 All right, good morning I'm very happy you are here because you know, it's Tuesday. It's cold It's the end of medium. You can tell I have medium voice, you know, this happens when you Speak all the time and do other things which I won't mention here, but thanks very much for coming by So let's start atop. This is my first time I'm using the iPad to present Because when I I do a lot of presentations speaking about the future of media and The one thing I don't like is that you always have to follow the order of the slides right Which is kind of annoying for me and I'm going for the audience because it's like being a robot eventually You just click and go on right so now I don't really have an order. I'm going to Skip around so if you have a question You can ask me right away If you have input I should leave something out talk more about something else you can also ask me But I will actually start at the top here Let's put this cable down here, okay, so Briefly what I do many of you may say what in the world is a futurist I Don't know that word even exists in French I suppose in some way it does but I'm a futurist I wrote a book called the future of music in 2005 and very sadly people are still buying this book because you know It's an old book and it's still true Basically what I do is I look at trends and Developments about five years in the into the future and I help companies to make up new business models I also work with people government organizations Okay, this has nothing to do with for with predictions or knowing something that you don't know It's just we spend all of a time being a little bit early Okay, I used to be in the startup business starting companies and I was always ten years early Which is not so good when you start a company But as an advisor, it's a good thing and there's an interesting saying of the guy who started IBM Thomas Watson and now the Watson machine named after him. He said I think there's a world market for five computers That's what he said in 1943 So one thing that's really important is to get ready for the future is to have what I call four sites Okay, in other words if you're sitting here today, you're thinking about how you're going to sell or or offer music tomorrow But it does it's not very helpful to think of itunes All right because itunes is here now What is coming after itunes what is coming after Spotify? There's a saying about if he had had us and Henry Ford what he if people had asked him No, I was way run if Henry Ford asked people what they wanted they would have said they want faster horses And because they only knew horses But he built a car So our job because things are moving really fast is to pay attention to the next thing and in a way You could say that this is really my job I'm listening to stuff that goes on And then I try to help companies I advise over a hundred companies worldwide from from Sony to Google YouTube many others, but mostly in the content sectors All of my books and publications are free except for my first book which is published through Berkeley the future of music So if you just go go to Google and put my name Gert and free PDFs you find everything Okay, I have five books available More or less for free you can also buy them at Amazon if you if you want a dead tree version I have a Kindle app and an iPhone app and so on so we'll go into that later anyway This is sort of an overview of my books my latest book is called the future of content Which is three dollars on the on the on Amazon Kindle and saving trees. There's no PDFs No printing available and my iPhone app. Just look for futurist You'll be able to watch all my stuff from there So I want to start here This is an important topic kite there's Julian from wiki leaks and Julian says I give private information on corporations to you for free and I'm the villain you know the bad guy and Mark from Facebook says I give your private information to corporations for money. I'm man of the year So this is a good sign That we live in very confusing times Sometimes we don't know what's what in America a couple weeks ago We are discussing a law that will make it illegal for companies if they had any Possible infringement even JPEGs PDFs Whatever it would have been possible to shut down the websites on the day's notice without a trial We have a lot of confusion about what's what right? Who should get paid for what and who should pay and so on these are confusing times primarily because We're now getting connected on a global level And Steve Jobs Rest in peace, you know, he said a lot of really smart things. I mean he was a very special character So it's impossible to emulate Steve Jobs. Don't try But one thing I said about his life says he wants to put a ding in the universe Okay, now I was looking at the title of this presentation saying really if you're thinking about how he can make a living with music in a Digital world, right? Well, you have to start by making a ding, you know by creating something. That's just you In other words just because we have the internet doesn't mean you're going to automatically make more money if people can download your Stuff or find you right you have to be special. I mean look at what's really successful today It's all stuff that's highly special. That's niches that people are excited about look at the successful brands that we have today All right, they all make it a ding into the universe as Steve has said. So I think this is a very important paradigm to consider now in this society what I call the network society and Most of you are young enough to know what this means I'm 50 so I I grew up when I was a musician and producer Long time ago. I went to Berklee College and I had a career as a musician. There was no internet We would have to send out a CD to get a gig. We have to make a phone call to call people up There was no way to reach out to people. There was no way to be found except for in the mail or in billboard magazine Which already existed back then Today in the network society we're living in a whole different world. Okay, this head sort of explains what that world is you know, it's essentially a Connection of wheels everything is interconnected This also means that we don't exist by ourselves right wall Disney Universal music to start companies like that today would be impossible right because they're one big wheel They're not like this and I mean there are independent companies who control production distribution marketing all of these things is part of what they do Right Microsoft is a company that is more like this now, but started as a company. It's one big wheel So now we're living in a society that's completely interconnected So I can guarantee you will not make money with music in the future if we don't work other deal with Google or with The telecom companies or the appetizers the device makers it won't work This is a moving part. It's an ecosystem Okay, so one of the things that we need to work on is to get off this idea of saying that you know We won't talk to you. We won't allow you to use the music and therefore we make more money This is a complete illusion. I mean music industry is now basically one of those wheels And it's a very small wheel right to be exact fifteen point seven billion dollars You know how big the telecom economy is? Anybody have an idea mobile phones operators right? 