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How to combined traditional royalty business model with free? After just read Free by Chris Anderson, my mind is all set at looking at the Free-model. No doubt that Free is on in the talks right now, but how can it be applied on a traditional business model like royalties for artists/composer (really the person(s) who owns the right to the song).

Take Spotify for example (was selected as one of the 50 best internet services by Time Magazine). A free-music streaming service that have growned incredible since start. And yet it still isn’t making any money. The big cost is the royalties interest for every time a song is played. Is an old model in the music industry for radio, tv and concerts. The more time a song is played, the more royality will Spotify have to pay to the artist (through different organisations depending on the country). This sort of cost should be considered Variable cost, which should be kept low. In this model the consumer don’t pay anything for listening to the song, the owner. At the moment Spotify isn’t making any money other than investees pulling in more cash. They in terms what to see a return on their investment.

Today Spotify makes its money on advertising and premium paying customers.

One news recently told that the big record companies basically got shares in Spotify. As it is important with content, and the record companies have the power here. So its a good idea to get the big boys to own a part of the service to keep them providing content and try to push the service. And in Sweden the record labels makes more money from Spotify than from iTunes. The backfire I see is the smaller labels that feel that the big ones gets to much power in the service and how it will affect newer artist and labels.

As stated, the problem lies in the continues royalties interest that only will rise the more users the service will get. Even if the Free in the service help it to expand and grow a good Brand, the money printing device isn’t really in place yet. Google didn’t start out with a business model to create revenue, but it found it later. Spotify might find its model soon, but time is running out, mostly due to the royalties, something Google didn’t have to think about. I really hope the service find a good model soon, cause I am a big fan of it.

In recent months, Spotify have been on many peoples lips around me. Music streaming services have come and gone, but I have never heard so much good reviews and word of mouth as Spotify. Not only developed in Sweden, but with a great working service and impressive content catalogue this one have all the possibilities to be a smash hit!  Currently in Beta and Invite only, it seems everyone around me using and loving it. And already are people working to port the service to mobile phones.

Today a free music streaming service, and it seems the business model and revenue in the future will come from Premium-paying-customer and audio advertisement. Though many of us who use it wonder how they will make money. One thing is sure, and that goes for all new entertainment media services; without content no service will be used. And for Spotify to attract more users it needs even more music. Not only the music from the “big bad boys”, but all smaller to fill the Long Tail as well.

But once again, it seems the music industry won’t take risks or simply won’t people to discover and listen to new music. This is thanks to the fear from the big record labels, who want to limit the amount of songs offers in the service and forced Spotify to take down many songs and tracks.  Once again its the lawyer who stands in the way of evolution of the music distribution media. Instead of taking a step forward the industry take a few back. The big companies still don’t seem to trust new platforms. Today I finished reading The Viking Manifesto, how we can learn business theories and ideas from the old Vikings. One chapter simply titled “Put lawyers last in the boat”, which means that lawyer (even how great and talented they are) often are counter-productive and often in the way of creativity.

I truly hope Spotify becomes a great hit! Not only cause its a Swedish company, but cause the music industry truly need a big push to cope with the incresing piracy. The CEO of Spotify Daniel Ek also believe the business model could work great for games as well. But this reqiures the game industry to adopt to the streaming model. I personaly thing the game industry is more keen on change than its older brother music. As newly appointed president of the United States, Barack Obama pushed into peoples mind, Change is emintent for surviual. Specially in the fast hardening media business. And that size and slow bureaucracy don’t always is the best move. Like the Vikings, even thou they were few they always adpoted and changed tactics to their advantage. Spotify have all those possibilites, but still rely on others for content and become the next iTunes hit.

One of this years biggest Swedish game releases, Dice’s Mirrors Edge have one of the best trailer-track. A cozzy chillout/electronica track that really contribute to build up the mood. I don’t think I’m alone wanted to know which song it was. But its clear that one of our biggest Swedish female artist, Liza Miskovsky will do the theme song for ME. Also the Swedish group Teddybears will do a remix on the theme song. Mirrors Edge will soon be released, and I’m planing to pre-order it really soon.

I remember the good old days (1992), when Super Nintendo was the greatest gaming console, and still is according to me. One of my friends had very… different game at that time, Mario Paint. With the game you got a computer mouse, specially made for the SNES and this game. Mario Paint was a compilation of games/applications. The big selling point and … point of the game was to paint. But there was another application we spent much time with and was a bit ahead of its time, a music composer. Through a simple interface and pre-recorded sound clips we could create our own goofy music tracks. It was a fun game, but I didn’t became a great music composer from it.

But now I’ve discovered this old game again. To playing and creating music, rather what others have done and composed with it. A simple search on Youtube on the phrase “Mario Paint”, generate a lot of results. The music composer tool with it sound clips have lived on through many retro gamers who recreated and distributed the application. And there seem to be a lot of fans out there composing remixes of famous songs and tracks, using this tool.

