 I work as a futurist. Many of you may wonder what a futurist is and I'll have a response to that in a second, but in the previous life I was a musician, composer. I went to Berklee College in Boston for 15 years and I switched to the Internet world in the mid-90s to figure out how to use the Internet for music and it was a very interesting time. And so after a while I realized that most of my ideas in music business were 5 or 10 years too early, which becomes a problem when you're trying to survive. So I wrote a book in 2003 called The Future of Music that some of you may know and ever since then I've been working as a futurist. So basically my job is to take all these different things that are flying around which are rather complex, especially in music and in media and bring them down to a bottom line to help clients reinvent. And I do this for many people around the world, many clients in the music business, in the media business and many others as well. And just as a disclosure, I do some work for Google and YouTube. I do not help to advise Google or YouTube on their music policy or any such thing. I think they know what they're going to do there. So it has actually been mentioned several times when I spoke somewhere about the music business that I work for Google, but as a disclosure I don't work for Google. I sometimes speak for them. So I have no agenda. Exactly the opposite is in fact the case. Just recently I moved all of my email away from Google because of the NSA affair. But different topic. So we live today in a world that has been refined and talked and called many times in a military term which I don't like using but it's a good fit called WUCA. Volatility, uncertainty, complexity, and ambiguity. Basically means it's a mess. So what we're seeing today is a large global change of every single paradigm that we have grown up with in the industrial society. This is not just a music problem. Every content creator, whether you're a writer or a dancer or a producer or a musician or an author are facing the same problem. Having said that, I don't think it's a bad thing. I think it's an interim area to where we're going to say well basically you can look at it on the left and you can say oh god this is just dystopian mess. We're screwed. I don't think that's true. I think the old system of music for example was essentially an aberration. We were extremely lucky when I was a musician to sell CDs because it was possible. But the future holds for us I think five billion connected people. That's going to be in three years. On mobile devices and tablets. Ready to pay because they have virtual money, they pay to the operator, they love music. Our problem is not that people don't want us or not interested. Our problem is that we haven't quite figured out the model of how to get to their purse yet. This is really our problem. This is not really a consumer problem. Most of what I want to talk about today is actually not bad. It may sound bad like a threat so I want to give you a bit of a warning. It's not dystopian. It just sounds a little bit like it sometimes. First of all I want to congratulate Sweden. As you know of course that's always a good thing to do when you're speaking in the country. Anyway the web index that came out a few days ago praises Sweden on the top number one spot for universal access, relevant content, freedom and openness and impact and empowerment. And you know what I think this has a lot to do with women. We're going to talk about that some more today. The fact that there's so many women involved here. I mean just look at this audience. I tell you 95% of my speaking gigs are guys only. So maybe that has something to do there. But also very interesting to see for example that the second slot or the third or fourth slot is the UK. Interesting to see that they are only in the fourth slot because they have 100% rating on relevant content about the UK on the internet. Otherwise they would be all the way down there. And Switzerland is not even on the list where I live. So we'll see what happens there. But the question about music I have is Sweden and Scandinavia in general showing us the future? I mean look at this chart. You've seen this before possibly. A comparison of music revenue change. 37% increase in Sweden. And growth of streaming 407%. While in the US the home of pop music you could say. Well that kind of pop music. Minus 5%. So what is so different about Sweden here? Is that a model for the future? And clearly if we're looking the other way. This is a slide from the New York Times showing that essentially downloading music for money like one track at a time has topped out. In other words, if you're hoping to sell downloads one by one. That was a good window for that with iTunes. But you know what? Once you spend $800 on downloading single songs. You eventually stop. It's not like movies where you consume another one. It's not that many. I mean I stopped at 1,250 euros when my kids used iTunes. Because they just download and click with my account. Like this can't be true. I'm going to end up with 10,000 euros worth of music. And you don't actually own it. So no wonder only 2% of the western population use iTunes to pay for music. That's not a solution. That's a fig leaf. It's a fake promise. I'll talk more about that, why that is in a second. Really what's happening with the internet is that we're facing a radical era of empowerment. And as consumers we love this. We can rate hotels, we can rate airlines, we can complain about EasyJet on their app. We can do all these things. We can rate doctors, we can rate futurists, we can talk bad about people are good. It's empowerment, right? But in music, the question is here in Sweden, 70% of revenues are streaming. Is that because the empowerment has happened here? Spotify has bundled with Talia, as far as I know. And Denmark is TTC and free music and parenthesis. Is that the boat that's going to float our money in the future? Providing access. So clearly, however, we're living in a world where this tidal wave is coming. And I think, again, this is good news, but it's kind of overwhelming right now. It's like when you sit on Twitter all day, it's like this huge fire hose of garbage or noise or occasional meaning flooding over you. It's a little bit like this, you know, artists, you know, we're looking at everything becoming digitized and the artists sort of sitting there and saying, oh my God, you know, what am I going to do with this? When I was a musician, I sent CDs out to get gigs, actual CDs. I sent out 500 and it was spent all day on the phone calling people for a gig. Now you do that on Facebook. Don't have to call anyone. I mean, that's a big step, digitization. But really, I think what happens here is that the music creator is becoming more powerful because the middleman are getting crunched. Well, actually, that means that the music creator will be getting more powerful once the crunching is done, I guess you could say. But there's an interesting angle here. What happens in this interim period? Now I think we're looking at this global transformation that we're seeing from product. There's a product, which