As I noted in the my SXSW Music 2012 post last week, subscription services and engagement apps are quickly becoming core factors driving the music industry and the conversations surrounding them.

Services such as Spotify and Rdio are responsible for an increasing percentage of music consumption. And apps, such as Turntable.fm that are focused on engaging fans over simply messaging them, are making major changes in how listeners connect with music.

With the rise of truly interactive music experiences such as these, there is an abundance of data describing everything from streaming song counts to conversation rates of direct-to-fan marketing channels. The challenge is aggregating and understanding this data, and much of the discussion at SXSW 2012 was on how to do this.

A New Kind of Chart

Billboard, Nielsen, and NARM's Digitalmusic.org have taken a step to aggregate and report streaming data with the launch of their On-Demand Songs Chart last week. This chart measures on-demand play from a long list of streaming services including Spotify, Slacker, Rdio, MOG and Muve Music, with more data sources to be added in the coming weeks. Billboard reports that in the first 70 days of 2012, Nielsen has captured more than 4.5 billion audio streams, giving artists, managers, labels and others in the industry a detailed look into streaming consumption behavior.

Quantifying and publishing this data is important. As the music industry works to convince both consumers and itself of the value of streaming services, one of the most effective tools in the debate is metrics. The worth of streaming is an active topic with content owners that are uncertain if these services are cannibalizing their other sources of revenue.

There's still a lot of work to be done before consumers adopt access over ownership, but by publishing charts showing levels and rankings of consumption, the process moves one big step forward.

Data Analysis Platforms Grow

In addition to simply monitoring data, there is a need for analysis and comparison of this information. Almost everything in the digital space can be tracked and quantified; this presents opportunities to turn data into intelligence if one knows where to look. It's become so easy to monitor digital activities that if one isn't paying attention, they're often missing out on simple ways to optimize their marketing, sales and promotion campaigns.

A number of music-specific analytics platforms have emerged in the past few years, including Next Big Sound, (see example below) Buzzdeck and Rockdex. Although similar in what they monitor, each tool is differentiated in how they turn this data into actionable intelligence.

There are also monitoring tools that aren't music-specific, but are relevant, such as Radian6 and Rapleaf. These focus on bigger-picture data such as sentiment analysis and demographics.

Now that the data set these platforms monitor is somewhat standardized (social media interactions, web traffic, sales, radio play, etc.) the real challenge is programatically providing action items and next steps. It is somewhat helpful to see correlations between market drivers, but this is often common sense. The high-value output from these services is helping answer questions, surfacing trends that aren't obvious, and providing specific actions that marketers and sales teams can use to optimize their efforts.

As more and more data becomes available, the tools to track, monitor and analyze will continue to evolve. This is a space that's in its infancy; learning to use these tools now can provide significant advantages to those able to derive action items from the information.

For decades, the music industry made decisions based on assumptions and gut feelings. There were few tools to quantify the value of a billboard or the effectiveness of a magazine advertisement. The new wave of metrics and analysis will give the industry a deeper understanding of the results of their efforts, allowing them to create better experiences for the artists and fans they serve.

Jason Feinberg manages digital strategy and direct-to-consumer for Concord Music Group (views expressed are his own), collects late-70s punk vinyl with a vengeance, and won't touch anything that doesn't have API access. Follow Jason on Twitter: @jasonfeinberg

The common ground between technology developers and music companies becomes clearer and clearer every year at SXSW. For many years, the festival has seen a distinct interdependence between the two industries. However, as the Interactive conference transitions into the Music conference, the two industries are beginning to show significantly different trajectories.

While the Interactive conference focuses more and more on emerging technology and the evolving economy surrounding it, attendees of the Music conference are now working hard to define the core set of functions and tools necessary to sustain their businesses.

Companies including record labels, management firms, music retailers and content outlets are realizing that the innovations of the past five years are solidifying, and a core group of valuable sectors are emerging.

Much of this discussion surrounds two specific areas -- streaming subscription services and engagement apps.

The Streaming Service Marketplace Matures

Streaming services such as Spotify and Rdio continue to make their presences felt at the conference. SXSW has become a key time to announce new features, promotions and deals. The number of songs and overall features of each service have begun to standardize; the next challenge is differentiation and subscriber acquisition.

Spotify continues to see rapid growth, announcing more than 3 million paying subscribers worldwide in January. At SXSW, the company has been focused on discussing strategy and taking stances in open debates. One of these conversations centers on the idea that withholding music from streaming services for a limited time ("windowing") will increase sales at iTunes, Amazon and other outlets. Spotify's position is that these are two different user types, and if an album isn't available on Spotify, consumers won't go to iTunes to purchase it but instead will go to YouTube where they will find the music for free.

Rdio, another streaming service seeing rapid worldwide expansion, rolled out out a new interface and features this week that focus more on album art, social engagement and new ways to discover music. A much more interactive sharing experience has been introduced into the web app, which allows simple drag-and-drop sharing and social discovery. The company feels this area is still in its infancy, but holds great value to both users and content owners.

Engagement Apps Continue to Evolve

Another constant discussion at SXSW Music is the value of engagement with music via technology. The industry has collectively moved beyond a focus on simple awareness-generation and understands that there is tremendous opportunity for true interaction with fans. Companies like Turntable.fm are innovating on how fans use technology to engage with music, friends and other fans.

Turntable.fm gained a lot of attention and users mid-2011 by providing a social listening experience that combined DJ culture, visualization and gamification. The company quickly found itself in the middle of a discussion as to the licenses it needed to legally operate. The service was unlike anything prior, and this resulted in a need to redefine certain aspects of its licenses. The company announced at SXSW that it's finished negotiations and is now licensed by all four major labels, allowing it to now grow the business and expand its content base.

Apps like Turntable and functions like Facebook's "listen with" show that social listening and other engaging forms of music discovery are becoming accepted means of marketing; the question now becomes how to further monetize these channels.

Metrics and Tracking

As subscription services mature and engagement becomes an increasingly valued metric, new services are emerging to track and analyze the associated data. In the next installment of SXSW Music coverage, MediaShift will look at the latest developments in this space including software such as Next Big Sound and the newly announced "On-Demand Songs" chart powered by Billboard, Nielsen and NARM.

Jason Feinberg manages digital strategy and direct-to-consumer for Concord Music Group (views expressed are his own), collects late-70s punk vinyl with a vengeance, and won't touch anything that doesn't have API access. Follow Jason on Twitter: @jasonfeinberg

Social Media content on PBS MediaShift is sponsored by SocialFlow, which scores your content and optimizes publishing on Twitter and Facebook. Learn more at SocialFlow.com.

One of the highlights of SXSW for me this year was a session called "Everything is a Remix, So Steal Like an Artist," a conversation about remix culture and creativity between artists Austin Kleon and Kirby Ferguson. As the session title indicates, their philosophy is that all artists build upon the work of others -- nothing is 100% original. (For example, as Ferguson argues, "Star Wars" is in fact a collaboration with dozens of threads of influence, from Flash Gordon to Joseph Campbell's "The Power of Myth.") In other words: Culture itself is a form of conversation -- and collaboration.

It's fitting, then, that Kleon and Ferguson had their conversation at SXSW, where one of the main goals "is to foster collaboration between between people with similar interests," according to event director Hugh Forrest (who adds, "... even if they don't understand quite yet that their interests are similar").

You could argue that Kleon and Ferguson's SXSW session itself was a remix, building on earlier SXSW conversations about remix culture -- including the 2009 screening of Brett Gaylor's film titled "Rip! A Remix Manifesto," which I wrote about here.

Or you could dismiss that perspective as absurdly meta. Either way.

Creative People, Unite

I wasn't that enamored of this year's SXSW -- too many crowds, too corporate, too few quality sessions (you can read my critique here) -- but after attending the festival six times now, I have to give credit where credit is due: The event does indeed fuel collaboration, in large part simply by attracting so many creative people to one place, at one time. Other festivals and conferences do this, too, of course, but the interdisciplinary nature of "Southby," paired with its emphasis on creativity, and its location in sunny, inspiring Austin, gives it a distinct advantage.

As Brian Reich, author of "Shift & Reset: Strategies for Addressing Serious Issues in a Connected Society," wrote to me in an email:

SXSW brings together a unique mix of people -- creatives, programmers, marketers, advocates. These folks don't typically get together in a single place, or focus on the same topics. So simply by proximity, SXSW forces you to engage with and interact with folks from different perspectives. That creates opportunities to look at issues differently, to form future projects with a different group of people around the table.

In Reich's case, participation in SXSW inspired him and a small team to produce We Can End This, a series of sessions at SXSW 2011 designed to get people to reframe and rethink the way we address hunger. Partners included Share Our Strength, Feeding America, the Capital Area Food Bank of Texas, as well as Tyson Hunger Relief, the Con Agra Foundation, Mashable, Pepsi, and SXSW itself. The group's goal was to agree on 3-5 big ideas that could be implemented within a year.

Reich noted that ultimately, those ideas were generated, but not fully implemented, though several partners put aspects of the ideas into practice. Still, the effort fueled this year's New Empire Builders project, featuring some of the same participants.

