Digital Noise: Music and Tech

After a couple weeks of rumors reported by The Wall Street Journal and other outlets, it's finally happened: concert promoter and venue owner Live Nation and the nation's largest ticket seller, Ticketmaster, have merged in a deal worth approximately $2.5 billion.

Why is this important? Because the combined companies are, in my opinion, dangerously close to building a vertical monopoly. The new company, Live Nation Entertainment, will own concert venues, the ticketing system for those venues, and exclusive rights to certain major acts that play those venues. In other words, if you thought concert prices were high now, just wait a couple years.

Some background, if you haven't been following along: Live Nation was spun off from radio-advertising giant Clear Channel back in 2005. Its main business at that time was concert promotion and ownership of concert venues--particularly large amphitheaters.

It's hard to get an idea of the company's scope, as it doesn't disclose exactly how many concert venues it owns in its financial statements, but in the last three months of 2008, it produced almost 5,700 events with attendance of over 18 million. Of those events, 600 were produced by Live Nation in Live Nation-owned or operated venues in North America.

Under the leadership of CEO Michael Rapino, Live Nation diversified and began signing a new type of business deal known as a "360 deal" with major artists like Madonna and U2.

In a traditional old-fashioned music business deal, the record company controls recording and distribution. In a 360 deal, a single company handles all aspects of an artist's career--recordings, concerts, and merchandise.

Ticketmaster, meanwhile, is the same company concertgoers have known and loved (or loathed) since the 1980s, though it's changed hands a few times, and was most recently spun off from Barry Diller's InterActiveCorp into an independent company.

Earlier this year, Live Nation and Ticketmaster severed their ticketing relationship--instead of using Ticketmaster, Live Nation would create its own ticketing system and sell tickets for its own venues and the shows it promoted. For a brief shining moment, it looked like there'd be new competition in the concert industry, perhaps leading to lower prices.

But Live Nation apparently had problems handling demand for recent concerts. Meanwhile, Ticketmaster was up to the same tricks that have given it such a sterling reputation among fans--Bruce Springsteen recently criticized the company for guiding concertgoers straight to the TicketsNow auction site (also owned by Ticketmaster) after tickets from the regular site sold out in a few minutes. Of course, the auction-site tickets were much more expensive. (The practice has drawn a class action lawsuit in Canada.)

Now it appears that the Live Nation-Ticketmaster spat was just gamesmanship, part of the negotiation process. So forget about competition--rock concerts are a private party for the rich, and the rest of us will be left to watch the DVD after the tour ends. That's going to be the new norm, not the exception. It's a shame--going to big concerts was a rite of passage back when I was a kid--but the spirit of rock and roll lives on in small clubs, garages, and laptop battles.

Music forums were abuzz all weekend about Live Nation's inability to handle the millions of simultaneous online requests for Phish tickets. The fabled jam band is reuniting for a summer tour after several years off, and is playing some Live Nation-owned venues, which means that tickets for those shows were available only through Live Nation. Unfortunately, Live Nation (a spin-off of Clear Channel) is relatively new at ticketing and its Web ticketing service couldn't handle the strain. The worst: apparently some would-be purchasers were offered seats, only to have the system break down when they tried to complete their purchase.

Error--tickets not found.

(Credit: Phish Dry Goods)

Maybe they should have tried the phone.

While I've never bought a ticket from Live Nation, I've turned to phone orders with Ticketmaster twice in the last year--for Bruce Springsteen and Sigur Ros--when the Web site was slow or offered only undesirable tickets. Each time, I got a much better seat than I could have gotten online. I imagine Ticketmaster allocates a certain number of seats at each purchase level for phone, and the lines aren't nearly as busy as the Web site, meaning the decent seats last longer.

I wrote about OurStage a couple weeks ago: it's a battle-of-the-bands site that's actually worth looking at, as it requires no up-front payments to participate, seems very hard to "game" by stuffing the ballot box for your own or your friend's bands, and offers prizes of actual value.

Concert giant LiveNation will offer 300 opening spots on the OurStage Marketplace.

On Wednesday, the company signed a deal with concert giant Live Nation, which owns many top concert venues in the U.S. and has been signing so-called comprehensive record-plus-touring ("360") deals with acts such as Madonna and Nickelback. Under the terms of the deal, Live Nation will offer opening gigs in the new OurStage Marketplace.

With the Marketplace, bands can sign up to create a free electronic presskit, then submit them for these gigs--which include big arena gigs like the Punk Rock 2008 Festival at Colorado's Red Rocks and opening for the Allman Brothers at the 20,000 seat Comcast (formerly Tweeter) Center outside of Boston. Unlike OurStage prizes, which go only to winners of the head-to-head competitions, any act can participate in the Marketplace.