in my view was an aberration because music has never been really a product. Music has a service and this is growing like crazy and the product is shrinking. We'll be looking at the end of CDs eventually. In countries like Switzerland where there's no price sensitivity, people buy whatever. But in Spain or in France or in South America or developing countries on CDs, there's no such thing. I mean, it's a relic. Give your kid a CD for Christmas, they're going to think you have to go to the loony bin. It's a crazy idea. So what's going to happen here is that we're moving from product to service to experiences, brands. I mean, why do you like Robin? Why do you like any musician? Not because they just make one CD or one product, because they're brand of what they stand for, what they say and how they sound. They're pretty much like why you like any artist really. So now I think we're moving in the direction of away from protection. This is a graph depicting what happens in the movie business. And then on the right side is the vast success of Netflix. All media is shifting from protection to engagement. It's as simple as that. If we have engagement, we'll make money. It's literally impossible if we have engagement and attention that you can't turn that into money. The question is how and when, of course, and what are the mechanisms? What are the laws governing this? Currently, most of the laws govern protection. When the protection is meaningless, why would the law of covering protection make money? That's like saying, you know, you're going to force something that doesn't exist anymore. There is no protection against people using our stuff. That's what computers do. I mean, so it's an interesting angle to see that we're moving pretty much in this direction across all media. And there's a great quote by Buckminster Fuller. It says, you never change things by fighting the existing reality to change something, build a new model that makes the old model obsolete. And that's what I would like you to do. The old music business is dysfunctional, is egotistical, and is self-obsessed, and is completely not working. I'm not saying all of it, but most of it. And I should know. I mean, it's been 17 years. So this new model is now shaping up. And I think we can see that here in Sweden. Very interesting. We'll have a debate about that shortly. So I think it's time to think about this kind of reset. You know, maybe this is a good time for a reset of rights licensing and how that works in Europe. I mean, clearly in Europe, we're going to have one army, one secret service. We're going to have one right society. That's where we're going. And that could be a company that basically deals with what's called big data, right? Because, you know, rights administration is mostly about data. So maybe STEM and SCAP will end up, you know, running the European society. I don't know. We'll think about that for a second. But anyway, what's happening now in technology is that we're living in an exponential world. As Ray Coltswell, the Singularity Guru, says, you know, what's happening here is mind-boggling. Very hard for us to understand because we are linear. I know if we count from 1 to 8, it's 1, 2, 3, 4, 5, 7, 8. When we count exponentials, 1, 2, 4, 8, 16, 32 and so on. It's exponential. And we're no longer at 2. We're at 4. The next point is 8. I mean, the change is a huge exponential wave. What we need to do here is we need to think about what are called offensive innovation. Not defensive. Not changing a minor thing, you know, so that musicians get their money quicker. Or, you know, whatever, all the YouTube deals are, those are great. But in the end, what is offensive innovation? That's the question. And it used to be when Spotify got started on this idea of music like water, it was offensive. Today, it's not. I use Spotify. I'm a very happy user. A lot for Daniel is doing. Swedish guy, of course. But 7 million users. Have they become part of the problem? Because they're also owned by the labels. Not to say that ownership by the labels is bad, but if there was ever a case for extortion, this would be it, right? You're not going to get to use my music until you give me equity. I'm not sure that's the right approach. I'm more about than a second, but bottom line is this. We're facing an exponential growth of internet users on mobile devices, watching videos, and being on the road with their devices. And because of that, all media is becoming disembodied. First happened with music, MP3s. Now it's movies, Netflix, Hulu, Amazon, books, the Kindle. I don't own education, textbooks, banking, money. Money is also a medium, really. So the disembodied of media is inevitable. Yes, it's better for me as a musician to sell a CD. It's better for me. It's better for me as an author to sell a printed book. I can count them. I can keep you from getting one. I can force you to pay. I can do all these things. But it's not going to happen. It's over. Embodiment of media. Some people will still have that unwanted. Yes, I love my library, but I'm 53. Do you really think a 20-year-old kid is going to look for your music as an embodied object? Maybe in vinyl, if he's a collector of sorts. Yes, but... So music is about access. You click and replace. In fact, you could say it's a radio station on the internet. It's free, and you click and replace. So what do we do about this? I think really what's happening is that this embodiment is forcing us to create a collective EU-wide approach of how we solve this problem. A structural problem. This is not a technical problem. It's a structural problem. Because this is the reality that we have to face, and I think this is a good thing. Copying is the same as listening. There's no difference. Now, if you're a lawyer, and there's some lawyers here, God forbid, in the audience, it's the same thing, right? Guess what? Mechanical-wide is the same in public performance. There's no difference. When you stream something online, it makes a copy. Every person in this room knows how to get an MP3 from YouTube. It's called Download Helper. Have you ever heard about it? YouTube has 1.2 billion users, and they're getting music for free. When you go to a party, that's how they play the music. There's no hard drive, there's no BitTorrent. BitTorrent is for old guys. It streams. Why would I use Spotify for 10 euros if it's free on YouTube? Can I also tell YouTube not to do this? I can because it's promotion. I need YouTube as an artist. Copying is the same as listening. Why do we make a legal difference? Why do we still act like the copying is expensive? Now, listening is free. Makes no sense. The incarnation of this trend is the mobile device. 80% of the entire world's internet traffic in 3 years will be on mobile devices. So if you think that you have a solution for people downloading one track at a time and paying you 2 euros, well, look somewhere else. What they're doing here is they have a mobile device, they click on the place, that's it. And it may save it for later or not. But this is what people are doing. The Brazilians, the Russians, the Indians, and the Indonesians will not be using iTunes and paying by the unit. Maybe four of them will do that. So here's the reality. Now, I face this reality very much myself as an author now. I wrote five books, my books are on the Kindle. Same thing. Bottom line is this. The revenue per unit, the green bar, is rapidly declining. We're looking at the value reduction of 90%, basically, or more, sometimes less. But the audience is exploding. So here's an example, right? City and vinyl, say 2 euros or 20 euros, right? 