Control Room's Aaron Grosky on the Music Industry's 'Final Frontier'
"There will continue to be a gradual but persistent transition to digital sales, with more licensing of music to brands, more interesting concepts in distribution like what Prince did, and artists targeting more narrowly where they think their audience is, striking deals with retailers and brands the way Paul McCartney and the Eagles have," said Aaron Grosky, president of cross-platform producer and distributor Control Room.
11/28/07 4:00 AM PT
There's no denying that seismic changes are afoot in the music industry. As the record labels engage in bitter battles over copyrights, artists are increasingly turning to alternative means of releasing music and reaching their fans.
Prince chose to give away his latest album, "Planet Earth," for free; Radiohead opted to let fans pay what they want. Madonna ended her 25-year relationship with Warner Bros., turning to concert promoter Live Nation instead. Paul McCartney signed a contract with Starbucks' Hear Music label, and the Eagles cut a deal with Wal-Mart for exclusive distribution. Meanwhile, Internet radio had a close brush with death, and the cross-platform "Live Earth" concert shattered all attendance expectations.
The music industry is already radically different from what it was 10 years ago; in another 10 years, it will likely have undergone another transformation. The E-Commerce Times had a chance to speak with Aaron Grosky, president of cross-platform producer and distributor Control Room, about the changes going on, what's yet to come, and what it all means for users.
E-Commerce Times: What does Control Room do exactly and what spurred its founding?
Aaron Grosky: Control Room is the leading producer and distributor of live entertainment in high definition across multiple platforms. We're a network of TV partners, broadband partners, wireless partners and radio. We shoot everything in high definition, with 10 cameras and Dolby surround sound, for a DVD-quality result. Artists own our creations, but we receive an exclusive but limited window through each of our platforms to broadcast the concert.
We do this on a global basis. Our partners include Microsoft's MSN, which has localized versions in 42 markets and 21 languages; MyNetworkTV, which reaches 97 percent of the U.S. market; and also Japan's Dreamboat, National CineMedia, Qualcomm/MediaFLO on wireless, and the UK's O2. We'll also be announcing a new radio partner shortly.
Kevin Wall founded Control Room in 2005 as a vehicle to deliver his vision for a network of the future -- live entertainment accessible to anyone, anywhere at any time. There was a tipping point when we saw more consumers watching online than on TV, and never before has there been a global content play for this kind of entertainment online. We now produce about 40 shows per year, including "Live Earth" in July, which spanned seven continents and 24 hours, and was the largest entertainment event in history.
E-Commerce Times: What are some of the most important changes going on in the music industry today?
Grosky: It's really a complete redefinition of what the music business is. We're now at the final frontier, moving off the physical and into the new world where music is consumed wirelessly.
Key questions now include: What does it mean for a record label to own a master copy? What role is there for the record label, or for the retailer, of which there are fewer and fewer every day? The music business isn't going to go away, but it's in the process of being redefined.
E-Commerce Times: Where do you think that definition currently stands?
Grosky: I think it's about how to take an asset -- the artist -- and get it out to the masses through nontraditional routes. In other words, how do you get your asset discovered? Because we distribute across multiple platforms, Control Room is one way to take an asset in one door and out to many. Each route may be monetized differently and present the content differently, but the goal is still the same.
E-Commerce Times: What impact will all these changes have on the revenue model for artists, producers and distributors?
Grosky: The reality of any shift is that some people who previously made a good income may no longer be a viable piece of the chain, while others will enter and play a new role. But there's a big, untapped market. Revenue opportunities for the artist are great, since digital distribution provides the ability to be seen and heard by many more than ever before. Whoever represents the artists -- whether it's labels or managers -- have a huge opportunity as well.
I believe now we will see the rise of the great managers, who will in effect become the new labels. Any manager who can guide an artist through the development chain and leverage the most opportunities will end up with the most control and revenue.
E-Commerce Times: Do you think the labels will eventually disappear?
Grosky: The labels provide a massive value and service to the artist base that's still yet to be replicated outside the labels. I think as managers get stronger, labels will need to get smarter and more streamlined. They will continue to suffer the contraction of the physical market, and their organizational structure may change, but labels aren't going to go away -- there's always going to be more artists arriving than managers can handle.
E-Commerce Times: How will this change the way fans get their music?
Grosky: Most of this has been driven by the fans -- they're defining it. It used to be that we, the music industry, would program to the audience -- they didn't have a choice. There were a few radio stations and a few TV channels, and consumers heard what we wanted them to hear. Now, the audience programs us. There's so much choice and fragmentation and different places for fans to see, hear, feel and experience the music. There's a much more direct relationship now -- fans are driving artists, and it's become an instant feedback loop.
E-Commerce Times: Where do you think things will go from here?
Grosky: People often like to predict doom, but it takes time for doom to come. Digital distribution accounted for about 2 percent of the market when iTunes first started showing up, and now the percentage is in the mid-30s. We'll continue to see the evolution of that for a little while. There still needs to be a machine that feeds mass-media outlets -- it's not a light switch that gets turned off.
There will continue to be a gradual but persistent transition to digital sales, with more licensing of music to brands, more interesting concepts in distribution like what Prince did, and artists targeting more narrowly where they think their audience is, striking deals with retailers and brands the way Paul McCartney and the Eagles have. We'll also see music used in more interesting ways like with advertising support.
What I think it comes down to is having to get our heads around the idea that there will be many different kinds of income streams around one piece of music. It's no different than looking at a retail program 20 years ago.
E-Commerce Times: How will all the various legal issues play out, such as the Recording Industry Association of America's (RIAA's) decision to sue consumers for file-sharing?
Grosky: That's a poor move -- you do not get compassion from your audience by suing them, especially when you're suing the ones who don't have the means and putting them in dire economic straits. I believe copyright and enforcement is the onus of the owner. Each artist needs to be responsible for their own work.
The RIAA is fighting a losing battle -- this is not where their efforts and energies are best spent. A better focus would be on determining how to quickly monetize these new platforms. Content will always have value. I think the key is to make it ubiquitous and available everywhere. If I could spend (US)$5 or $10 a month, whether through my phone provider or cable provider or whoever -- and get access to most of the music known from anywhere I happen to be, whether it's my home, my car or a hotel room -- then I'd have no reason to take something without paying.
Ubiquity is what's missing. If we had that, then people don't need to own music -- they don't need those files clogging up their hard drives. With ubiquity of music, the emotional concept of ownership will go away. Content owners will still have opportunities through licensing, sponsorship and other monetizing possibilities, and I think more people will opt in than buy records on a yearly basis now, creating a larger gross revenue. We're not there yet, but I think that's where things should end up.