Category Archives: venture community

Tallinn – the Baltic Tech Hub

Last week, I had the great pleasure of giving a keynote address in Tallinn, Estonia during the Creative Hotspots conference. The event was organised by the British Council.  You can catch the video of my presentation here and the others including the fabulous Jenny Tooth of the Angel Capital Group, the dynamic Elizabeth Varley from Shoreditch’s Tech Hub.  a visionary from Skype and a founder of Angry Birds creators Rovio.  The event, organised by the Brits brought together, Finns, Swedes, Russian, Germans, Poles, Brits and Estonians – who would have thought it?

Tallinn is an extraordinary town, picturesque with its medieval centre and still lots of snow on the ground, but also boasts a bit of a tech hub including a NATO cyber warfare research unit – borne out of its recent history and mentioned in the Economist last week.

On the Friday morning, the President of Estonia came along to open Tallinn Music Week  (TMW) and talked with great passion in Estonian about Alvo Part – the greatest Estonian composer. But then talked at great length about how he had discovered Arcade Fire a few years ago and thought for the longest time that he was alone in all Estonia to know about this band. Until he read a review by Helen Sildna – the amazingly dynamic woman who organises TMW. He sent her an email telling her this,  but she thought it was a fake and ignored it. There’s a moral in there some where.

Maybe one day, every country will have a President who loves the music of some hip alternative act from a foreign country and then will come and open an international music event, and talk about them,  in a casual, low key kind of way.

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Rights Registry

Last week, in the middle of the TED conference, I had the opportunity to talk to the Westminster eForum about file-sharing, remedies and how to move beyond the UK’s Digital Economy Act. As I’ve worked on this problem and explored what others have proposed as remedies, I am more and more convinced that Rights Registries are part of the solution we need to move to. In a digital networked world where our content moves around in mysterious ways, we need a digital networked solution to mirror and reflect that activity in order to create a new means of managing digital rights in a fluid marketplace.

But this cannot be a wholly owned solution, along the lines proposed by Google.  Instead we need authoritative metadata databases that are open to search and open to updates, that are regulated by governments, moderated by authorised boards and not-for-profit. This kind of structure starts to offer significant benefits over our current proprietary closed systems which are hemorrhaging rights owners revenues.  I have written a white paper based on my talk last week on the subject,  which you can download from here: The Rights Registry 1.5

I’m very interested to hear other people’s thoughts about how we move forward the development of real practical solutions for digital media on the internet,  based on going with the flow of consumer behaviour and encouraging all kinds of  usage not punishing consumers for what the technology allows them to do.

Quotes from TED Global 2009 – Oxford, England

spreading ideas worth spreading

quotes from speakers at TED Global

“Globalisation will lead to a new Renaissance, a huge opportunity for innovation. But there are also two huge problems. Firstly, those who are left out and excluded. Secondly, managing growing complexity which leads to systemic shock (eg current recession, swine-fever, etc).” Ian Goldin

“Afghanstar, Poet of the Millions, the unintended consequences of Britain’s got Talent, in Asia and the Middle East, Reality TV is driving reality.” Cynthia Schneider

“Sound can be like a bowl of spaghetti,  sometimes you just have to eat it and see what happens.” Julian Treasure

“Regret factors associated with cyber warfare threat could be equivalent to weapons of mass destruction.” Guy-Philippe Goldstein quoting US military

“It is better to be sometimes cheated, than not to trust.” Samuel Johnson quoted by Susan Kish

“Today, the information monopoly is broken, so brands need to find a place for themselves in this swirling mimetic environment.” Andy Hobsbawn

“The pain of psychological death + the pleasure of beating yourself = hunger in paradise.” Rasmus Ankersen

“The opposite of snobbery is your mother.” Alain de Bothon

“The trouble with our meritocracy is that in the 21st Century people own their own success, but they also own their own failure.” Alain de Bothon

“Obsession made my life worse and my work better.” artist quoted by Stefan Sagmeister

“Super massive black holes represent the breakdown of our understanding of the physical universe.” Andrea Ghez