It's the People, Stupid

Of course, there's no collaboration without relationships, and dozens (hundreds?) of relationships are formed at SXSW. Andrew Hyde offers this example on the SXSW website:

I remember walking down the hallway to go to a keynote and randomly complimenting someone. We hit it off realizing we worked in the same niche area of interaction design. Moments later, I saw Kathy Sierra and decided to strike up a conversation (that ended up going for two hours). In a 20-minute period, in a hallway no less, I made two fantastic friends that I have kept in touch with for five years. You can't underestimate those moments, or the potential for them.

I've met filmmakers, comedians, librarians and even (gasp!) Canadians at SXSW. We aren't working together on a formal project just yet, but several of these relationships have lasted well beyond the festival -- and who knows what role they'll ultimately play in my life.

Of course, SXSW is also a chance to nurture existing relationships -- to spend time with people you primarily know online, or via long distances. Many circles in the Venn diagram of my professional life intersect at Southby, and the highlight of the festival for me each year is catching up with people from various communities, from public media to comedy. Again, the Austin location makes these reunions even better -- sitting in the sunshine, sharing a Lone Star or breakfast taco (or both) is the perfect way to reconnect. (This year, Mother Nature threw a few cold, rainy days our way, which made me realize just how essential sunshine is to the festival's appeal. Also, as a pregnant woman -- no Lone Star for me. But I digress.)

Austin Alchemy

Again, it's not just that SXSW brings people together in person -- we've all been to conferences that do this and fuel nothing but boredom, not collaboration. There's a unique alchemy at play at SXSW, I think, that has something to do with being interdisciplinary, something to do with an emphasis on creativity in all its manifestations, and something to do with Austin itself. SXSW's Forrest observed:

(Austin) has been a mecca for live music, bands, artists and other creative/independent thinkers since the mid-1960s. So, I think the spirit of creativity that prevails for 10 days at SXSW is a strong reflection of the spirit of creativity that prevails in this city for 365 days a year. SXSW does NOT happen in a vacuum -- the vibe and personality of Austin is one of the strong contributing factors to making the event so special. Of course, maintaining this vibe and personality is always a challenge when you grow. But, over the years, I think that SXSW (and Austin) have scaled pretty well.

I don't know if I agree with him on that last point -- with 2-hour-long registration lines (and more lines everywhere you turned), I think Southby may need some re-engineering to maintain its value moving forward. The reputation of the festival as a cauldron of creativity may sustain the event for a while, but nothing can live forever based on past success. I wonder, will SXSW be able to collaborate with its community to preserve what makes the festival great? (Is my perspective warped? Do newcomers find the festival just as invigorating as I once did?) I hope you'll share your perspective, and also let me know about any collaborations you're part of that grew out of Southby.

In the meantime, I'm gonna go steal some art -- err, collaborate.

Images courtesy of Flickr users Austin Kleon and Katie Laird.

Amanda Hirsch is the editor of Collaboration Central. She is a writer, online media consultant and performer who lives in Brooklyn, N.Y. The former editorial director of PBS.org, she blogs at amandahirsch.com and spends way too much time on Twitter.

What started out as a casual live music conference has grown into something huge. The South by Southwest conference now encompasses music, film and interactive, and spans 10 days in March. Last year, SXSW estimated that the conference brought in 65,200 people to its exhibit space, and pumped a whopping $168 million into the local economy in Austin, Texas. And SXSW has become a breeding ground for new social technologies, such as Twitter in 2007 and geo-location apps in 2010. What's shiny and new this year? We have a team of MediaShift correspondents on the ground, giving us reports on all three sites all week, from the music and interactive festivals.

SXSW Posts

> At SXSW: Poderopedia, Others Spotlight Civic Media in Latin America by Miguel Paz

> At SXSW, Building Trust with the Penny Press for the Digital Age by Ryan Thornburg

> At SXSW, Austin Alchemy, Creative Culture Lead to Collaboration by Amanda Hirsch

> A Few Tips on Entrepreneurship from SXSW by Sandra Ordonez

> At SXSW Music, Streaming and Engagement Apps Rule by Jason Feinberg

> Mediatwits #42: SXSW Special: Homeless Hotspots; Ambient Apps; CNN/Mashable? podcast co-hosted by Mark Glaser and Rachel Sklar

> Photos: Location, Highlight, Cyborgs Top SXSW 2012's Buzz List photo essay by Kris Krug

> With the Rise of Streaming Services, Music Biz Pushes for Metrics by Jason Feinberg

*****

What do you think about our coverage of SXSW? What did we miss, or what could we have covered better? Share your thoughts in the comments.

Mark Glaser is executive editor of MediaShift and Idea Lab. He also writes the bi-weekly OPA Intelligence Report email newsletter for the Online Publishers Association. He lives in San Francisco with his son Julian. You can follow him on Twitter @mediatwit.

Social Media content on PBS MediaShift is sponsored by SocialFlow, which scores your content and optimizes publishing on Twitter and Facebook. Learn more at SocialFlow.com.

In 1980s Brooklyn, Spike Lee knocked on Branford Marsalis' door to introduce himself; Marsalis was soon playing saxophone for several Spike Lee joints. Elsewhere in the same neighborhood, Erykah Badu ran an idea for a rhyme by Carl Hancock Rux, which would later turn into her famous song, "Bag Lady." As the new documentary "Brooklyn Boheme" from directors Nelson George and Diane Paragas illustrates, such informal artistic collaboration was par for the course for a decade-or-so-long span in Brooklyn's Fort Greene neighborhood, an almost magical coming together of artists in a particular time and place. (Watch the trailer here.)

How do we create environments that encourage such prolific collaboration? Are such circumstances necessarily serendipitous or can we orchestrate them?

Cut to 30 years later, and my husband, Jordan, is an active member of a different kind of artistic community: February Album Writing Month, or FAWM, whose hub resides at fawm.org. Each year, thousands of amateur musicians come together from around the globe; the goal is for each participant to write a minimum of 14 songs in 28 days (this year, it's 14 1/2, thanks to the leap year). People post their creations to the FAWM website, where they also share feedback with each other, most of it positive.

Through his participation in FAWM, Jordan's found a number of artistic collaborators; he's written songs with former strangers from Norway and Amsterdam and with his friend John from Madison, Wis. John's one of his best friends, actually, and they were in a band together back in high school, but they hadn't collaborated musically in years, until FAWM came along and gave them the nudge they needed. Now John has an album out, and Jordan is featured on a number of tracks.

A Fort Greene in the '80s for journalists?

So how does all this relate to journalism? Well, I wonder -- is there a "Fort Greene in the '80s" for journalists -- a time and place when journalists came together and fueled each other's work? Are we living through that time now?

And what about FAWM -- is there a website or other online community that fosters that kind of collaboration in the news space? (Could Collaboration Central be that space?)

I wonder, what is it about FAWM that gets people truly collaborating? After all, there are plenty of online communities whose members don't interact in nearly as constructive or collaborative a manner. Is it the project's built-in time constraint? With tight deadlines looming, are musicians more likely to reach out to people who provide complementary skills, who can help them produce more songs, more quickly?

Jordan says yes, this is part of it. "Collaborating starts out as a pragmatic thing. It makes it possible to write more songs." OK -- so, collaboration as a strategy for meeting deadlines. Why is it then, that for so many journalists, deadlines feel like an obstacle to collaboration? Does this have to do with inherent differences between reporting and songwriting? Or is it more a factor of journalists working inside organizations with inflexible processes in place?

Of course, the benefits of musical collaboration transcend efficiency. "I end up having written songs I never would have written alone," Jordan said about his FAWM partnerships, "and I learn things about my own songwriting by working with partners."

In a blog post back in 2010, musician David Byrne muses on these exact themes, noting:

To have one's work responded to by another mind, or to have to stretch one's own creative muscles to accommodate someone else's muse, is a satisfying exercise. It gets us outside of our self-created boxes. When it works, the surprising result produces some kind of endorphin equivalent that is a kind of creative high.

Could journalists who collaborate experience a similar level of intellectual and creative satisfaction?

The bottom line

Of course, sometimes -- in arts and entertainment, and in the news biz -- collaboration is about the bottom line, more than it is about the virtues of two (or three or ten) minds versus one. As Carrie Lozano wrote on this site earlier this week, "While collaboration itself doesn't solve the question of how to pay for ... reporting, it does put more resources toward a story." In the blog post I mentioned above, Byrne acknowledges:

"There are also some more market-oriented, pragmatic arguments for collaboration. If both collaborators are sort of well known, then there is a natural interest among the combined set of music fans. Part of the marketing has been done without having to do any corny PR."

Market-oriented collaborations are easy to find. This past week, for example, Rihanna and Chris Brown released remix tracks featuring each other in what many, including Salon's Mary Elizabeth Williams and Slate.com's J. Brydon Lowder, viewed as a collaboration motivated by commercial versus artistic considerations. Of course, we can't know for sure without getting inside the artists' heads, but surely, Rihanna and Brown are no Lennon and McCartney -- or, to bring it back to Fort Greene, they're no Talib Kweli and Mos Def (aka Black Star).