20 euros. iTunes gives me 2 euros for a download where I have to pay 2 euros. Spotify, very little. Pandora, even less. And YouTube, nothing really. Whose fault is this? Well, should we look whose fault it is? This is what happens in digital systems. It's efficient. Distribution is not a cost any longer. So we have this value decline per unit. But the audience is growing up from my 100 people that I have here to a potential of 5 billion or whatever fraction of that I can get. So do the math. What's better for us? I mean, first of all, of course, it's inevitable. There's nothing we can do about this. This is digital efficiency. It's exactly the same thing in an airline saying people can compare prices of flights and therefore have to be cheaper and more transparent and better, right? That's what we ask them to do. Same thing. So what's happening here is that the inevitable result of all of this is lower per unit cost for the consumer and income for us but a much higher audience. I'll go through some math in a second to explain how this could work. But there's nothing we can do about this. I mean, if you're watching a movie on Netflix, you have Netflix in this country, I think, right? We don't have it in Switzerland. We're not worthy. But here, if you watch on Netflix, do you know how much money the studio is getting from you for this, like 16 cents? You know how much money they're making when you buy a DVD, 24 euros? You think they're happy with this? But Netflix has 43 million subscribers. 43 million. And NBC Universal is getting some $350 million a year from what we do here with their stuff, with their TV shows. Well, what's better for them? Is it to say, no, we don't do this? We don't collect this money? And to sue people for piracy? They license Netflix. Not everywhere, but... And music is not unique. This is a graph showing what's happening in telecom. I mean, all of you guys know, of course, WhatsApp and Viber and iMessage. That's how you bypass the operator, right? No more SMS? You have your buddy in Tanzania? Use WhatsApp. That's what happens in the red line. Over-the-top messaging is beating SMS. And SMS is a $320 million revenue stream per day. Don't you wish you were in that business? $320 million per day. It's gonna go away. It's dying. Because now users have the internet, they can do whatever they want for messaging. Anything, really. What are they gonna do about this? Same problem. So when distribution becomes abundant, which means everywhere, anytime, at lower cost, then new things become scarce. Distribution is no longer the problem. On the flip side, distribution is no longer the moneymaker. Flip side of that is, there's new scarcity. What brand? What relevance? What context? What timeliness? You know, I subscribe to only three things or four things online, actually. Spotify. And then in terms of magazines, I subscribe to the Economist and to Wired and The Guardian. And the Economist, you know, you may know the Economist. I never actually read the Economist. I throw away the printed copy as soon as it arrives. I listen to the Economist on my app. It's an audio track when I drive. It reads the magazine to me. That's why I pay $150 a year to the Economist, only because the writing is good and it reads to me. That's the new scarcity, my eyes, my time. So clearly, no wonder, looking at this chart from Henry Brogett from last week, that new media companies on the left are valued more than twice as important on the stock market than the old media companies. That's what they do. They add value or they try. You can argue, of course, they're exploiting. Of course, you can argue that. But where are things going? I mean, all of these guys want to be these guys. It's a trend that we're seeing everywhere. So because I've been in the music business, on and off as a satellite, I could say, for a long time, this is my main problem. We're living in ego land. It's all about us. It's about my revenue stream, my turf, my authority, the way I do things. I've never seen such a dysfunctional system in my life anywhere else and I meet a lot of people. Even the banking business beats the music business. And that's saying a lot. We have to fix this. This whole idea of saying, this is what I do, this is what you do and stay out of my turf and we can't compete and I mean, where is this going to go? This is a typical scenario of a zero-sum mindset. The pie is limited, I get it, you don't get it. That's not the future. This pie is growing. It's not a zero-sum game with five billion consumers. We're not competing on that level. We're competing with other media. So this is what I call the economy. This is not a music economy. It's a music economy. There are four companies who are running recorded music and then there's an independent one that's acting like a major company. Gremlin or Merlin, sorry. So we have an economy, right? And really what we need is we need an ecosystem, a function, an ecosystem to make this work. That's what Europe is all about. I mean, you want to go back to America, you're back at the economy, right? This is why it's not working over there. We need to think of an ecosystem. Peter Drucker, a great management guru, said, the greatest thing in times of danger is not the change or turbulence itself, but is to act with yesterday's logic. And God knows this has happened in the music business until like yesterday, okay? Well, it's good to see that it's actually not happening here, considering that we have this event here and actually speak openly about these issues. Yesterday's logic protection. If I don't protect my music, nobody will pay. And what kind of logic is that? It's like forcing to love the same thing. It's an oxymoron. Content is king? Why do we even ask that question? Of course, content is important, but there's so many more things that are triggers for purchase. That's what it's all about. Why would you buy something? Context, relevance, tenderness, brand, packaging. It's not just one thing, right? And of course, the ultimate one is this one, right? Customer control. That's iTunes. You know, I love Steve Jobs, Rest in Peace. I am an Apple guy, but that's going to work in the future. Not in your wildest dreams, it wouldn't. This is what's going to work in the future. This is a slide from my friend Ross Dawson, also a futurist, talking about the newspaper business. And we call this the reason to buy. Guess what? There's 150 reasons to buy, depending on who you are. Maybe you're into interfaces, maybe you're into relevance, maybe you're into Flipboard, and you'll pay a premium to see it better. Maybe you're into novelty, reputation, whatever the reason is. It's a combination of things of added values. That's what Spotify does