Terry McBride's Blog

Written by Jay Oatway
Friday June 6, 2008

There's an old expression, "The less you know about how laws and sausage are made, the happier you'll be." Which is to say that the process behind creating these things is so gruesome that knowing what goes into it, would put you off democracy, or your dinner.
After two days at the Music Matters conference at the Hong Kong Grand Hyatt last week, I think the same is true for the music industry. The less you know about how music ends up on your phone, the happier you'll be.
But out of the madness, there rose a distinctive voice of clarity: Terry McBride, founder of Nettwerk Music Group, and the only music middleman who seems to truly understand how web 2.0 -- including the mobile web -- really works.
McBride founded Nettwerk 24 years ago, and has since risen to fame by encouraging his artists, like Avril Lavigne and The Barenaked Ladies, to engage their fans using the new tools available -- crowd sourcing and social networking.
I sat down with McBride on the sidelines of Music Matters and asked him what the future of music looked like.

How do you create value in digital music?
Scarcity creates value, but the Internet is a giant photocopier. As soon as a song is released it is no longer scarce and has little [monetary] value.
But, within the music business, there are a number of forms of scarcity. When a song is about to get released, for about five minutes it's scarce. We get first point of entry - we get to introduce it how we want. That has some uniqueness to it.
The access to the artist is unique. Everything you wrap around that can have scarcity. You can create a release experience that brings 10 million people to one place - you can monetize those eyeballs, you can create hoops that users have to go through before they can hear a song for first time.
It's crucial for any artist to have an authentic relationship with the fans. That's emotional scarcity. Their willingness to give has the value.
Much of the music industry is missing the future because they're not talking to who they're trying to sell their products to.
The media business is based on control: what you see, when you see it and for how much. That's now gone. The only control you have now is when it's first released. The only scarcity you have is the creator and the brand around it.


Should the Internet be blamed for the Music Industry's problems?
No, the internet takes a niche and turns it into a market place.

It is what it is, and we're not going back. Moore's Law doesn't just show us a doubling in speed and power, but also a doubling in the applications and the imagination that goes into it. There's also an emotional Moore's Law that's doubling by some greater multiple. Technology allows it to happen, but technology doesn't create all this stuff that people are doing behind it. And that's what's growing much faster.

I think this is a big part of what's being missed: how we as people consume music and how it affects us. And the multiple sensory points it has to hit to connect with us. It starts with basic text, the adds static visuals, then audio, and then moving visual. The more of those points you add together, the better the chances go way up some one remembering what they just consumed. The Internet allows artists to go beyond just music.
We need to think of the music business within all those sensory points.

How can mobiles contribute to those sensory points?
The possibilities are unlimited. But they are very culture coded depending where you go in the world. I think it's Very interesting that within Asia the data shows a desire for consumers to have just one personal device -- the mobile. But in North America we still have the desire to have two.
But the device itself doesn't matter all that much. Everything is going up into the clouds. It's not going to be physically with us, instead we're only going to want access to it. The better a mobile can access rich media, the more it will create a demand and a great economic model.
The desire to personalize the device is a whole other emotive connection. But the mobile is just that, it's just a connecting point. It allows me to connect with anything - with you, with music, with email, with photos, with whatever.


So, music isn't just some commodity that need to be monetized?
A song is an emotion. Whether a high-grade recording or a low-grade mp3, it's an emotion.
It's about psychology. We're all in tribes. Your tribal peers are your biggest influencers. Tribes get bigger thanks to the internet and mobiles. It's about sharing your passions.
My thought: let people share. Create a site where you can share it with others, wrap ads around it - and now I can monetize your behavior, rather than the music. Even if that's on YouTube. All the publishers and labels (except Viacom) have a revenue sharing deal with YouTube.
If I can get Avril to create something for YouTube, turning her 200 million hits into half a billion hits -- that's the same as selling a million records.

Why is it taking so long for the industry to seize these opportunities?
The most amazing innovations after they are done seem really simple. It's all because you can't see it, because you don't know what it looks like.
I think it's about having fun! Imagination is the most powerful tool we have. Once you know what it looks like the challenge is in bringing everyone's mind into the same room.
I don't believe holding onto an idea is power, I believe that sharing it is. I believe that a high-tide floats all boats. The more people that can be emotionally affected by the music the better.

Optimism - From my perspective you are your thoughts. Try yelling "No, No, No, No" out loud and see how you feel, then "Yes, Yes, Yes, Yes" and see how you feel. It will be different. Are all emotions simply choices? For me they are, so I choose how I want to feel and that, in turn, affects everything all around me. Many claim I am an "optimist", especially when it comes to the music business, but I am simply my thoughts. I simply imagine so many fun things to do that I intuitively know will create joy and abundance within my life. I cannot live in the negative and doom and gloom, it simply does not exist for me!

That is why I love Asia, the positive, optimistic energy is so real in that part of the world, you feel it when you arrive. It's in the land, in the people and in the culture. China is simply a magical place, the people are special, so warm and open, genuinely kind and their culture is so rich. There are those that will bring up the government and all their beefs with various issues. I respect all points of view as they are all inherently right, but I would never paint a people by the policies of any government. To me it's what I see and feel from those that I communicate with. The debate over piracy in China is an interesting one, it's one where we in the West apply our sensibilities upon another culture, a culture where music was always shared and the concept of copyright is foreign. We could debate this, but then again all sides are right from their perspectives. All I know is for Avril we have spent a lot of time and investment in the market over the past 5 years and it's the only market where Avril is seeing increased sales across so many IP verticals that it now represents 40% of her world wide IP income. It's bigger than North America or Europe. Some base figures on the most recent album 2.8 million ring back tones, 28 million full album streams, 5 million downloads and 2 million CD sales, then throw in one million-plus of Manga episodes, youtube views and you begin to see a real economic base.

Upcoming fun in Asia... How about allowing the Avril fans to socially vote their favorite local Artist into the support slot. Not like the old days of Promoters or Labels or Managers placing an Artist on tour... Or in some cases an Artist buying into the slot. This is all about an authentic relationship between Avril and her fans. It's about Avril respecting those local fans and giving them a say in the event, an ownership. After all, they own Avril's songs within their emotional social culture already; she is a part of their lives. When you begin to understand this principle everything shifts

That brings to mind a few fun things we will do in the next few months. We will release the 1st single by a big Artist as just mulit-track stems, nothing else. So it's not about doing a remix after the fact, there is no set perception as to how the song sounds. Fans can mix away and socially filter a winning mix to the top. Then we can release that mix with the Artists own mix to radio... Hmmm maybe even do a whole album this way?

If you have any other fun ideas, just shoot me a note... Remember our sandbox is the beach

Warm wishes

t

ps- chills at hearing new Sarah McLachlan songs