So: Who are journalism's Rihannas and Chris Browns, collaborating to make a buck (or spin an image) ... and who are our Lennons and McCartneys? Who are our Black Stars?

Amanda Hirsch is the editor of Collaboration Central. She is a writer, online media consultant and performer who lives in Brooklyn, N.Y. The former editorial director of PBS.org, she blogs at amandahirsch.com and spends way too much time on Twitter.

The Mediatwits podcast is sponsored by the CUNY Graduate School of Journalism, which offers an intensive, cutting edge, three semester Master of Arts in Journalism; a unique one semester Advanced Certificate in Entrepreneurial Journalism; and the CUNY J-Camp series of Continuing Professional Development workshops focused on emerging trends and skill sets in the industry.

Welcome to the 22nd episode of "The Mediatwits," the weekly audio podcast from MediaShift. The co-hosts are MediaShift's Mark Glaser and entrepreneur Rafat Ali. This week is a special edition dedicated to Steve Jobs, the technology visionary who died on Wednesday. The news spread quickly online and on social media, with so many heartfelt memories, stories and old videos. And of course, in death as in life, Jobs remained a polarizing figure, with so many admirers and so many haters. No one can deny he helped usher in the personal computing revolution, while later disrupting the music and telecom businesses and creating a whole new market for tablets.

The special guests this week are two Steve Jobs biographers: Alan Deutschman, who wrote "The Second Coming of Steve Jobs" in 2001; and Leander Kahney, who wrote "Inside Steve's Brain" in 2008. They're both eagerly anticipating the new biography of Jobs by Walter Isaacson. The discussion also touched on the recent iPhone 4S announcement from Apple, and the tough shoes Tim Cook has to fill as Apple's CEO. Plus, how does the new Kindle Fire stack up to the iPad? Amazon fanboy Rafat Ali already has his on order.

Check it out!

mediatwits22.mp3

Subscribe to the podcast here

Subscribe to Mediatwits via iTunes

Follow @TheMediatwits on Twitter here

Intro and outro music by 3 Feet Up; mid-podcast music by Autumn Eyes via Mevio's Music Alley.

Here are some highlighted topics from the show:

Intro

2:00: Jobs' official biography shoots to #1 on Amazon

3:40: Outpouring of support for Jobs, even from competitors

5:00: Rundown of topics on our show: Steve Jobs, iPhone 4S, Kindle Fire

Remembering Steve Jobs

7:30: Special guests Alan Deutschman and Leander Kahney

8:20: Deutschman: Obituaries in the works for the past 8 years, but still a shock

11:10: Deutschman has e-book coming, "How Steve Jobs Changed Our World"

12:50: Kahney: Apple ecosystem works well because it's locked down

16:10: Deutschman: Jobs did subject people to verbal abuse in pursuit of perfection

Tim Cook and the iPhone 4S

18:00: Where does this leave Tim Cook as the new CEO?

19:30: Kahney: Jobs was actually against the App Store at first

23:10: Deutschman: Jobs was white knight for book publishers vs. Amazon

26:00: Kahney: Jobs was the primary fanboy for Apple

Amazon Fire selling like hotcakes

28:10: Kindle Fire outdoing the iPad in its early days?

30:10: Kindle has closed environment, more closed than Apple

32:00: How annoying will Kindle ads get?

More Reading

The day Steve Jobs called Walter Isaacson at Fortune

Celebrating the life of Steve Jobs in photos, videos, quotes and tweets at The Next Web

The Obituary Of Steve Jobs We Couldn't Ever Bring Ourselves To Write at Cult of Mac

Steve Jobs obituary at CNET

The Steve Jobs I Knew at AllThingsD

My Thoughts on Steve by Jason Calacanis on Google+

Steve Jobs' Health, Forced Sabbaticals, and His Brilliance at 1×57

Steve Jobs and the continuing disruption of media at GigaOm

Steve Jobs Was Always Kind To Me at The Wirecutter

Steve Jobs Narrating the "Think Different" Ad:

A memorial at the Apple Store in San Francisco. Photo by patr1ck via Instagram.

Apple's iPhone 4S is swell, but pricing is the real killer app at ZDNet

More Like a Whisper Than a Bang at Reuters blog

Leaked Sales Numbers Suggest Amazon Kindle Fire On Track To Outsell iPad [Exclusive] at Cult of Android

Analyzing Kindle Fire Sales Estimates at PaidContent

Weekly Poll

Don't forget to vote in our weekly poll, this time about what you'll miss most about Steve Jobs):

Mark Glaser is executive editor of MediaShift and Idea Lab. He also writes the bi-weekly OPA Intelligence Report email newsletter for the Online Publishers Association. He lives in San Francisco with his son Julian. You can follow him on Twitter @mediatwit. and Circle him on Google+

The Mediatwits podcast is sponsored by the CUNY Graduate School of Journalism, which offers an intensive, cutting edge, three semester Master of Arts in Journalism; a unique one semester Advanced Certificate in Entrepreneurial Journalism; and the CUNY J-Camp series of Continuing Professional Development workshops focused on emerging trends and skill sets in the industry.

SXSW is easily the most chaotic experience in the music industry. For the 14,000 people that attend the music conference it provides opportunities to immerse themselves in the ecosystem that powers much of the global business. It is one of the best times to tee up deals and relationships that could power significant developments for the rest of the year. As it grows each year, it becomes a more and more complex beast that can overwhelm even the most experienced attendee. If you missed it, haven't ever been, or just couldn't cover all the ground this year, here are the things I am still thinking about a few days after the conference ended.

Leveraging Existing Technology

Although I was mighty impressed with a number of technologies and initiatives, I did not feel there were any seismic revelations or leaps forward -- and I see this as a good thing. After years and years of people jumping onto the next big thing in hopes it would "save the industry," we are finally seeing the maturation of essential product and service verticals. Best-of-breed platforms across all categories are solidifying, with growing (and reasonably stable) companies providing analytics, on-demand and streaming content, direct-to-fan marketing and sales tools, smart phone technologies, and integrating social sharing into almost every type of engagement. Instead of looking to add more and more low-value features, players are focusing on industry horizontals and partnerships to leverage existing technology to expand their feature set.

A few specific apps did generate a lot of buzz, including private mobile chat-room app GroupMe, socially enhanced streaming music service SoundCloud, and the "social magazine" Flipboard, which partnered with Duran Duran during SXSW Interactive.

Music Apps Get Social

The trend in music apps has traditionally been to surround existing content with a way to interact with it. The new wave of apps are finding ways to use music as a social link to engage friends both online and off. The music itself is starting to take a backseat to the experience that it can foster.

Streaming Services Jockey for Position

People from streaming and on-demand services were out in full force at SXSW, participating in panels, sponsoring events, and pushing their agendas. Fortunately, much of the conversation was about user adoption concerns and how to hit critical mass. It is still a crowded marketplace, and differentiation isn't easy, but features around social and music discovery are proving valuable.

A report released during SXSW predicts these services will reach over 161 million subscribers by 2016, citing a steep increase in smartphone usage and a decreasing focus on the notion of ownership. This is by far the most optimistic prediction I've seen, and it doesn't address a number of hurdles, which are outlined here. But the report's prediction of 5.9 million subscribers by the end of 2011 seems attainable.

I am sure players including Rdio, Spotify, Slacker, and Rhapsody hope to see these predictions come true.

Eternal Truths

A few things never change about SXSW. The first, and what I believe to be the cardinal rule, is to book your hotel room as early as possible. Staying downtown is essential -- you need a place for private rejuvenation throughout the day, and catching a ride home at 3 a.m. is an arduous task. With more than 35,000 total attendees in 2011 (and rising every year), a good place to rest your head is getting harder and harder to find.

Second, RSVP for anything you think you might want to attend. It can be a massive task, so consider using an assistant or a service such as Amazon's Mechanical Turk.

Lastly, it really still is all about the music. Technology and buzz mean nothing if the experience doesn't move you. Who moved me? Odd Future, Yuck, OFF! and Duran Duran in the smallest venue I have ever seen them in.

Only 51 more weeks till we do it all again...

Jason Feinberg runs digital strategy and development for Concord Music Group, collects late-70s punk vinyl with a vengeance, and won't touch anything that doesn't have API access. Follow Jason on Twitter: @jasonfeinberg

Fostering those conversations is the purpose of the revamped New Music Seminar (NMS), the most recent edition of which took place last week in Los Angeles. The conference focused on the music industry's evolving economic models and gave artists a look at the future of the business -- from do-it-yourself (DIY) outfits up to the major labels. Tom Silverman founded it 30 years ago as "a new kind of grassroots music industry gathering for disenfranchised music business upstarts," according to the NMS website. (You can hear more from Silverman in Mark Glaser's Q&A with him previously on MediaShift.)

I spoke with panelists, industry veterans, and aspiring artists at the conference. Here are a few points that were on most everyone's minds:

1. No single product defines the industry.

For decades the single song was the music industry's core product. Then for a few more decades the album reigned. The industry was well suited to meeting these consumer preferences because the profit margins were significant and selling more of anything in a single transaction is generally good business.