3.7 trillion a year So that's somewhere in the neighborhood of zero point five percent of what they do 350 million dollars a day spent on SMS. So the music industry is now part of a much larger story But a very important story with music right because Creativity is emotion is what drives a lot of things and music is all about that So in a network society, we can't say you know what if we don't like this we don't play if this wheel here Does not correspond with the other wheels, you know what happens if of course the other wheels disconnect and continue And that's what we see now. We have to connect with the other wheels We cannot afford to say well, we don't play ball because we don't make enough money from you guys yet I mean the idea of saying that he will not license Spotify because you're not enough making enough money yet is Suicide right? I mean think about the logic if you had said 70 or 80 years ago or a hundred years ago that you would not license radio Because it's a is free. That's bad and B is not paying enough Then he would have killed the very mechanism that made music the biggest phenomenon in the 60s and 70s, which was radio We need to give permission to try stuff. Otherwise, we're always going to stop what can innovate us So this is a very very big problem in the music business that we asked too early for too much and we kill innovation. I Checked the other day. There's 778 companies who tried to innovate the music. They're dead and Two of them were mine by the way But like just a couple days ago beyond Oblivion a New York based company filed for bankruptcy I'm the latest in the attempt to innovate the music business, right? Because we're not giving enough permission We're not giving enough way to actually build this right now artists are saying well Spotify You know I get whatever, you know a billion plays. I only get a hundred dollars. Well, that's not good clearly But Spotify has three million users. I'm paying users Let's have Spotify have a billion users How much money are you gonna make for this? Let's get YouTube to have two billion active users I share the advertising money with you YouTube can make several billion a month in advertising then we see real money So let's not be too quick with was saying that you know We don't allow things to nurture is like saying your baby grows up being a PhD, you know No, it's a baby first. You have to grow it and you have to actually allow it to move so in this world now the digital world we're soon going to add The other three billion the Brazilians the Indonesians the Chinese and They're moving much much quicker with everything that we ever seen In India you have people connecting to the internet now that never had radio or television and Now they're watching YouTube on their mobile phones. I Mean what better opportunity could we have as artists to reach those people to sell them our Commercials to make music for them right to distribute to them to do tours there and vice versa. They hear right both directions So there, you know the rules of the game are completely different And the rules of the game of how you pay for music are not going to work there And there's just nothing to do with copyright. This is just reality So we take the word copyright. We'll talk about that later. I think we need to remove the first part, which is the copy Everything that would do on the internet makes a copy And you play a song on YouTube you are in fact making a copy on the cache of your computer In fact, if you use a download helper extension on fire folks, you can keep that copy That's what kids do now to get music. It's simple If we stream every click every copy every forward every email creates copy of music and most of that is not legal in parenthesis Right, but it happens anyway So we have hundreds of companies who have used this idea of saying well, you know, basically the same streaming and copying is the same thing We don't live in a copy economy. So if you're a lawyer you're in deep trouble, right? Because the entire setup depends on saying that you have copies you have radio, which is free You've got this whole system, right? But the internet blows away this idea of saying, you know, what we think is actually happening The most popular way of sharing music today on the internet is not file sharing Is not those programs like line wire and what have you right? It's basically people sending stuff back and forth on YouTube and ripping What's on YouTube right just? Recording it so to speak which is not per se illegal in some countries it could be But anyway, we have three billion billion people connecting and they will call the shots, right? They will tell us how much they're willing to pay And I have to tell you if I find another person who's going to tell me that people aren't willing to pay for content I think I'll throw up, right? I mean if you look at the global trends People are paying everywhere for content. They're paying for dating which is content, right? That's Database they're paying for linked in you guys are linked in 550 million dollars We are the content of linked in right they're paying for Netflix 24 million subscribers Paying 10 bucks and they're paying for farm will 450 million last year They're paying 6.8 billion dollars for virtual products flowers. They're paying for iphone apps So don't tell me they're not paying for content, right? This is just not true But we're asking them to pay in a way. That's a punishment We have to get engaged with what people actually want to do and this is what's going to happen in the in the very near future You guys are lucky that you're actually at the end of this period In terms of how this all is coming together Okay, the digital natives This is a baby. You're gonna play or what? Start playing It's not playing Sorry, I gave away the whole point of my video anyway Here's a baby. Okay, we can check it out YouTube yourself But iPads are very popular with kids small kids, right because you can touch them and do stuff They learn in a very short time that you can paint you can create things and you can make a photo or you can use photo booth They learn all these things right and then you have this this shot here over on the other side basically showed a baby Saying okay, I'm gonna use a real magazine as you can see here And she's trying to zoom the page of the real magazine, right? and These are digital natives. They're completely different Assumption of what happens here, right? mean Of course, she's just a baby But you know when you're 10 years old with this sort of mindset if you can't interact and you can't just make it work You're not interested. You don't exist All right, in other words if we make these people in the future stick to the old rules from 20 years ago We're toast, right? We're not going to even be considered So we have to think about digital natives what people do on the internet in the future going forward and One of those important things that you should get used to is cloud computing and not in the Apple way But in the general way, right? What's happening is that all content is moving into the cloud and we discussed this in 1999 with mp3.com and Napster I was the same idea But now all content is moving into the cloud that means music television films Education Berkeley music calm right the biggest online music school in the world is online Health records banking money Scary thought of course if it all moves in the cloud we can be in theory We can be tracked right which is a scary thought, right? But it will happen anyway We won't be lo using credit cards in 10 to 15 years depending on the country even earlier. We won't be buying textbooks For universities will have a device that has all the textbooks coming through the cloud And this is in the music business. This is our chance To get to those people on the other end of the cloud Because guess what if we do this our costs are next to zero The only cost we have here is an attention cost, right? We have to actually make sure that they come to us That is the real cost So it's been said many times before also the speech before here that attention is the currency