Monday, October 18, 2004

My notes of the presentation by Joichi Ito at Aula

I was last Thursday listening at Joichi Ito at Aula (Finland) who gave a great presentation about the future of music business. I always appreciate people who are able to give a brilliant and interesting presentation without using any slides. Very skilled.

I recorded some notes of the presentation in my notebook. There were several good points I think I should share with you. My notes in cursive:
  • Joi was in Italy:

    • CreativeCommons copylefters accused as pirates

    • Tone changed once understanding grew.

  • It costs $300, 000 to produce one hit – iTunes sells one for 99c

  • If price is low enough, maybe there will be no piracy:

    • When people are doing file sharing, they are working.

    • If the price is low enough (e.g. 20 cents), people would actually pay instead of working (waiting for download to complete, search for quality sources etc).

  • Music is all about social interaction:

    • Friends recommend, people go file sharing.

    • File sharing increases people's interest in music.

    • This probably results in more record sales as interest in music increases.

  • Social navigation like Amazon's collaborative filtering allows you to discover music and books you have never heard of.

  • 95% of physical CD's are pirated:

    • Most artists lose money on CD's.

    • They make CD's anyway.

    • Cheapest way to market.

    • Let people steal your music to become famous.

  • Music brings people together. Fills the gap between people.

  • Mass media made folk music ”not cool”.

  • Head market is shrinking. We have to focus on tail.

  • Joi's example: LastFM:

    • Creates a profile of your musical taste.

    • Similar to Amazon recommendation of books.

    • Stream music from your personal playlist to others.

    • Chat included.

    • You can add music from playlists of others to your own.

    • Creates playlists similar to your taste.

    • lastfm/user/joi

    • Allows people to share their own music even for money.

    • Allows customers to vote for price of music.

  • Marketing music is difficult:

    • Joi explains a case where Yahoo marketed wrongly and the market was found elsewhere.

    • You never know where your fans are.

    • Collaborative filtering as a solution.

    • You can now theoretically charge 20c per song and still make money – long tail.

  • You can't make Michael Jackson in the long tail:

    • Joi suggests there will be no Jacksons in the future because people are no more paying attention to mass media (Whoa, you should have seen the faces of some music bosses in the room).

  • Musicians are ready to pay to do music if they had no other option. Musicians are ready to make music for no-profit, as long as no one exploits them in a bad way.

  • Pro-Am revolution:

    • Amateurs sharing music, doing music and learning about music.

    • There are a lot of professional musicians, who are not as talented as some amateurs.

    • To become professional, you would have to go to school and buy and learn a lot of things before you can become mainstream.

  • Joi explains Karaoke success in Japan:

    • You want to participate in the creative process.

    • Real market is in the long tail – amateur music.

    • ”Digital tribes”. Digital tribes may now have their own music.

  • Identify your community and provide what they need.

  • Figure out what to sell them.

  • Band becomes a community platform. Allows two-way communication between fans and bands.

  • Flash community as a sharing amateur community – some make music, some make storyboards, some make animation, some make coding etc. They share and put things together.

  • Company is required to clear all copyrights in music business – lawyers create a part of the record expenses.

  • CreativeCommons is good because it decreases the parasitic cost. Allows content to be more fluently shared.

  • Delivery and discovery business. Delivery is free (P2P). It's all about how these communities develop.

  • Moving to world where everyone has their own voice. Internet is like a radio – they promise all kinds of crap.

  • In Google individual weblogs come up in searches.

  • Joi quotes someone I don't remember by name: Democracy is not about giving everyone a vote – real democracy is giving everyone a voice.

Then I wrote down my question to Joi, which he didn't quite answer but the answer was great anyway:

You talk about the fact that Internet enables part of the distribution and lawyer profits to decrease, leaving us collaborative filtering which is helping people to find stuff in the long tail. Sounds like local distribution is about to disappear. That actually the long tail becomes more profitable and the market size of the long tail is bigger than the head (mainstream stuff). When is this going to happen? When are these communities going to take off on a wide scale? 5 years? 10 years? What are the obstacles that could break this idealistic approach? How DRM (digital rights management) relates to it: is it harming or supporting the future you describe?

My point was that this is no way mainstream, yet. Generally speaking people are not yet discovering the long tail online but probably some day will. Sure there are examples already that lead the way but general public is not yet aware of what they are missing at the moment.

Also, I think the big media empires might react very aggressively in this change and try to lock-in people in the old world (with DRM etc.) until they figure out it's impossible and change their business plan. It will hit their forehead pretty soon.

This is where I closed my notebook and just listened other people asking questions. There were some interesting points about blogging and how record companies are suing their music loving customers. The add by Pepsi was displayed with a parody version of it. Does anybody know where to get these?

Great stuff.

Btw., I asked about how Technorati is going to make money in the future (I checked their website and saw no $$$ signs anywhere). Mr. Ito told me that they are revealing some value-added services for power users and advertisers. It seems they follow the < 5% rule of making money from communities. See Livejournal as an example of the 5% rule. LinkedIn is doing the same. Ebayization of everything.


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