“I found a dead fly and plucked a hair off its head to make a paint brush. I would never do that to a live insect.” William Wigan, micro sculptor

“Mirrors would do well to reflect a little longer before sending back images.” James Geary quoting Jean Cocteau

“In Mexico, the Indians played music to stay in touch with their ancestors, but in Africa they play to stay as far from the grave as possible.” Mark Johnson

“The internet can be characterised as random acts of kindness by geeky strangers.” Jonathan Zittrain

“Work places and institutions are preventing our efforts to use technology to create greater intimacy between ourselves.” Stefana Broadbent

“What’s wrong with placebo’s? They have very few side effects and most of those are purely imaginary.” Rory Sutherland

“As an adman, I think of saving as consumerism needlessly postponed.” Rory Sutherland

“Bio-diversity is collapsing, mass extinction is taking place in our fiels without anyone noticing. You don’t look a corn seed in the eye, as you might a panda bear, but we still need seedbanks.” Cory Fowler

“Leaving something unfinished makes it incomplete and gives one the feeling that there is room for growth.” 14th Century Japanese essay on idleness quoted by Marcus Du Santoy

“Some stars have swallowed their planets.” Garik Israelian

“People could stroll and get their learn on. People could come to this sidewalk garden and chillax.” Candy Chang

“What do scientists do if paradigms fail? They carry on as nothing had happened, saying yes I know it’s wrong, but if it were right…?” Elaine Morgan

“African students study under streetlights at the aiport because they have no electricity at home.” Paul Romer

“3% of arable land is taken up by the world’s current cities inhabited by 3bn people.” Paul Romer

“80% of traded food is controlled by 5 multinational companies.” Carolyn Steel

“40 cities represent 90% of the world’s wealth.” Parag Khanna

“Dry areas cover over 1/3rd of the earth’s surface.” Magnus Larsson

“In India, 62% of all injections given are unsafe.” Mark Koska

“90% of the feature requests for features in Word – are already in Word.” Aza Raskin

“Organised crime represents 15% of global GDP.” Misha Glenny

“40bn batteries are disposed of every year.” Eric Giler

“Only 3% of GDP is invested in technology R&D annually” Geoff Mulgan

“Life is a series of things you’re not quite ready for.” Rob Hopkins

“Design is a priesthood wearing black polo neck sweaters and designer glasses. Design is too important to be left to designers.” Tim Brown

“I wanted to know what had turned my best friend into a terrorist and why she had not tried to recruit me.” Lorreta Napoleoni

“The music makes my therapy, I have no advisor, no one to talk to, music helps my imagination.” Emmanuel Jal

“To change the world, using no resources, use music.” Ross Lovegrove

“Tritium is bred from lithium, using the neutron.” Steve Cowley

“In ballooning we understand that winds, at different altitudes,  blow in different directions. So in life, if we want to change direction, we need to reach different levels and to do this we have to throw things overboard, we have to get rid of a lot of ballast, certainties, dogmas, paradigms.” Bertrand Piccard

“The empires of the future are the empires of the mind.” Winston Churchill quoted by Richard Bernstein

“Always take ‘no’ as a question not an answer.” aphorism quoted by Geoff Mulgan

“We are here on earth to help others, what on earth the other are here for I have no idea.” John Lloyd quoting W H Auden

“Ice is the canary in the global coal mine.” James Balog

“If we refuse a single story and know that there are many stories, then we regain a kind of paradise.” Chimamanda Ngozi Adichie

“Roman military expeditions were just one long shopping spree really.” Carolyn Steel

“Architecture is retrofitting the world to our needs.” Bjarke Ingels

“There is a severe mismatch between what science knows and what business does.” Daniel Pink

“The musical work is in your head, conductors are building the roller coaster with sound as the orchestra plays.” Itay Talgam

“We are doing nothing, because we want to see what is the inner point of all the difference.”  Brother Paulus Terwitte

The Digital Britain Debate – public vs private perspectives

The Digital Britain debate is a curiously British affair. If we were having this discussion in the US, we would be talking about Net Neutrality and the implications of maintaining a broadband level playing-field with access for all and regulation for all while reconciling the needs of businesses to run services and users to retain privacy and civil liberties.

