Solid 2011 Music Predictions from Around the Web

Opinions are like…well, we know everybody’s got one, especially in the music industry. In an attempt to sort the wheat from the chaff, I’m posting a few of my favorites:

First, my 2 cents:

Many folks predicting the future of music agree that consumer brands will play an increasingly larger role in the music industry. I agree. Headway is being made in this direction, especially in digital advertising. Keep an eye out for new revenue streams to develop, primarily from video advertising and branded entertainment. VEVO is making progress, although I don’t know many artists that have seen a big spike in their royalty payments as a result.

With that in mind, look for individual artists and their management teams to optimize digital content for advertising. Some of the major labels, digital content providers like VEVO and various ad networks do offer advertisers advanced demographic and psycho-graphic targeting, but this revenue is spread over a large number of artists enriching individual acts very little if at all; when you factor in all the corporate bureaucracy that exists between the end user and the artist, that number gets even smaller. (The trick is making sure that the artist owns the rights to the content he or she intends to monetize.)

In 2011, brands and advertisers will connect with specific artists that complement their message and in turn these consumer brands and ad agencies will pay a premium for real estate across that artist’s website, video content and social media properties. It’s easy to argue against this assumption by making the point that one artist’s website won’t offer scale in terms of the millions of monthly impressions or video streams advertisers are looking for. However, there is still value in brand/artist co-branding if leveraged properly, and collaboration among several artists can help bring enough scale to impact a brand’s reach. In fact, quite a few online music collectives are currently well positioned to exploit this model. For example, Sonicbids and Ourstage, have already done most of the heavy lifting by constructing a network, categorizing the inventory by demo and psychographics and by building site traffic.

For this to work, artists should cut out the middleman and go directly to the brands themselves. To do so, they must measure consumer visitation and engagement using legitimate analytics services that advertisers are accustomed to seeing. Bands need to enlist analytics services such as Quantcast and Nielsen to quantify their digital offering in order to tell a compelling story about their value online in a language brands and ad agencies understand. In my opinion, TopSpin Media is at the leading edge of the artist analytics movement so I would expect big things from them in 2011.

I also agree with many music 2011predicters that digital video will continue to grow, especially with DIY utilities provided by YouTube, Kyte, Ustream and iMovie. However, I think we will see more bands experimenting with innovative content production; bands will adapt content for mobile technology – laptops, tablets, smart phones – by integrating interactive technology with audio and video content to create more engaging and holistic experiences that maintain continuity across multiple songs or entire albums. Think American Idiot or Tommy but as artist/album-centric content produced specifically for the iPad.

- RZ

1. Subscription Services Will Be Popular, But Not Profitable

If Spotify’s $26.7 million loss in 2009 is any indication, subscription services still have a ways to go before they’ll actually become profitable. Hell, Last.fm isn’t even turning a profit yet — although it could be getting close. Still, this year and the end of last year saw services gaining even more steam — MOG launched its all-you-can-eat service in December, followed by Android and iPhone apps, and, most recently, an app in the Chrome Web Store. Rdio also launched to much excitement, and Slacker Radio announced that it would be launching an on-demand offering as well (possibly across a variety of devices to be unveiled at CES).
Yes, streaming music services have been around for a while now, but what’s changed in the past year is the number of devices you can access them on — everything from the iPad to Roku to the Xbox Kinect to the upcoming Chrome OS devices. The ability to listen to music on-demand across a variety of devices is sure to be a hit among consumers — it just remains to be seen how these services will monetize.

2. More Artists Will Finally Get Social

You know your friend in that band that never gets gigs? The guy who basically has no idea how to use Twitter and thinks Foursquare is a playground game? Well, even that guy is going to start realizing in the coming year that he can’t just keeping sticking his head in the sand where social media is concerned.

I mean, Billboard recently tapped Next Big Sound to gather stats for its “Social 50″ Chart; we’re talking about a publication that’s been around since 1894 paying attention to social metrics where artist popularity is concerned. Let’s hear that date again: 1894. So basically the fact that you’re over 30 is no excuse for not having a social media presence.
Add to that MTV’s burgeoning interest in the social space — its assignation of a Twitter DJ and the launch of its new music discovery tool — and you’ve got a lot of eyes on the digital sphere.

In the coming year, I see more artists following in the footsteps of socially savvy bands like Kanye West (for better or worse), Ben Folds and Pomplamoose, and learning how to use social tools to their advantage.

