The deals over the last few years have been changing in the sense that the basic structure is the same the deals have gotten much more difficult. There are fewer of them, the record companies are spending less money, deals are smaller for the same level artists than they would have been a number of years ago because the same level of artist is selling far less CDs than they would have a number of years ago and therefore the whole economics of the business is changing. Also as we speak companies are scared and when they’re scare they tend to cut back and not spend the way that they did which is understandable; they need to do it to survive. And that in a sense is healthy in the long term because it makes for a tighter business but it’s also painful in the short term. We’re also seeing new revenue model streams where the record companies came to the conclusion of look we’re the locomotive driving an engine and then the artist makes money from touring and from merchandising and song writing and publishing and things that we don’t’ share in. And therefore if we’re going to put the kind of money in marketing and into an artist we should share in the other areas. And while this is not widespread there are a number of companies doing it and there are certainly a number of companies that are asking to share in income streams beyond simply records.

I don’t think anybody at this point knows the answer to how the music business resolves itself to become a healthy and viable in the long term. I think there is any number of possible solutions or indeed there maybe a bunch of smaller solutions that add up to one larger solution. There are several different things floating around. In my mind one of the key aspects of the future is cell phones because every kid has a cell phone even if they don’t’ have a credit card. And it’s really easy to get something if you’ve got a cell phone particularly when mom or dad are paying the bill. And therefore I think a model for the future is the ability, which we’re not there technologically yet, to get any song you want anytime you want it on your cell phone with a high quality. And at some point that becomes a monthly service fee which is divided amongst the companies. And if feels like it’s free even though you’re paying for it and you don’t think about it. And therefore it becomes a way of feeling like you’re getting the same kind of experience. By the way once you do that do you need to own music anymore? It’s not the way we’re used to doing it but it may not be necessary. Why carry around your whole collection of music if you can get it anytime you want it and you can hear anything you want anytime and it’s constantly updated and organized on somebody else’s server that says here’s my favorites and by the way we’ve got a lot more in case you’re interested. That’s a model for the future. Certainly a tax on CD burners, a tax on hard drives, a tax on iPods, any of these things are possible models but you’re running into a lot of political difficulties when you do things like that because the computer people think if there’s some extra money to be paid for a hard drive it would rather have it in their pocket not in the government’s. And therefore there are very powerful lobby and so it’s a difficult thing to get done politically. But I do think there are models like that in the future.
The internet is clearly a model; the advertising on the internet is enormous amounts of money. whether it trickles down or works out to be divied up for people who are watching videos or listening to music on there, whether that becomes significant we don’t’ know at this point. But I think all these put together will form an industry; we just don’t’ know yet what it’s going to look like.
Currently in the cell phone market music is made on ring tones and something called ring backs. A ring tone is when someone calls your phone it plays a song. A ring back is when you call someone else’s phone instead of hearing a busy signal or a ringing you hear the song that’s being played. They’re very different technologically but essentially it’s just a fee that someone pays to have that song either downloaded to your phone to play or else on a server somewhere to come instead of hearing a busy signal or hearing a ringing. And that sounds like a novelty business but at least as of the last year it was over $3.5 billion worldwide. And it’s this odd phenomenon becuase it’s a fashion statement on your phone people will pay $2.00 or $3.00 for a song to download 30 seconds of it when they will go and steal it rather than pay $.99 for the full song on Apple iTunes.
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