well. I don't buy Spotify because I listen to music. In fact, I don't use it much for that. I look at the playlist of my friends. I share stuff on Facebook. I find new artists. It's all those things. That's why I pay. So the new generatives, they make the royal family, right? So don't ask, content is king. Content is a royal family. It's more than one thing. So what we need to do is to go away from the industrial mindset of the music business, which is truly industrial, industrial in that very sense of this picture, to this mindset. This is the Osani tribe in Africa. They create a game that only works if everybody is connected, everybody is working out. So basically we have to go to the digital and exponential mindset. We have to not control distribution, but monetize attention. I'll talk in a second what that means. We have to go from monopolistic ecosystems to an ecosystem. And this is incidentally what Europe is facing right now. Either we create this ecosystem of working together or we're finished. Because there's no alternative. We can't keep on pursuing an ecosystem. Take television. What's happening in television is that people who have cable TV are not going to cut it tomorrow because they're used to it. Apple 5 is not going to cancel cable subscription because it's 100 euros or so because she likes to surf around there. She's used to that. But when you're 20, you'll never sign up for cable because you have this, right? You have over-the-top apps. Do you need to sign up for cable or satellite? Well, you just use Apple TV, Roku or whatever. It's all there. So you're getting the same thing for a fraction of the value. It's no longer about distribution, but about attention. And we have to embrace that. It's a bitter pill when you have been in the distribution business. Okay. The people who made the horseshoes for their horses were not happy about the train arriving. But you can't outload the train because you're a horseshoe owner. So interesting to see that the streaming market took off in countries like Mark Mulligan, a music expert, says where the download market didn't start. Already like, you know, you see here, Sweden, Norway, Netherlands, France, Deezer and so on and so on, right? I mean, clearly, in the markets where hardware dominates, America, England, Germany, then it's all about single downloads. It's kind of interesting to see that Apple owns 83% of the download market worldwide, but they make almost no money with music. They make money selling boxes. I mean, they could drop out, give all the music for free. It wouldn't make a difference to them. They sell more stuff with apps and make more money with apps and with music. And we're looking to them to help us. God forbid. I mean, look at this. What's happening here? It's totally obvious. You know, this one line being subscription service and the other one is paid to download. UK, USA, Germany, Japan. It's working there because it's a hardware-dominated places. People buy hardware and they're large. Looking at this is totally clear where we're going with this. I mean, the green line is a decline in physical purchases, you know, CDs. The blue one is online and the red line is mobile. We're going all the way to mobile. And when you're on mobile, you can see here US Mobile Music Revenue. Guess what it is? 86% advertising supported. This is US, right? We'll never be that high here. But do you know how much money people are spending on advertising? Brands? I mean, in music business you can't even find it under the rug if you compare the proportion as $680 billion a year to spend on advertising. The average value of an internet user is $49 per year. You don't think there's enough money to pay for music when the scale is there? It's clear. The numbers are totally obvious. There is no long-term mass market for selling downloads. This is something that happens on the side or could be a premium for example, a high definition. Yes. But it's about selling access. So, you may have heard about the plans of the melodives to rebuild themselves as this, as a fake resort about the Venetian hotel where 68% of Americans that go to the Venetian hotel in Las Vegas say they will not go to Venice, Italy because it's the same thing. Right? Well, nothing against Americans, of course, but the point I'm trying to make here is this, right? It's fake. Right? It's not real. Fake scarcity is misleading both the artist and the consumer. Fake scarcity means people will pay for one song whatever we ask for them to pay because we make it scarce. And iTunes is saying that if you are downloading another song, you have to pay again. That's fake scarcity. It's not real. This is only for people who have unlimited budget, like us, basically. But not for our fans. I mean, again, I love Apple and iTunes, it was great what they did, but we have to move further than this. Fake scarcity is not going to work. It's not going to help us. The CEO of Netflix, Reed Hastings he calls this problem with distribution, managed dissatisfaction. Meaning that we were always really pissed off about how it was working, but there was nothing else to do. So if you want to watch a movie, you have to have HBO in America, or you want to watch a sports game, you have to have a sports channel, you have to have satellite. If you want to buy music, you have to buy SED, and so on and so on. And iTunes was the epitome of managed dissatisfaction. I mean, think about that for a second. When you die, God forbid, your entire music library is gone. Nobody has the right to get your idea and your music. You don't actually own it. And when you watch a movie on iTunes, you fall asleep, guess what happens the next day? You can't watch it. It's only 24 hours. Great. I mean, I do this. I mean, it's amazing that I actually do this. But anyway, so it's not a sustainable business. It's a Godzilla, basically. I mean, if you're looking at what's happening here, paid downloads in the U.S., percentage gain and loss, dead, don't stake your life on paid downloads. I know it sounds good from the outside, because it's, you know, it's unit sales. We can count them. But it won't work. 43 million subscribers Netflix has. 10 bucks a month, unlimited viewing. What's the damage if we do this? And $10 for movies translates into, guess what? $1 for music in the equivalent, right? In the logical equivalent, because, you know, it takes two hours to watch a movie. And how many are you going to watch? 