[This transcript is excerpted from a special edition of Art of the Song entitled The State of the Music Biz. Click here to listen to the complete program as broadcast on Public Radio.]
Viv: Now we’ll hear from Panos Panay. Panos is the founder of the music website Sonicbids and now heads the institute for creative entrepreneurship at Berklee College of Music in Boston.
Panos Panay: Well I think what’s going on right now is sort of the handing over of the baton from one industry to a brand new industry and when you’re going through these transition periods, there’s a lot of turmoil, there’s a lot of upheaval. There’s a lot of jockeying for positioning, if you will. We’re in the midst of that transition and I think we’re just beginning to see the early glimpses of where the industry’s going to go. It’s probably not that different than let’s say where internet search was in the early 90’s, pre-google. Where there was just a lot of different players, there was a lot of change, and eventually there was one model that sort of won. I think we’re having the convergence of a lot of different things happening so it’s both. It’s not just an music industry change, it’s also a societal change that’s going on. When you’re in the midst of that upheaval, you kind of feel that “Oh my god, this going to last forever” but history has shown us over and over and over again, across multiple eras and across multiple industries that eventually a winning model does arise and the music industry and music in general is much more resilient that I think people tend to believe.
The industry is not dead; it’s just going through a transition. When you’re looking at five billion or so smart phones, or whatever the number is, out there, all of which, their users are a fingerpoint away from accessing music, and when you’re seeing that consumption of music and uses of music being at an all-time high then, for me, it’s not an issue of demand, it’s just an issue of a business model. Wherever you’re seeing investment, there’s a lot of capital that’s being invested in space. Wherever you see customer demand, coupled with investment, coupled with innovative, or innovators, or pioneers trying things, eventually you do come out of it on the other end. In a funny way, once you’re in that, you kind of tend to forget what the world was like before it.
The consumer ultimately is the driver. You can fight it as much as you want, but ultimately the consumers are gravitating to streaming online music. I don’t know about you but I’m a subscriber to a streaming service. To multiple actually, for that matter. And I’ve seen my consumption habits shift from the CD to downloads to streaming. I don’t think that the answer is to try and kill the music steaming service, I don’t think the answer is to try and fight it. I think the mindset that we all need is, “Ok, how do we make this shift while maintaining an economic, or creating an economic model that makes it viable for the most important people in the space, the creators, to generate an appropriate return and get appropriately compensated.” I think where we are right now is that, you have two things going on: you have a consumer that’s demanding accessing music in a particular way, and consuming music in a particular way.
By the way, I will open parentheses here and say I don’t feel that where we are right now is where we will end up. I think there’s a lot more space for innovation within the streaming services environment. But to go back to my initial point, you have a consumer who’s demanding, and in many ways dictating, a new model of consumption. On the other hand, you have a structure, or an investial structure and also, to some degree, legislation that is struggling to keep up. They’re not keeping up and I think the two are in almost direct conflict and the entity paying for this conflict is the creator. When I talk about the industrial structure, I’m talking about all the intermediaries that exist between the person consuming the music and the creator. When I talk about legislation, clearly I’m talking about copyright legislation, which is desperately trying to keep up, but the truth is legislation is always going to be a follower. I tend to zero in on mostly the industrial structure and how that can change given that today we’re able to deliver a file of music for practically no cost versus ten years or fifteen years ago where to manufacture, produce, distribute and deliver a record or CD was infinitely more expensive. So you have a structure that’s based around a very, very different model, dipping its hands into a transaction that has moved from dollars to pennies. That’s where the conflict exists. If you’re getting from me, what do I think the answer is, well the answer is, or maybe the question ought to be, “Do we really need all these intermediaries between you or I downloading or streaming media or listening to music and the person who made it?” I think in 2015 the answer is ‘no, we don’t’. What I feel has lacked in the industry is enough inquiry, frankly, about the future of the space. We’ve been largely observant. I think the creative class has been largely asleep during this revolution. The people who’ve been awake are the people who’ve been creating the platforms but the people who’ve been asleep are the content providers and that is the creators. What’s been lacking in this industry for me is both inquiry and this is one of the areas with the institute that we’re focusing on: the creation of a research center akin to the media lab at MIT or the d.school at Stanford or other research labs where we’re asking these big questions and through the cross-pollination of people from different background and disciplines trying to envision and, in some ways, hopefully be people who help create some of that future. Entrepreneurs don’t predict the future, they create it. Whereas, I don’t feel that it’s up to nonprofit organization like Berklee to create that future, I do believe that it’s up to nonprofit organizations like Berklee to create the conditions so that the creators of that future can come together and envision it which is what Stanford has done with search whether it’s Yahoo or Google or other entities.
Right now with the research lab we have one project that we’re calling Rethink Music, the Fair Music Project. We’re looking at both the way that money flows today from content consumer to content creator and all the steps and intermediaries and exchanges of hands that it has to go through and who takes what and why. Then the next step that I feel is extremely promising is actually looking at the impact that crypto-currencies and protocols like blockchain and bitcoin can play in the future distribution or efficient distribution of money and all the possible effects that that can have. It’s still very early days, I’m not quite ready for me to sit here and tell you exactly what that will be. I don’t know if anybody can sit and tell you exactly what that will be. But I feel, for me, this is how you begin to turn the page. You start by asking intelligent questions and you start by bringing together groups of people outside of your space looking at areas where you can borrow concepts that have worked. Music industry is not the only one to go through a transition or is not the only one to be faced with challenges, and then put one foot in front of the other and have a bias toward action rather than obstruction. Having a bias towards positive collaboration rather than sort of, again, the instinct being to fight everything new. Embrace, ultimately, technology as an enabler rather than as a destroyer.
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