Mike Butcher

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Bob Lefsetz spoke to In The City about his view of where the music business is going.

His quotes included:

“It’s all about the Internet.”

“There is no real Rock n’Roll vibe in the music business now. Now it’s all just ‘fucks with bucks’.”

“Execuitves hate the artists because they can get layed and the executives can’t.”

“The price of music has to come down. How come 5 year olds have cell phones now? Because they can afford it.”

“Content is not king. Distribution is king.”

“Labels have control over retail, hence their power.”

“The indie is now on the same footing of the major.”

“Music should not be free.”

“On iTunes I can only afford the same amount of music as I could before. I’m not attacking iTunes – they are there because of the labels.”

“An album is $10-15 album in the US and its one decision. It’s 10 decisions to buy ten songs on iTunes. The iTunes music store is like buying your TV programmes day by day, hour by hour.”

“AOL opened up their portal so people to get in – indicative of the gradual movement toward making content more available.”

“EMI has no power.”

“Clive Davis at BMG is THE PROBLEM with the music business.”

“The key is to have a career band.”

“Universal Music Group has so much market share they are now bullies. They ARE the RIAA.”

“Hialry Rosen now says their position is driving P2P underground.”

“Punk was just about a person being who they are.”

I’ve been called a skin-head, an anarchist etc. But I’m happy being a punk rocker.”

“England is a school of thought.”

“Music is not about talent.”

“The worst thing I’ve ever seen in the UK is a T-Shirt saying FCUK. It would be better to get a t-shirt and scribble FUCK on it. You’ll have a more interesting life than saying “look at me, I’m half dangerous.’ ”

Olly Barnes of U-Myx.com, said the had an “amazing response” at In the City.

“Every person we wanted to see, we#039ve seen. Everyone from Ted Cohen to iTunes,” he added.

“For us, producers are bread and butter for U-Myx, and there are masses of producers are here. As well as publishers, who have an opportunity to exploit their catalogues using U-Myx.

Any regrets? “Not seeing the Idiot Pilots – I would have done anything to see them.”

He said U-Myx is “about music not technology. In the last year we#039ve worked with Paul McCartney, Muse, the Killers, New Order. We expected 20 release this year, and we#039ve now going to be over 60.”

U-Myx songs are more expensive, at £2 on iTunes, meaning labels get to sell a track at a premium.

“It won#039t be for absolutely everyone, but 30-40% of a fanbase would, according to our research, jump for the U-Myx version.”

Steve Gottlieb, President and founder of TVT Records, the most successful indie label says.

“The indie labels will ultimately win, because they are most concerned with music that matters and who give commitment to their artists.”

“Major labels are disfunctional by design.”

“They cut costs and there is no artists development.”

“There will end up being one major.”

He calls them Majees or the Indors.

These will be large sophisticated indies or groups of indies who can compete by recognising that “there are no economies of scale and every artists is a brand new unique business.”

“Last couple of years the majors have tried to ape the Indies, but the reality is that they are under enormous pressure for instant results.

Steve Gottlieb, (pictured) President and founder of TVT Records, the most successful indie label says.

“I started TBT 20 years ago and the rules were fair to allow me to compete.”

“I had to build from the ground up. Nine Inch Nails, KLF, Underworld, XTC. Have worked with a lot of artists, and even broken whole genres. It would not have happened without indie labels.”

“The ability to build that was because the playing field was level.”

“This past year has been the year of the indie’s. White Stripes, Concorde with Bright Eyes. Not a week goes by now without an indie breaking a big new band.”

“And it’s not because major labels can’t do payolla like they used to. It’s more that buying a Top 40 ‘hit’ act has never been a good business. Buying so-called hit records has begun to wain on its own.”

“But it’s disheartening that margins are now much titghter and competition higher.”

“The reason the music business has been savaged and imploded should be layed at the door of the major labels. They made profound mistakes in their decision to persecute Napster and to settle with MP3.”

“We settled with Napster when they said they wanted to migrate their 70m people to a legitimate platform. If it didn’t happen then people would be pushed to other free P2P platforms and that’s exactly what happened.”

“So by default MP3 became the standard. Now worse quality music has won out, despite the exact opposite being sold as the CD revolution.”

“The majors inability to grapple with technology and then settling for MP3 were major steps in the road to where we are now.”

“We continue to fight over P2P and downloading. We argue about pricing on iTunes.”

Gottlieb said that an act like 50 Cent five years ago would have pressed $21 at retail – double what it is now. The price for CDs at that time “wasn’t moving up because consumers thought it was bad. They were not price sensitive.”

