zed equals zee

Terry McBride, CEO of Canada’s Nettwerk Music Group, gave this year’s Zafris Lecture at the Berklee College of Music. Our intrepid correspondent Tim Smith was in attendence, and he files this report for zed equals zee:

Given the recent economic news and the hangdog looks on the faces of record label execs for, oh, the last ten years or so, it might be surprising to hear Terry McBride, the CEO of the “indie major” Nettwerk label, predicting good things ahead for labels—and that the industry’s savior might already be in your pocket.

As McBride tells it, record labels have lost the battle to make money on music as content—it’s estimated that they cash in on less than 5% of digital downloads—and they need to find new ways to leverage a consumer’s connection to the artist. A song is an emotional experience, he says, and more than just a copyright. Listening to a song makes it yours: ultimately, you own the song, because you own its context and meaning. While that’s a nice sentiment, he’s not just interested in the warm fuzzies; he wants to find ways to exploit that emotional connection. The way McBride blends the languages of branding and monetization with his obvious and genuine enthusiasm for music is instructive. To him, authenticity is critical. Rather than being incompatible with commercialization, he argues that authenticity is necessary to  build a brand that consumers like us are more likely to identify with. McBride extends this focus on authenticity to even include advertising; aligning the artist’s brand with advertisers that believe the same things and represent the same causes (hey, it worked for Bono, right?).

Nettwerk is conducting some ongoing experimentation with user-generated content to try to reach into that emotional space of involved fans, one-upping Radiohead’s “Nude” contest. Hip-hop artist K-OS‘s new album, due out at the end of March, will include two discs: the album itself, and a fan “pre-mix” CD. The stems (the vocal, instrumental, and loop tracks used in the album) have already been released to fans, and an online voting process will help narrow down the tracks that will eventually make it onto the second disc.

But what McBride is really excited about is the potential for mobile applications to change how labels make money. He foresees a digital world in which Amazon, eMusic, and other pay and free download sites, not to mention hard-drive-based portable MP3 players, have become largely irrelevant in favor of expansive Rhapsody-style jukeboxes in the sky. He particularly talked up the model of  the Slacker Internet music devices, which cache streaming content feeds programmed at the Slacker mothership (an optimism perhaps inconsistent with the devices’ frequent appearances at discount-product-graveyard woot.com). He also predicts that innovative applications, such as Shazam or Tap Tap Revenge, will depend heavily on metadata in addition to music itself, and that leveraging metadata could be an important revenue source for labels. Combining internationalization, lyrics, video content, and even studio content like stems, will be key to producing compelling applications.

To date, though, these compelling products aren’t coming from the record industry, which generally hasn’t understood developing technologies and might be too atherosclerotic to respond even if they did. At the Q&A, I asked how indie developers would be able to get access to these metadata streams—the music is publicly available, after all, but not the metadata. He seemed a little surprised. Most record labels, he thought, wouldn’t acknowledge the value of the data they have or understand why they need to be available. He sees the community “wikifying” it and coming together to produce metadata for content through some sort of crowdsourcing mechanism. A couple of examples of this do already exist:  English-language lyrics are easy to find, and the GraceNote and FreeDB databases let users provide artist and track information for audio CDs. But it’s not clear that the user community can produce something of sufficient depth and quality to be useful off the shelf.

As you’d expect, given his experience and stature, McBride seems to really get the business and the consumer experience of music in some important ways. There’s definitely something to the ideas that the growing capabilities of mobile devices and pervasive connectivity could change the way that we interact with our music libraries, and have new kinds of experiences with an artist and their music. But is the app store the thing that will tie them together? That remains an open question—it’s time to get building and see.

[More info at Terry McBride’s Blog. Thanks to Nick for the invitation!]

MP3: K-OS – 4-3-2-1 [buy]