Digital business models IFPI

Well, thank you all, and welcome, my name for those who don't know me, but saw this while we were announcing it on LinkedIn. My name is Caroline Sutton, I am the CEO of STM, and it is an absolute privilege to welcome you. all of you to our second webinar in our series called

business

models

for a new world. The goal of these webinars is to really try to inspire us to think outside of our current box. Of course, we are moving from an economy that has been based. around magazines or monographs in the past and moving from the magazine side to an article-based economy and of course one of the first

models

of that was apcs uh but we're also seeing new models emerge but probably and this The point of the series is that maybe there are some models that we're not even aware of that will actually be there in the future, so this series is really trying to inspire us to think about what some of those might look like. models, eh, for those. of you who don't know that our first webinar in this series was held last year with Matt Cockrell, who I think was the number one employee at Biomed Central, so Matt was one of those inventors, as you'll see, APC item processing charge, etc.

He's now created his own company called ckbk, which is essentially a Spotify of cookbooks, so if you want to check out that webinar, it's pretty interesting because I talked to Matt about the kind of

business

model he's now introducing into around his new businesses, um, but also some of his thoughts on how that is or isn't relevant to the academic publishing industry because he obviously worked in our industry for a couple of decades and again had been there during the early days of APC, today come on. move absolutely outside of our own industry, but into an industry that certainly has a lot to learn.

I think we are united today. Sorry, I'm just getting all my notes in order. We are united. today by David Price uh who, uh, if you've read the introduction, you'll have seen that David is with

ifpi

, which is an organization that represents the recording industry, so David will be talking to us today about the journey that the music industry. been in terms of moving towards the

digital

environment and we had a previous talk that was extremely interesting, so with this I just want to say a big thank you to David, for joining us today. I'm going to give the David, excuse me, I'll turn it over to David for a while and then we'll also have a chance to ask some questions towards the end.

If any questions come to mind while David is talking, go ahead and put them in the chat. I'll be sure to facilitate a conversation after David's presentation and have a conversation with David, so I'd like to invite David to unmute and turn on your camera, David, if you can. Do it and we hope to hear from you. Delighted to be here. Thanks for the presentation. Caroline. Unfortunately I can't turn the video on, but I'm sure it looks like I've muted myself at least. David. I'm not listening. So I just want to make sure it looks like you're not muted, but I don't see your camera either.

Let me make sure that's the case. Why don't I make you a co-host and see if that helps? Yes, perfect. here we go, maybe I'll be better as a co-host, welcome David, I'm so sorry, you can hear me too, I have to say, although I can't hear you, oh, very strange, I just have a little sound. problem here should be coming up uh let me unmute oh everyone else can hear you so it's just me so oh my gosh I'm going to have to figure out what the problem is while you why don't I invite you to move on?

David and um I'll see what I can find out here on my end, well thank you Caroline, I can hear you perfectly now I can hear you too, thank you. Wonderful if anyone has any problems with the video, chip or audio. Please post in the chat and we'll try to fix you as we go. I'm delighted to be here, thanks again for the presentation. Caroline. I want to talk to you a little about the experience of the music industry in this Internet world. the world of immediate access to music, at any time, I have some slides just to help talk a little bit for the first 20 minutes or so, so I'm going to share some of them with you, which I hope will be about happen, here we go, so like I said, I want to go back about 15 or 20 years, maybe even a little bit more to talk a little bit about the experience of the music industries over the last few decades.

I was thinking about subtitling. There's something like we made mistakes, so you don't have to do it. I think the music industry was one of the first to bear the brunt of both the power of the Internet and some of the destruction it can cause, but as a result. We were perhaps one of the first to really try to reconfigure the industry in a way that could help us as well as music fans and music artists, so to start with just a few quick words about

ifpi

, we are the voice of the recorded music industry. Worldwide, the trade association, if you will, for international record labels, core members of the three major record companies, Universal Warner Sony, but we also have over 8,000 record companies and individual labels that are our members throughout the world, we tend to work mainly as ifpi. through the national groups network so that people like BPI in the UK connect in France, if it's SW Sweden in Sweden, Roa in the US.