Here in the UK, the assertion of the need for “universal access” is one of the key needs to achieve what Carter identifies as the best possible outcome from Digital Britain which is Digital Governance and the digital delivery of public services. And this laudable aim, then leads us quickly into needing to discuss the future of public sector broadcasting in the shape of Channel 4 – and strangely leaving the BBC quietly out of the scenario for change.

Lord Carter said today,  speaking publicly for the first time since the publication of the report, that he hopes the effect of Digital Britain is to help set an agenda that will re-boot the economy both through public sector investments and private stimulus so that we  could replace some of what we became over-dependent on in the Financial Services sector with what we might become grateful for in the digitally revitalised creative industries. There is a tension here between the public and private agendas and it is similar but crucially different from a tension in the US’s net neutrality debate.

While there is considerable debate on the future of Channel 4 and its public service remit, there is precious little discussion about how to stimulate new business models, encourage risk taking and commercial experimentation. The acknowledgment that some of the content industries might want some new protections online is almost incidental. The Rights Agency, Digital Britain’s proposed solution to reconciling the differences between the music industry and the internet service providers,  would effectively regulate a process which is already in place today, enabling whistle-blowing on alleged large-scale online copyright-infringers. It would enable the ISPs to maintain their safe-harbour protection and lack of liability for what they carry over their networks by throwing a bone to the content owners to allow them to continue to criminalise their customers – albeit only the very naughty ones.

One of the arguments at the heart of the Net Neutrality debate is about consumer desire to maintain a free and open internet which enables all users and all businesses to communicate, transact and share content without regulation as against an interest from corporations and ISPs to monitor and “shape” traffic and content and to offer various levels of quality of services to those that are prepared to pay for more bandwidth and accept more regulation. ISPs are stretched between a universal access model where they take no liability for what goes across their network and they simply create margin through scale (ie compete with each other for numbers of users and pricing), and more of an old-fashioned walled garden approach where their networks are restricted and the content that moves around them is more tightly controlled and where they can charge a premium for premium content – a kind of HBO online. It’s an unenviable model right now as consumer prices drop and infrastructure maintenance build-out costs increase.  It would suggest that the need for content on the networks is going to be greater than ever. Yet, Virgin Media, for example have just failed to get an innovative new music service off the ground because they couldn’t find a solution to the demands made by the record labels who are all too desperate to retain their old ways of making money.  It’s hard to see what the incentives are in the Digital Britain report to resolve these kinds of conflicts.

In the UK, the debate is too skewed towards public service issues and not sufficiently engaged in helping meet business interests and formulating viable forms of commercial stimulus.  Instead of trying to figure out the balance between public interest, civil liberties and personal privacy as against commercial interest in innovation and in delivering new more profitable services, we are focussing on how best to spend the taxpayers’ pounds on public service provision and the surrounding dependency ecology of small production companies and programme-makers which Channel 4 was originally designed to stimulate.  As a friend who is a veteran media buyer whispered to me this morning, as Lord Carter rose to speak “Nobody in the advertising industry gives a @#$%! about Channel 4,  they want to know what Carter is going to do to help create real new sustainable businesses”.

Spotting the gaps in the new music industry landscape

At the beginning of every year, as the music industry gets over its winter hangover by inducing another one at the Midem conference, the pieces of the puzzle that used to be called the industry fall into place again. The process of getting together and discussing the state of the nation is ever more needed when everyone is embarked on rebuilding the architecture of an entire industry. Taking stock and gaining a fuller perspective are more and more valuable when the ground is constantly shifting beneath our feet.

A few of course are also tasked with the additional burden of trying to maintain their living from the dwindling pieces of the old industry. The majors have a really difficult task in doing that and,  as they struggle to manage their transition from one model to another, they do everything they can to try to slow the whole process down and prevent other players coming in and stealing the ground from under their feet. It’s a sad fact that after ten years of creeping transition and increasing economic pain, the process hasn’t changed that much. The majors are still making it difficult for others to do business with them and try to extract as much cash from technologists and venture capitalists as they can, whilst paying out to their contracted artists as little as possible.