If in this cloud I have 68 million songs How in the world is anybody going to pay attention to you of course you have to be in the cloud Nothing you can do about it not to be in the cloud But you have to find a way to actually get to people and to connect with them to see what they want to do Right and they will do it on mobile devices Primarily on mobile devices If you have a question just please fire away, okay, so The future of music is the cloud and the crowd There's only two things that matter was said already 50 times this week in the conferences, right? Remember this there's only two things that matter, okay? One is the creator in The other one is their so-called consumer the user, okay? We're up for debate in between sorry to tell you but In a digital economy, it's the creator that matters because only they can create and it's not going to be any better because I have Software right it's still going to be a process of human creation and the consumer and If you're looking at some of these services, you guys know flip board, right? It's really amazing way to read news Spotify, Simfy, Instapaper BBC I a player right what does this tell you? The content moves to the cloud we use software to access it And the connection of the cloud and the crowd is the money and this is why the new players in the music business will not be the labels or the Societies because there are middlemen, right? They will be people who make that connection between the cloud and the crowd And the search engines the social networks Facebook goes public public sometime this week They will have a hundred billion dollar war chest to do this A hundred billion dollars, you know much of what a phone has for innovation right entire budget for innovation I think it's something like 16 billion right and Facebook has a hundred billion and no costs, right? They don't have a network They just make software so when you think about this, right? Basically, we need to figure out how we can get in this process of the cloud in the crowd and The important part here is of course filtering I mean, I'm not interested in all of the music from Indonesia. I just want the particular music I'm interested or that's recommended by my friends right because in when you buy stuff 96% of people buy through social recommendation and that's on the internet even more pronounced We buy what somebody else has said that they also bought That is the process of how we do stuff This is why when I'm on Facebook and I play Spotify track and it shows up on Facebook I get like email people saying I really like the song that you published through Spotify on Facebook And I bought it or I bought the concert ticket or right. This is social commerce So the thing is if we don't allow to be in the cloud, right or if we make it too difficult Or if we put all these rules for example as itunes does, you know that you you start watching in 24 hours later Your movie is gone, right? We're pissing off the people who are giving us the money And I mean how this is like going in the airplane when you come in there will say, you know what you can only stand Because you know we we figured that you you're healthy And it makes no sense whatsoever So there you know when five billion people are connected to the global network, right? I mean right now we have about two billion and reality is really only one billion have high-speed internet access Even less who are actually active So in five years we have five billion people Right now the world is about seven billion, okay? So think about the huge opportunity for us to reach those people But also to create business that doesn't cost anything to facilitate except for attention When I got started on LinkedIn you guys are on LinkedIn right we can connect. I'm G Leonhardt there When I started on LinkedIn my my buddy Ray Hoffman in those days started it I was number 8,000 And today is a hundred seventy eight million on LinkedIn. I Send emails to my friends mostly in the music business saying we should connect So we can talk about important stuff and also develop business, right? You know what the answer was? Say why in the world should I connect with strangers to talk about stuff? If you're not already with me, I don't want to do business with you, right? I want to keep behind the wall And what we do is a club, right? You're not in the club. You're out the club. I said that's simple, right? Well, guess what today? We're all in the same boat, right the same CEOs. It wouldn't take my LinkedIn request. They're asking me for recommendation today on LinkedIn They're coming to the same point where we're saying if we are not connected you're dead So the first step you should do today is to network with everybody in the room To help each other how to figure out how to solve these problems Because it's a collective problems and not singular problems So whether you're a writer or a musician or a label or or a publisher. We all have the same problem Which is how to get attention? That is our basic problem and Because when we have attention we can monetize Okay Very important point, right? You've seen the muscle need hierarchy muscle is a sociologist Who said basically we have the human needs are Physiological safety belonging as team self-actualization and sex is somewhere in there in there as well It's a very simple pyramid, you know You go up the pyramid until you have more room then you say well now I want self-realization, right? But today in a digital economy It's it's also changed and that we have food shelter and the top of the pyramid is the mobile phone I mean, it's amazing how you can see in Brazil or in Africa when people have five more dollars You know what they're gonna do. They're gonna buy a mobile phone They're gonna top up the phone to make calls, right? This is the digital economy This is the same people that we're gonna sell to because when they have a mobile phone we can reach them So another thing you should do tomorrow when you come to the office Everything you do needs to be available for mobile format and I'm not talking about apps for downloading, right? Mobile versions of your website We'll take your day to do this Google has free tools for this to turn your side to a mobile site There's an Israeli company called conduit mobile They've just launched yet meet him that do a really great web app for free And there's many more like more views and many others, right? So if your website is a mobile you're making a big mistake because most of the people in the future Will be using mobile devices to look at your stuff They will not be using computers The CEO of Google the former CEO now Eric Schmidt three years ago. He said that basically Everything the first step is mobile. Okay, think about the beauty of this You know if you go to my website about my music 2.0 book called future of It's called Musicfutures.com I keep forgetting my own URLs. I have too many music futures.com Okay, this is a place I put up where you can go with any mobile phone and it cost me like five dollars to do this and You can read my whole book on the mobile phone Last year most of my traffic In regards to all these things came from the mobile sites and from this side people reading a very simple five dollar side Saying they can read it on the blackberry. They can read it worldwide. They can download the PDF They can do all these things there, right? So if you have a label or an arches or a publisher of your composer you have to have a mobile site Because that's that's where all the action is going to be clearly the future is mobile and You know think of your world like this mobile first Don't forget in America for example We're stuck with the computer because we have the money to buy one and in a safe place to