And we have something like 65 national groups, we have offices spread all over the world, but most of our people are here. London, where I'm speaking to you from today, so let me go back to 1999, just as the century was starting to turn, just as the Internet was starting to come into people's knowledge and consciousness in '99, there were two main ways. in which you could listen to music, most people bought CDs, the industry made about 20 billion dollars a year worldwide, mainly from the sale of CDs, there was some vinyl and there were also some sources of associated income, but the big part came from CD sales 10.15 maybe 20 or 20 euros £20 for a c for a CD at the time, but if you weren't buying CDs and you were particularly technologically happy maybe you were sitting on college while you got music was through Napster Napster was really the beginning of the music industry starting to feel the impact of the internet, created in someone's college dorm room in 1999, in the United States it proliferated very It quickly became popular and popular, and Napster, if you don't know, was a very simple peer-to-peer program that allowed you to type in the name of a piece of music, an artist, a song, and it showed you all the other people who were connected. to Napster. you could download that song, so whatever you were looking for was pretty much available somewhere, so suddenly you went from having to buy a CD at the store or maybe just listen to the radio and wait for the song you liked to come on to being able to download and get any piece of music you want for free now, obviously as far as the industry is concerned and as far as all laws are concerned, that's copyright infringement, so the way the industry responded to that might be what you would expect.

So if you like the number one business model for dealing with the Internet as it relates to the music industry, as it relates to the music industry, is let's protect the Legacy business, let's protect what we currently have, these CD sales, and we did that by launching a bunch of Napster lawyers and what happened is that Napster went out of business very quickly, um, and it was very quick in terms of the turnaround time. Napster was launched in late 1999, by July 2020 we already had a US court ruling saying that Napster was liable for copyright infringement they were ordered to implement some filtering technology and as soon as it was installed That technology, people abandoned the Internet because they couldn't download the copyrighted music they wanted, and Napster was dead.

That image is actually the Napster home page, I think at the beginning. in 2021 when the network and the company finally went out of business, Napster's uh symbol, their logo was a cat, a sleeping cat, so they called it Dead Kitty in this wonderful piece by Mrs. Painter that you can see there, so the first solution for how we deal with the internet try to stay in business Legacy sue the bad guys, stop the bad guys is a solution that certainly worked for Napster. The problem is that we probably underestimated the power of the technological and cultural tidal wave that was hitting every industry, every business, every nation at the same time.

And that was the power, obviously, of the Internet. You know, it has completely changed our lives, it has changed the way all businesses operated, but at the time, back in 2000, maybe we couldn't see and we couldn't understand how much power. that was going to have an impact on all aspects of life, the problem we face is that yes, Napster closed but Napster was replaced by this and by this by all these and by these then these guys came, you know, there were dozens of hundreds. probably thousands of different peer-to-peer networking websites, ways to find pirated music very, very easily and very, very quickly, these are our current mistakes.

Bears stream ripping websites, you can go to any of these websites, you can give it a YouTube URL. and they will download you in MP3 the music that is played in that video very quickly, very easy, very difficult to close, unfortunately, but a great impact, still on the music industries, the ability of the music industries to sell content properly, so that piracy has evolved over time. uh, and I really want to go back and focus on the first 10 or 15 years of music piracy. I don't want this presentation to be exclusively about piracy. I'm going to move on to talking about other areas in a minute, but I think it's very important to just look at the impact that this had on the industry going forward, so I'm going to stop this revenue graph at about 2014, give or take, that It's the point where things started to level out and stabilize a little bit, but we'll see, in 1999 and 2000 we were a $22 billion industry in terms of revenue flowing into our record companies each year, so in 2014 things looked very different, say the revenue we were getting from streaming, so we're talking about things like Spotify, like YouTube, it's very small, very nascent and still represents a very small part of the overall revenue.

Revenue comes from downloads, like iTunes sales, but most of the industry even in 2014, even physical sales of CDs, vinyl, were still the biggest single. part of our revenue, even 15 years after Napster came along and indicated where the future was headed, we were still dependent on CD revenue and physical content sales for most of the material coming into the music industry and some of the smallest parts. of performance rights revenue, so money when the music is played on the radio or in a restaurant, for example, and synchronized when the music is combined with a television commercial or similar, but most of the money in that At the time it was still physical content, so we had some attempts, as I mentioned, kind of different business plans during the launch of iTunes in 2004, where we went from selling albums primarily to just selling discrete downloads, you could buy individual MP3s, you could buy the whole album if you wanted, which helped. it helped moderate that decline in the physical, but it never really replaced it and then we very slowly started to see the impacts of streaming.