Today, music games have exploded in popularity and reached a broader demographic than traditional games. Guitar Hero and Rock Band are the big giants, and the new big feature they talk about and fans have been asking for new tools to compose songs and make playable gametracks from existing tracks. This is nothing new. In this aspect Mario Paint was way ahead of its time. Maybe not that advanced or realistic as many people would want, but it sure sounds cute. It wonderful to see how creative and passionate people are with this 16 year old tool, both to create their own tracks (sometimes with musicvideos created through… Ta dah! Mario Paint!) and making covers on big hits. The good old days.

Caramelldansen on Mario Paint

Caramelldansen on Guitar Hero

In the expanding game industry, music game have been a new big contributor. Not just in terms of revenue, but capturing new audiences, who haven’t played games before. With games like Rock Band, Guitar Hero and Singstar, the convergence between music and games become even more clear. With new versions, add-ons and downloadable content (DLC) in the making, this segment will expand even more. Some inside the industry even believe the publisher and developers of those games will exploit music based games, ending up shooting themselves in the foot.

But people don’t seem to mind! They enjoy pretending to be rock stars in their home playing on plastic instruments. Which create a constant demand for more songs, artists and albums to be bought or downloaded. And artists with songs in the game feel the effect too. Music games have become a powerful marketing and sales channel for old, new, big and small bands. Boosting sales both through sales of the game (+ DLC) and outside the game medium, more artist and record labels discover the potential. Maybe the record label see to much potential…

One of the biggest worldwide record labels Warner Music Group released their Q3 numbers, showing and increase in digital revenue with 39%. No surprise! It seems they’ve become a bit to greedy however. Warner Music Chief Executive Edgar Bronfman had this to say:

“The amount being paid to the music industry, even though their games are entirely dependent on the content we own and control, is far too small”

- Edgar Bronfman – Reuters

The music industry have had problems for a long time, finding new ways to create revenue. And Edgar believe the licensing feeds for Warner Music songs are to low. He want to charge more for the right to use Warners music in the game, so the songs true value becomes clear. Value in music is a question of interpretation. Can you put a price on music value, when we all as individuals value differently depending on favorit genre and how much we dedicate ourself to our favorit music. Music value will not be determend by the record labels, the market (consumers) will set the overall value!

A interesting reaction have come from Wedbush Morgan analyst Michael Pachter, who question whether Bronfman actually understand the game medium:

“The other thing I find interesting is Mr. Bronfman’s distorted view of his leverage in this matter. Activision isn’t operating a music download service where consumers get to choose whatever they want; instead, Activision is selecting which songs will be available, since they require modification (conversion into a game file).

“Thus, Activision can select songs not published by [Warner Music], so Mr. Bronfman should rethink his negotiating leverage.”

- Michael Pachter, Edge-Online

Obviously Mr. Bronfman haven’t fully understand music games. He want just want more money, and probably not to increase the salary for the artist and bands. This statement is probably just a way for him to save and rise the stock value of Warner. I don’t think he actually cares about the artists, just trying to save his own skin.

Warner just provide the music, and that’s only one part of the whole game music infrastructure. Most of the work are being done by the game companies, who have the demanding job of synchronising the beats and the buttons combinations. And they also take care of the marketing and everything else. The record labels get marketing, new revenue streams and artist branding, for free! They only have to provide the music, which they would have to promote anyway.

An increase in revenue for every song provided by the record labels, will affect the whole chain. The game developers have to charge more for the games or don’t afford to include the amount of songs in every new version of the game as the previous one. The retail price will increase or buyers won’t get the same amount of content. And keeping the price to a minimum is very important. In a digital world were cost constantly decrease, it would hurt the music games appeal and brands if the price would go the other way. Consumers pay the price, and if Guitar Hero and Rock Band becomes to expensive, eventually people can’t afford them.

Also think about the fact that songs bought in those games are locked within the game it self! If they would release, say for instance the next Neaera album on Guitar Hero and I download the entire album, I can’t (today) upload the tracks to my iPod to take with me. And lets not forget that the majority of artists and bands represented in the music games owns by the bigger record labels. And many old bands presents as the selling points, band that already have made a ton of money!

It’s a bigger problem for the music industry than just music games. They (the big record labels!) desperately trying to find new revenue streams and sell the same music to us consumers over and over again in new ways. And as long as consumers buy their music over and over again they will continue. But eventually it will all turn around on the record labels, when people stand up and truly demand not to pay for already bought music one more time. And that day may not be so far away.

[Update]

Activision Blizzard’s CEO Robert Kotick have now answered to Mr. Bronfmans statement on the royalties for Warner music in games. At the same time as Music games have been reported to be one of the biggest key drivers this year for the overall increase for the game industry.