3. Music Videos Will Continue Their Renaissance Online

This past year, a very sizable player entered the online music video space: Vevo, which launched at the end of 2009. In just one year, Vevo has become a very worthy adversary to sites like MTV.com when it comes to hosting music videos, and MTV, for its part, has started amping up its online/on-air video output as well.

Now, we’re not saying Vevo has single-handedly sparked the renaissance of the music video, but it has helped give the format a kick in the you-know-what. That platform, coupled with the growing ability of artists like OK Go, Arcade Fire and Kanye West (he’s everywhere on this list) to create true cinematic, and sometimes interactive masterpieces — which are the bread and butter of the viral web — have ensured that online music videos will continue to be eminently shareable in the coming year.

4. Ping Will Never Take Off — Never
Apple’s new social network, Ping, launched to much excitement this year, only to disappoint those of us in the media who were keen on replacing MySpace with a new locale for music discovery. Why? Well, there were scant few bands on the site at launch, and two months out of the gate, the site boasted only 2,000 artists. (The process to get an account on Ping is not as simple as creating a username and logging in; Apple needs to vet bands before granting them access.)
In the ensuing months, Ping has made an effort to become more social, adding Twitter integration and social playlists, but the site’s focus — predictably — seems to be more on commerce than social. For example: Yes, you can create and share playlists, but you can’t use your own songs to build said playlists — you must assemble them from iTune’s song previews. So, basically, by sharing playlists users are creating free advertising for iTunes rather than trading tunes.
Yes, MySpace may be suffering some financial woes (and a bit of an identity crisis), but it’s obviously a much more social sphere than a place for commerce (which may explain the financial woes). Case in point: It just added a suite of fan management tools for artists. Ping may not die this year — Apple is a tenacious beast — but I don’t see it gaining any traction either.

5. Music Piracy Will Not Die

Despite the looming spectre of the COICA Internet Censorship and Copyright Bill, people will continue to file share and steal music. They’ve been doing it for 10-plus years and they’re not stopping now.  Unfortunately, artists will continue to have to find creative ways to take advantage of the leaky nature of the web by adopting pay-what-you-wish models (a la Girl Talk and Trent Reznor) and taking advantage of the buzz that a leak builds (a la The National).  That’s not to say that matters are looking sunny for artists. It’s likely they will have to continue to diversify their methods of garnering cash by ramping up touring and licensing deals.

MusicGlobalization.com

1. Companies Will Hold Stake In Artists

Because so many companies are now adopting the Apple advertising model by using relatively unknown musicians in product campaigns, partnership expectations will also change. This will lead to companies expecting 360° deals just like the labels. For example, if Nike makes the collective decision to break an artist by dropping their tunes in an upcoming commercial, Nike will now expect to have a percentage stake in digital and physical sales for X amount of time. It’s an inevitable partnership now that businesses clearly understand the parallel between advertising and music.

2. Major Labels Will Adapt

Major labels have adapted to industry change about as well as I can ice skate. 2011 will be different. iPad, and it’s soon to be rivals will be the change catalyst. The new creations are making it clear to labels that that digital music and the vehicles of delivery are not a fade. Because of this, Apps can’t be ignored. He who holds the money contains control, and unfortunately (or fortunately) major labels still control the money. This means they’ll redirect their funds, stop fighting the digital warfare and begin pumping major money into App development to break their roster. 2011, expect more interface between gaming and music using Top 40 artists.

3. Shelf Space With Big Box Retailers

Walmart, Best Buy, and Target have already made substantial reductions to their physical music shelf space. This will continue. Instead of carrying the standard Top 40 albums, trends indicate the big box stores will ink only exclusive partnerships and carry heritage acts who have a long sales history.

4. Big Box Retailers Outside Of The United States

As buying trends for U.S. retailers dwindle to scary levels, Australian, Asian, and some remote European stores dominate physical sales. Why? Several contributing factors (ie: economic) but primarily because the vital relationship between non-traditional retailers and musicians has yet to explode in overseas territories. This will lead to a continuation of traditional sales methods (ie: big box stores).

5. Artist Development Will Once Again Exist

The label retaliation against poor industry figures has historically been to invest less and less into developing musicians in order to sustain long-term careers. The result, you see quick famed one hit wonders and lots of junk on the radio. Because labels will seize the opportunity by increasing their annual budgets by investing in Apps, labels will once again focus on developing sustainable careers – not one hit wonders. Likewise, A&R will once again become relevant which will lead to an increase in music industry jobs.