We had the first deal with YouTube, which at the time was a relatively small website. In 2006, Warner reached a long-ago deal with him. a small limited deal in 2006. We finally had the launch of Spotify in 2008. Now it only launched in Sweden, a couple of Nordic countries and at the time it was a small Scrappy startup that few people had heard of, but let's go back now and I just want to focus a lot on the bottom line of streaming revenue, so what we'll see over time (I'm going to take this to about 2014 again) is a very gradual growth in usage and popularity and streaming revenue. that enter the music.

In the industry, you know, it was a very gradual growth even though you know the level of maybe consumer interest in this was indicated by things like Napster and the other file sharing services that were out there, things still took a long time to catch on. going, you know? In 2014, we had about a billion dollars coming from streaming, but that's within a 14 to 15 billion dollar industry, so it was still a relatively small portion, we only had about 28 million subscribers across the board. the world, people who paidfor Spotify Premium or other subscription music services, but this is the point where things finally started to take off. 2015, for example, was the point that I typically see as the moment when music streaming really entered the public consciousness.

Apple Music launched amidst a huge rush of publicity and people, as well as very early. adopters started to hear about music streaming, they started to understand how it worked, what was on offer, what the value proposition was, you know, £10, €10 a month and you get every piece of music out there, so it started to feed people's lives. to fuel how they lived their lives with new technologies, with changes in data costs and that this was the point where streaming revenue and the number of people involved in streaming really started to grow. We had the launch of Amazon Music in 2016.

A ton of other services trying to stake a claim. In 2018 we had about 250 million subscribers, so subscribers increased about 10 times in five years until 2018 and then in 2022, last year, now we are almost 600 million people pay for music, pay for that Spotify subscription , Apple, Deezer, Amazon, Tidal or QQ.music or qo or melon or one of the hunt, you know a lot of streaming services that are out there and now it's an industry worth almost 18 billion dollars just for streaming so you know that the change, as you can see, happened very, very, very slowly until it happened. very, very quickly, suddenly, and it took a long time for that to really be reflected in what people wanted and what people were looking for, but also in the willingness of the industry to do everything possible for their ability to close agreements with dsps. and the ability to find the right value proposition for the labels and the artist, so there are still some questions to ask about streaming, it is not necessarily the final answer.

Here you know what happens when we reach the audience ceiling in mature markets, how do we do it? the foundations for new markets, so there are a lot of questions there and I'm happy to delve into some of them during the discussion, but let's go back for a moment to the initial revenue graph that I showed you and move forward to 2022 and you can see again the impact massive that streaming really had on the music industry, you know, since 2014, where it's worth just over a billion, we know that up to almost 18 billion dollars a year flowing from streaming, downloads have really gone down again. proved to be actually stronger than most people thought, quite resilient and we're actually seeing an increase in things like vinyl sales now and CD sales also increased last year and then performance rights and Sync also generated a bit more revenue year over year, so this is a streaming success story in some sense, but it's also important to look at that in terms of actual value.

If you were to factor in inflation in this graph, you know, even though we're in our $26 billion industry. 2022, probably with much lower inflation than a $23 billion industry in 1999. So there's been a big impact here, but you know things obviously look a lot more promising now than they did 10 years ago, so I want to To touch for a moment on some of the conditions that were necessary for this growth in streaming to occur, both the growth in income and the growth in consumer adoption. The first two are things that, as an industry, we have very, very little control over. um, Internet infrastructure, in particular, the cost of Internet infrastructure, the cost of broadband, the cost of data on your phone, those things are incredibly important to the adoption of streaming services and the continued popularity of those services.

Hardware that you know the iPhone didn't have. It wasn't released until 2007 and smartphones weren't at that point of mass adoption for at least five years after that and there's a very close relationship between someone's propensity to own a smartphone and their propensity to have a music service on streaming, so it makes a lot of sense. If you have your phone with you, you have access to any piece of music in the world at any time, so that's an incredible part of the value proposition of streaming, but then there are things that the music industry itself actually has.

