Join Myself, Media and Tech Executives at Pivot Con 2015!

I’m excited to be hosting the upcoming Pivot Con 2015 at the Dream Hotel in New York City. I’ll be accompanied by executives and staff from the industries leading media companies to discuss the future of tech and media.

The pace of business transformation accelerates year over year as new
technologies emerge and best practices evolve. Pivot exists to create a
community of leaders from innovative brands and companies, and to
provide this community with a roadmap to navigate the increasingly
complex modern business landscape. From product development, to customer
experience, to internal operations Pivot provides the insights and
connections you need to remain agile and impactful in a Social/Digital
world.

The one-day conference will combine dramatic keynote
presentations with interactive roundtable conversations to leave you
inspired and ready to take action.

Join us at the Dream Hotel in New York, NY on October 29th for Pivot Con!

Pandora is Not the Enemy

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This week Pharrell Williams sent the music industry into a frenzy by announcing that he only made $3,000 from 43 million streams of his massive hit song “Happy”. This made waves throughout the music industry as many people point out what is an apparent imbalance in the market.

However this isn’t a problem created by the streaming services. It was a problem with the way music was priced from the dawn of the digital era. The record labels lost this war a long time ago. Unfortunately a lot of people are just now figuring out what was lost. To point the finger at music sharing services like Spotify, Pandora, Beats and others is to misidentify the problem and the blame.

There are two main reasons that the streaming services are catching unfair flack for this:

The Economics of A Music Streaming Service

The first problem is the fact that streaming music is a tough business to be in.

The fees to join these streaming services are abysmally low – free for the majority of users and only $54.98 for a one year paid subscription on Pandora that allows you to stream whatever you want. The number of paying users is really small and the usage by free users is paid for by ads that they listen to.

We know Pandora makes money off of its free users but how much? We can start to guess if we apply the Pareto Principal which states the vital few pay for the many. In business this is known as the 80/20 rule, 20% of paying customers pay for the other 80% of non-paying customers. This works on the web because of freemium business models where web services monetize the two types of users differently. 

In this case Pandora sells its audience of millions of non-paying users to advertisers. The paid users offer $54.98 per year.  Pandora only has around 3.3 million paying users which at $54.98 add up to around $181.4M in revenue. Of course, not all users pay consistently, or for a full year, but lets agree to keep it simple for the sake of projecting.

We don’t know how much Pandora pays for ads but we do know their revenue in 2013 was $427M. Since we know paying customer revenue, we can subtract that from the total revenue and assume that Pandora pulls in $246M from its advertising revenues. We also know from press statements that around 61% of Pandora’s revenue goes to paying performance royalties. Assuming that number held in subsequent years, it would mean $150M is left to be paid out to the recording artists.

Pandora reportedly had 80,000 different recording artists in its catalogue at the time of its IPO. While, its probably grown considerably, I’m not sure those numbers are public so lets use to old number to be safe. If you divide $150M by those 80,000 artists, you get $1,875 at most they have available to pay out, per artist.

So Pharrell Williams actually earned 62.5% more money than the theoretical average Pandora music artist could possibly make. From Pandora’s perspective Pharrell broke the bank!

The Value of A Stream

For the second problem, thank Steve Jobs and Apple.

In 2003, with the launch of iTunes Apple famously negotiated the ‘fair-market value’ of an MP3 to be $0.99. While, this literally didn’t force everyone to sell MP3s at that price, the fact iTunes won as the platform of choice for the music industry and consumers effectively set this price for everyone in the MP3 selling business moving forward. The other thing this deal did was to allow for the unbundling of the album.  People no longer had to buy entire albums to get single songs. They could get single songs from the album at $0.99. Anyone selling music could sell for less than $0.99 but they couldn’t go above unless they offered more value (in the form of selling WAV files, FLAC files, or other formats that were better quality than MP3s).

But a stream is not an MP3. Streaming a single song from a single source isn’t valuable. An MP3 I can actually buy directly from an artist or music outlet. An MP3 one can ‘own’. In that way (and that way only) they were similar to physical media. Physical media (CDs, Tapes, Vinyl) were different in that they had inherent scarcity and value. The costs of production, manufacturing, distribution, marketing and promotion were all added up and some margin above cost of production set the price of sale.

MP3’s changed things dramatically. The cost of distribution became nominally low while the cost of manufacturing an MP3 essentially went to nothing. This is because the cost to ‘make’ the MP3 is some infinitely small fraction of the cost of owning a computer and having electricity to power it. The rest of the costs stay the same. 