put one Right, that's not the case in India or Brazil, right? There's often no power There's not a safe place to put them and then there's that there's water problems and what have you right? It's all mobile devices. It's all mobile internet devices So if you want to reach the other three billion as we call them you got to switch to the mobile If you don't know what this is Who knows what this is? Great improvement It's a QR code. In fact, you can zap it right now if you want, but this is a shortcut This is a shortcut to one of my ideas of paying with attention Actually, if you click on this it takes you to pay him with attention comm which is a bunch of stuff about how that works Okay, it's a shortcut This is widely used in Asia for example now now we have people with radio frequency ID chips and with new field Communications where you have shortcuts to assets For example for bands. This is the most direct way when you play a gig you put up a poster with the code People didn't take the mobile they make a photo the photo connects to the website boom you're there All right, don't have to remember anything just make a photo in fact now There's bands playing with the QR code as a t-shirt for that reason So I mean clearly that is a sort of a shortcut in a simple way. We have to keep in mind that basically what we have Today, I mean if you have kids, you know what I'm talking about, right? Consumers are leaping Consumers are doing stuff that we never heard of because we're busy writing music or doing whatever right? I mean what's happening on Facebook is absolutely astounding, right? Last year there were 56 laws overturned by Facebook action or never launched 270 companies last year were threatened with Facebook action and had to change what they do Because these people made so much noise And that they couldn't continue the practice banks insurance companies oil companies green piece Went on Facebook against Volkswagen and against their practice of what they're buying what they said, right? I mean consumers are leaping and this is happening in music the consumers are saying you know what? This is all nice and find you ideas about how to do this, but we want to do something else Go back to one of my favorite topics spotify My consumers are saying clearly we love this idea, but we're not ready to pay $10 And the reason being is It's YouTube It's everywhere else. We get the same thing. It's just a little bit more difficult, but okay Consumers are saying you know we want another offer and then we're willing to pay And then we're willing to upsell which is the very idea what I call talk about later Which is freemium right starting with free and then making it premium Think about this logic for a second, okay? If services like spotify got $1 a month from people One dollar like one lousy dollar not from people but also from advertising that they would cost right? So doesn't have to be the people themselves one dollar right a billion users At $1. It's a billion dollars a month is $12 billion a year All right, and there's a lot more than one billion people will be the entire music industry in one swoop Of course, then you can say well It doesn't work it commoditizes music and so on and so on right not true Look at radio. Look at cable TV. Look at the copy machine. Did the copy machine devalue books? Well answer is clearly not right You can copy as much as you want is not very convenient to copy an 800 page book right and carry around and you know You pay for the package so consumers are leaving we have to get along with this and this is what they're doing this is a video of a Twitter feed When the Egyptian ruler Mubarak had to leave there was a Certain time of the day or the evening where he was supposed to come and speak And he wasn't showing up right on Twitter this motif developed that said reasons Mubarak is late Was the hashtag you know on Twitter and there were people tweeting like this there were over a hundred thousand I mean going like this right with jokes about why Mubarak was late And This is the kind of stuff that people are doing now. They take an action right they're doing stuff like this and This works both directions right the people have a problem. They know Kenneth Cole. You may know the clothing company, right? He tweeted the reason that there's so much trouble in Egypt is because our new collection is going into the stores today And he made a joke about that right and within a day Everybody was boycotting Kenneth Cole and stopped buying stuff and he had to go and and excuse himself And he you know was a big thing So if we're in the music business, we have to fish where the fish are which means we have to go where they are doing these things and Where are they these days? I mean in China they are on QQ and and here they are on Twitter and then and Weibo in China and so on and So we have to go and fish where the fish are And ask yourself, you know, wherever you're from where are your fish? And that is the key question you have to find out that question before you can think about marketing, right It's also a question of who you are for example, if you are a writer And you have to find a niche Where you can be so strong in that niche that everybody comes to you automatically Right where you can find an exact location of what you think you can do best and Then basically find out how that works. I mean Twitter obviously is a very good example in general How this works? Okay, we're living in this world now, right? This is the world of liquidity It's fluid We hate anything that slows us down or that makes it hard, right? This is why we hate the Wi-Fi here, right? No, just kidding. Yeah, it's not liquid. It's not good enough Right, we go to EasyJet or Ryanair or any of those places, you know The booking process is great. The boarding process is terrible, right? But buying and booking and changing is like this is completely liquid So that's what we love about services are completely liquid like cable TV, you know, just do whatever you want. It's liquid So now because the consumer has all the power We're now looking to create only systems that are liquid. If your system isn't liquid don't bother I mean you have to take away the hurdles In the music industry, we've had dozens of hurdles, you know rights problems territorial problems This video is unlicensed in Uruguay or whatever. I mean like hundreds of variations of bullshit. Why it's not working, right? That's going to kill us If we don't make it liquid somebody else will and we just stand by and do nothing We have to do away and my view is that anybody who is in the way of making it liquid should leave Because that's ultimate. I mean, it's a very simple capitalist principle, right in the connected society people should go around the hurdles They find a way to go around it Read Richard Benson's latest book called screw business as usual Well, he's talking about exactly this He says it doesn't matter what we have thought of that we would like to do with our customers It matters what they expect from us, right? And the reality is the reality we may want it to be different, but it's not It's a liquid world So then of course, you know in the music business We've had this issues for a long time that we said well We wish it maybe we can put some hurdles and put some rocks into the river, right? But where has that led us? We're here in 2012 And we're doing exactly the same thing that Napster did 1998 Which is how to figure out how to put the jukebox in the sky and make money from it, right? In the meantime, we sued lots of people and we had lots of mediums You know, we need to change this motto into creating a liquid world going forward Netflix Spotify It's about access Today's consumer of music and of