Greater control over the first of these is the willingness to commit to services for licensing and take on much of the risk just to touch Spotify again. I think I called it a scrappy startup in 2008, it wasn't just that Spotify's lead programmer in 2008 was a guy who the year before had been the lead programmer for the biggest and most popular BitTorrent client. A bit torrent, as everyone knows, is one of the most important aspects of piracy around the world. A guy named Ludwig Strigius had written. a client called uTorrent, an incredibly popular, very easy to use, Daniel how record labels get into this. company and start talking to them they are going to be a little reticent about it.

Are you willing to take that risk? Licensing his music to a program that at the time was still using peer-to-peer methods and was, you know, at least. partially involved with all the BitTorrent activity that had been going on a few years earlier, so there is a big risk, especially when it comes to an industry whose Legacy business is shipping physical CDs, but the industry has taken that risk. They've taken that leap, they're willing to license and engage with people, and I think the experience with companies like Spotify has helped ensure that we're now seeing a lot more willingness among record companies to take those leaps, those leaps of faith with new ones. platforms and new services than what we were seeing 10 or 15 years ago, obviously it is necessary to have that continuous investment in artists and technology.

The recorded music industry is one of the largest investors in research and development worldwide. In any type of industry and you have to keep the flow of new artists, you have to adapt with the type of services that are out there, you have to make sure that you bring in new artists, develop new artists and provide the For the type of music that people want to listen to There has to be an adequate political framework. This is one of the big jobs of the IFPI: to ensure that wherever we are dealing with music, wherever governments and bodies like the EU, for example, are involved with new laws that have anything to do with the Internet or with copyright ?

We are there representing the interests of the music industry. This is particularly the case in New Markets. One of our big focuses over the last five years has been to identify those new markets. and work to ensure that the right laws are on the books and implemented in the right way, so that when it comes to fast growing markets like China like India and huge potential markets like Indonesia like Nigeria where they are working with our national groups to put the right laws that you know to encourage governments to recognize the importance of copyright and the importance of other types of laws that help establish the right framework for our companies to do business and it is also very important that This goes back, I think, to what I was talking about. with Napster about recognizing consumer needs and wants, ultimately we're based on what listeners and music fans want to hear and how they want to hear it, that's where most of our revenue comes from, we have to understand what what consumers do.

I want to, so I'll show you some slides from what we call our music consumer study. This is one of my big projects. Every year we talk to between 40 and 50,000 music listeners around the world to try to understand what they are listening to. how they listen to it, how they feel about things, what their music habits are, so one of the first things I'm going to show you is what's important to people about streaming services when someone pays Spotify Premium for music from Manzana. What's important to them about that service is what makes them shell out their 10 euros 10 a month to have access to all that music and what we find is that it's the music that they really want, those millions of tracks, it's the ability of listening without interruptions is the ability to have that musical experience where they want it, when they want it and how they want it, on any device, wherever they are, they want to be able to have all their music at their fingertips, that comfort and ease of use So it's primarily about the music that's been licensed for the service rather than the service proposition itself, the value comes from access to all that music and when we ask people how they search for music and what they're looking for, you know how to find it. .

Music on Spotify or Apple Music is what people search for, they are not guided by Spotify's recommendation algorithm, but rather they search for it themselves, so it is the power of music that drives the success of this more than that um. The particular features that something like Spotify might have a couple more slides, before we wrap up, one of the things we also asked is about music engagement, the amount of time that people spend listening to music through different methods, and I said no. I don't want the presentation to focus exclusively on piracy. I also don't want the presentation to focus exclusively on streaming because one of the most important things that the industry has tried to do in the last five or six, maybe 10 years from now, is give music to people in the way they want, where they want, how they want and that doesn't just mean through a streaming service, it can also mean helping them engage with music through as many different methods as possible, so we asked people how much time we spend listening to music every week and on average I think in 22 different countries 44,000 people last year in all of those people we discovered that they listened to an average of just over 20 hours of music a week, that is, approximately three hours a day and when you analyze it , you realize how diverse the listening experience tends to be, which is why about a quarter of total music listening time, just under five hours a week on average, is done through subscription streaming services , so it's Spotify Premium or Apple Music or one of the other paid ones.

