The future of the music industry is mobile

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BARCELONA, Spain--There was a time when the concept of mobile music entailed little more than ringtones and full-track downloads, but that is no longer. Streaming media services like Spotify, Rdio and Deezer have ushered in a new era of mobile experiences that are not only redefining how listeners discover and share new music, but also how the record industry promotes, distributes and monetizes its content. That paradigm shift--and where the music business goes from here--was the subject of Wednesday's lively Mobile World Congress 2012 keynote session The Future of Mobile Music.

"Mobile is the ticket to the future of our industry. That's my point of view, and the point of view of a lot of artists," said Ceci Kurzman, president and founder of Nexus Management, who guides the careers of acts like Shakira and Alicia Keys. "Record sales may be on the decline, but interest in music is rising astronomically. People are simply experiencing it in different ways." 

It's true that record sales are on the downturn, but the bleeding is slowing, said Will Page, chief economist for performing rights association PRS for Music. Citing forthcoming data from the International Federation of the Phonographic Industry, Page said music sales declined 3 percent in 2011, compared to close to 9 percent the previous year. Credit digital technologies for making the world a smaller place: "The decline is slowing, but growth is coming in emerging markets," Page said.

The music industry is relying on mobile connectivity to make the world even smaller by delivering music to consumers in developing nations without desktop access to digital storefronts and streaming media efforts, let alone conventional retail channels. "Adele has sold 21 million records, which is a remarkable achievement," Kurzman said. "But that number is relatively small when you consider the scope of music around the world. It should be in the hundreds of millions. Mobile provides us a highway to the global audience."

Kurzman subscribes to a theory she distills as "Ubiquity first, revenue later," explaining that in the modern era, artists should focus on building a devoted international fanbase before turning their focus to monetization. While the evolving streaming music revenue model remains a massive headache for record labels who made their fortunes selling albums at brick-and-mortar retailers, the promise of reaching a truly worldwide audience holds enormous appeal for artists, Kurzman said.

"I don't know an artist who wouldn't rather sell 10 million albums for $1.00 each than 1 million for $10.00 each," she said. "They want to reach the most people possible with their art and work. Artists see the opportunity here, and the mobile community will find they have great partners in artists if they're willing to innovate."

But many listeners pay nothing for music--not even $1.00. "We must build superior services to piracy," Page said. "We need to keep focusing on the carrots, not the sticks." Page cited the example of the popular motorist television series Top Gear, which he said is one of the most pirated programs in all territories of the world--except the show's native U.K., where it can be viewed legally via the BBC iPlayer application.

Although artists have embraced the mobile opportunity, few if any have identified how to leverage it. "Mobile revenue doesn't exist at the moment, but strategically, it's at the top of my mind all the time," said Matt Drouin, who manages the Canadian indie rock band Metric, which has turned down major label overtures to release its records on its own Metric Music International label. "We make four times as much per album sale as an indie act [compared to a major label artist], but we don't have the global reach. Mobile is the most obvious path to that--it gives us the ability to own the relationship with the fan, and to end our reliance on radio. Every day, we ask ourselves 'How do we expand our mobile reach?'"

Premium mobile services also can help artists monetize their music far more quickly than alternative revenue channels like licensing tracks to movies or television commercials. "It's a matter of fast cash versus slow cash," said Bertis Downs IV, who manages R.E.M., which split last fall. "It can take 18 months for money to flow through the conventional system. The mobile operator community can help drive fast cash."

Although the music industry is still navigating its mobile future, it understands that the past is never coming back. "We're going to experience the decline of the old way of doing things and the emergence of a new way of doing things," Drouin said. "Radio was and continues to be the biggest driver of discovery and consumption. It's in decline. Where does [a replacement] come from? It's through social discovery. Where does that come from? Mobile will play a really big role in that. We're going to see a world where people pay for access, not ownership, and where it becomes about playlists. Quality will propagate, and it will build the artist's brand, and we can build a business around that. We have to go down that road. We don't have a choice."--Jason