media in general is concerned with access. They're not concerned with copies Yeah, there are there are people who are collecting copies. You know, I have I have CDs. I have books, you know But that's not our future the future is not to sell copies And this is a sad truth, you know that in many ways we have to say our future is not going to be Encouraged that burn oil, right? Gas that that is not gonna be our future of driving many ways We like to drive like this, but it's not working our future the content business is not about selling copies We look at newspapers, right? Newspapers as you know are in decline pretty much around the world except for Eastern Europe and various select territory In America 27% decline of advertising revenues in newspapers many newspapers shutting down. So this is a real big issue, right? So now I might my suggestion is really quite simple. You remove the word paper keep the word news That's the solution because guess what the costs of paper are 80% of the entire cost of the undertaking Why do we need paper? People love news. They love curation. They love good writers. They love good opinions. They love quality clearly But they don't necessarily have to use paper to get it So once we get used to this we can say well, this is kind of hard to do for the New York Times You know considering all the investment in paper, right clearly. That's a problem This is why most companies in the music business will have their butts kicked by internet companies, right? Because they're about the content not about the distribution. It's not about distribution is about attention It's about the content. It's about liquidity. It's not about shipping Stuff so if we can do away with this idea of saying that we sell copies And I mean we're still selling copies and that's still a big income driver, of course, right? But here's the point. Yeah, if your argument is I'm not going to allow people To have access to music for a lot less money because I'm still selling CDs and iTunes, right? Then you're killing yourself right because what you're saying basically saying you don't want to see what's actually happening until the very last Moment where you can still make a dollar with the CD or the iTunes download, right? Then you're going to go flat over the cliff. It's like a guy who's like a horseshoe maker who's saying I don't know what the train looks like Well, they trained it away with the horseshoe makers. We didn't need horses when we have the train, right? And that's our future So we have to think in two levels If the world's music revenues are still 60% CD sales and iTunes, right? We don't want to get rid of this Really? So we have to be like the Annopleps, which is a fish that has four eyes Your cemetery park you can see them, right? They have two eyes looking up and two eyes looking down Okay, the two eyes looking down are the ones with the old business, right? Which we can't really completely get rid of and just stop right, but we need those two eyes looking up We need to find the new way of how we can monitor imagine again five billion people have an access to digital networks on Cheap devices and these devices will not be iPads or Apple. There'll be ten dollar devices So I driven Ten dollar devices. I mean then we can say we can sell access to them as part of an offering Right being part is very much like cable TV of a subscription. I think that is where we go and that's our future and This is one of the most important paradigms of what's going to happen there It's a lemonade stand, right? It's free lemonade and the woman says It's not free or it's free They sell you information This is the nutshell of our future, right? What people do in Media on television on Facebook on Spotify on those channels what they do and who they pay attention to is going to pay our Bill going forward right because when people are in those systems, they create a huge amount of value for everyone They create data. They look at ads. They opt into other things. They buy things I don't know if you're aware of this, but the global advertising budget in media is five hundred sixty billion dollars Marketing public relations and other assorted lying is another four hundred billion Right you have a trillion dollars. I mean a trillion dollars is spent on reaching us a year a trillion dollars If you don't think that Spotify or YouTube or any of the other guys is gonna make enough money from advertising to pay for music Then you know, I can't help you because the math, you know, the math is clear here Okay, we just have to say okay when But if we say that they have to pay everything in advance until they get there then we kill them also, right? so Basically, if you're seeing why does Google make 3.7 billion dollars a month What do they do they don't own anything? They own servers and stuff right they don't make content They don't own a network. They don't put the cable in the ground. Nothing. What do they do? They sell information Yeah, good point. I think Radio has a good future if radio can adapt to the ways of distribution that we have in the web today And expand the licenses. I mean one big problem is of course podcasting. You can't do this and so radio has to enhance the license grant Right and the good thing about radio is curation Because as I was saying earlier it doesn't matter. I mean we used to be very excited about this 10 years ago We would say okay, we have access to 60 million songs and they're all free now That was a very exciting news for a lot of people But guess what it doesn't matter my time is a lot more important than a dollar For most people in the western world. They're more worried about time than money So if you can in the news business or in radio create a mechanism where you're saying, you know By having the time-saving factor and the curation and the value of the experience That's what you pay for right you don't pay for the music or the content you pay for the packaging I mean this is why we love apps Okay, I checked yesterday. There is about 22 divorce apps. You know that will teach you how to get divorced on the mobile phone, right? You can do that all on the internet or you can just do it, right? But the reason you buy these apps is because of the packaging It looks better. It feels better. It seems easier. So you buy an app, but it's only a dollar, right? So bottom line here is that radio has a has a strong future if you're able to Expand into those new places and keep the role of a curator I mean this is why I listen to KK as F or to KCRW or the or BBC radio one Not because I can't get the music for free some welds. I can But because they are really great at curating This is why I read the New York Times or the Wall Street Journal And this is why I spend money on all the other stuff, you know that I spend stuff on because of curation Because I don't have the time to go out to a hundred thousand YouTube tracks And I like Pandora, but it's not good enough for me for the programming so this principle of paying with With data and with attention is a principle for the future And the music industry has to come to the point of where they're saying well, who are the wardens of this information? well clearly Google Yahoo and very soon Facebook and Twitter TNN to Twitter news network, right They have this information. They know what to do and they can turn attention into money So it means absolutely amazing to see I never felt so amazed me how how this happened in China When Google owns a company called top 100, which is a search engine in China, right? Top 100 has made a deal with the record labels that you can stream and download the music for free from the search engine Okay, the reason being is that Baidu, which is the biggest search engine allows