On the paid tiers of streaming services, we see a little less than another 10 through ad-supported tiers, so listening to Spotify with ads interrupts streaming music, listening to videos, which in most countries just means that YouTube is very important for music and music consumption, then short-form videos. You know mostly that that means Tick Tock outside of China and India, but you know that Tick Tock didn't really exist three years ago, it was part of people's musical lives, the pandemic changed that and now we see this incredibly important ecosystem, uh, up and running. . to perform a variety of tasks.

Within the music industry, social media is important and then the old radio stage, you know, radio has been there since 1920, but it still brings music to people, especially in Europe where it's incredibly popular, but still you know three. On average, people spend hours and a half a week listening to the radio. The older the person is, the more they tend to listen to the radio and the less they tend to listen to streaming services, but radio is still very important to people's musical lives. Music like CDs like vinyl, people still listen to live music and various other types, but as a consequence of all this, they strive to give people the music they want.

I'll cover a couple of other methods in a The second is that most people think we're in some kind of golden age, almost here in '77, we agree that there are more ways to listen to music than ever and If I look at that pie chart, that listening pie chart, you know everything. those streaming methods short videos social media I didn't have them when I was a kid, you know, I would have loved to be able to listen to any music, but I was stuck with radio CDs, some vinyl and that was it. We know going out to concerts from time to time, so this ability now, all of these streaming services have really revolutionized access to music for most people and it's not just here where we stop because now we're in a situation where that things are in a state if you like to have constant evolution, your labels are constantly looking for new opportunities for artists and new ways for fans to interact with the music and with the artists, so it's not just about of things likeproducts and brands, partnerships, sponsorships, endorsements, things that have always been there. on one level or another, but we are looking at a short video, musical adaptations, a video and a long-form film, you know, the movies, documentaries, television shows that increasingly feature music, a gaming content, not only FIFA soundtracks or whatever game you want to play, but virtual reality concerts within platforms like Fortnite and Roblox, which give people completely new ways to interact with artists, live streaming became very popular during the pandemic and has proven to be another enduring aspect of what happened. during coverage or lockdown people are still accessing live music streams, then we have things like nfts and the metaverse.

Now their time has probably come and gone very, very quickly, but again the industry was ready to work with companies in this area and they are still willing. to license content to companies here to see if there are opportunities here for our artists other opportunities to give people ways to interact with music through these new methods okay, I have two very quick final slides, skip those statistics um just to highlight some of the current political issues that we face as a trade organization in particular, the first one is what we've talked about from the beginning, which is piracy and unlicensed content, we're constantly looking at this, it's a big one.

Part of the role of the ifpi and our task is to locate these unlicensed services. It's finding ways to address them. It is discovering how this panorama constantly changes. with middlemen to try to prevent this from happening as much as possible, we're looking at new things like streaming fraud, the ability to buy fake plays on things like Spotify or Apple Music or YouTube so we can get things on the charts or even try to making money from fake views of content and the biggest problem we are working on right now is something that actually surprises me quite a bit.

I have managed not to mention until now what artificial intelligence is. This is obviously. A huge concern for all industries right now, but particularly for the music industry, we are concerned about several areas, one of them is music that sounds like the artist had a Drake diss track a few weeks ago, but now It's very easy for almost anyone to make a piece of music that sounds like Drake Taylor Swift Rihanna Eminem The Beatles, whatever, it's not difficult to train an AI to recognize the musical styles of particular artists and then make new music or cover songs. my old self or previously existing music that sounds just like that artist, obviously we consider that to be simple infringement and we want to make sure that drastic action is taken as much as possible.

Make sure that permission is requested and that a license can be freely negotiated if the artist and if the rights holder decides to license it, you know it is in your control whether they license your material. We also want to make sure that there is transparency in terms of what the AIS have been trained on and how they use that material and we want to emphasize things like human creativity, you know, the part that humans have, the fact that humans are so important to that musical process, uh, and the unique emotions that are communicated through a piece of music, okay, very quickly wrapping up all that, going back to this idea of ​​business models, you know, we started, I guess, with this model of physical property business, you know. from selling CDs, selling bits of vinyl, we moved slightly, we toured a little when Muse, when piracy started to hit, with selling downloads, but again we're talking about ownership, we're talking about selling discrete downloads like singles or albums, people could buy them and keep them, then we switched back to a music system to sell access to music through streaming services.