Long-term, OurStage envisions itself becoming a clearinghouse where emerging bands can connect with venues that need to fill spots. It's an interesting concept, but OurStage will have to amass a fair number of proven high-quality live acts--not just kids in bedrooms with Garage Band--to become a trusted source for venues. So far, I've liked some of the artists I've heard on the site, but not enough to write their names down. That points to a chicken-and-egg problem--a lot of artists probably feel they can get "noticed" in the traditional way, by making great recordings and playing lots of local shows, getting press writeups and radio play, and attracting the attention of A&R men and concert bookers. As long as OurStage is free, bands have nothing to lose by giving it a shot, but it will be interesting to see how entrenched the traditional gatekeepers of the music business really are. I'm betting these old institutions won't die away, although they might use online sources (such as OurStage and--more likely--MySpace) as one more way of discovering acts.

I've always preferred prognostication to nostalgia, so rather than replay the best of 2007, I'll use these late December doldrums to make 10 predictions for the coming year. Some editors will warn you that this kind of list is suicide--it's too easy for everybody to look back a year later and see where you were wrong--but it hasn't hurt Cringely, so here goes. In no particular order.

DRM will die. The trendline is clear--Apple's been selling DRM-free tunes on iTunes since May, Amazon's DRM-free MP3 store has three of the four majors signed up, and eMusic has become the second-most-popular music download service (after iTunes) thanks in part to its longstanding insistence on selling DRM-free MP3s. A year from now, DRM will be irrelevant and hardly used in digital music. All four labels will agree sell their songs without DRM on Amazon. Nearly every iTunes audio (but not video) file will be DRM-free, and Apple will get rid of the "Plus" designation. Some music subscription services like Rhapsody and Microsoft's Zune Pass might retain DRM so that users can't cancel their subscriptions and keep the songs they've downloaded, but they'll be the last holdouts--and some of them might try eMusic's approach of limiting monthly downloads rather than limiting compatibility and usage with DRM.

3G iPhone and iTunes. A 3G iPhone is a fairly safe prediction, given that AT&T CEO Randall Stephenson already let it slip, but I think there'll still be a small surprise embedded in the announcement: iTunes 3G, a service that will come with the phone and give users anytime-anywhere downloads of any audio content in the iTunes Music Store. Impulse buying will go through the roof.

No Zune phone. Microsoft won't release an iPhone competitor this year--at least not one with hardware designed by Microsoft. The company might release some sort of software update or client application that allows Windows Mobile users to play songs from the Zune Marketplace and transfer them from the Zune PC client software to their phones, but even that probably won't happen until 2009. And it'll sink like a lead balloon against v3 of the iPhone, at which point Microsoft will bend to the inevitable and start building its own phone from scratch.

GarageBand will win a Grammy. Not the program itself, but somebody will make a record using Apple's Garage Band--which comes included with every Macintosh sold--as their primary recording and mixing tool, and that record will win a Grammy award. There's already been a critically acclaimed movie, Tarnation, made exclusively with iMovie, so now it's time for all those bedroom musicians to get into the do-it-yourself spotlight.

Mashups will go mainstream. Have mashups already jumped the shark? The controversy about The Grey Album, in which DJ Danger Mouse combined lyrics from Jay-Z's Black Album and The Beatles' untitled white album, is almost four years old. There was a burst of experimentation from big-time artists like David Bowie and Beck around the same time, but not much since 2005. Nonetheless, I predict that artists and even some labels will begin re-releasing their back catalogs as standalone instrumental and vocal tracks, and fans will recombine like crazy using programs like Garage Band and Splice. At least one mashup will get significant radio play, with the complete approval of the original artists. (Although you might say that Puff Daddy accomplished this 10 years ago.) They might even be incorporated into video games like Rock Band--imagine the challenge of having to sing Abba while the rest of the band plays Judas Priest. By the end of 2008, putting a mere song on your social-networking profile will seem hopelessly old-fashioned.

The campaign--don't call it "marketing"--that preceded Nine Inch Nails' Year Zero release will become the gold standard for building audience engagement for tours, albums, or new artists.

Year Zero will become the precedent. On the plane trip home from visiting family over Christmas, I read Eric Davis's analysis of Led Zeppelin's fourth album, part of the 33 1/3 book series. While a lot of it seemed like a stretch--as is the case with any highly intellectualized deconstruction of rock music--it did remind me of a certain sensation created by certain artists and albums, a sense that the listener is more than a mere consumer, but is in fact an active member in a secret club that only other members fully understand, a sort of musical Masonic society. Think of that Zeppelin album, the Grateful Dead, the Residents, or Secret Chiefs 3. In 2007, Trent Reznor, working with 42 Entertainment, took this kind of mystical clubbishness and updated it for the digital era. USB drives with leaked tracks from the upcoming Year Zero record were surreptitiously placed in bathroom stalls at concert venues. Phone numbers with frightening secret messages were encoded in bursts of static or out-of-phase audio signals. Cell phones were distributed to fans who figured out some of the clues; a phone call placed to those phones summoned them to a secret concert. In 2008, we'll see more of these kinds of musical events that use digital technology to break down the wall between audience and artist.