6. New Genres Will Generate Mainstream Impacts

The U.K. has been the latest genre maker by taking underground beats and spinning them into mainstream success through licensing contracts. As this may not be monumental at the moment, it does indicate there is a potential trend to accept non-mainstream genres for advertising campaigns.

7. The European Market Will Level Out

European musicians have made the largest dent in the global market. As American groups once controlled the Billboard charts, now European bred artists make up over a quarter. In most cases, European musicians have more crossover appeal in the States rather than their homeland. However, 2010 year end statistics revealed markets leveled out. Meaning, European musicians, because of their success abroad, are gaining popularity momentum in their respected home countries. This ultimately means European musicians no longer need American fans to be successful so touring and marketing efforts will remain close to home.

8. Traditional Managers Will Be Weeded Out

Just as labels have been forced to adapt, managers and their respected models will also be forced to change. Management models, meaning – how managers manage groups, break bands, pitch musicians to labels and generate exposure – must adapt. Why? This worked when groups wanted to sign with labels. The progression was clear – obtain a local/regional following, secure radio airplay in that given area and use these statistics to negotiate with labels. Now, nobody wants to be associated with labels. Musicians are their own labels. Managers must accept this. Getting an act signed used to be the management payoff. Now, managers must find different revenue streams to be successful.

9. Entertainment Attorneys Must Adapt

It’s remarkable that anyone can be more hardheaded than label executives, but entertainment attorneys take the cake. Seeing I’m an entertainment attorney I cringe with that remark! Somehow attorneys figured they could continue charging the same astronomical hourly rates given the economic landscape, and further, musicians today feel as if they don’t even need attorneys. Well the truth is musicians need entertainment attorneys more so than another else on their creative team, however they need a good entertainment attorney who understands the new industry playing field and works on a budget.
*For further explanation, my door is always open and my e-mail is checked three times a day – I’ll be happy to discuss: marty@frascognamusic.com

10. The Australian Market Will Continue To Amaze

Australia dominated the music world closing out 2010, and this trend will continue with a vengeance in 2011. With a strong indie label market, solid distribution outlets, and a fan base who goes bananas for live music, Australia will further separate themselves from the flailing world economy.

11. Canada Picks Up Steam

I’m constantly asked, “where is the next big market,” and I always reluctantly answer. This year it’s been easy for me to answer Canada. Why? Because the American music market is leveling out in terms of accepting international musicians, labels have yet to make a solid leap into actually signing international acts. With this said, Americans will fill this void very conservatively. As opposed to signing international acts which labels can’t afford to groom, American labels will look towards their neighbors up North. Canada, unfortunately for many Americans is considered “foreign” (musically speaking) and American fans have an intriguing attraction to Canadians. Couple that with unique radio pockets, talents musicians, and potentially strong tour venues due to their close proximity to the American border, and you’ve got a stew of success for 2011.

CEO Panos Panay

1. Consumer brands investment in new music talent will overtake record label investment.

Just today I was reading in the Wall Street Journal that investment by US consumer brands in music related activities will top $1 billion. This doubled in the past 6 years. By contrast, global investment by record labels in new artists was $5 billion. Remember, for one this is a core activity, for the other, this is a fraction of their marketing spend. With record sales declining and consumer spending finally picking up, you don’t need to be Nostradamus to figure out this one. Companies to watch: Diesel and Red Bull.

2. More artist-fan funding collaborations ahead.

The RIAA likes to treat consumers like they’re thieves. Don’t touch this, don’t steal that, it belongs to us, not you and not the artist. Smart artists know that the future is all about direct collaborations with fans. Check out Amanda Palmer who funded her Radiohead covers album exclusively with fan donations. Music fans want to help artists. They just don’t want to spend $15 buying music albums any more. Expect creative funding partnerships ahead. Companies to watch: PledgeMusic and Headliner.fm.

3. App Stores will become the new record stores.

We’ve seen all kinds of mainstream artists release apps in 2010 (Jay Z and Phish are just two) and a host of app developers get more and more business from artists. When the album shrank from a 12 inch (30 cm) LP to a byte-sized file on your computer, with it was lost the experience of touching, feeling, seeing and discovering the artist in that tangible way that only vinyl offered. Apps bring that interactivity back. Companies to watch: MobBase and Mobile Roadie.