We started out looking at paid subscriptions and supported levels of streaming through video sites and then that changed again and evolved further and we looked at streaming through social media. sites through short-form video platforms like Tick Tock and we are constantly looking to see where music streaming could have an impact in the future and then there are even more engagement-based models and more that they offer users and the experience of the listeners and the experience to interact. with their artists or interacting with music in different ways Fitness platforms gaming platforms like fortnite things like nfts the metaverse and obviously everyone will have seen the launch of Apple's VR headset.

We announced a couple of days ago again that the ability to use them to access music is going to be incredibly important, you know, live concerts or music videos are going to be a big part of that, so we need to make sure we understand what the issues are there and that our companies are also involved as much as possible in making I'm sure there is the right framework for them to license their content. Well, I've been through a lot in a very short period of time. I've probably spent more or less the 20 minutes I should have been allotted. but there is a lot to solve.

I'm more than happy to answer any questions or just engage in a general discussion, whether it's about music industry experience, perhaps lessons that might be there to help. Help your own businesses. Thank you. Very much David, this has been absolutely fascinating. I'm wondering if you could ask a couple of questions that are a little broad and then we have a couple of AI questions that are coming up in the chat right now. I want to make sure we get there, but I'm curious, so I think in our industry the shift to

digital

and some of the demands that are coming out of the market in various places, I think they are in some places as well. in many ways challenging our thinking about what our role is in the value chain that we've been involved in and I wonder if there was also a type of conversation that had to continue in the music industry as well, I mean, what is ? the role of music producers if before it was both producing and distributing and now there were others who began to distribute in another way or do you feel that it simply adds to things that you are already doing no, that is a very good question and we certainly face those problems and we have faced them in the past.

Regarding distribution, for example, there was always a concern. Well, do you know if it cost £15 to buy a CD that you had to physically make? And you know, here it is in my hands, why isn't it cheaper to get a digital download? You don't know and you don't really understand the costs that are involved in everything you know, creating the mp3s in various formats of different qualities, sending them out loud and creating the technologies that we are required to do all the work that we have to do with different platforms and different DSPs, so there is always a question about that, but I think probably the most important question is where the success and the responsibility for the success of music consumption lies. or if that is related to individual artists or albums or in the sense that the recovery of the industry and the recovery of our income we always see that the platforms where the dsps and digital service providers are quick to say that this artist it was a success. our platform we are responsible for that, while we as a record industry say well no, we are responsible for that because we invested in that artist, we brought you their music, all you have done is provide an access portal to that artist in particular. and their music, so there's always an argument between people's ability to access music through platforms and the platform that takes responsibility, while the industry likes to say, well, you know we're the people who make those investments in our artists.

We're helping them create their music, we're just bringing the music to you and you're taking the credit just by providing the ability for someone to write the name and listen to their music, so I think it's an ongoing debate that recognizes the value of whose name it is. the brain of that music. and who is creating the popularity of that music in the first place, it's very interesting and I think related to that, I think you've already started to touch on it. Someone asked what you think the lessons are for B2B versus B to C um, yeah, I don't.

I don't know if you've had any thoughts on that, it's a good question. I think in terms of B2B we would probably be looking more at our relationships with the platforms and as a business organization that's not something we can get involved in. in um, but I think what we see is that we've gone from having a very wide range of partners in the physical world, you know, we had a lot of retailers that sold our music, we had a lot of radio. stations that we could go to to try to promote music, there are a lot of tv stations that we would try to use as as record companies we now have a much smaller number of very large dsps that we have and that our companies have very strong. relationships with, so that's a different way of negotiating value and negotiating licenses and I think it requires very different skills in terms of delivering music to the consumer.