The world's best offline record store will go online. There's nothing else like Amoeba Records. Its three locations in Berkeley, San Francisco, and Los Angeles offer unsurpassed selection--including cellophane-packaged vinyl I've never seen anywhere else--and seem to be curated by music fans with amazing depth and breadth of knowledge. In 2007, Amoeba took its first tentative steps into digital distribution, releasing exclusive recordings from Gram Parsons and Brandi Shearer in both MP3 and CD formats. In 2008, I predict Amoeba will finally go online in a huge way, offering an unsurpassed quantity of MP3 downloads from every imaginable source: major labels (like Amazon MP3 and the other high-profile stores), independent labels (like eMusic), and do-it-yourselfers (like CDBaby). Look for the nascent Amoeba label to offer distribution on terms never before seen in the recording industry--more of a non-exclusive commission model like CD Baby than a typical all-inclusive marketing-recording-publishing-distribution deal like most labels have favored--and for several high-profile artists who've recently quit their labels to sign on.

The loudness wars will end. It's been repeated so many times, it's become a cliche: today's recordings are mastered too loud, eliminating dynamic range and making it hard to listen to a complete album. In 2008, artists and producers will finally begin to demand a return to proper mastering, and radio stations and record execs will be in no position to contradict them.

The concert business will follow the recorded music business down. It's a bad time to be a big rock concert promoter like Live Nation. According to a recent story in Pollstar, the concert business actually declined in 2007, despite high-profile reunion tours by The Police and Van Halen and David Lee Roth--two acts with so much internal strife that nobody expected to see them on stage again. I say the 15 percent drop in ticket revenues from 2006 to 2007 will be followed by the same or greater drop next year. Music fans are fed up with exorbitant ticket prices, false scarcity, and quasi-legal scalpers, and there are only so many more nostalgia acts to trot out. Where are the young bands that can sell out 20,000-seat arenas for the next 5, 10, 20 years? (And before you call me out on the Arctic Monkeys, let me just counter with Oasis. Huge in the U.K., briefly popular in the U.S., and irrelevant to all but the die-hardest of fans 10 years later.) In other words, the concert business is about to suffer from the main problem that's hurting the recording industry--not MP3s, not piracy, but lack of interest and investment in artists with long-term (as opposed to instant) commercial potential.

Led Zeppelin will play again, but not tour. Speaking of nostalgia, it won't be 1973, but the reunited Led Zeppelin will play a handful of shows in the U.S., focusing on a multi-night stand at New York's Madison Square Garden timed around Robert Plant's 60th birthday on August 20.

The dam's breaking open: first Prince released a record as an insert in daily newspaper. The Eagles went direct through Wal-Mart. Radiohead announced plans to release its new album without the assistance of a major label, and rumors about Oasis and a couple of other British bands followed.

On Monday, Trent Reznor posted a gleeful announcement that Nine Inch Nails' record contract had ended, and that he would be experimenting with direct distribution to fans in 2008. This isn't surprising, given that Trent recently told fans at an Australian concert to steal his music. Yesterday, the Wall Street Journal reported that Madonna is about to leave Warner Brothers and sign a $120 million deal with Live Nation, the concert promoter and owner of many large venues around the U.S. (Live Nation was spun out of Clear Channel when the radio giant got out of the concert business.)

The Madonna deal would be a little different than the do-it-yourself approaches being taken by Radiohead and NIN. Instead of no label at all, Madonna would actually be signing what's known as a "360 deal," in which her label gets a cut not only of record sales, but of merchandise and concert grosses. Only the "label" isn't a traditional label at all, but rather a company whose specialty is concert promotion. But the business model's probably going to be similar to the label-less acts: sell the album cheap, or give parts of it away, and charge a premium for the concert experience.

As I've said before, this approach might make sense for established artists, but if giving recorded music away becomes the norm, the road from local hero to rock star could be a lot harder. Beginning musicians tend not to have a lot of resources, and need a label (or some other backer) to help fund early tours. If labels have nothing to sell, who picks up the slack? Concert promoters and management agencies? Perhaps, but the economics are different--they can't rely on a highly profitable hit to fund the ten unprofitable artists still under development.

(Side question: can Madonna really play the guitar, as the picture in this article implies? Or does the soundguy turn her channel all the way down?)