Endless choice has altered consumer behavior significantly. But with this change comes an opportunity to market substantially more products to fans. As album sales have declined, the industry now profits from a complex puzzle of revenue sources: merchandise, video, high-fidelity audio, karaoke tracks, song stems, artist access, and many other diversified offerings.

Today, there is no magic formula that works for all artists. Knowing what fan's preferences are and offering up tiers of products seems to be the winning equation.

2. Don't believe the hype.

Every year or two, a core trend is over-hyped and eventually disappoints. For years, it was ringtones. Likewise, DIY and direct-to-fan have proven to be more complicated and less successful than expected. And the bottom fell out on music-based videogame sales, culminating this month in the shuttering of the Guitar Hero franchise.

The newest hot trend is cloud-based music services. In Silverman's keynote (as well as his MediaShift interview), the founder of NMS and Tommy Boy Records made it clear that he didn't believe these services will revolutionize the industry, as many are predicting.

The numbers just don't add up, he said. Currently, online CD sales are only down three percent from last year. Physical CDs still count for 76 percent of album sales. Clearly, people are not abandoning music ownership just yet.

An interesting fact Silverman pointed out is that music storage is actually cheaper than the bandwidth to stream it. This isn't a consumer-facing factor as cloud services typically don't charge based on consumption. But it may have a long-term impact on the financials of ownership vs. access: Unless the cost of bandwidth drops, cloud-based streaming services will struggle to compete on price with digital music sales.

3. It's all about the music, after all.

What the past few years have shown is that technology and clever business models mean nothing without music people care about. In his NMS introduction, longtime artist manager Peter Malkin reprised this video, which lists the plethora of tools that enable musicians to run their enterprise. The point of the list is to show that there are a tremendous amount of tech platforms, but none of them really matter if the music isn't any good. Here's his presentation at NMS:

I spoke to Malkin after his presentation, and he expanded on this point, saying that a great live show is still the most important tool in an artist's arsenal. A strong musical foundation is key no matter what tools one chooses to use, he said.

4. New opportunities for artists at every level.

A number of companies announced new product lines at NMS, many of which cater to artists interested in offering goods and services directly to their fans. It used to be only the biggest acts who had the resources needed to pitch niche products.

> ZMX Music launched their direct-to-fan sheet music service at NMS, allowing smaller artists to enter America's $600 million sheet music industry. They cater to artists that do not have deals with the major publishers (e.g. Hal Leonard) and wish to sell their sheet music directly to fans. The non-exclusive service evenly splits revenue with the artists and offers embeddable widgets that allow for direct sales across many platforms.

> Topspin, considered the direct-to-fan leader for high-end artists, announced the launch of a self-serve model aimed at bands earlier in their career. A monthly fee of $9.99 and 15 percent of sales gives any artist access to serious marketing and sales tools.

> GigsWiz offers a ticketing system that encourages artists to actively sell tickets to shows rather than simply informing their fans of them. By sharing revenue, the service creates an incentive for artists to get even more involved in their show promotion.

> JamBase has expanded their service, allowing fans to connect via Facebook and be alerted when their favorite artists are playing local shows.

Other companies had launch announcements and platform upgrades, including Mozes and SoundExchange.

Just remember, as Malkin pointed out, these tools are only as useful as the music they power and the personal connections they are used to enhance.

Photo by Caesar Sebastian via Flickr.

Jason Feinberg is vice president, direct to consumer marketing for Concord Music Group. He is responsible for digital and physical direct-to-fan solutions for CMG's frontline and catalog including the Rounder, Fantasy and Stax labels. Recent campaigns include Paul Simon, Allison Krauss, Paul McCartney, Elvis Costello, Carole King/James Taylor, and Crowded House. Follow Jason on Twitter @otmg

That exaggeration was in full flower at the recent MIDEM conference that Silverman attended, where the talk of the show was Beyond Oblivion, a startup that is trying to license all music worldwide and have people pay one fee to listen to them when they buy each device. While Silverman believes such a scheme might finally help get around the major hurdle streaming services have in licensing music, he's still bullish on good old physical album sales.

"People still want to buy physical," he told me in a phone interview. "Album sales were only 26% digital in 2010, meaning that 74% of all albums sold were still physical. That's with the loss of Tower and Virgin and with Best Buy cutting way back on the amount of music they carry. So even though it's harder to buy music physically it's still an enormous amount of sales. If you read the music trades you'd think there were no more physical sales."

Of course, Silverman admits that this is only looking at album sales, while digital downloads tend to be singles -- at a ratio of 15 to 1 (single sales to album sales), according to stats he cited from SoundScan. But Silverman also noted that album sales hadn't dropped off as much in many parts of Europe as they had in the U.S.

Silverman is a figure from the days of vinyl and "new school" hip-hop (who remembers the three-sided De La Soul single? [at left]). I vividly remember meeting him and a very young Queen Latifah when I was "beat box" editor for CMJ, a trade magazine covering alternative and college radio, circa 1989. In our wide-ranging recent phone talk, Silverman referred to "record stores" and "record sales" and the "record business," showing his roots.

But he's also trying to find a way to steer the business to a brighter future where artists and their labels or managers create 50/50 joint ventures, giving artists more power, control and royalties than ever. He is the ultimate insider/outsider, serving as an observer on the board of the Recording Industry Association of America (RIAA), while attacking them for not looking toward the future and spending too much energy holding onto the past.

The following is an edited version of our chat, in which Silverman talked about streaming services, the staying power of physical music and why he decided to revive the old New Music Seminar.

Q&A

What are biggest mistakes by the music business in recent years?

Tom Silverman: The fact that the industry showed no foresight after the conversion to CDs. The entire industry and all the hardware makers changed the value proposition of music from a $9 value perception [for an album] to a $16 value perception over a few years, and convinced everyone to recreate their entire music collection all over again. That led to the biggest boom in the history of the music business and it didn't peak until around 1997. That, to me, was a great move.

The recession in the music business in '79 was blamed on disco, but the real cause was that everybody had filled their catalogs with vinyl and cassettes and sales dropped off, so the record business went into a slump and needed a new configuration. We saw the same thing happen with CDs around '98 and '99, a little fall in the business, which meant everyone had re-bought their collection with CDs.

You'd think we had learned from this that you have to replace a product with a new product - this is something that Steve Jobs understands. He gets us to buy one iPod after another, and one iPhone after another, and the iPad. We haven't learned that. I'm on the RIAA board as an observership position, and I always raise my hand and say, 'Why do we spend 95% of our time trying to protect a business that's declining, and 5% trying to expand the business?' It should be balanced.

We botched high definition, we botched surround sound. When digital came in, it was our opportunity to get everyone to buy their collections again, and find a way to manage the consumer's value proposition. But instead, we only thought about how to stop it. We should have said, 'How can we take this flow of energy and make it work for us?' No one ever asked that, they just looked at it as something evil that should be stopped. It's no more stoppable than stopping the tides.

How has the music business model changed now?

Silverman: The new businesses are based on collaboration and connection, not based on control and coercion, which was the model of the labels. 'Let's roll them up so we can have more control. Let's control radio and maximize control.' But digital caused them to lose control. They don't have control over release dates anymore. Forget about WikiLeaks, we have had WikiLeaks in the music business for years! Every important record is leaked before it comes out. Anybody can have every record two weeks before it comes out and no one has been able to stop that from happening.

The important thing is: how do you monetize that? There are some people asking that question but not the labels.

Silverman talks about how record label execs still don't understand the new business model where the artist-fan relationship reigns:

silvermanlabels.mp3

What's the best way to look at physical music sales? Some people say to just forget about that now.

Silverman: Physical music sales? Retailers are part of the problem too. They've never understood how to sell music as a lifestyle. There are places where it's actually sold and not just carried. There are people who come in for the hits at Wal-Mart and Target but if you go to Amoeba Music there's a different environment and there's always a line. And people probably buy three times as much per capita at Amoeba than they do at music sections at mass merchants because there's an environment that makes you want to buy music and people are there to help you. There's nobody home at these big box retailers, there's just music in a bin.

Although physical sales took a 16% or 18% drop this year [in the U.S.], it's surprising that it wasn't greater considering the loss of shelf space.

I look at stats like this: Online physical music sellers online like Amazon -- their physical album sales were only down 4%. Chain stores were down about 20%. Where it's easy to find with full stock it's not a double-digit loss. In every other country the drop isn't as bad at all. In the UK, it's flat. In Sweden, it's flat. In most countries it's down a few percentage points, but not down 10% or more. America is creating a self-fulfilling prophecy. It's a combination of the media and the people who control the retailers that are left. They believe that because it's going down it's over.

Tracks are outselling albums 15 to 1 in digital. People like to buy tracks online with Apple and Amazon. Digital albums are growing at a greater rate, but I doubt it will ever get down below 10 to 1.

What about the alternative revenue streams out there? Do you see promise in those?