4. Smartphones are the new… automobiles.

Most of us listen to radio when we drive (I don’t know about you but I can’t recall the last time I turned on the radio at home; late-80’s maybe?) With a host of online radio apps available, more and more people will experience radio and new music discovery from the comfort of their own… subway, stroll to work, gym, dog walk. The iPhone has enabled Pandora to finally make the jump from niche to the mainstream and many other companies are coming after it. Company to watch: Rdio. Wild card: Clear Channel.

5. The word Indie becomes obsolete.

Back in the day, indie meant independent. As in, I have no major label behind me because I’m not main-stream enough. Indie was punk. Or speed metal. Or name any genre that did not fit into the neat radio formats of the day. Indie was The Ramones. Or Wendy O. Williams. I have no idea what indie means anymore. NARAS considers even artists like Paul McCartney to be indie this year. Most artists don’t even want to be on or need a label the way they had/used to. So, an artist is independent of what? The end of labeling is a good thing. 2011 will be the year when we stop talking about indie music and indie artists but about new music and emerging artists. Or, just about MUSIC.

1. A Major Label Shakeup
Despite all the talk about the major label system collapsing at any moment, it doesn’t seem likely. However, 2011 may finally see a restructuring of assets and brands. EMI has no shortage of financial issues, and the current discussion points to Terra Firma handing them over to Citigroup in the near future. The big assumption is that EMI will be broken up and sold in pieces to the other three majors (Universal, Sony and Warner Bros). Of particular value is EMI’s publishing division, and if the piecemeal sale does happen, there may be a fight for this asset. Of course, the other three majors aren’t having the smoothest time with cash-flow either, so it remains unclear exactly who can buy what. At minimum, EMI will not look the same at the end of 2011 as it does now.
2. Indie Label Opportunity Grows
All music companies will be focused on streamlining their efforts in 2011. This involves smarter processes, innovative policies, and keeping overhead low. Independent labels typically have had to function with these elements in place from day one; their ability to stay nimble will allow for continued growth opportunity. As business partnerships continue to solidify between content owners and brands, smaller labels will be able to adapt quickly and profit at lower revenue thresholds. This creates a strategic advantage that, if managed properly, will see upward trends on indie label balance sheets.

3. Streaming Services Reach Critical Mass

In 2011, someone will become the Apple of streaming — perhaps Apple itself. Consumers are getting closer and closer to accepting renting over owning content. Companies such as MOG, Rdio, Spotify, and Rhapsody are poised to capitalize on this. With good timing, savvy marketing, and clear messaging that succinctly communicates the benefits, a streaming music provider can easily take the leading role in this race. The safe money seems to be on Apple (in part thanks to the Lala acquisition), but the other contenders are quite serious and finding the level of funding necessary to compete. This sector is also making major moves into mobile and car audio; these additional distribution avenues only strengthen the push toward widespread adoption.

4. Free Continues Moving Upwards
“Free” has been a highly debated concept. One side states that the awareness and data capture free provides can be converted to sales over time. The opposition feels that free devalues content and sets the wrong precedent. The truth may lie somewhere in the middle, but it is clear that with the volume of free content (legal and otherwise) one has to be giving something away simply to stay competitive. This line of thinking is nothing new, but it has finally permeated the companies and artists at the top. The majors and superstars have relaxed their policies on free (especially when paired with data capture) and that trend will continue. This will happen in parallel with efforts to find techniques to convert free to paying — a critical element to make this model work.

5. The Essential Toolkit Solidifies

Digital marketers have an almost endless supply of new technology and techniques to try. However, over the past 18 months, many have faded away or a best-of-breed front-runner has emerged. In 2011 we will see this continue as it becomes more clear which technologies and techniques provide real value. In 2010, it became easy (and essential) to track true performance metrics; marketers now have multiple tools to evaluate effectiveness based on conversion, data capture, sentiment, and engagement. This analysis is helping define where to focus efforts — and that is helping digital music marketing become a more precise practice.
Companies with momentum in the digital marketing toolkit space include Topspin, Bandcamp, Nimbit, Rockdex, NextBigSound, Rootmusic, SoundCloud, Buzzdeck, Artistdata, Mozes, and the ever-essential Google Analytics. Let’s also not forget the mainstays — Twitter, Facebook, and email-marketing platforms such as ExactTarget, Mailchimp and Constant Contact.