40 a month? I mean, not if you're not unemployed. So, I mean, look at the growth here that we're seeing. I'll give you a short comment from Kevin Spacey who you may know is a star of Netflix series called House of Cards, and I don't recommend it. I think it's actually on Netflix. Not that I can watch it on Netflix, but here's a very interesting comment about music. Clearly, the success of the Netflix model releasing the entire season of House of Cards at once proved one thing. The audience wants the control. They want the freedom. If they want to binge as they've been doing on House of Cards and lots of other shows, then we should let them binge. I'm going to get these days out of my life. And through this new form of distribution, we have demonstrated that we have learned the lesson that the music industry didn't learn. Give people what they want, when they want it, in the form they want it in, at a reasonable price, and they'll more likely pay for it rather than steal it. Well, some will still steal it, but... You get his message? I mean, that's the message. The problem is this. Why are we whining about how little Spotify pays us? I mean, they have 7 million subscribers. I mean, that's like less people than go buy groceries today at the grocery store, in average. We need 700 million subscribers. How do we get there? Distribution as a key revenue driver is a burning platform, just like the BP platform. It's dying. That's the future. And attention. If people like you, they click on your stuff many, many, many times and you accumulate money through this. I'll show you on the business model side how that works. But that is our future. It's all about this. The reason I'm here is because I'm somewhat a brand. I mean, you can watch my YouTube videos. There's 150 of them on my channel. And just watch that and never come to see me. It's about brand and audience. It's not new. So the consumer is standing there giving us a very simple message that we have to look at. You're saying, I'm happy to pay cash or pay with attention, which is usually data in the sense of Google or YouTube. Highly personalized, timely, social, meaningful, relevant, but it must be under 100% irresistible terms. If you're not okay with that, leave the music business. You can't argue with the 5 billion people. And lots of people have done this right. I mean, you know, Jeff Bezos, the guy who owns Amazon, he just bought the Washington Post, the most politically widespread newspaper in the world. He's going to stop printing. That's what I think. Because he wants to change the model. This is really offensive innovation. So it must be 100% irresistible. And ask yourself a question. Is Spotify, as much as I like it, 100% irresistible? The answer is, it's for me it's actually about 10 euros. But it's not in general. The hurdle is too high. How do we get 700 million people on Spotify? We reduce the hurdle. Of course, we can't do that because the labels own them. So sorry we can't solve that problem right away. But the message is really clear. I mean, if you're looking at this chart, consumers want cheap, bundled or fields like free, and then they're going to take the next step. They want to be convinced first. So on the left, you see all the stuff that people do, watch music videos, download a song on the internet stream. Music, watch music. And the last point, the little box is paid to download an album. It's obvious what consumers want. We have to do something to make this work. So now we're on this path and it's very interesting to see how the change is happening in the last two years, which gives me hope about the dysfunctional family of the music business. But it used to be that free beats everything. Now that we know that everybody is listening to everything that we do and we become naked and the NSA is looking at our very, you know, secrets that we have and Google knows more about you than your wife, so their control and distribution was essential. That's the logic, clearly. Because if you don't, then it's free. But the future is the reverse. All of a sudden we're looking at this saying it's about value, trust, relevance and it's about earning and keeping attention. This is a huge shift that's happening in this path because people are mobile devices. So we're going to see this kind of shift towards services like this. And this is really great news for us. People are willing to pay. That's why they pay for Netflix, for Flickr, for Farmville, what I used to pay for Farmville, or for LinkedIn. People pay. This is a game changer. So I call this a forced evolution of music. And we're here now at this point where we happily sold copies, and that was a huge bubble that we loved because we can count them. It's a human, you know, can touch it and count that it's real. Now we have to license access. That's what it's all about. License access. And then on top of that we generate new premiums. High definition, concert recording, remixes, different language versions, synchronization, you name it. There's hundreds. If we skip this part and say we don't like to license access because it's a dangerous model because people may stop buying copies, they will stop buying copies. I mean, if you haven't understood that yet, you've got a problem. You really think in 10 years kids will learn from printed books and they'll be digital textbooks. I mean, they'll be in the cloud. It's completely obvious. So what we see here, we have a model for that. Radio makes illegal what used to be illegal by providing a license. We have to do the same thing. I've talked about this for a long time. So clearly one of the bottom lines here is that access-based revenues are doing great. Publishing, synchronization, public performance. I mean, look at the chart of the publishers. They haven't suffered much from the internet. And over here I mean record income from the performing rights organizations that clearly shows us it's about licensing access not copies. Copies are the same. I know it's painful if your lawyer will give you nightmares. How are you going to make money in the future? So the legal structure of the music business needs to be rethought and transformed like this car becomes a robot. And the worst part now, because I live in Switzerland, this cartoon says, we've considered every potential risk except the risk of avoiding all risks. And this is where we're at. It's like, what risks? What are you talking about here? The risk is to die or to try to live. That's the risk you're facing. Now, pick one. Pick one. That's our risk. There's nothing else here. There's only those two options. So how would we get a profit in music, not publishing? Music market in Europe, here's an example. One dollar per internet user in Europe per month for music. One euro, sorry. So currently that means 600 billion internet users. Internet users. 600 billion a month. Euros. 