Swedish music export to Japan have a long and successful history. With artists like Pandora and Meja, Sweden concurred the Japanese market. Those artist and many more were active in mostly in the 90s. That was the age of CDs and album. Sure to say the Japanese audience have a thing for Swedish pop and cute girls.

And now a new Swedish song have won the hearts of the youths in Japan. But not through the old fashion way like in the 90s. Through new technology, remix community and the web an old Swedish song taken Japan by surprise. The song is Caramelldansen, originally made by Caramell was released in 2001. It was later remixed and speed-up called Speedycake Remix, which seems to appeal more to the Japanese youth. I don’t think the remixed track is available for retail in Sweden, it is in Japan.

Whats interesting is in which way it became a success. Some one have taken a piece of the remixed song and made a Anime Music Video, synchronised with the beat. Illustrating two girls doing some moves to the beats. Released and distributed on Youtube it have been watched (at the time of writing) about 1,622,739 times. Also, the concept have been cloned into countless video where different anime charaters makes the same move to the song. Its become a phenomenon spreading. Its even branched Japanese kids and youth recording themselves dancing the Caramell-dance to the beats.

A new Swedish music success, thanks to new technology! I sure liked the song before I heard of this. Welcome to the new world of the prosumers!

The big record labels in the UK, report a increase in revenure from new sources outside the traditional direct sale model. Licensing to movies, commercials, games and other mediums have increased and therefor the profit from those areas. Investments on mobile and online seems to work very well since revenue went up around 55%.

It finaly looks like the music industry starting to figure out how to work with the new medias for a sustainable digital business model. The future for popular music will probably transfer from depending totaly on sales to other areas such as licensing and touring. Not every artist or band is suited for stage performances, those acts simply have to find other means to be profitable. Feels good to finally see the old big machine finding alternative ways to distribute and market new music. Unfortunatly it will probably only involve already big acts, and not promote smaller acts in the same extent.

Figures from the UK shows (not unexpected) the increase in game sales and revenue from 2005 till 2007, while at the same time the music business loosing money, not ether unexpected. For many years now the discussion has been whether games have taken sales shares from the music industry. I would say yes! Its a never ending fight for our (the consumers) time and money. And I would probably suspect that, generally the value of music in peoples mind have decreased. This might be related to piracy and radio. But then again, every industry is affected by this, not explicit the music industry.

According to me, music is a very ambient medium, something you just can have in the background of our life, while games demand more of our attention. As the game industry steadily increase more actors want in, and other “loosing” medium want a piece of the cake. An example of a successful convergence is the Guitar Hero franchise. These games helped drive album sales for some of the bands which songs represented in the game. Still, some analyst believe Guitar Hero is at its peak. Yes that might be, depending on how the franchise is handled.

One problem with Guitar Hero, is that they seem to focus to much on old, already successful music. They sell the same old shit over and over again, the same bands which already sold millions of records and songs. It’s not really helping to drive the “new” music industry and acts. And big record companies see the success of Guitar Hero and Rock Band and problably view them as new possibilities to make more money. Yes read it right, not promote new music, help artist and bands to break, but to fill their fat, already rich fucking costume suit pockets with more money! And “they” are the ones highest up in the food chain. One of the big things I hate in business today (not only today but always), is the simple fact how the people highest in the hierarchy “must” earn the most, and when business goes bad, they usely won’t decrease their salaries. They won’t take one bullet for the team! Fucking bastards! … okey a side note here… anyway…

Yes, I believe games have eaten a piece of the music industry’s revenue. Still I think one reason could be the transition music is going through today. For the mass market CD is still the most available format, but many want music digitally. This is a period where we as consumer wait for the music industry to go all in on one format! Digitally or the old CD? Once the future format and platform really is determent and get the full focus and attention, I think people will be more willing to invest and buy music more frequently. Now it feels more like when the war for the DVD successor was raging. Bur still, with any medium they have their ups and downs. People have more choices nowadays and is very careful were to invest their money. And videogames is big today, many play them, AND they cost more. Many of my friends including myself, consider the CD price to high. If they would lower the price, we would by many many more albums.

People wont stop listen to music, people LOVE music! But I think the value in music, and what people are ready to pay for music is lower than the music industry wants. Maybe if the music industry start develop new business models and stop spending money on the wrong investments (hint: over expensive music videos), they can survive. They can if they want, and they have to according to me.

