The Hot Seat: Gerd Leonhard

Published in The Music Network

As the media landscape changes at an awesome pace, Gerd Leonhard has neatly carved out a status as the sage of the digital sage. The self-styled “music and media futurist” is one of the top commentators in the game, his one-man roadshow passing through 15 countries over the past year. Leonhard will add Australia to that list for the first time when he delivers a keynote speech at the August 20-22 AustralAsian Music Business Conference in Sydney. The Basel, Switzerland-based media thinker penned the influential tomes Music 2.0 and The Future of Music: Manifesto for the Digital Music Revolution, a provocative account of the dying conventional recording industry and the digital saviours at hand.  He has just completed his fourth book, Broadband Culture.

Gerd, how do you see the music business shifting?

We’re move away from the traditional scarcity model which is preventing people from doing stuff to a model which allows them to do stuff. It’s pretty clear that the old way of doing business of music is driving against the cliffs. All revenues are declining, all models are gone, copyright can no longer be enforced in a way that we anticipated. There’s a whole new approach to how business is being done in music, and that is based on selling access rather than copies. It’s now about making money around the music rather than with the music. Rather than the old model which says ‘you can buy the song now if you give me a dollar,’ the new model says ‘you can listen and stream and do whatever for free’ as part of this growing process. You can then offer high-definition concert recordings, a better distribution stream or a deluxe DVD, which will all be done in a highly sophisticated up-selling process.

Where is the money to be made?

The ISPs hold the key to monetising music on the Web. But they are not going to get involved in a system that enforces rules that users don’t like. Music on the Web has to be licensed like it is on the radio and TV – a public license. A license that becomes available to anyone who needs one. Today on the Web there is no standard for anything for music, you have to negotiate every country, every company, every publisher. It’s a dysfunctional system.

Will it become a functional one anytime soon?

It’s a political debate, just like radio and television was. At a certain point, the governments said ‘hey everybody’s listening to radio, but radio isn’t legal. But there’s no way we cannot make radio legal now, because its part of the infrastructure.’ The Web is the same thing. The new model where everything is licensed and everybody participates is much better for the creators and the users, but it may not be so good for people in the middle, because they constantly have to add value.

So where do labels fit into this new model?

Anybody who adds value will do great. Anyone who just extracts value will do lousy. My anticipation is that most of the majors will leave the music business because the enormous margins of the past are no longer realistic. The new players in the music business will be the electronics companies, device makers and of course the mobile phone companies. All the telecom companies will move up the food chain into content so that they become the lubricant of the music system. This is very good news for anybody who wants to be there and be creative about adding value. But it’s bad news for big companies who are just interested in extracting money.