7.2 billion a year. That's 40% of the current global music market. One euro a month. Now, that euro doesn't even have to be paid by them. Because guess what? A euro a month, I can easily find a way to bundle that. Advertising, streaming, marketing, sponsorship. It's a euro. I'll show you some facts about this. Would anybody not have Spotify or Deezer or SimFi if it was a euro? And if they didn't have to pay but just pick the right provider like TDC or Talia? Be no-banner. Problem solved. Upselling from the one euro to dozens of premiums. For example, you could say, for the euro, you can only keep 50 or 100 songs on your mobile. Not 2,000. Or you don't get HD or you don't get the concerts. You can do some regional bundling. You can say, for five years extra that you pay directly, yes, like the pro badge on Flickr. Add another 400 billion mobile phone users. Clearly, the stats are there. That's the Avalanche Revenue. Europe has the highest internet penetration in the world. Our countries are perfect for this. We're seeing how ads spending is increasing on the internet. It's a no-brainer. This is the same logic. Why is this not happening? Of course, because those that own distribution don't like this idea. Artists would love this. Wouldn't you love 7.2 billion a year as money, as guaranteed money? Minimum money? So looking at the giants what they've done on the internet, Apple, Google, Amazon, they've gone from the core business into new areas. What they've done is they are already looking at this and saying music is indispensable for us, but guess what? They already see music as disembodied and mobile and social and cloud-based added value. They're already doing this. And no matter what work I do for them, I have to tell you these people are going to go ahead with this idea. So what's our response to this? Why don't we go to YouTube and say, you know what, one year a month that you can easily make with advertising, you put the download button next to the video. And that could be provided by Spotify or wherever I care. Easy, be no-brainer. Because people already are doing this on YouTube. They're already downloading the Mp4 and the Mp3 without paying. It's ridiculous that we haven't done this. I mean, I can't figure out why we haven't come to a solution yet. The money is there. You don't think the money is there? Online advertising will take 50% of the entire global advertising budget in the next three years. We're talking about $300 billion. You don't think they'll get immediately $10 billion from music out of this? You know, it's clearly it's hard to see the stats there. So the question I have for Europe and for the Swedish leaders to lead Europe, that's my only hope. The Swiss people won't do it. They're not even Europe. But can Europe create a new digital music ecosystem? This is our future. We have to create this. And it's really about the shift that I call from ego to eco. This is an interesting illustration I found on Tumblr. So I'm using it. I don't know who did it, but it fits me. The thing is we need this, right? At leadership. We need people who are going to put their brain on a rocket and their heart on a rocket to actually go out and suggest this and not come up with minor fixes. We need a reset that goes away from this idea of saying we're going to control everything to a biosphere. I mean, this is where we're going with all business, really. Not just with music. Netflix is a biosphere. Netflix is now a producer of videos. They've gone from a distributor to a publisher and a producer. This is happening to everyone there. That's about the transformation. So I'll wrap up and then we'll have our discussion with Paul. So our bottom line is we have to collaborate now or we get squashed. That's our choice. Let me ask you this question. Why do you think Netflix exists and people are paying this much money for movies while we haven't gotten anyone to go beyond 10 billion subscriptions in music? It's not the people who don't like music because we've tried to eat the pie and have it. Tried to not endanger what was before. And this, of course, is by and large not the issue with artists. But artists have supported this among their organizations and we should discuss later. So we are now at a pivotal point. Either we can keep running around in circles while everybody is trying to innovate the business and we'll eventually squash everyone else. Or we can take a detour and we can actually break the cycle. So a brief summary. Point one, the CD, physical media, is quickly disappearing in the river mirror. And that's going to happen. And downloading singles, same thing. It's disappearing. It's still here. It's still growing. I'm sure you're happy about iTunes Revenues now. Great. But that's temporary. Managed dissatisfaction won't make the pie bigger. We're not going to get more money from the consumers by telling them what to do or how to not be dissatisfied but somewhat stay around. Streaming in excess is the new ownership. We need new laws for this. If streaming is the same as owning, then we have to change the law. We have to make it legal to stream and to own at the same time, which currently really it isn't. It's perverse to see that most people use YouTube as a digital jukebox and it's very easily possible to convert the song any which way you like. At the same time, of course the argument made is only streaming. Everybody knows it's a fig leaf so it may as well look at this. Access may result in a 90% reduced unit price but it has a thousand times the audience. Yes, it will take some time to build this. No, we won't get there if we charge 10 euros outright. We can charge 10 euros later as an upsell. We need digital music licenses that enable billions of users to generate money. If we're going to generate money from 2% of the population like we're doing now with iTunes yes, that's not going to be good. We need everyone to be able to contribute. Many new premiums can be offered on top of this and we'll discuss in the conversation. The really sort of new or even old you could say embodiment of music is the artist himself, herself. It's the band. The embodiment is the artist. That's what it should be and that's what it always has been. We're going back to this in the digital environment to not copy a person. You can copy a file. This is the value of the artist. The artist is going to get more stronger in this relationship and that is exactly what the problem is in the eyes of the industry. It's like the user and the artist getting stronger is not going to be a good position for me to get 90% of the money in the middle. So social media clearly are big opportunities. We'll talk about that in the EU because we need offensive innovation, real leadership, hypercollaboration. I mean three years ago, not two years ago, the US Post Office one of the largest organizations in the world headed for bankruptcy like Kodak made a deal with UPS to stay alive. UPS was the arc enemy, the worst entity in the world to compete with the US Post Office. They got together and made a deal to survive. That's going to be the same thing for us. We're going to have a hypercollaborate with all possible entities to get to a solution quickly. So thanks for your time. You can download this presentation on my website sometime this afternoon when I get online at futurewithgird.com. Thanks very much for listening and now I look forward to a nice conversation. Thanks very much. So good morning. My name is Paul Brindley. I'm from Music Ally in London and first of all can I just invite me to this great event in such a lovely surroundings too. I'm really delighted to be here. I'm particularly pleased to be able to have a chance to respond to get and give them a bit of a grilling and then we're going to have more of a discussion with some great panelists that are going to join us in a moment. But let's just kick off. I agree with you most of what you say. Many people would dispute the fact that we're moving from a world of ownership towards a world based upon access that eventually the CD probably will disappear. In some markets it's going to linger longer obviously it's not uniform everywhere. But when you talk about control going away and the control