I mean, it's been turned upside down, you know, we went from the ability to buy a single CD. to the ability to have every piece of music in your pocket, uh, for less money than you would pay for a CD 20 years ago, you know, that's an incredibly different value proposition for most users, so I think that We often say that the music industry today is completely unrecognizable from what we saw 20-odd years ago and I think that is the case, all those relationships have been rethought, they have been reconfigured and the way the industry works It's unrecognizable for something from 20 or 25 years ago, yes, and I.

I agree with you, although I am someone who has a very large vinyl collection in my house, I just realized that I should have sat in that room with that background for you. I was also asking and I think this partly relates to what we're talking about because of course there's also the artists themselves and the creators of the music and what does it look like in this new environment where I guess there's real pressure on the price of the transmission to be very, very low? global market, so everyone around the world should be able to buy it and how do we make sure that the creators on the other side are functioning properly, yes, recovered for their efforts, also in all of this, this is a major issue. um and I think what you've seen is that for most artists, uh, for people who remember, you know how they used to release music 20 years ago, you'd release a single, you'd release another single, you'd release an album and then you'd go on tour. with the back of that album, so your sales were very focused on the initial release of your album, so you would have a huge increase in income in a very short period of time of two or three months.

If you went on tour, you would make income from your touring income and you would understand how you could allocate that income over time to then make your next album, etc., and so on, streaming is completely different than streaming. Slower but more consistent income stream over a long period of time. You no longer get that initial £10 or £15 every time you buy a CD. You make some income from streaming your new content when it's released, but then the hope is, and the reality is, that you make much more consistent income and recurring income from your back catalog and that you release that album over time as you people pass it on, but it's often very difficult for artists to make that change and we see ourselves doing it.

Recognizing that there are a lot of artists who are being rewarded in completely different ways than what they're used to, so the industry has had to work a lot on things like transparency to make sure they're talking to artists. and they understand this and they just get people used to these new business models, these new ways of charging people, artists, artist groups are very concerned about the ability to develop new artists, record companies believe that they still It's a job that they are very, very strong in and very, very considered very important, but there are obvious concerns that the streaming business model doesn't necessarily work for every artist group out there and I think we need to have those.

Constant conversations with our artist. groups and with our dsps to make sure those people are being rewarded appropriately. I mean, what we do see is that over time, more and more of the money that record companies make as a percentage is returned to the artists that we've seen, you know, very poor contracts that they could have received. completely rewrittenso that they benefit much more from the digital environment, so it's very difficult, there are a lot of complicated arguments there, but it's obvious that we want to make sure that artists are adequately compensated and that artists get as much money as possible because that's what bases all of our success, yes, and I know we said this was a 45 minute session.

I'm wondering if you have a few more minutes just for a few more because I think there's a very interesting conversation that I think there may be some people joining in that may have to leave, but I want to give a chance to a few more. Questions I also thought it was really interesting because AI piracy is absolutely something that we in our industry face as well and try to understand what we do about it. Similar to Napster, we've had Scihub come in and take content. One of my questions for you will be, once you started getting into streaming, did you see piracy go away, but I think you answered the question no, because in your presentation we talked about that that's still an avenue that you're on. having to go ahead even though I would say the cost of accessing music via streaming is pretty low, like you say Contra, when you had to go and buy the full album and we as consumers probably pay less and get more for the money um one of the questions I have is more from my own perspective as a leader of a trade association and I think I'm in the middle of an industry that, you know, is being disrupted, we're looking for new business models, uh , That's how it went.

Very interesting, I thought you had noticed that not all artists' music is suitable for streaming because I think we are also trying in our space to figure out if it really is a model that will suit everyone, everyone would love for that to be the case, but that doesn't seem to be the case. I'm curious in terms of ushering in these new business models. A transmission was emerging. Did I understand correctly that it started with some of the big actors who dared to sign some deals with some? of these distributors or streaming services and it was then.

I'm just curious how the industry moved as an industry event to start making these emerging models start to stick. I guess there were other things that went away, but I'm trying to understand how we help an industry move forward, but I can't go out and tell people that this is the one that everyone should adopt because that would be illegal on my part, it would be uh yeah, so I'm curious how that all happened when you look back, I mean, I think it was a pretty slow process. Most of the 2000s period was a big shock to the system because revenue was decreasing every year and we saw piracy becoming more and more.