But there are a lot of reasons to be optimistic about the new digital media business that is starting to grow up between the cracking paving stones of the old analogue one. The number of startups and vigorous new companies trying out new models is larger than ever. Despite the recession raging around us, many of these companies have got sufficient funding to struggle their way through the next twelve months and come out the stronger on the other side. For those that don’t, there are still plenty of people looking closely at this industry, searching for bargains and seeing the potential becoming clearer daily.

So what does the new landscape look like and where are the gaps?

Increasingly, it really does look as if the distribution piece of the puzzle is sorted out pretty well. There are the major retailers of the catalogue for download or stream or subscription (iTunes, Amazon, Rhapsody, 7Digital, Nokia, all playing in the game – as well as the advertising funded crew We7, Spiral Frog is apparently still going and maybe even QTrax ). There are the new digital platform providers who are trying to offer artists clean and simple means of going direct to consumers (Myspace, Topspin, Mubito, Musicglue, Audiolife, bandcamp, etc). And there are the consumer focussed folk who are either trying to aggregate content to make the fan’s life easier (Facebook, iLike, Shazam, etc)  or provide discovery and recommendation services – either by human intervention (the playlist) (Mystrands) or by algorythmic cluster analysis (Imeem, Muxtape, Songkick for gigs, etc).  There are the radio/tv type services that really just happily stream stuff at us and try to make that a bit more of an interactive service (Pandora – US only, Last FM, Spotify, and of course YouTube, Hulu – US only, Muzu, for video,  etc).

Now we’re just starting to see a few companies focussed on the data that’s thrown off by all of this work (Hitwise, Bandmetrics, etc).  I’ve talked before about data because I see it as the component with the greatest potential in all of this. If there’s one thing the web throws off it’s tons of data. In this area one big question is whether the killer app is an aggregator service that scrapes and mines and spiders and tries to track everything that moves – and then license that back to everyone. That’s the Nielsen model. Or is it customised, commissionable tracking service you can hire for your artists and their competitors? Or is it a built in set of metrics that some of these platforms start to offer to help provide and sharpen the feedback loop of marketing and consumption?

So I think there are two key gaps – one is really good web marketing and promotional tools. Where are the companies that are creating simple tools for artists to create viral word of mouth affects across Myspace or Facebook or stickiness for official artists’ websites?  A new data-driven one might be Buzzgain – but it’s early days to tell what they’re doing and they look like quite an expensive service upfront. Seems like the digital platform providers need to develop more tools like this and incorporate them in their offerings to artists – and I’m not convinced that they’re doing that too well yet.

The other gap is for the fully comprehensive business that brings together the artist services side with the consumer offering and makes use of all the data that it is gathered from both sides of the equation to sharpen up their effectiveness in bringing fan and artist together. The bigger players like MySpace Music ought to be well positioned to do this, but somehow they’re not there yet. Newcomers like Topspin or Imeem could be consolidated together to create that opportunity and then build out the switch in the middle to make it really effective.

So expect to see this coming during the next few months – and somewhere to confuse us all on top of this is the increasing need to find ways of using the cash flow of brands to stimulate the content flow of bands. That’s what we used to call an advertising revenue model but which today can’t be called that – because we know that’s going away. So here is the really interesting key to all of this. The biggest advertising driver on the web is Google and their biggest revenue mechanism is serving TEXT classifieds in our faces. Wow! With all the creative, design and styling skills that have made advertising so interesting over the last few years – in the beginning of the 21st centry – it’s back to TEXT and all the intelligence is in the back-end contextualisation analytics. Truly we are still in the foothills. There really is some very cool stuff yet to come!

Hands On

I did not intend that this blog should only be about EMI. I do think about other things and I promise I will write about them. Love, death and the future of the planet spring to mind.