When the Record Industry negotiated with Apple for the cost of digital music, they ultimately took the stance that costs of production were not more than half the cost of sale. CDs used to sell for around $20 each, MP3 albums (on average) sell for around $10 each. The cost of a single MP3 is around $0.99.

So what is the value of something that you can’t ‘own’ like streaming music? Something that you want to have access to from anywhere in the world from any device? Streaming is like the digital equivalent of radio. The record industry negotiated price points that forced Pandora and services like it to adopt radio-like business models.  But so far digital radio ad buys haven’t accounted for the type of revenue that terrestrial radio ads do, resulting in the streaming services having the razor thin margins that they have.

Beyond that, people aren’t used to paying for radio. From their perspective, for the past 100 years its been free. They also aren’t used to paying more than $0.99 per song or more than $10 per album. If the average person used to buy at least 5 albums per or 50 MP3s per year from iTunes, $50 per year is palatable for streaming services. If that price goes to far above $50 per year, people will just go back to buying MP3s because they will feel they are getting more for their money. Buying MP3s may not be the endless supply of all music that streaming is, but owning something still provides an endless supply of enjoying SOME music versus none.

The fact that Pandora raised its prices today is a slippery slope.  If the other streaming services follow suit and raise prices too high, it just sends public demand back to wanting to own their music and the streaming services will screw themselves out of business.

You can blame The Record Industry or you can blame Apple but don’t blame Pandora for a business model that was forced on them.

Tap Dancing 2.0

Adidas just took it upon themselves to reinvent shoes, sampling, break-dancing and performance art all at once.  Check out the video below, it’s self-explanatory…

I guess we can now sit back and wait for the LXD or Savion Glover limited editions.

(via HypeBot)

Classical Music to Code By

This weekend I spent a few hours trying to teach myself the basics of R, a programing language for statistical computation and data visualization.  It’s fairly easy language to grasp, but much like Proce55ing or any other language for that matter, once you’ve got the basics down, making the cool stuff can send you down a rabbit hole of trial and error. That said, unlike with most of the other languages I’ve tried to teach myself, I felt like I got this rather quickly.  

I thought about why I felt I worked better today than other days and reflected on the differences between what I normally do (multitask while watching TV and doing other stuff) versus what I did today (sit here planted until I learnt myself somethin’). The other major difference I noticed, however, was the music I was listening to – largely string quartets and orchestral arrangements by Kronos Quartet, Brodsky Quartet, Alarm Will Sound and others.  

I’m not sure if it’s been documented or if it’s just anecdotal, but the combination of maths (music and programming) seem to compliment each other, especially when one is learning. Or perhaps it’s just the fact that there were no lyrics to distract me.

What type of music do you work to? Do certain types of music help or hinder the process?

Best Albums of 2007

In no particular order….

Ceu CEU
Unkle WAR STORIES
Stephanie’s ID Grus Americanus
Radiohead In Rainbows
Jay-Z American Gansgter
Duran Duran Red Carpet Massacre
Dri Smoke Rings
Burial Untrue
Amon Tobin Foley Room

Jay-Z’s American Gangster

A friend of mine who works for the the press played me the whole Jay-Z “American Gangster” album the other day and I’m thoroughly impressed. It’s an instant classic, the new “Blueprint”. For a rapper, Jay-Z has been surprisingly consistent with delivery. Of all his original studio albums:

Reasonable Doubt (1996)
Vol. 1… In My Lifetime (1997)
Vol. 2… Hard Knock Life (1998)
Vol. 3… Life and Times of S. Carter (1999)
The Dynasty: Roc La Familia (2000)
The Blueprint (2001)
The Blueprint²: The Gift & the Curse (2002)
The Black Album (2003)
Kingdom Come (2006)
American Gangster (2007)

Most hip-hop fans will cite at least two as ‘classic’, 5 of 5 star albums (Reasonable Doubt and The Blueprint), the majority of what’s left was extremely successful both commercially and critically. Of the remaining, only The Blueprint2 and Kingdom Come weren’t the critical or commercial successes everyone thought they would be. For a rapper with a career that’s lasted longer than a decade (or even five years for that matter), that’s pretty impressive. I can’t think of any other rapper (living or dead) who’s ever achieved the same kind of all around success with music.

Anyways, “American Gangster” is surprisingly good. Much like on “The Blueprint” the production is less commercial than Kingdom Come and more ‘hip-hop’ oriented. I wonder who else will surprise me before the end of ’07.