Silverman: Sure. Not that they will make up for the loss of physical sales but it's promising. We'll continue to see revenues from Spotify [a free streaming service not launched in the U.S. yet]. In the markets where Spotify has launched, we've seen more revenues than we anticipated. It's at the forefront of cloud-based music. It's also the biggest referrer to iTunes and other download services. There's a 'Buy' button next to everything that you listen to, and it's driving a lot of sales in the countries that it's in. And there's not a lot of evidence that cannibalization [of sales] is going on, which was the fear of [music business execs] and others. People like it.

Now you have Google working on a cloud service and supposedly iTunes is working on a cloud-based service. So you have on-demand streaming happening and generating new revenues and more discovery that will lead to more download sales. I just came back from the MIDEM conference, and the hype there was that the record business is over, that digital downloads is over and that everything will move to access away from acquisition. I think it's bullshit, honestly. If that's true than Pandora wouldn't be the #1 driver of sales to iTunes and Amazon. People are finding out about great new music there that they wouldn't have heard of before.

Silverman says physical album sales still have life, and that they will co-exist with digital downloads and the cloud:

silvermandeath.mp3

Any other surprises from the MIDEM conference?

Silverman: There's a concept called "feels like free." People don't want to feel like they're paying for stuff. They might be paying for it, but they don't want to feel like they're doing that. [laughs] There's a difficulty licensing music for any new service, because you have to go to every publisher in the world, every performing rights entity in the world, all the record companies in the world and get them to license to you. It's a nightmare and that's why Spotify is only in seven territories, that's why Amazon isn't in every territory. I don't know how Apple iTunes was able to do it. They're not in every territory, but they're in a helluva lot of places. That's why Pandora is only in America.

Clearing rights is so difficult, so impossible, so extortionist that it's stunting the business similar to the way the business stunted itself in the Napster era. So a startup Beyond Oblivion is trying to license all the music and trying to deliver it in a clear package to any hardware maker that's connected, including a digital picture frame, an automobile - anything that's connected. If you want to bundle all the music in the world, you pay a fixed fee, between $15 and $150 depending on the lifetime of that thing and how much music you typically listen to on it. They've created actuarial tables on how people listen to music and the lifespan of various devices to work out pricing.

They pay that one time and the person who buys the device has access to all the music in the world for the life of the device. Tethered music you can listen to on that device only. You can buy multiple devices that are Beyond Oblivion compliant. They pay one time for all the music.

What happened to the New Music Seminar? I remember it being a massive conference in New York in the late '80s. What went wrong?

Silverman: The New Music Seminar acted as a catalyst for change when we started it in 1980, and became the biggest music conference in the world by 1990. It started to peak then as the business had grown and the things we were fighting for became mainstream. Then we became all things to all people instead of a cause. We were pushing new music, hip-hop, new wave, house music -- new music that was just starting to break. We'd have young Turks talking about new ideas. It was effective and then got bigger and more expensive, and I started to have problems with my partner at the time.

In 1992, I dropped out and 1994 was the last year they had it. And I picked it up again 15 years later because I felt like there was a cause again. In 1980 there were great people with great ideas who weren't being heard. It was great timing, the year before MTV was launched. It spawned SXSW, CMJ, all the other music conferences came out of it, took the model of the Seminar. It started out as revolutionary and became generic.

How will the new version of the New Music Seminar be different than other conferences that are out there now?

Silverman: This conference is built around a mission: to build a sustainable profitable music business, which we don't have now. Every other conference talks about why things suck and how we can fix them. We don't talk about fixing them, we talk about building a new one. I lost my belief that the old record business could be saved and thought we needed a whole new paradigm to create a new business model. We wanted the New Music Seminar to be a forum to discuss what that might be.

There are less artists breaking through and less investment in the music business because the return is so bad. We have to figure out how to change the economic model, the contractural model. It's a great chance to right some of the wrongs from the '50s when the original music contracts began. And the music contract hasn't changed much, it's just got longer, like 80 pages now. We're suggesting a new business model that's more of a holistic 50/50 joint venture between artists and labels...And the business won't be dependent on record sales or music sales but you're selling the relationship to artists. How do we manage the artist-fan relationship?

Silverman explains how anyone can make music with GarageBand and there's an explosion of music releases, making it harder for artists to break through:

silvermangarage.mp3

Are there new skills that record labels and managers need to have now with the rise of digital music?

Silverman: Yes. Once a manager or label is in a joint venture with an artist, their main job is to grow that fan base and move it to greater levels of passion. How do we get a fan to move from passivity to activity to super fan where they live and breathe for the artist? That's a new skill that labels and managers have to cultivate. They're great at getting exposure -- press or radio -- but they could never drill down to the fan level because before the web there was no way to reach the fan. Now the label has to find a way to find out who their fans are...And they'll have to be skillled at monetizing those fans beyond selling music.

Did the labels make a mistake by letting Apple and Amazon know more about music customers than they do with digital downloads?

Silverman: We don't know who the customers are, but they do. Apple and Amazon own that. People know at the major labels that they could have created a delivery warehouse, and Apple could have done the selling and we could have done the delivery. Having those IP addresses [for customers] is having the keys to the kingdom. Any major label that has direct contact with even 25% of their customers is in great shape and can monetize the relationship instead of just selling records, which was the old model. If you look at Facebook, MySpace, YouTube, Twitter, it's all built around relationships.

*****

What do you think about the future of the music business? Will physical CD sales still be popular? Would you prefer streaming services? Share your thoughts in the comments below.

Mark Glaser is executive editor of MediaShift and Idea Lab. He also writes the bi-weekly OPA Intelligence Report email newsletter for the Online Publishers Association. He lives in San Francisco with his son Julian. You can follow him on Twitter @mediatwit.

Here are some predictions and thoughts about what 2011 may hold for the music industry.

1. A Major Label Shakeup

Despite all the talk about the major label system collapsing at any moment, it doesn't seem likely. However, 2011 may finally see a restructuring of assets and brands. EMI has no shortage of financial issues, and the current discussion points to Terra Firma handing them over to Citigroup in the near future. The big assumption is that EMI will be broken up and sold in pieces to the other three majors (Universal, Sony and Warner Bros). Of particular value is EMI's publishing division, and if the piecemeal sale does happen, there may be a fight for this asset. Of course, the other three majors aren't having the smoothest time with cash-flow either, so it remains unclear exactly who can buy what. At minimum, EMI will not look the same at the end of 2011 as it does now.

2. Indie Label Opportunity Grows

All music companies will be focused on streamlining their efforts in 2011. This involves smarter processes, innovative policies, and keeping overhead low. Independent labels typically have had to function with these elements in place from day one; their ability to stay nimble will allow for continued growth opportunity. As business partnerships continue to solidify between content owners and brands, smaller labels will be able to adapt quickly and profit at lower revenue thresholds. This creates a strategic advantage that, if managed properly, will see upward trends on indie label balance sheets.

3. Streaming Services Reach Critical Mass

In 2011, someone will become the Apple of streaming -- perhaps Apple itself. Consumers are getting closer and closer to accepting renting over owning content. Companies such as MOG, Rdio, Spotify, and Rhapsody are poised to capitalize on this. With good timing, savvy marketing, and clear messaging that succinctly communicates the benefits, a streaming music provider can easily take the leading role in this race. The safe money seems to be on Apple (in part thanks to the Lala acquisition), but the other contenders are quite serious and finding the level of funding necessary to compete. This sector is also making major moves into mobile and car audio; these additional distribution avenues only strengthen the push toward widespread adoption.

4. Free Continues Moving Upwards

"Free" has been a highly debated concept. One side states that the awareness and data capture free provides can be converted to sales over time. The opposition feels that free devalues content and sets the wrong precedent. The truth may lie somewhere in the middle, but it is clear that with the volume of free content (legal and otherwise) one has to be giving something away simply to stay competitive. This line of thinking is nothing new, but it has finally permeated the companies and artists at the top. The majors and superstars have relaxed their policies on free (especially when paired with data capture) and that trend will continue. This will happen in parallel with efforts to find techniques to convert free to paying -- a critical element to make this model work.

5. The Essential Toolkit Solidifies

Digital marketers have an almost endless supply of new technology and techniques to try. However, over the past 18 months, many have faded away or a best-of-breed front-runner has emerged. In 2011 we will see this continue as it becomes more clear which technologies and techniques provide real value. In 2010, it became easy (and essential) to track true performance metrics; marketers now have multiple tools to evaluate effectiveness based on conversion, data capture, sentiment, and engagement. This analysis is helping define where to focus efforts -- and that is helping digital music marketing become a more precise practice.

Companies with momentum in the digital marketing toolkit space include Topspin, Bandcamp, Nimbit, Rockdex, NextBigSound, Rootmusic, SoundCloud, Buzzdeck, Artistdata, Mozes, and the ever-essential Google Analytics. Let's also not forget the mainstays -- Twitter, Facebook, and email-marketing platforms such as ExactTarget, Mailchimp and Constant Contact.

6. The Net Neutrality Debate Continues

The positions and arguments haven't changed much, but the Net neutrality discussion (particularly at the government level) has accelerated. In late December, the FCC approved rules that enable mobile carriers to regulate application use. Many members of Congress have already stated they will fight this by creating a new law. This debate is still far from over; expect heated discussion all year long.

