners" in the music world are most progressive in terms of putting control back in the hands of the creators and the consumers of music?

That answer is easy—it's the independent record labels. They have always been the most progressive, the most inventive, and the most willing to take risks. They have no choice since they never controlled distribution or radio and had to find ways to get their artists exposed. The indies were the first to support MP3s, streaming services, P2P, and ad-supported services.

3. And who has it all wrong?

Well, based on the track record of the recorded music industry as a whole, I would say they have not succeeded in figuring out a way to survive in the digital world.

4. In a blog post a few months ago, you unleashed the following nugget of genius: “When free is a few clicks away, convenience rules.” Apple's gift to the music industry was that they made paying for downloads easier and safer than downloading for free. Do you see other good examples of music industry companies focusing on creating convenience rather than asserting control?

I think Amazon has done a convincing job of putting convenience first. Not too many people mention the fact that they offer used CDs on the very same page as a new CD and are happy to sell the user either. That is putting convenience before control. I also think VEVO has built a pretty nice service for watching music videos and, over time, will expand themselves to be on all devices that matter.

5. One of the key elements of the open source way is collaboration. When it comes to the art of making music, collaboration is fundamental to how great music is made. But on the business side of the music industry, collaboration seems to work a lot less well. In the software industry, we use the word "coopetition" a lot to describe companies that are both collaborators and competitors. I hate that word, but it does capture the idea. Are there some places in the music industry where a rising tide might lift all ships if there was a little more coopetition and a little less competition?

It's not always cooperation vs competition. Just the idea of cooperation evaporated from the lexicon of the music industry about a decade ago. From the moment digital distribution appeared to be real, the industry shied away from partnering with technology companies and startups alike, instead believing they could do everything themselves and attempting to control digital distribution the way they had physical.

I think the industry lost sight of the fact that it was once built by entrepreneurs and missed an opportunity to again work with those pioneering the future. More cooperation is needed. In the digital world, only ecosystems survive.

--
David Pakman is a Partner at Venrock, a premier venture capital firm with offices in Palo Alto, New York, Cambridge, MA, and Israel. Previously, Pakman was the CEO of eMusic, the world’s leading digital retailer of independent music, second only to iTunes in number of downloads sold. After buying eMusic from Vivendi Universal, in the three years that Pakman ran it, he grew the business by more than 850%, from $7M in revenues to more than $68M.

Prior to joining eMusic, Pakman was Co-Founder and President of Business Development and Public Policy at Myplay, Inc., the company he co-founded in 1999 in Redwood City, CA that introduced the “digital music locker” and pioneered the locker category. Before Myplay, he was Vice President at N2K Entertainment, which created the first digital music download service. He also was the co-creator of Apple Computer’s Music Group. Pakman is a graduate of and a member of the Board of Overseers at University of Pennsylvania’s School of Engineering and Applied Science with a degree in Computer Science Engineering and is an avid musician and songwriter.

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5 Comments

Cynic's picture
Community Member

Chris and David, I read that with interest and then zipped over to David's blog and read his Amazon/MacM story. Putting the current argument over IP issues (of which DRM and piracy are subsets) in an economic rather than legal context, it sounds like the major entertainment ("big content") providers are trying to shift market conditions by using enforcement to create or preserve artificial scarcity on the supply side of things. (This is maybe less of an "ah-hah" moment for someone more familiar with the industry, but it suddenly made some of the more draconian positions taken by some of the industry bodies seem less irrational.)

This is an interesting strategy, since it puts off the pain, fear and difficulty of whipping a legacy business model into shape. But still, and as much as DMCA and its counterpart statutes outside the U.S. have inconvenienced millions of consumers, I would have to think any regulatory/enforcement approach to retarding change is ultimately only good for the short-term in the face of a basic change in the business or technical environment.

Thanks for a really engaging article on a very topical subject.

David Pakman's picture

Hi Cynic,

Your assessment is spot on. The content industries enlarged their success in the analog world by controlling exclusive access to their content through tight distribution channels. There is no scarcity in digital, but through the use of DRM and limited licensing, they have attempted to re-create a limited set of distribution options for the consumer -- an attempt at artificial scarcity, as you say.

In music, this encouraged piracy by making the pirated version of music superior (no restrictions, easily available) to the paid version. See this cartoon:
http://bit.ly/bBLhvk

Thanks!
David

Mr. Conglomerate's picture

Pakman: Becoming commercially successful by selling music or touring has never been harder."

Really?
Payolla: Paying large sums of cash and other things we need not mention in exchange for airing over the radio waves specific music (music determined by gatekeepers) on radio stations. These radio stations were illegal, accept to those who paid specific sums of money to Government (controlled monopolists with near unlimited power of enforcement) to control who was permitted to air their exclusive music for sales purposes only.

Drugs were freely offered to musicians for the primary reason to dupe some into accepting a fraction of what their creative genius, or stupidity was allowed to keep. Drugs worked two ways: it soothed the pain of getting ripped off and it gave the elusion that they were more important than they actually were.

It's much easier to produce and distribute your music, the competition is a killer.

FL Studio Tutorials's picture

Autotune has hijacked music just as creationism is to evolution, astrology to astronomy, new age art to 'proper art' etc...

But I do love the fact that anyone can make music and have it heard! Gotta love the net!

Free Loops's picture

I agree with the autotune comment, it really has hijacked the industry.