Last week, I did an email interview with the Innovation Lab in Denmark. The interview is reproduced below, by permission, and also available at http://www.innovationlab.dk/sw30670.asp
We Are Not Evil
In 2003, John Buckman had enough. He had enough of the increasing music-piracy, he felt was destroying the opportunity for his favourite musicians to survive, and he had enough of the way large music-corporations and legislations were controlling the majority of the music business. A business that, in his own words, is going through a “crazy exploratory phase”. A business that a large percentage of the world’s population has an opinion about. He then decided to realize and materialize his idea on how musicians and the music fans should be treated. He launced Magnatune – a music company which he believes mirrors the conditions of a modern-day world of music.
The pessimist, the anarchist and the optimist
It seems that every day, the music business is facing a new reality. Things are changing rapidly, and every day one can read mind blowing stories about the current activities taking place. A fact that tells you that very little is stable – which again can be a very good thing, if the goal is to innovate and develop new ways of doing business.
-How would you describe the current state of the music industry – and what are your comments on the current changes and the accelerating development trends?
The old music industry is in crisis. What worked for so long is failing rapidly, and there isn’t enough flexibility in what exists today to try to find things that might replace the old ways. There’s also the very real possibility that the music industry will simply be smaller, and that people will simply spend less on music than they did in the past.
Today we see three trends, all colliding:
1) Increasing piracy, now responsible for approximately for 30% of all Internet bandwidth usage
2) A move toward near-perfect rights enforcement, through a combination of operating-system enforced DRM, lawsuits and raids, and government laws.
3) A massive increase in open music (and other open media) inspired by the success of open source software.
-There seems to be a lot of innovative initiatives in the pipeline – often based on quite unexpected partnerships. Where do you see music going?
“We are in a crazy exploratory phase, and I can’t say at this point who will win.
A pessimist might say that the major labels will continue to merge, and continue to control 90% of music sales, and government will help them both enforce their cultural monopoly status, and force the populace to use media the way they say.
An anarchist might say that what governments and labels do is irrelevant, because piracy (by which I mean “unlawful use” and not any moral judgement) is huge and unstoppable. By some measures already 95% of the music consumed by young people is “unlawfully obtained”
An optimist might see a radical transition about to take place, where distribution channels are freed up, people listen to a much greater variety of music, and individual musicians have a chance of getting their music heard and making a living at it.
I like to be an optimist, so I’m doing what I can to make this scenario take place”.
- One often hears that we are facing a potential super-expansion of the business as loads of new players come about. What is your view on that?
“Everyone I know is listening to more music now than ever before. Digitization allows a kind of “long tail” of your own music collection. You’re no longer limited by the size of your record shelves: you can store 3,000 Cds on a tiny iPod, 75,000 albums on a 750GB hard drive. The music is easier to manage, can be listened to in more environments and with more convenience, and there are more and easier ways for the music to be paid for. So, these signs point to a potential huge expansion for the role of music in people’s lives, and a greater diversity of musical culture.
That is, if the major labels and government don’t panic and stop this from occurring, which will either result in a musical police state, or the no-revenue-scenario of widespread piracy”.
We Are Not Evil?
Can you tell me a bit about why and how you started Magnatune. It was triggered by personal experiences, right?
“My wife was signed to a record label, she does electronic music (Intelligent Dance Music) and that experience made us realize that the CD business is doomed, and someone needs to be find a business model that might help interesting, non-mainstream music survive”.
-How did the slogan, “We are not evil” come about?
“If people are to be convinced to pay for music, and not get it from P2P networks, you can either use a carrot or a stick approach.
The stick approach is to beat the users over the head and hope that they do what you say out of fear. That’s the RIAA and major label approach, and not only is it not working, but in the end your audience hates you, and that’s not good for business.
The carrot approach means providing a better alternative to P2P. I think people want to be ethical, they want the musicians whose music they love, to be paid for the art, so they can continue making their music. People want to be “ethical consumers” and help change the world for the better with their purchasing decisions.
“We are not evil” means we promise to behave ethically in everything we do, both to consumers and to musicians and with other companies we work with. For music fans, it means being able to listen to all Magnatune music for free, as mp3 streams, before choosing to buy. It means no DRM. It means MP3s and perfect-quality WAV files. It means “how much do you want to pay?” so you can decide what the right price is for an album. And it means a real commitment to open licensing, via the Creative Commons.