In many ways 2011 won't look much different than 2010. The music industry is still suffering from steep declines and is still building strategies and systems to counteract this. The key words moving forward are innovation and experimentation; most people have accepted the fact that we cannot force consumers to behave as they did in the past. Instead, we must seek to better understand our audience, foster stronger communication, and be willing to take leaps of faith on a regular basis.

*****

What predictions do you have for the music industry in 2011? Please share them in the comments.

Jason Feinberg is vice president, direct to consumer marketing for Concord Music Group. He is responsible for digital and physical direct-to-fan solutions for CMG's frontline and catalog including the Rounder, Fantasy and Stax labels. Recent campaigns include Paul Simon, Allison Krauss, Paul McCartney, Elvis Costello, Carole King/James Taylor, and Crowded House. Follow Jason on Twitter @otmg

1. The "DIY Revolution" has Been Relatively Ineffective

Although going it on your own was all the rage in 2009, reality has shown that the majority of artists still need a team around them to reach any substantial level of awareness, sales, and revenue. However, this team doesn't necessarily need to resemble the traditional record label department structure. For many artists, surrounding themselves with a few tech-savvy friends and some seed money can generate the momentum necessary to fuel a moderate indie career. To reach far and wide enough to live off of one's art, the task list is simply too long to tackle alone. In reality, DIY can work just fine if you modernize the traditional definition of the term.

2. Tech Can Replace/Enhance Some Functions

Technology has removed many barriers and allowed almost anyone to play the game. It has also removed the need for some of the team members that have always been needed. Recording, mixing and mastering music can be done faster and cheaper than ever before. Distributing the output digitally is near instant and inexpensive. Anyone can create digital tools that collect email addresses, stream music, sell tickets, and engage with fans. Just remember that with technology, "build it and they will come" is pure fantasy.

3. Direct-to-Fan is Valuable When Executed Properly

Even with all the hype, direct-to-fan (D2F) has proven itself as a valuable strategy when implemented correctly. D2F, when viewed as a set of best practices, can supplement list growth, sell high-margin offerings, and give artists a chance to engage their biggest supporters in innovative ways. However, the idea that D2F is simply creating a Topspin account and building a splash page is a myth -- proper D2F involves content and offer curation, a well-planned timeline, some existing reach, and savvy marketing both online and off.

4. The Aggregator Market Has Solidified

Very little has changed in this area over the past couple years. With a few clear leaders emerging, artists have no problem getting their content to the marketplace. Other than some simple distinguishing features, most digital aggregators provide an identical core service: Get your music on iTunes, Amazon, and many other digital storefronts. Tunecore, CDBaby, IODA, Reverbnation, and a few others have effectively cornered the market.

5. Marketing Tools Have Diversified

The emergence of multiple tiers of artists has also allowed products to follow suit. Companies that offer similar products are finding their own market niches by catering to specific classes of artists (hobbyist, middle-class, established, legacy, etc.). The distinction between services is often based on feature sets, and that typically correlates to price. We'll see this trend continue as the tiers further solidify and the realities of what different artists can spend (and need) come to light.

6. Facebook Gaining on Email

Traditionally, email has been the Holy Grail of communicating with fans, but as social media and SMS adoption grows, Facebook and text messages are giving email serious competition. Many bands are turning to Facebook as their core communication channel; for many types of audiences this makes perfect sense -- Facebook allows for standard communication but also offers sales, research, and data collection opportunities in one location. By owning the entire ecosystem, Facebook makes the call-to-action process much simpler.

7. The Official Site is Critical (Again)

I'd argue this has always held true, but most artists in most genres have begun to truly grasp the importance of an official site. Official sites allow levels of control that are unrivaled by any other platform. Artists can have full control over sales, data capture, and fan engagement on their own site, whereas other platforms such as MySpace and Facebook have limitations in these areas. However, some artists are keeping it simple and can implement those core functions on even the most simple of platforms; the benefit here is little to no cost and minimal administration and maintenance. The right strategy is to understand the value of different platforms, and find the right mix based on audience and needs.

8. Physical Fulfillment is Still a Logistical Puzzle

The hardest logistical part of running an artist's business is physical fulfillment. This is an area that has always been tough and it's only become marginally easier through new services and technology. There are a number of ways to fulfill physical goods -- do it yourself, find willing partners, use an established fulfillment house, or sign a formal distribution deal. These each have their pros and cons, but ultimately it comes down to the complexity of the offerings and the quantity of business a band is doing. No matter what method, someone must be managing the process at all times; with so many moving parts (manufacturing, delivery, shipping, stock levels, customer service, etc.) fulfillment management can be a full-time job.

9. The Value of Mobile and Apps is Still Cloudy

The music space in mobile is still somewhat like the Wild West. Their are certain sectors that are entering adulthood -- SMS marketing for example, where Mozes has become the clear leader. However, other areas are far from fully formed. Music apps for mobile phones are plentiful, but they rarely generate acceptable levels of revenue. One thing has become clear -- for almost all artists, charging for a music app is the wrong business model; give it away for free and utilize in-app purchases.

10. Monitoring Tools: A Race to The Top

There is no excuse to not know what events and metrics surround an artist or release. There are so many analytics platforms that the challenge is figuring out exactly which data is important to the current state of a project, and then finding the easiest way to aggregate the information. Check out RockDex, Next Big Sound, BandMetrics, Radian6, and BuzzDeck to see the range of platforms and services. Although they cater to different audiences, they are all racing to determine the ultimate set of useful data and develop the most effective ways of interpreting and displaying it. The real challenge is then telling the user what to do next.

*****

What truths have you discovered about the modern music business? Please share them in the comments.

Jason Feinberg is vice president, direct to consumer marketing for Concord Music Group. He is responsible for digital and physical direct-to-fan solutions for CMG's frontline and catalog including the Rounder, Fantasy and Stax labels. Recent campaigns include Paul McCartney, Elvis Costello, Ray Charles, Carole King/James Taylor, and Crowded House. Follow Jason on Twitter @otmg

Digital music streaming services have been around for over a decade. Companies such as Rhapsody, Napster, MOG, and We7 have experimented with various business models and user experiences, with mixed results. The traditional streaming model was based on an all-you-can consume subscription offering, occasionally supplemented with a very limited amount of downloads. Adoption has rarely met expectations, and long-term sustainable profit has been elusive for most companies.

Now, a new wave of streaming services such as Spotify are emerging. Can they succeed where others have failed?

Changing Consumer Behavior

The lack of adoption of music steaming services has been attributed to a number of factors. First, a culture of ownership based on decades of purchasing physical media has locked many fans into a set way of thinking about music consumption. There are millions of music fans that correlate paying to owning, not just listening.

Then there is the illegal downloads issue. Convincing someone to pay to listen is difficult when they can freely own all the digital files they can find. Recent IFPI numbers estimate that 95 percent of all digital downloads are still illegal.

In addition to having to change consumer habits, logistics have also been an obstacle to user adoption of streaming services. For the majority of the past decade, most services were only available via a computer, thus limiting the number of settings and situations in which a subscriber could use the service. Most streaming platforms have now begun releasing iPhone and Blackberry apps, which adds portability into the equation. Until recently, devices were not able to capitalize on the functionality that these services offer, but thanks to 3G and WiFi networks, the bandwidth finally exists to take streaming music almost anywhere.

Subscriptions are not the only business model being used to monetize streaming. A number of ad-supported platforms have come and gone, such as imeem, which was purchased by MySpace late 2009. Imeem and similar sites (including MySpace itself) attempted to use the traditional media advertising model: Provide content for free, but surround it with marketing messages. Typically, this took the form of banners, sponsored promotions, and in-stream audio advertising. This model has also proved difficult to sustain long-term, due to the fact that royalties and bandwidth costs often exceed advertising revenue.

The New Wave of Streaming Services

Currently leading the charge in ad-supported streaming is Spotify. It has combined peer-to-peer streaming technology with in-stream audio advertising. Advertisements also appear on the user interface, raising the likelihood of user engagement. For users who wish to use the streaming service without advertising, and to have the option for higher quality audio, Spotify offers subscriptions in various configurations.

Due to licensing issues, Spotify is only available in a handful of European countries. Founder Daniel Ek previously expressed a desire to open in the U.S. by the end of 2009, but did not succeed. As discussed in a recent article on paidContent.org, the barrier to expansion seems to be licensing concerns, one of which is that U.S.-based labels are no longer satisfied with ad-supported free services and are only looking at subscription models. The most recent numbers show Spotify has 250,000 paying subscribers, compared to a free user base of six million.

The Path to Profitability

Content is key to the success of a streaming site, but adoption is still the ultimate issue. If consumers are focused on owning content, be it physical or digital, paid or illegal, streaming services will continue to have a major uphill battle.

In a recent Bob Lefsetz article, he addressed this issue, providing a detailed look at the obstacles standing in the way of mass consumer adoption. He also looked at how other industries have used bundling and focused marketing efforts to influence consumer viewpoints on renting content versus owning. Lefsetz states in his opening sentence that, "The recorded music business must switch to subscription, it's its [sic] only hope of economic survival."