over distribution going away you look at Spotify you look at YouTube what are they if they're not distribution channels? They're platforms. YouTube is our platform Well hang on it's distributing music to the consumer isn't it? It's a platform that distributes music. The distribution part of YouTube and Twitter and other social media platforms is not the main part the main part of that is the connectivity of people and what they decide to use. And this is where they're a little bit like radio it's very social, it's collective there's no central programming so distribution that's one of their components but distribution from their point of view is free and this is of course how they make their living being what Geron linear calls siren servers they have their own reasons for doing that. I guess my point is you didn't actually talk so much today you have talked in the past a little bit more about kind of disintermediation the idea that perhaps labels become a little bit more relevant I tend to think actually it's almost the opposite that's really happening that what we've now got yes we've got a new opportunity to go direct to the consumer on the net but you know it's actually a much more complicated world in which we live and to manage all these channels the new channels as well as the old channels in the current state that we're in is it just not actually even more complicated and therefore you know you do need these kind of intermediaries you need to know a lot about how to reach the consumer and that's you know that's distribution well you always need intermediaries if you're an artist right because you don't want to do with the marketing and stuff yourself so there's a role for labels there's a role for publishers of course there's a role for societies copyright societies and performing rights organizations yes but that role is strictly between satisfying the artist and the consumer there's no other place for that there's not a self satisfying role that we had until now that's basically if it fits us then we'll help the artist or we'll help the consumer you know there's deadly attitude so distribution as such is in the cloud it's just there so we can decide to say that we don't like it to be there and we don't want to get paid or we can legalize it and collect in a way that we will get paid that's exactly what Spotify is sure is but of course as I said earlier from my point of view I quite like how they're doing this and I don't care about the 10 years I'm just saying it's not going to be a solution for 700 million or a billion people because of the proposal if we are successful but is that just because it's too expensive I'm not saying it's too expensive I mean for me I like I'm just saying we don't get mass penetration with that kind of model and we need mass penetration like radio why should every consumer I don't think every consumer I think this is a bit of an arrogance going on in this argument to be honest to expect every internet user to want to pay one euro a month that's not what I'm saying they won't actually pay on the end they pay with their attention like they do now at the end of what we're seeing on the web is that when I go somewhere like Google, YouTube, Twitter I pay with my presence I create momentum I pay with my data, in many cases I pay with my privacy so they make money because I'm there and because I'm there they add the music I'm going to be there even more it generates value why should the intermediaries the ISPs the people that are providing the pipes access and distribution why should they be paying the music industry all this money they're going to pay if something adds value to their users but I think what we found unfortunately over the past decade or so is that perhaps what we thought in terms of how much value music services could add to telcos and ISPs it just hasn't really proven to be the case now that's largely because it's been priced too highly but do you really think and of course it's a lovely simplistic solution to say if everybody in the whole world paid a dollar a year a month it's called radio Paul radio had exactly the same problem and how much money did radio make for a long time for all of us, it made a boatload of money if you were popular if you're not then you didn't get any money you just simply deemed legal after the fact that everybody used it and YouTube is the same thing I mean YouTube went and did this without asking anyone and now they are de facto way of life and so what are we going to do about these guys we're going to say you have to go back and not do this we have to actually legalize them and collect it's exactly the same problem I think it's completely obvious here that for an ISP or a mobile operator for a month based on advertising that they could actually get probably more than the euro back what if they don't want to offer that music for this well I can tell you I've been involved with about 30 of them when I talk to telcos especially around the world the number one thing is that they're saying we're not doing music because these people are ridiculous because it's too expensive yes to get the licenses not only that if every telco is a kind of basic deal what's the point the point would be that you do something else on top of the deal I don't listen to radio stations because they have a license to play music I listen to radio stations because of what they play and how they play and who the personalities are it's exactly the same thing here I would use Deezer or Spotify if they had a public license like that because they look different they do different things, they have different plugins they have different whatever not because they're legal nobody uses Spotify because they're legal because they have benefit it's convenient it's a much better way just like Netflix I could go and download Breaking Bad from the internet but instead I much prefer watching it on a very convenient service I don't live in Switzerland let me bring it to the bottom line the problem with the streaming services is that we come from our value perception it comes from the CD so we're trying to get the maximum we can out of those poor suckers that are still paying and this is fundamentally wrong because what it does it takes the same model and extrapolates it forward and says we're getting XYZ for the CD XYZ from AirPlay, XYZ from these guys and so therefore this is the Spotify price and now incidentally we also own Spotify so now we can extend the same thinking which gets us into exactly the same trap that means everybody else is doing this for free while we're asking for 10 years if we were able to say that we get absolutely everyone connected to a service like this and then upsell to other platforms we'd make a boatload of money let's get down to a bit more reality then as to how do we get there how do you get that kind of license is it a compulsory license is it a statutory license how do we get to the point where ISPs can get this license to offer all music for a euro a month charged to their consumers I think what's happening is quite obvious is that the refusal to deal with the reality of what is actually happening results in a disconnect