6. The Net Neutrality Debate Continues

The positions and arguments haven’t changed much, but the Net neutrality discussion (particularly at the government level) has accelerated. In late December, the FCC approved rules that enable mobile carriers to regulate application use. Many members of Congress have already stated they will fight this by creating a new law. This debate is still far from over; expect heated discussion all year long.

In many ways 2011 won’t look much different than 2010. The music industry is still suffering from steep declines and is still building strategies and systems to counteract this. The key words moving forward are innovation and experimentation; most people have accepted the fact that we cannot force consumers to behave as they did in the past. Instead, we must seek to better understand our audience, foster stronger communication, and be willing to take leaps of faith on a regular basis.
Jason Feinberg is vice president, direct to consumer marketing for Concord Music Group. He is responsible for digital and physical direct-to-fan solutions for CMG’s frontline and catalog including the Rounder, Fantasy and Stax labels. Recent campaigns include Paul Simon, Allison Krauss, Paul McCartney, Elvis Costello, Carole King/James Taylor, and Crowded House. Follow Jason on Twitter @otmg

Deloitte predicts that 2011 revenues for digitally distributed music will exceed physical music sales in at least one major market, most likely the United States. This long-anticipated event will probably be driven by a sharp decline in CD sales, rather than a significant increase in digital music subscriptions or downloads1.

This leads to a related prediction: CD retail will start becoming a seasonal or event-driven purchase. By the fourth quarter of 2011, there could be 1,000 temporary “pop-up” music outlets created to meet occasional surges in demand. Pop-up outlets will be a small, but growing, niche segment2.
In 2011, the U.S. will likely be the first of the big-three recorded music markets to see digital music revenues from downloads, subscriptions and streaming services advertising surpass revenues from physical music. The UK is likely to follow, either in 2011 or by the end of 20123, assuming CD sales continue their steep decline4.To put the severity of this decline in perspective, CDs made up 75 percent of record labels’ 2009 revenues in the UK.

The decline in the CD market is likely to cause a marked reduction in year-round shelf space dedicated to physical music. Even with fewer competitors, dedicated music retailers may decide that their shrinking revenues and profit margins make physical music retailing less viable5. Some may diversify, shifting their focus from recorded music to equipment for playing music, concert and festival tickets, or music-related clothing.
Rather than selling popular hits, other music retailers may specialize in music genres that would be harder to discover on the Web. Their aim would be to attract fervent music fans who are willing to pay for music. These niche markets will likely make up only a small portion of total album sales, similar to vinyl record sales. For example, in the U.S., vinyl sales grew 250 percent from 2006 to 2009. However, the end result only represented 2.5 million units out of a total album market of 374 million6.

Despite the shift toward digitally distributed music, physical music retailing will not vanish: while demand for CDs in the medium term will continue, it will become increasingly seasonal. In 2010, nearly half of all CDs sold in the UK were expected to be purchased during the fourth quarter, driven by seasonal gifting and the finale of the X-Factor music talent show7.

Retailers will likely respond to variable demand by creating pop-up stores. Current music retailers might establish a variety of temporary stores, including conventional retail spaces with short-term leases8, temporary outlets in high traffic locations9, and small-scale outlets offering curated, exclusive merchandise10. These curated outlets could be located wherever and whenever there are people who want to buy CDs, such as live music venues11.

In the medium term, pop-up stores may also be set up to coincide with major record releases. A long line of fans eager to purchase a new release from a pop-up store could generate marketing buzz and increase record sales.

General retailers, such as department stores and supermarkets, may abandon selling CDs year-round if their turnover and margin targets are not met. Instead, they may only stock CDs when demand is stronger, such as during gift-giving seasons or major music events. In some cases, music might be sold from a pop-up outlet physically located within the main store12. During the rest of the year, music might only be available from the main store’s website13.
Bottom line

The next few years will probably remain challenging for music retailers. The one bright spot is that CD prices could rise over the medium term as dedicated CD buyers have fewer outlets to choose from. CDs could follow the path of vinyl LPs, which rose significantly in price following their exit from the mainstream.

Music fans who prefer CD audio quality might be willing to pay a higher price. However, price increases will not compensate for a continuing decline in unit sales; net revenues from recorded music will continue to decline.

Nevertheless, because recorded music provides crucial exposure for musicians, it is likely that record labels and other music promoters will continue to produce CDs – even at a loss.