One of my alltime favorite game is the sequel to another of my top 5 games, Chrono Cross, sequel to Chrono Trigger. I remember the first time I played Chrono Trigger. It was the spring of 1996, I came home after school and had a bigpackage in the mail. Cause they never released the game in Europe I had bought it as trough a company that Imported games. I never really knew what to expect for the game, it was released by Squaresoft, the creaters of Secret of Mana and Final Fantasy 6 (3 at that time). I plugged in the game and began a journey that have a big place in my heart! I was home alone that afternoon, quiet in the house, just me and Chrono Trigger. A moment I will always remember.

When, years later they release a sequel, Chrono Cross. And naturally I bought it instantly the moment it was released (Imported of cause). And first I was a bit disappointed, I think mainly cause of the battle system, and the lack of connections to Chrono Trigger, so I stopped playing it after just a few hours. It wasn’t until my friend Douglas borrowed it and played it through that I gave it a second chance (He instsisted me to finish it, and thank god for that!). The moment I finished Chrono Cross it changed my life, my view on video games and view on life in general.

Its a pity not everyone can experience the feeling of Chrono Cross. The story, the characters and the whole life philosophy that it discuss. It may be hard for many people to understand or grasp how much a game can make you all emotional like that.

One huge factor in games are the music. And boy, does Chrono Trigger and Cross have great music or what!? I like to share my music and to introduce it to other people, and I do with some mixed reactions. But when I play the songs from those games (often remixes) people usualy get amazed. “Is this really from a game” is the usual reaction. The soundtrack isn’t just a reminder to me of the old good times, but I get all crazy inside. Thats even better is all the other fans out there that take those classical game music pieces and revive them through remixing them (sometimes even better than the originals). And Chrono Trigger and Cross music is 2 games that have the best remixes. OverClocked Remix is a great source to find most of the great remixes out there. One of the latest that really got me was a compilations of remixes called Thieves of Fate, check it out! See if your not touch to some of the wonderful tunes!

I don’t know if its just, but I can’t seem to get the story strait on the whole Pirate Bay story. In the last year I’ve heard so many versions on what happens. But now it seems like the duel is going down once and for all. Today the prosecution against the site begins in Swedish court, when a big group of international movie company, records labels and video game publisher are suing the site for enabling piracy of copyrighted material.

Last night on Swedish tv-channel TV4, there were a debate about the subject with representative’s from the record industry (Bert Carlsson, who doesn’t even have a computer) and a spokesperson from The Pirate Bay. And frankly I was really pissed at the low state of the discussion. They just nagged on about the usual stuff concerning piracy. The record labels still nagging about how piracy is the reason for the declining in record sales and the music industries profit. And Pirate Bay still claims they don’t see any moral problem wih their site and the BitTorrent technology. Yes the technology isn’t illegal, its what people use it for is.

Again I say it, I’m not for stealing and people who do honest work should get paid. But I simply can’t stop wondering who cares about us common people? The industries (videogame, movie and music) is only interested in making as huge profit as possible to then place these back in to new productions. And the Torrent-”industry” defend their right to continue to develop their technology and sites. Sort of a statment against the entertainment industry…. I don’t know.

But the reality is that lots of people download copyright material for free, rather then buying it. And this have been going on for years! I remember in the late 90s then the Mp3 format came, it was a revolution, and it took the music industry years to realise the potential. Some of my old friends asked me last year when I would go work in the music industry, apparently it was written in the stars according to them. My answer still is probably never and if so not until the music industry get their shit together. They still hang on to the CD format and want people to buy their music over and over again! And they release many versions and some times add new tracks so people will buy the CD again! Again… many people download music for free, and what does that tell you? That people don’t like music? People love music and with the technology of the modern day (read Internet), they have new was to discover new  and more music than before. And they want the music to be theirs and to be able to do what they want with it. But the record labels haven’t been keeping up with their most important client, their customer! Their just interested in getting the best artist who will create best music to earn the record labels the most amount of profit. Have they ever asked us consumer how we want our music? Most of the people downloading music isn’t bad guys or criminals, but average people! That should be an indication to the music industry to try to change it self instead of just holding on to the past and the old business model that obviously doesn’t work in today society.

And if Pirate Bay should be convicted or even shut down, many other stand waiting to take over. The new distribution of media and files can’t be stopped…  so try to see the possibility’s and use it right! So many attempts have been made from the entertainment industry, some managed to make it work, many many failed!!! In music one could say that the first real “success” was Apples iTunes, and yet again the record labels and movie industry isn’t happy and just want more money. NBC Univeral wanted more, Steve Jobs said that the people don’t want to pay more and NBC Universal couldn’t accept that. So they went to Amazon, (but now it seems they going back to Apple after all). The failure of locked CDs and DRM protected MP3 took the music industry years to understand wouldn’t work. Again… maybe just try to listen to what people want and don’t treat them like criminals or idiots. They are the most important thing for corporations, they decided the future of entertainment industry’s. I really think that the music industry’s executives should get down from their high horses and face reality. They have lost power, so live with it.