to where this is happening in parallel to us saying that it shouldn't be happening and as you can see now in the last few months every artist is complaining about how little Spotify pays them at the same time Spotify is going to go bankrupt at the same thing with 7 million users or 10 or whatever they have so it's a fundamental disconnect there to get that license means a legal framework that says this is how we're going to go about it in general if that can be achieved maybe has to be done on a national level so it's a compulsory license it's a collective voluntary license is what I would prefer but yes if the rights owners don't agree how are you going to get to the point you're going to force you in a situation where I was in a band my old band have been dormant for a number of years but they're actually thinking of doing stuff now and they like to think that they could sort of manage the way that they come back and make a reappearance so that might be doing an exclusive deal here or an exclusive deal over there there's a lot of artists as we know who are already not happy with having their music on Spotify now as a consumer it would be annoying that there are gaps in the catalogue but what are you saying you're saying like well too bad we're just going to force you have no right at all you can have your right and not get paid what do you prefer this is what it comes down to that's a great idea that I have the right to refuse I'm not talking about emotion picture with my music which is different I'm talking about people listening downloading my music where does that stop digital content so why not have a composer license why is music so special that it should be treated as an isolated case that the state that governments should intervene to force you as a musician as a composer as a recording artist as a rights owner, a label or publisher to have no rights over how you choose to distribute your content I'm not saying that we as creators and as people who live in the society as users also we have to create a solution that is a fit for 98 100% of the population and how we get there there's only two choices either the system collapses which is imminent it's not imminent is it because revenues are beginning to grow it's turning we're not back to the heady days of a decade ago it's not collapsing if you call the solution a 90% reduction then I call that a collapse it's shrunk and revenues have gone elsewhere the live music market has expanded enormously publishers have not been hit quite so hard as labels it's not a 90% reduction overall in the music industry there's new revenue streams synchronization and other things like that true, but at the same time selling music if I want to sell music de facto doesn't really exist anymore I mean if you're lucky it does because you're a certain segment that can still sell physical music or downloads so if there's no provision to license my access then I'll never make any money from it so if I'm unlucky in five years there's no more CDs I'm part of all the streaming services but they're only licensed to the illustrious 2% we still haven't answered my question does music be a special case? do we stop at music? or do we have compulsory licensing for all digital content? where do we stop? music is special of course in any case because the way that you use music is not at all the same than reading a book or watching a movie I agree with that so the value equation if I buy a book on the Kindle I can get any book I want I can get a year's speak Russian get any book you want but it's an ugly PDF or you can download a .mobi file and send it to your Kindle most people don't know how to do this so I spend five dollars on this book I don't read a hundred books a year I mean I do but most people don't so therefore five dollars is okay for a Kindle book and I'll read it for ten hours so it's well spent money a movie I watch for two hours it's a quality HD stream I don't want it to flicker and stuff so therefore I'm willing to spend because it's an experience on a big screen music is ephemeral it's in the ether it's in my car it's in my mobile and it goes by in three minutes so therefore the way that I look at the time spent versus money spent is less at least initially so when I'm a music fan I find artists there and I pay for that on Spotify but if I really like this stuff maybe I will download and pay for the app for example I'm gonna bring on Daniel and Lena in a second but one last question just to sort of follow on because you know you do often refer to Netflix and you know the Kevin Spacey point which I think you could say okay look the music industry was very slow to get to where we've got to today the music industry obviously is getting there a little bit more quickly though it was equally as defensive at first it has to be said but why do you think then it is the case that Netflix has been so much more successful in terms of you know the total number of subscribers compared to Spotify why do you think that is I said before it's irresistible I mean if you're interested in movies most people are you are looking at how to get those shows or television or movies at some price I mean ten dollars for movies is irresistible and it works great and it's unlimited it's a no brainer basically what are you gonna pay for cable is 70 euros and then you don't even get the movies that you want so it's a totally wipe out proposal and this is why they take them off like a firecracker this is where the cable guys and the satellite guys don't like Netflix because I don't need them when I have Netflix music to make it a wipe or a proposal like that it would have to be in the range of a euro because then I say what it's a total no brainer of course I do this this is how we get everyone I mean I agree that the price difference perhaps is a little bit too much but surely is it not also the case that people are just much more consumers are used to paying in some countries more than others but they're used to paying on a subscription basis for audio visual content for TV and film they're not for music so it's not just the industry that has to get used to this do you not think that Spotify has done pretty well really I mean I think in terms of the number of subscribers they've reached to date and the conversion rate I'm not just sucking up to Spotify being in Sweden I just think it's amazing how well they have done really it's amazing how well iTunes has done considering the idiotic proposal that you don't actually own anything I mean hey I love Spotify I think they've done great I wish them luck and it's a great service I love it and my kids love it yes but is it a solution on a global scale for five billion people the answer is in the current form no because five people will not do this there will not be enough money there it's not like Netflix where every country in the world is writing furious emails to read hastings to launch in their country because it's a no brainer we do the same for music we got two billion users you know this is not happening not because the money isn't there it's because the control of distribution is the paradigm and that is what's going to kill us