you to put in Santana MP3 And then you can just download it, right Google does not allow that So what they did is they said, okay, we want to do the same thing So what we're going to do we're going to give all of the rights holders a piece of the ad revenue on top 100.cn in return for free streaming and downloading just like Baidu but cut you in and Guess what the record label said the big record labels. They said this is great because China is screwed anyway Fine, we don't get money from China. So we'll take you or whatever 20 million We're happy to get it and here in Europe Where we're still buying we don't get this right because the money would be 2 billion. It wouldn't be just 20 million But the logic is quite clear right if we are able to get in and make it legal what people want to do and Participate in the revenues will make a boatload more money than we do now by saying that they have to apply to our theories and Of course, you know, ultimately I mean this graph from China Perkins shows the logic right 1999 the global internet user Average revenue per user was $9 in 99 Now in 2011 the average value of an internet user is $49 Now why in the world wouldn't we take this money? All right, why wouldn't we go and say we'll participate in the flow of these revenues and allow this to happen, right? The answer is Because we're thinking about our own pizza. We're not interested in building bacon a larger pizza We're interested in eating the pie of our neighbor That can't continue So I'm writing a new book was called from ego to eco and it's very much motivated by the music business, right? We have to get off the ego society. This will kill us right because basically if we don't agree that we're going to play ball with The other guys they're going to play ball with somebody else and we'll be left out there somewhere in the field And this is on the first part of the story second part of the story is this will happen regardless And when when it happens whoever is best at having attention will make the most money That's not really different than now, but very dramatic Okay on radio for example if you get lots of radio airplay Most countries around the world you get a percentage of the pot This is why we like to you know, I'm a composer. I get 50 euros a month or something. I for a couple of measly songs I've written Okay, 50 euros or whatever it is in the future if we license the internet All right, if we make it legal to do all these things every time somebody pushes a button a tiny coin can fall into the virtual box somewhere just like radio But as long as we say, you know You have to come to us to ask for permission to play a song or above 60 seconds in Switzerland And we're going to discuss this for four years and send your facts back then, you know, that's not going to work Right, I mean as I showed you earlier the speed The speed of the web is mind-boggling You know car companies used to have a new car Every four to six years I'll be a new car, you know what the time invention cycle is for car companies now 16 months next model Microsoft had 20 years to rule to dominate Google had five years Facebook has three years timing out this year in terms of dominance picking Twitter has two years The timing is increasing like crazy and we're still sitting here arguing about whether you want to participate We can't afford it and this is a political issue, but it's also practical to when that happens Whoever is best at getting attention will get the most of the pot just like radio airplay If you have any questions, please So so it's clear that the music businesses isn't going to change. They're not going to license open licensing It's not going to happen. If it would have happened, we would see plans d-dexes But they've been talking about forever. We can't even get standards let alone open licensing What's going to happen? Who's going to be the disruptor who's going to create a liquid solution and Change the entire business from while the rest of the business has their pants down Yeah, that's going to happen. Good question. Yeah, I think we're Hey, I think we're at the point where many people are realizing that this isn't working Whether it's how dope you are three strike or actor or so far so these are all just constructs that are way too late I'm not working right people are realizing phone sample in France a lot of people are saying well Yeah, we've got this adobe law, but what in the hell is that going to do for us? I mean is it does it actually have a benefit of any sort that we can feel so there's a lot of rebellion against us The second one is that much like for example in Brazil Where you had pharma companies making AIDS medicine and the Brazilian people couldn't afford a hundred euros a month The Brazilian government said we need a public license for this medicine a generic medicine You either give us a deal or we break the license because we need to live We need to have those people take those medicine, right? So Brazil broke the patent of the pharma companies and then the pharma companies went to court international court and they lost Because the court said you have to be willing to license at the conditions that the local people can afford And the pharma company said okay, we'll do it for two dollars And you know what how much it cost to make this pill like zero point zero zero whatever right, but of course it cost a billion to build right So I understand the logic, right? So basically as I was saying earlier in an ecosystem We have to come to the conclusion that if we don't collaborate on making this work We won't neither one of us will have anything and I think this is starting to dawn on people now If I may argue with you, please You forget that those powers you're talking about Facebook Google whatever They're not willing to put to actually work with the smaller companies at all. So basically You cannot work with them they decide and if you go to them They say okay, you have to go through this guy or that guy, but they won't talk to you So and they're not the ones who develop the artist. They're not the one who care about the music They don't care about anything very good point I mean, I think they're of course we are in this discussion of who can make this change We're ten years into a conversation, right? And there's a lot of fear on both sides And so the internet companies and the telecoms are saying you know We kind of like this music thing or the movie business, right? But these people are incredibly stupid and difficult to work with right This is what I hear from them all the time It's like we would love to solve the music problem, but these people are impossible to deal with and now you're saying That they don't want to talk. I mean exactly. It's probably both true, right? But the bottom line is until you realize that we won't have anything either way then that's when you start moving, right? So I think what we will see happening with Facebook Google and YouTube, right? Is that when we show that we have an opening for an actual conversation, right? The conversation is only with the big companies like Universal Music They will not talk to somebody smaller than one of the major Well there I think that Facebook of course is talking to Moolen and all the other that that is ongoing I so I wouldn't be that pessimistic on that but and the Indians have a lot of power now And so I'm not so sure that is a problem, but bottom line is I think we need to show that we're willing to talk I mean, okay imagine the situation when you're having dinner with your kids Okay, and you are you're calling the shots of the conversation every time that something happens You won't get very far Okay, you have to signal that you're willing to have an actual