Meanwhile though, a few current thoughts about where optimism has gone. The takeover of EMI by Terra Firma caused me some optimism last year. Their pronouncements about their strategic direction, their desire to completely rebuild the model and to adopt a clearly digital approach, connect artists directly with fans, work closely with social networks, expand participation into other areas of musical activity, all seem to be essential elements in the creation of a new paradigm (sorry about that word – but it is sometimes justifiable) for an entire industry. Who knows, they might even begin to consider the clear need for blanket licensing of ISPs in order to monetise all that P2P – certainly telling the BPI and RIAA to stop suing the customers on their behalf seemed like positive moves.

And, although it’s painful, the need to let a lot of people go from the organisation seems almost inevitable. It’s very hard to turn a super-tanker when it’s fully laden. It may even be momentarily justifiable to scare a few artists off to lighten the load. What’s being done at EMI is only what is required at each of the major labels if they are to be transformed and survive – and although they are hated in their current form – and are never likely to be perceived as benign – major industries probably need some very big, major players as well as a healthy indie crowd too.

But things don’t seem to be turning out so well at NEW EMI and it’s interesting to observe.

Rumours circulating at Midem last week suggested that the new management team may have started to discover some royalty and accounting issues in the precious publishing side of the business which may lead to assets being written down by as much as 30%. A certain naivety in due dilligence about the significance of royalty structures or a certain obscurity to contracts that are only now becoming more clear? No doubt time will tell – my lips are sealed.

More apparent however, is the inevitable culture clash that’s taking place between the private equity, pure rationality approach and the music business, the people are the business approach. This does not have to be unproductive. But unfortunately it seems to be damagingly the case with Terra Firma and EMI currently.

You can probably discount the defection of a few major artists – Radiohead I’ve already talked about – The Rolling Stones never sell any records and haven’t done for years. Coldplay and Robbie Williams are rather more significant – although many say the latter is nearing the end – I suspect he is a world-class entertainer who will continue to carry a major audience for a very long time to come – and Coldplay continue to straddle the line between mainstream accessiblity and some vestigial, credibility among the more musically literate. If EMI can’t retain acts of that stature not only is it damaging to their bottom line and revenue projections, but it sends a massive message to the rest of the artist community.

The tone and stance of Terra Firma to the artists of EMI has not been well received. At a meeting of some 200 managers, the atmosphere was allegedly chilly to say the least. Critical comments by Tim Clark (Williams’ manager) in the FT have led to threats of litigation from Hands. According to Clark, “he’s gone rock’n’roll – he’s got blacked out limo’s, body guards, the lot”. There is a history of top level execs in a similar position going “native” in some way and making themselves embarrassing and absurd in the process. It doesn’t usually happen this fast though!

Meanwhile, an idea of centralised marketing seems to be emerging from the company which is also worrying. It seems to display a lack of understanding of the value of cultural positioning and the uniqueness of individual artist’s fanbases that require to be addressed in different ways – not with a single voice emerging from a single marketing team.

The degree to which marketing music is an inexact art is hard to underestimate. Of course some would argue that it’s therefore some kind of law of probability that if you throw enough of it at the wall then some of it will stick. But in this day of individuated artists and differentiated fans, the law of the long tail says “talk to me with an individual voice and treat me as an individual”. Commercially, you might say that to all the girls but culturally you’ve got to be smart and sensitive to artists’ needs and what fans are in to, to hope to get this right. The grass roots is where it’s at now – online the great levelling is happening – and some very finely honed tools are needed to reap what you sow here, dedicated applications which are currently not in the hands of the majors at all.

At the heart of this is a question which is almost about the cultural credibility of the organisation. Now, as we know, this has little or nothing to do with commercial success – on the face of it. There is a big area of music that doesn’t worry about cultural credibility at all – the reality TV, X Factor swathe of MOR pop does reach big audiences. BMG in particular has been pretty successful in this area. If that’s what Mr Hands is thinking of in the transformation of EMI, then perhaps he is doing the right thing.

It’s hard to read though. Certainly the legacy of catalogue (which presumably is what he invested in) is not about that area of music at all. EMI, Virgin, Parlophone, Capitol, Blue Note – these are labels who grew up with particular flavours, tastes, and acquired significance. Although they may have dabbled in the ephemeral pop tastes of the moment, they also had a sense of quality, a sense of responsibility to their artists to nurture their careers – but also to steer them – sometimes meaningfully sometimes misguidedly in some musical direction. Lots of artists famously complain about the labels’ A&R folk not understanding them and not trusting their directions, but as many great records made it out into the world with the help of the label as despite them.