His rationale for this belief is that iTunes and other a la carte purchase options are a losing battle regarding long-term revenue. Selling music track-by-track may be better than illegal downloads -- but it's still a poor economic model. By removing value from the album format (and losing its higher price point), the music industry has allowed customers to spend very little money. This means the business requires a much higher number of transactions to be profitable.

Lefsetz argues that by requiring users to pay one amount for massive amounts of music -- essentially bundling content the way the cable companies do -- the music industry is able to charge a much larger amount of people a higher amount of money. In exchange, these customers get all the music they can consume, across any device they want to use. Instead of paying $10 for storing 10 tracks, they can pay the same amount and have access to millions of tracks.

The continually dropping cost of bandwidth and massive connectivity available has set the stage for a profitable model in subscription-based services. The biggest challenge is to now convince consumers this is the best method for experiencing music. This job falls to the streaming companies and to the labels and artists that license the music. It also requires that the technology continue to offer more and more choice and convenience. In addition, a massive number of free users must be shown the value of converting to paying for listening, through higher quality audio and an ad-free experience.

As with almost everything in the music industry, the optimal streaming business model is still being figured out, but the emerging success of companies such as Spotify is showing a growing level of consumer adoption.

Jason Feinberg is the president and founder of On Target Media Group, a music industry online marketing and promotion company. He is responsible for business development, formulation and management of online marketing campaigns, and media relations with over 1,000 websites and media outlets. The company has served clients including Warner Bros. Records, Universal Music Enterprises, EMI, Concord Music Group, Roadrunner Records, and others with an artist roster that includes Har Mar Superstar, Flipper, George Thorogood, Steve Vai, Robben Ford, Chick Corea, and many more. You can follow Jason on Twitter @otmg

For some in the business, this year brought trouble after trouble; for others, 2009 was a time for growing revenue, relevance and positioning. Whichever end of the spectrum you are on, there have been few dull moments for digital music this year. And next year promises even more change and growth.

Innovation and Acquisitions Abound

A number of high-profile acquisitions in recent months have shifted the digital music landscape.

Apple's recent purchase of streaming/download service Lala has sparked much speculation. Articles from the New York Times, PC World, and Apple Insider have discussed possible reasons for the purchase, and most tend to focus on the creation of an Apple-powered music streaming platform.

Unlike iTunes, Lala allows users to stream music they own from the web, effectively creating an anything/anywhere platform. It would give users the ability to listen to music via the web and mobile phones without having to download the content to different devices. There's still a scramble for a sustainable streaming model, and Apple wants in.

This is interesting on its own, as it adds a dimension to music consumption that is basically the opposite of how iTunes was built from day one. But this is only one part of why industry players are talking; everyone loves drama, and this story has plenty.

Just one month prior to Apple's acquisition, Lala made headlines as one of the key partners in the new Google Music service. Lala, along with a number of other partners, now powers streaming music search results through Google. When a user searches for music on the search engine, the option to stream the song (as well as purchase, get lyrics, and find tour dates) appears at the top of the results. With Apple's buyout of the company, people are left to wonder what may come of this service.

MySpace was also busy on the acquisition front, recently absorbing two music streaming services, iLike and imeem. Each of these companies had built a solid user base, but had not found the profitability investors expected. A buyout wasn't a surprise. Speculation abounds here as well: Both of these companies offer enhancements to what MySpace currently provides, but they do not bring anything particularly new or unique to the table.

That said, these deals are not without their own drama. iLike has powered Facebook's most popular music service for years, so this acquisition creates an interesting relationship between MySpace and Facebook. There are many other music applications on Facebook, so this development probably won't be significantly disruptive.

The same can't be said for imeem. It built its massive user base by allowing fans to create streaming playlists and embed them across the web. Bloggers and others relied on these players, as did web technologies such as twt.fm, which allowed users to easily tweet a link to an imeem-powered streaming track.

These services immediately broke last week when, without warning, MySpace completely pulled the plug on the imeem service. All traffic to the imeem.com domain now points to MySpace Music, and all backend access to the site (via its APIs) is turned off. This has created unhappy fans, bloggers, and developers.

Is innovation flourishing, or is the herd thinning out? These were only some of the more high-profile acquisitions this year. Expect to see more in 2010.

Direct-To-Consumer Continues Ascent

Another important trend this year was the continued emergence of a hyper-charged direct-to-consumer business model. Companies such as Topspin, Audiolife, Nimbit, and Reverb Nation are enabling artists to interact with -- and sell to -- their audiences in many new ways. I wrote about this topic in a MediaShift article earlier in the year.

The idea of direct-to-fan goes back decades. Massive value can be created when an artist engages their audience directly. This has been demonstrated for years at concert merchandise booths, and online in the form of things such as newsletters and e-commerce using PayPal.

The difference, and the reason this topic is on people's minds, is that technology has quickly propelled the D2C marketplace both downward and forward. Direct-to-fan has always worked well for large bands, or for artists with momentum. Now, small artists -- if, and only if, they are creative and good -- have the tools to recreate this revenue stream at their level. It doesn't mean every garage band can quit their day jobs, but it does mean more artists have new opportunities to make a living.

Forecasting, marketing, commerce, distribution, customer service, analytics, and deep fan engagement are all now available to artists at any stage of their career. This year saw some highly innovative and often successful campaigns run by emerging artists. In 2010, more artists will embrace this model, which means a lot of noise and competition. It will be more of a challenge for the brilliant acts to shine through.

What Else is Next

A few more thoughts about the year ahead:

• 2010 will be the year of analytics. Digital marketing and sales departments have been cobbling together metrics for years. Many things are trackable, but it's often impossible to access the data or find the means to implement structured analysis. Platforms such as Next Big Sound, RockDex and BandMetrics are looking to fill this need. As APIs and data sources continue to open up, these services will get better and better.

• The conversation about an ISP tax for unlimited downloads will continue. The big players working to combat piracy will continue to focus on this.

• Spotify is still gearing up for a U.S. launch, but in light of imeem's troubles, the ad-supported streaming model is under further scrutiny. There are fundamental differences in their ad structures, but ad-supported is ad-supported.

• I am curious to see where advertising goes on Twitter. The Huffington Post has one idea, trying to sell ads into feeds.

There are many more things on the horizon. I'd love to hear your thoughts on the state of the digital music industry, and what's next.

Jason Feinberg is the president and founder of On Target Media Group, a music industry online marketing and promotion company. He is responsible for business development, formulation and management of online marketing campaigns, and media relations with over 1,000 websites and media outlets. The company has served clients including Warner Bros. Records, Universal Music Enterprises, EMI, Concord Music Group, Roadrunner Records, and others with an artist roster that includes Har Mar Superstar, Flipper, George Thorogood, Steve Vai, Robben Ford, Chick Corea, and many more. You can follow Jason on Twitter @otmg

Regardless of their background, practically every person I spoke with agreed on a core set of truths about the future of record labels (and the industry as a whole). The consensus is that:

• Financially, the current situation most record labels find themselves in is not sustainable, especially for companies whose main source of revenue is selling music as their primary product.
• Sales of digital music have not come close to replacing the revenue lost from the decline of physical sales. Overcoming this requires a significant shift in label expenditures, and revenue sources.
• Investors are finding it very difficult to find opportunities that have an acceptable chance of return on investment. This applies to releasing music, as well as ancillary services and products around music.
• Power is shifting away from labels and back to the artist and management. Labels still provide valuable services, but, for the first time in decades, they are no longer the center of the industry.
• The ultimate power now rests with the fan. The dollars they spend are being fought for harder than ever before. At the same time, fans are demanding more content than ever before.

Here's what the experts had to say.

Feedback From the industry

Paul Resnikoff, founder and publisher of music industry news site Digital Music News, has a bird's eye view of the entire music industry.

"I just wonder if music can ever be monetized to the same degree; I think that [NBC's Jeff] Zucker really hit the nail on its head with his '"analog dollars to digital pennies":http://www.nytimes.com/2008/03/10/technology/10online.html?_r=1' comment," Resnikoff said. "It might resonate for years to come."

George Howard, the former president of the Rykodisc label, an advisor to Carly Simon and an assistant professor of management at Loyola University in New Orleans, feels financial sustainability is directly linked to an artist providing more assets directly to their fans.

"Record labels in the future will concern themselves with all the heretofore locked assets that an artist has, and [with] utilizing music as a sort of gateway to a more dynamic relationship between artist and constituent," he said. "It will be a direct relationship -- no middle-man. There will be an increased focus on so-called sentiment analysis, and utilizing the social media tools to create an accelerated word of mouth."

Jay Coyle, owner of Music Geek Management and a direct-to-fan marketer agrees that the responsibility falls back on the artist.

"As for the future, I think it really relies on the artists themselves forging a small team to build and execute what the major labels used to," he said. "I don't think the old model is totally dead, but more success will be found with hard working managers and artists...who focus on direct-to-fan marketing and sales. If they feel they need a label involved, then all parties need to do their fair share of working hard for equal rewards."