conversation And I think that it's a mutual process right clearly and the other issue if I may say is that the revenues for Record companies from Spotify or one in the other streaming services is still a fraction of a fraction of what you get via iTunes Yet it's destruction in reality because people can hear for free. That's a fact of life Well, let me address that issue. I mean if you look at it It's really at the destruction of the record business in my opinion. Yeah, well, of course But the question is like a volcano right where we're going to stop him do it to when I ask him to stop exploding You know, this is just what happens, but it's nature in a way, but basically What's happening is that when you take analog content, you know DVDs or movies or songs, right? You put them on to a digital network The value of that content is in general one-tenth The money value right because what happens is that in the choices that we have and because distribution is basically free some Well, it's right the value guys gets dramatically reduced So what happens here is that in instead of saying that we're going to sell music and make the money from selling the music We sell everything around the music for example the experience that tickets the merchandise and the HD versions You know whatever other stuff we have right you can see this happening pretty much in every industry right it used to be the core value what we sell is one thing and the music that was cities and downloads, right? But now the distribution is in the middle But it's basically the added values are getting to be much bigger than the middle and this is something what we have to learn Is to say okay? If we have Spotify and people are not paying or they're paying with ads, right? Then what else would they pay for and the answer is as there's what Kevin Kelly calls the new generatives But there's 50 things that they would be paying for example high definition classical music All right life recording from venues live streaming people already pay 350 million dollars a year for classical music remote access, right? It's that's already happening Would they pay to be a fan and get into a private virtual room with the artists and and see the latest remix That would pay and they are paying for that already, right? So I'd skip to this slide because it's a very good question Clearly speaks to the mechanics and the and the issue here Okay, Kevin Kelly blog. He's a he's the co-founder of wired and is he's a really influential guy if you put in Kevin Kelly On YouTube you see lots of speeches that he's talking about these things, right and Kevin says He wrote a book what technology wants which kind of hairy book, but you should read it if you if you can Kevin says When copies are free We need to sell something that can't be copied And the reality is as much as we would hate this right copies are free. They're not legally free, but they're de facto free Free in some way or the other right so when copies are free We need to sell something that can't be copied and you know what this is good news for artists Because what cannot be copied is for example relevance right is actually authenticity It's got a whole range of things there. He's talking about I explained one of them immediacy, okay? When you go to a concert of an artist There's a trend now to say well you can buy that very performance that you went to Because you were there right and maybe it's also videos so you can see what actually happened It's like a like a souvenir right and it's immediate because as you are there you're buying it Using a QR code or radio chip or a poster or coupon or the mobile phone, right? And if the price is low enough Everybody does it And of course it sounds bad because it's a live recording. It's not the same in the studio. It's not as good Right, but it's an immediacy effect and if I'm a fan I'll buy it You know I used to sell books on my speaking gigs and I could never have enough books Even though most people I don't think actually read them, but when I was done speaking They would always buy all of the books because of the immediacy effect, right? They love to have the book and I couldn't carry enough books So and of course bands know this when you play somewhere you can sell CDs, right? I mean people don't like CDs, but they buy you to do anyway because of this authentic effect, right? So this immediacy is a very very big thing that goes along with the idea of authenticity Is it really you? Is it the real recording? Is it an authorized book? Is it a Authorized translation of the book People pay for this thing and this is why we pay for apps We pay for apps because of all these things The app in a way is a new CD you could say but it's temporary, you know don't get too excited about that Okay People get tired of that too, but basically Kevin Kelly says this is this should be our motto for our future to say Well copies are free. What else can we say that can't be copied, right? And that has a lot to do for example. We had lots of sessions yesterday about branding, right? This is why every single major brand in the next five years will make a deal somehow with music, right? Because music is a factor of emotion that sells the brand. This is why converse doing is doing this This is why they have the Pepsi refresh project. This is why you have Kickstarter, right brands getting involved there So that's all very good news For us in terms of what happens there. The other one is for example find ability Find ability means There's so many bands so many artists so many labels, you know, where do I go first? Well, the answer is I pay attention to what my friends are paying attention to And I will pay for the social filtering for the curation I will pay and the Facebook will launch these tools, right? And I will pay with my attention for example, you can clearly see when Facebook goes public right Facebook has almost a billion users Okay, Facebook is is is a highway now It's a highway that we can drive on And now Facebook is becoming cable TV without the cable In other words Facebook is the ubiquitous platform for us to move our stuff on The other thing is that Facebook has so much data a scary amount of data I downloaded the other day of my data from Facebook was 2.8 gig and To just to see what they have for me, right? They have all this data about me that Facebook can very easily go to brands and say you know what you want a 14 year old kid that's into skateboarding whose father is on a cruise ship. We'll find that person for you and They can make a match and they can do the right pitch and pay for our content that way So that you'll see a very very powerful relationship for example This idea of selling things on Facebook, right? That is clearly going to be a major platform for us As much as Facebook has other issues, of course that we don't really want to touch on Quickly about this point and I think you know a little bit of time very soon here Don't let people like Rupert Murdoch or Fox or any of the other guys right or any of the guys in record business Confuses people are willing to pay if I wasn't believing that I wouldn't be standing because it would be ridiculous, right? I mean, why would you bother? People are paying everywhere people are paying for the most bizarre stuff because they have a reason to pay The problem isn't the pay. It's the wall in newspapers You have a reader who reads the New York Times for example, I like to read online, right? Sooner or later you hit the wall and it says make it up. You can take it or leave it It's like a hard stop And most of people there two percent of people saying well now this is I guess I have to do this now Right and this is like iTunes. This is the iTunes wall, right? 