Okay, Britney.

You’re a crazy bitch but your new record’s pretty hot. I could say that I was interested in the production of Danja Handz (Timbaland’s protege), Bloodshy and Avant or Pharrell Williams (of the Neptunes), but to be honest I’m just feeling the dance/party vibe of most of the tracks. A lot of the production reminds me of stuff that was coming out of the UK club scene a few years back (Garage, Acid Breaks, Big Beat, House). Anyways, I can’t in good faith recommend that you buy it. It’s my own guilty pleasure. 😉

The Last Jackson Hero

Michael and Janet Jackson used to be music royalty. No matter how much you didn’t buy into the image, tried to ignore the hype and tried to tune them out, for the better part of two decades (the 80’s and 90’s), they maintained a brother and sister dynasty that hadn’t been seen since the days of the Osmonds. Come out of the 90’s into the 00’s you wouldn’t have thought they had both already peaked. I mean after the breakout success of “You Are Not Alone” (1995) you’d have thought MJ still had a few monster hits that he hadn’t unleashed yet. Janet Jackson’s own “I Get Lonely” (1997) was another break out hit that also left me believing that her best was yet to come.

So what happened?

We all know about Michael Jackson’s legal troubles, but that shouldn’t have stopped his follow up album INVINCIBLE from performing. Around the same time the album was released he announced that he was leaving Sony. A dumb move because if a record label knows you aren’t renewing your contract, why in the hell would they promote your album? I’m sure they attempted to cover costs, but they weren’t going to release tons of videos supporting an album that they didn’t even seem to be happy with to begin with. MJ retaliated by calling Tommy Mottolla, the guy who started banging Mariah Carey when she was like 17, a racist. Rightfully, no one with any sense bought into this. Still, “You Rock My World” showed a lot of potential as did “Whatever Happens”, his collaboration with Carlos Santana. Instead of pushing forward with his career and getting back to his roots (Jimmy Jam, Terry Lewis, Quincy Jones) he opted for Teddy Riley and Rodney Jerkins who, it can be argued, took his career in a different (somewhat less successful) direction.

Janet’s last big albums were the VELVET ROPE (1995) and ALL FOR YOU (2001) both of which have sold more than 3 million copies in the U.S. alone. ALL FOR YOU, which outperformed VELVET ROPE in first week sales and worldwide, looked like it would mark the beginning of a new era of Janet. While Michael had found his biggest success in the 70’s, 80’s and 90’s, It looks like Janet’s years would be the 80’s, 90’s, and 00’s. ALL FOR YOU was further supported by Janet’s starring role in the hit movie NUTTY PROFESSOR 2: THE KLUMPS and the lead single’s (“Doesn’t Really Matter”) appearance on the movies soundtrack. At the same time however, Janet had gone through a much publicized divorce from her former business partner/manager/songwriter René Elizondo. Her follow up records DAMITO JO and 20 Y.O. didn’t perform quite as well (with 20 Y.O. performing the worse between the two). Since then she’s gone on to experience some weight gain, the infamous nip-slip at the super bowl, a much publicized relationship with producer Jermaine Dupri and a subsequent weight loss. Reportedly, she will star in the forthcoming Tyler Perry movie WHY DID I GET MARRIED? and is rumored to be flowing her lover Jermaine Dupri to Island Records.

Both artists are reportedly working on their “comeback” records. Janet, I think has the best chance of maintaining a stable career. Michael however, is constantly surrounded by controversy…so much so that it over shadows his music. I’m still waiting for new MJ records though, this new song leaked a few years ago and was reportedly from his forthcoming record. If he gets rid of the whack rapper and just releases the song as is, he might have another hit.

iTunes for the Web

MediaMaster is my newest favorite Web 2.0 Application. Hopefully no one sues them because the utility is nothing short of revolutionary. It’s quite simple, you upload any non-DRM protected audio file that you own to their servers and they store it, allowing you to play everything back through an interface that’s similar to iTunes. Beyond that though, MediaMaster allows you to stream your music as a sort of ‘radio station’ that you can share or embed on any blog or website! You can also share any individual song.

I find this incredibly useful as now I can upload all of my CD and mp3’s to my laptop and have a centralized storage solution that’s available to me anywhere in the world as long as I have an internet connection. I use it a lot at work now to play back CD’s that I’ve either left in the car or at home. Here’s a description from the creators themselves…