It’s not clear where this kind of sensibility is on Mr Hands’ agenda. But, no matter which part of the market you target – and as a major – presumably these days you’re targeting all of it – having some credibility among the artist community and their quixotic managers is a primary ingredient – that seems to be missing from the new EMI. It’s nowhere near a lost cause yet – but the question that needs asking now is how will Electro-Magnetic Industries – get their magnetism back?

The Slow Spark of Low Heeled Boys – recorded music industry slowly implodes

Radiohead’s recent price promotion set lots of people talking about the new model but, behind it, really becoming visible are the sharp edges of the old recorded music industry factions – sizing  each other up for the power-play. Major bands and their management companies (like Radiohead’s Courtyard) are exploring on a daily basis the opportunity that their established bands’ brands have to take control of the business model in an unprecedented fashion. For Radiohead, the In Rainbows promotion was just that – a great vehicle for publicity for their new album. The web has played this role very well for over ten years now and there are plenty of great little online promotions businesses set up to help artists achieve exactly the kind of mass outcry and coverage that Radiohead achieved. But in fact while everyone was busy talking about how much money they may or may not have made from this, the management company and the band were undoubtedly exploring their longer term position and what kinds of partnerships are going to make the most sense to them.

With which of the warring factions hoping to become the Man in the Industry will they plight their troth – or will they themselves seek, in some metrosexual kind of way of course, the Man status?

Will they go the Live route as Madonna has done with Live Nation and throw their lot in with that side of the business or will they find a finance house like Ingenious and have them fund future recording/performance/A&R/merchandising/creative fantasy activities?

This is all part of the breakdown of the business into increasingly acrimonious factions – each of whom hopes and needs to gain more control. On the one hand the majors are trying to find ways of endearing themselves to artists who they have historically had a power-hold over. And increasingly, they’re wondering how to create a relationship with the fans themselves – even while they task their “trade associations” with suing the same consumers to teach them a lesson the majors themselves are finding it hard to learn.

On the other hand, collecting societies and agencies – the encrusted old institutions of the industry are watching the developing debate over the need to license (and thereby monetise) the massive amount of p2p filesharing activities that continue on ISPs and other providers’ data networks. The notion is pretty widely held now amongst the brains in the industry (and the others too) that a new business model will be born out of full blown and automatic licensing of access to new content (and catalogue) across digital networks. Millions of transactions daily are not returning a penny to the artists or the labels or the publishers who own the rights – and the only people profiting are the network operators. Clearly there is a deal to be done – and once that happens – it’s the current collecting societies – the BMIs, ASCAPs, MCPS/PRS’s and PPL’s of this world who believe that they will be the new gatekeepers, the controllers of the switch at the heart of the industry. Unless of course someone new enters the game to do that whole thing more efficiently and economically.

On top of the flat rate revenues that may accrue from such a licensing scenario, new business opportunities are emerging and it is here that the start-ups, the new technology companies are now looking as much as to the old chestnuts of DRM and Digital distribution.

In fact, the irony is that while the warring factions shoulder-barge each other around the rights issues and control of digital distribution, the consumer reality has moved on. The flat fee will come to be in some shape or form and the place where the real focus should be is now on how to make money when distribution has been commoditised. Where are the real value adds that consumers will pay for and which yield the kind of returns the recording companies are used to?

The time for experimentation and shrewd bet placing is now upon us again. Only trouble is – that volatile community of investors, less risk-averse than the recording companies for so long – the Venture Capital community – are now looking at the huge levels of decline and flux in the music industry and preferring to place their bets elsewhere.

So the few folk who have made some very big bets, have got some really interesting opportunities to re-architect the business. But trying to build the new while hanging on to the still, significant revenues from the old model is a tough call on anyone’s business acumen.

Watch this space – the implosion is in slow motion – and if you can bear to look that closely you can see each of the individual sparks flying – quite spectacular!