2% of the population in the countries where iTunes exists Continuously buy music. I mean you have to be a fool of course to fill up your iPod for ten thousand dollars, right? I mean who does that? I think there are some people who do that, right? But you hit this wall All right, most people don't get over the wall If you're going to base your business on this kind of model you're in deep trouble, right? I mean never mind the other ones who are pissed off and just delete you forever So instead of doing it that way We'll do it like this We make a gradual climb to a place where they're willing to pay I mean hey, that's not rocket science. That has been in business for a long time cable TV right Cable TV works like this because what it costs to put the cable into the ground to get me cable TV is a Lot more than the payment I make to start with cable TV In fact, I think it cost them something like eight hundred dollars to connect people to cable TV If they came to me and said you know what you want cable TV give me eight hundred bucks and then a hundred a month But I would tell them to get lost instead what they did is I said it's twelve dollars and They ate their losses Now guess what happens now in America. I don't know the numbers in Germany. It's more satellite Now eighty five dollars average is what Americans pay to cable television and eighty percent of Americans are paying Why don't we do it like this? I mean, why don't we find this approach of saying you know what? We have these services the first level is more or less free the second level You have an option to buy something else and we go all the way up to where we want to be which is a hundred percent of the population That's the only logic that works on the web Twitter Skype Facebook LinkedIn Zing eBay Amazon and You only will do this if you understand digital economics, right? Because otherwise you're saying you know what you pay or you get lost And that's what we've been doing for ten years. That's itunes. I mean as much as I love itunes and Apple I mean obviously I love Apple stuff, right? That's not a solution That's a fig leaf Again as much as I love the itunes guys and Steve Jobs in his work, right? This does not solve the problem So for us also as content creators This model is much better because in this model we are the key constituents, right? Nothing goes without the real guys doing the real thing on the other end And this is precisely why we don't have it right because it puts the content creators and the consumers in charge Not the companies in the middle So that needs to change um Another key important point, right? this is a Really interesting phenomena in London called secret cinema Okay, well you sign up for this club and they put on Movie performances in ridges and subway tunnels and old buildings and so on and you get to decide what place You're part of this Experienced thing and this is by far the most popular way now that people discover really interesting stuff And they go through their social network to connect there, right? and This phenomenon clearly shows that you know, it's really about creating experiences I mean if you want to sell what you're doing, you know If you're looking at the old examples in the music business ECM records put them all your world music or so It's an experience, right? It's something special. That's what Motown Records and Blue Note used to be It's a stamp of something It's like Burning Man as I said yesterday, right? Why the hell did we go to Burning Man or some of us, right? Well? It's a special experience, right? I mean it can't be copied It can't just be copied. You don't sell a download of Burning Man Anymore questions? I think we have to come to Conclusion you're very soon. Do we have time pressure anybody? Do we have time pressure to actually get out of here? We don't Okay, well, okay. I'll do minutes. Okay All right, I want to summarize a little bit. Okay before you before I let you go Attention is the new currency Don't worry too much about when you get started about how you're gonna get money out of people The bottom line is when you have people's attention The system is in place of course currently we don't really have the system in place That's another story at an infrastructure issue, but when you have people to tension look at Facebook, right? They have people's attention. They're going to fetch a hundred billion dollars in the stock market And then of course you have to merit to keep people's attention. That's another story So attention is a new currency very important We'll skip this one as an artist or label or a writer or a musician You have to send a signal that you are a must-have If you are an option You're in trouble I mean you have to have a signal that says you know what I am the one who's going to do this gig because I have the best Motown band in town. I'm gonna do the gig right or you have to send a signal a must-have signal I mean, this is why we have Lady Gaga being such a huge success, right? First of all, of course, she has a whole different philosophy about her stuff and then she sends a must-have signal You must have seen it It's like it's like a movement in a way you could say and then Are you worth talking about? Ask yourself that question. This is a very painful question when I was a musician. I Did this for 10 years. I decided one day. You know what? It's been interesting, but I don't really have that much to offer that I can be the must-go-to guy So you have to be sure that you're worth talking about Whatever the angle is it has to be real So do we have more questions? Otherwise, I'm going to get to the end of this As much as our rate on Apple on their business philosophy Here's our friend Steve Rest in peace and he said something very important. He says stay hungry. Stay foolish This is one of our biggest problems in the music business, right? For a long time We were spoiled by the fact that we were selling CDs and made a billions of dollars for nothing essentially reissuing stuff, right and Then we stopped being foolish We basically said, you know technology is you know proof to me first where the money is If you're living your life based on our eye based on return on investment You're going to be so slow that you will wonder what has run over you when you're done at the end of the day So you can't always think about return on investment when you make an investment in the future clearly It doesn't exist yet So stay foolish means, you know what if good ideas are coming along, let's jump on them Let's agree that we will try this And this is very important. I think also for your personal career Is to stay open to what develops? I think what we're seeing this right now is that musicians are now part of society for example In advertising that musicians are very very sought after in advertising because of the ideas because they can improvise So we have to remain open to all of the options. So that would be my tip for you stay hungry to stay foolish Do we have an urgent question or a comment or a? Bomb can we have a microphone then we'll wrap up in a second or just speak loud so everybody hears it Okay, you already saw it Okay, sorry Okay. Yes. Yes. Okay, this one. Actually, that's a good one. Thanks very much for bringing this up. Yeah Okay, let me shortcut because I think people have to leave. Okay. I know where you're going with this. It's actually a very good summary It's good that you lead us back to this right because in a network society. We are part of an ecosystem So we have to create lubrication between the wheels I we have to collaborate to make this work and what we're seeing here is that we're heading into a direction where if we refuse We drop out so That's my final comment. Thanks very much for coming You