It is a problem and yes, I think compared to 15 years ago, piracy is probably much less than it used to be, but it is still a meter problem, particularly in many developing markets for us, but in terms of the evolution of the different models I think you're right when you say that There were a lot of attempts, you know, there were a lot of services out there that had similar ideas. There was a streaming service called Rhapsody that came out in 2003 or so, it was very shortly after Napster, which was a licensed service, but no. it had a lot of music, uh, and it was pretty slow and you know it was almost not the right time, you know the technology wasn't there to give people the success that they wanted, so you know that willingness to take a leap with services like Spotify .

It takes a lot of discussion between rights holders and our companies and, uh, a platform like Spotify requires testing in countries like Sweden and Norway. Sweden was ideal. I mean, Sweden had been decimated by content piracy in the 2000s. They had incredibly good internet speeds. um, there was The Pirate Bay based in that country, you know, people were used to viruses, so Spotify comes along and says look, let's try it here, what are you going to lose? You know, there's almost not much income coming into the country right now. Look where we got here, so Daniel Eck is very persuasive.

He had good relationships with record company executives. They decided to move forward and that flourished in more countries over time. It took them, I don't know, three or four years before they did it. could be released in the US, they've been steadily signing on to more record companies, so it's been very gradual and I guess it's been the consumer that's driven that, in terms of us doing the trial with Spotify, it turns out to be very, very popular, we expanded. It proves to be popular in markets other than Sweden, Norway and others and gradually spreads around the world, whether through Spotify or a different DSP, so you know it took a lot of experimentation, but it was necessary. the right kind of fundamentals too, you know, that's talking about internet speeds, data costs, all of that has to be at the right time for these things to reach a public level where they're acceptable, you know what I find? useful because there are a lot of people in our space who have been pushing for open access, so you know, there are no barriers, no subscription barriers to accessing research articles and, to some extent, monographs, just celebrating the 20th anniversary of what is called The Budapest Open.

Access Initiative, um, which you know, declared that a new era was coming, and we've been saying, but a lot of things have been happening, actually now more than half of the content that we're publishing is freely available, but there's something like that , but It is going too slow, by those who want this movement to happen, but we are trying to say that we are trying to move as fast as customers demand it around the world, but equally, we are trying to find what it is. It's going to be the right business model so that players big, small and otherwise don't disappear in this transition, so knowing that it took the music industry quite a while to get to where it is now gives me some hope that be Not because we are, you know, we're all struggling here and trying to find our way forward, but it's hard work, it's challenging and it's particularly challenging when you have the pace of technological development that's available to everyone. you know, we would look at the last two years, there's been nfts, there's been the metaverse, there's no AI, there's been all the crypto stuff, there's virtual reality in the future, you know, where do you put your resources to try to better understand and how to deliver them? music in the best way for the artist and the best way for people to access it and hear it well, oh David.

I know you and I had a prep call for this and right on that prep call we realized we really should have more. conversations I know Claudia Russo is in touch with your organization otherwise but I really want to follow up because I have a lot more questions um some of them are very specific questions some of them are broader but I think there are as you say some lessons and some points in common and not least as both industries are now facing AI and the challenges that that brings and I'm sure we're going to deal with it together, someone just wanted me to do it.

I asked real quick though because I see they put this up twice what is the best AI tool for music. I don't know if you want people to use an AI tool for music if that question is about creating and what you want. If you're looking for music creation, there are hundreds of different tools to help you, most of them featuring AI at some level or another. You know these are not tools that are new to the music industry. interesting, we're doing our big consumer study right now and we've asked the GPT chat to generate some questions for us about people's perceptions of AI music and it's actually pretty useful for that, so we probably would have asked questions anyway, but it shows that you know it shows the power of these kinds of tools, um, yeah, I think the best AI tool for music probably hasn't been written yet and it's probably something that, already You know, given the growth in the power of artificial intelligence, we might need to be a little afraid, well, thanks David, there was a lot in this talk, so just to share with everyone, we will be recorded and we will post the video, so again I want to thank David for joining us today and thank you all for joining, it's really giving me a lot to think about and I see an incredible amount of parallels here so thank you again David and thank you again everyone for joining and we will be setting up a new webinar soon thanks for the opportunity.

Good to talk to you all today thanks David, take care foreigner