“Consumers have proved they will pay $5 for a ringtone and change it a week later.”

“The price of a single on iTunes represents a 99% loss.”

“iTunes is a sham. Billions of dollars is being made by Apple, with its 500m downloads. The average iPod accounts for 25 legitimate sales. Half of that average reflects 25 over a period of years, so 12 per year. That’s not the future of the music business.”

“That is not a viable future for a business that takes years to break bands and take years of commitment to break through.”

“So that’s why I’m proud to be part of a group of Indie labels, to provide independence.”

“Consumer need to get over the fetish of ownership, which has always been a fetish. Physical CDs will always have a market, but people want all music all the time.”

“People are monetising the sales of pirated musc, and it is the tech companies that are doing it”

He said it’s clear that in a world where there are only 25m players, the worlds population is listening to free music on burnt and ripped music CDs, ripped from legitimate CDs and downloaded from P2P networks.

“Meanwhile the RIAA continues to sue consumers, not technology companies.”

In the future, trusted guides to new and good music will continue to be media outlets, but bloggers and online social networks can be added to that list.

At a panel on the future of the music consumer (70p kid versus 50quid man),

When music is so available, what they prefer is a trusted guide in the scene.

Nick Watt, director of NMK said: “Rough Trade started Rough Trade album club, where they send a selection for a monthly fee, which is an example of how it’s happened before digital came along. Now it might be a blog or another trusted brand.”

“Most people know that HMV’s ‘store recommendation’s’ are paid-for marketing vehicles, where labels pay for the racking of records at the ends of the aisles. There is very little real recommendation – and it’s gravitating towards online.”

A technologist, who started working for record forms in early 1970s. In 1972 he got into video, which was the size of a modern mixing desk. In 1978 he met with Atari (owned by Warner at the time) and got into games. In 1977 he met with Steve Jobs at Apple. In 1978 the PC came out with Commodore PC. He got online in 1979. In 1982 he started Warner and Atari group to look at music. Alas, they set up division in competition with each other so 1982-84 was a “death march”. He worked on CDi with Phillips. At his house his has a draw of CDi which took ten years and a billion dollars to create. INXS, Cranberries, all did a CDi. It shut down.

Microsoft wanted CDi to use DOS. They didn’t so Microsoft cut them out and CDi’s wouldn’t play on a PC.

He went on tour with the Sex Pistols. He also toured with Prince.

In the 90s he got every Diamond Rio going (15 versions).

He respects what iTunes did.

“Liquid Audio looked a lot like iTunes. But iTunes popularised it. Rio, Amplified.com, all these people deserve recognition.”

“iTunes works but the others work fine. But Apple does it the best.”

Ian Bell of 7digital, which runs digital media commerce on behalf on record labels, broadcast, retail and brand partners, said the danger is thinking that digital is only 1-2% of digital revenues. “Digital is not 1-2% of music consumers. They are combining their listening habits between CD, downloads, subscriptions and mobile phone content.”

(Ed’s note: Well yes, since most digital music is still pirated MP3 and ripped CDs).

“We constantly get emails from our customers who say, for instance, they can’t a particular download to work or move it between their phone and their PC. But these are a broad cross section, from businessman, to teenagers, to housewives.”

Bell sounded a note caution about the growing enthusiasm in the industry for subscription services.

“There’s still a divide between A&R and interactive, but record companies are grasping digital – it’s just not obvious what the killer solution is now.”

“Our business is being driven by marketing managers in labels saying they want to do digital, and bringing in new revenue streams.”

Bell noted how The Stereophonics recently recorded their last single live every night on tour and made this available as a download in AAC, WMA and MP3.

“They drummed up 5-6000 sales through that. In many cases those sales would not have been made with a physical product. It’s great for their chart position and revenue and giving the fans something different.”

Ted Cohen, Senior Vice President, Digital Development & Distribution, EMI Music, says “There are labels who get it, but digital has more of a voice at the table than it ever has. I showed Warner the Net in 1996. They got it. But at the time AOL was metered by the hour.

“Now it’s about consumer control. User created mixes and playlist trading. Things will find their audience. For most people iTunes works, and you can’t fight that.”

With unlimited shelf space, this leaves room for boutiques who specialise in genres.

Such as? “Jazz sites, Blues sites. Any genre where someone give you expert editorial and direction will work.”

For instance The Essentials section on the Amazon store can guide people to getting into a genre.