For artists, “we are not evil” means that artists keep the rights to their music, can see all our accounting books and know they’re getting their fair cut, and they get 50% of all the money we collect”.
The Good People
On Magnatune’s website John Buckman is also appealing to the before mentioned ethical consumers. Magnatune gives the buyers a choice. They are given the choice to either pay a suggested price or to add a little more in support of the artist. In an interview on Magnatune’s website, John also says that “people are willing to steal from the companies but not from the artists”. And this is verified by the fact that the average price, the buyers pay, is way higher that the actual suggested prices.
“People who click the “buy” button have just indicated that they’re an honest person who wants to pay you for the music. They’re not a pirate; they’re the good people. So why not reciprocate that trust and let them pick the price? If they want to cheat, they’re not even going to bother with Magnatune, they’ll just go to Bittorrent. And that trust in the buyer pays off: many artists see average sale prices as high as $10, and the average is around $8.40, even though people are not getting more from paying more than $5, other than the knowledge that they did the right thing”, says John Bukcman.
-What is your view on fixed pricing versus flexible pricing?
“Another reason Magnatune does “what do you want to pay?” is that a student has less money than an executive. They are at different points in their life. Magnatune should be able to accommodate the student, who can only just barely afford $5 for that album, as well as the executive who is thrilled to have rediscovered their love for a music genre wants to pay $12. By the way, 20% of buyers pay $12 or more: it’s very common. And about 15% of users pay $5 or $6”.
-What do you think about the democratization of the means of production? How does it affect the business and the relationships between a) musicians and the industry and b) the musicians and the customers, when studio equipment is becoming really cheap and advanced software today replaces a lot of studio gear?
“Any musician can spend $3000 and buy a pro-quality digital recording studio. That means the musician can spend their time, really work on the songs and not rush an album out. Overall, I think the quality of albums goes up when musicians can record at home. I know that for Magnatune, we will allow up to two not-as-good-as-the-rest songs but that’s the limit, the rest of the album has to be consistently amazingly good. In the past, if you had one great song, that was enough to get an album released. And of course, my favorite albums on Magnatune are those where every track, without exception, is mind-blowing, and we manage that every once in a while”.
“Piracy-everywhere-no-money-for-musicians” or “major labels rule the world”?
-Can you tell us a bit about your concept of Open Music and why you let your artists share their digitally coded music?
“The worst thing for a musician is not piracy, but obscurity.
In today’s world, you can choose total control, no sharing, and no-one will ever hear your music. Or, you can open up your rights, allow non-commercial use, remixing, sharing and downloading, and through those techniques build your fanbase and eventually find a way to make some money from that.
Since music fans have the option of P2P, which is honestly a very easy and friendly experience, musicians need to try harder to interest people in their music. That, to me, means an open music approach, where a “some rights reserved” license is applied to the music, and fans can make more (lawful) use of it.
Also, Linux proved that open source was an effective idea against the Microsoft Goliath. Why not the same approach in music? Can open music slay the Major Label monster? I hope so”.
-Do you think there is an upper limit for how big and influential Magnatune and similar types of businesses can be – from a current point of view?
"Sure, the biggest we can be is to have a few dozen extremely successful genre based labels within Magnatune, so that fans of Baroque Classical, Death Metal, electro-pop and World Fusion know us for the quality of our musicians. That would be super, and a significant contribution to musical diversity, and I would be extremely happy if that happened”.
- What do you think will be the biggest challenge for musicians and companies the years to come?
“Offering an alternative to the “piracy-everywhere-no-money-for-musicians” or “major labels rule the world” scenario. Both those would have terrible consequences, and I for one, vote for Open Music”.
- And what do you think will turn into being the biggest opportunity for them as well?
“New uses of music that people haven’t thought are important. For example, Youtube has shown us that many, many people like making videos and sharing them. Could the same thing be true with music? I work a lot with the Creative Commons remix web site “CCMixter.org” and think that fans listening and then reworking the music they love, could be one of the future ways people interact with music. It’s not that different from the phenomena of mix tapes: people want to be in control, and they’ve got their own ideas of what they want to do with their music”.
Kenneth Madsen, Innovation Lab 2007
“We applaud Grooveshark’s approach of making the largest
possible catalog of music available while compensating artists and the members
of their community,” said John Buckman, Magnatune founder and CEO. “It’s clear to us the music industry needs to change, and that’s why we founded Magnatune, and we’re excited to see a unique
distribution channel like Grooveshark to complement our efforts.”