An Entirely New Model

Fanscape CEO Larry Weintraub is an industry veteran with 25 years of marketing experience. His extensive work in social media has given him insight into the relationship between the brand and the consumer. He has constructed a start-to-finish scenario of what the record company of the future looks like:

The record company of the future is a one or two person operation. It's the artist and if the artist is not a business person, it's their 'manager.'

The artist finds a way to record their music on the cheap. Whether they record it live at a club or multi-tracked on their home computer, it costs them very little. If they want to spend a little more, they have a job and put a little cash aside each month.

With the finished product they go to Craigslist and find someone who can help them do their artwork for next to nothing.

Armed with a finished album and a nice piece of accompanying art, they give their music away to the world. It's available to stream on their MySpace page; it's available for free download in exchange for an email. To the paying world, it's available on a site like CDBaby.com that also helps them upload the music to iTunes, Amazon, Rhapsody, and everywhere else. When the artist plays a show, they sell their "burned" CDs for $5 with a copy of the artwork and a personal letter saying thank you. They give each paying customer three extra burned copies to give to their friends.

Music is free. And they realize this. If people are willing to pay, they may do so. But the music is the gateway to the live show, the T-shirt, the licensing for a movie trailer.

Then they promote their album by managing a fairly simple website; a MySpace page will do. They respond to every single person who makes a post. They blog about what is going on in their lives. They ask for opinions about the music. They respond graciously. They have a YouTube channel for live performances, they have a Facebook page and a Twitter account. They communicate with their fans. They let them in.

The chances for becoming a star are slim. But they always have been. Now the artist is in control. They are not indebted to a major company that doesn't really care about them. It's up to the artist to make things happen.

The Artist's Perspective

Multiple Grammy Award-winning guitarist and independent label owner, Steve Vai has seen all sides of the record label equation. After years of major label releases, Vai recently released his new DVD "Live in Minneapolis: Where The Wild Things Are" on his own independent label, Favored Nations. (Disclosure: my company is managing the marketing for the DVD.) He offered an artist's perspective on the future of releasing music.

"The two things that will always be needed in the music business are the content (the artist and their work), and the people that know how to sell it (the labels or the glorified marketing team)," he said. "The brain muscles between these two entities are usually pretty different and nary do the twain meet. The way in which we create, record, distribute, purchase and play music will continue to evolve into technology that we are not even comprehending at this time; but there will always be the need for music to be made and for someone to know how to market it to the audience that craves it. Because ultimately there is a vital need for people to be stimulated by the music that resonates with them. It satiates the soul... for a time. "

*****

Stay tuned for part three of this series, which will offer more thoughts from a variety of industry professionals.

Jason Feinberg is the president and founder of On Target Media Group, a music industry online marketing and promotion company. He is responsible for business development, formulation and management of online marketing campaigns, and media relations with over 1,000 websites and media outlets. The company has served clients including Warner Bros. Records, Universal Music Enterprises, EMI, Concord Music Group, Roadrunner Records, and others with an artist roster that includes Har Mar Superstar, Flipper, George Thorogood, Steve Vai, Robben Ford, Chick Corea, and many more. You can follow Jason on Twitter @otmg

Even as recently as the 1970s, the thought that consumers would be able to bring the industry to its knees by circumventing the existing structure and barriers seemed ludicrous. Large companies solidified vertical and/or horizontal integration across almost all elements in the supply chain; this practically ensured a stranglehold on consumers.

Then, as the infamous "home taping is killing music" warning inside record sleeves indicated, the music business (record labels and trade groups in particular) became concerned that blank cassettes were eroding profits. The ability to record songs from radio, a record, or via another cassette meant that people could acquire music cheaply or even for free.

It's worth noting that not all people saw this as the beginning of the end. In 1981 the Dead Kennedys endeared themselves to a legion of anti-corporate youth by printing this message on one side of a cassette EP:

"Home taping is killing big business profits. We left this side blank so you can help."

As anti-establishment as the Dead Kennedys and their label Alternative Tentacles were, I don't think even they could have dreamed up the situation most record labels would find themselves in during the following decades.

The Decline Begins

Since 2000, most formats of physical music products have seen a rapid decline in sales. Debate flares about the causes, but most people accept that digital file sharing, an audience oversaturated with content, an ever-growing number of avenues for entertainment, the splintering of audiences into niches, the widespread shuttering of brick-and-mortar record stores, and the questionable quality of mainstream music have resulted in severe problems for record labels.

Each of these individual factors is bad enough, but a coming threat to labels is that the contracts of many career artists are coming to an end. For the major labels, these superstars have always been the profit center. If an artist has built a sizable fan base (usually thanks to the label), the infrastructure now exists to operate fully outside the traditional model. Labels should be prepared to see some level of attrition moving forward.

The traditional label model that worked for almost seven decades is in its death throes.

What's Next?

Much of the current debate in the music industry is on the role record labels will play moving forward. The majority of label income has traditionally come from selling physical product, which is the area now seeing the sharpest decline. As a result, record companies have experienced a rocky decade, seeing wave after wave of layoffs and massive decline in revenues. In addition, technology and innovative distribution and marketing solutions now give many artists the ability to work outside the traditional music business model. This further reduces the value a label can offer to many artists, especially those in the mid and lower tiers.

Nobody is quite sure what the future looks like for record labels, but in discussions with a wide variety of music industry professionals, a few common themes seem to emerge.

Marketing Services

First, regardless of what is being sold or where the fans are, every artist needs promotion and marketing. Record labels are experts at this, and will be able to provide value here for the foreseeable future.

"Marketing expertise will always be needed whether it is provided by a traditional label or by the artists themselves," said Kevin M. Richards, an independent music marketer who has held marketing positions at multiple labels. "With millions of new songs being released as digital downloads yearly, there is no way a listener can sort through all of it and find anything new without some promotion. Some bands will be able to promote themselves and go right to the top of the charts. Others may choose to have an experienced record label assist."

Scott Perry, owner of New Music Tipsheet and Sperry Media, agrees.

"The core roles of record labels will never change -- facilitating the marketing and distribution of an artist's work is essential," he said. "However, the rights and revenues split will be vastly different, and that will affect the role the label plays in distribution and marketing."

Ultimately, labels will need to find new ways to generate revenue from their artist relationships, as the continuing decline in physical product sales will not sustain profitability.

Missing Profitability

Sean Adams, editor of U.K. music webzine Drowned in Sound, sees another possible avenue for labels.

"It'd be interesting if any of the promoters buy any of the labels, and start to invest in touring acts, but I'm not sure the oil tanker that is the music biz can turn quite that quick," he said.

This addresses the core problem. Labels' traditional revenue streams are drying up and no business can flourish without sustainable income. A remapping of revenue sources is inevitable and has already been put into practice by many labels via so-called "360 deals." Pulling from tour revenues seems to be a logical progression, especially since the new paradigm for many labels is that records exist to promote the tour, rather than the opposite which was true for decades.

To this point, Scott Perry adds, "The bank is broken, and until investing in an artist's career is proven to be a profitable endeavor, it will be difficult for any artist to find a benefactor to fund the labor necessary to push an artist beyond their sphere of friends and into a larger network."

Brenda Walker of Rebel Content is a marketing consultant and content producer. She feels smaller labels will continue to quickly adapt to new revenue sources.

"Smaller labels, often owned by managers and artists in partnership, will increase their focus and expertise in direct consumer marketing and distribution, both online and mobile, packaging music in a variety of ways," she said. "Because they are nimble and will control comprehensive rights for licensing, they will grow revenue from multiple channels -- recordings, licensing, merchandise and live performance."

Alternate Models

Although labels expanding their reach into additional streams of existing revenue should allow for their continued existence, many people are discussing the notion of completely rewriting the core music business model.

Walker feels a scaled-down shell of the current model is in store.

"The major labels will look more like music publishing and even stock photography companies, focused on maximizing income from exploiting licensing opportunities. Their operations will scale down, but they will not go out of business," she said.

Adams offers up a much different model.

"I think corporate patronage is the only viable model," he said. "Something that mashes up Levi's ads in the '90s and the Starbucks' label...I really don't see anyone else who values music in such a way and sees an upside to being associated with the emotional relationship people have with music."

Regardless of one's opinion as to the future of record labels, the consensus is that the traditional model no longer works. Certain functions will always be required, but where the funding comes from and how revenue is generated will be significantly different. No one solution is guaranteed to work, but forward-thinking artists and labels are already starting to change their businesses to once again find sustainability and profit.

Jason Feinberg is the president and founder of On Target Media Group, a music industry online marketing and promotion company. He is responsible for business development, formulation and management of online marketing campaigns, and media relations with over 1,000 websites and media outlets. The company has served clients including Warner Bros. Records, Universal Music Enterprises, EMI, Concord Music Group, Roadrunner Records, and others with an artist roster that includes The Rentals, Flipper, Thin Lizzy, Sammy Hagar, Primus, Poncho Sanchez, Ringo Starr, Chick Corea, and many more. You can follow Jason on Twitter @otmg