Where The Action Is

Nov 09 2010

Sometimes it’s good to get out of your safe, predictable environment (if anyone could call the US music business safe and predictable these days) and venture forth to new lands and new frontiers. Sometimes it’s a royal pain. After a trip to the Amsterdam Dance Event, along with stops in Milan, Verona, and London, four missed flights, a midnight desperation flight to Brussels followed by a two hour taxi trip (never tried that one before) to Amsterdam, I’ve seen the good, bad and the ugly. Trust me on this: nothing is uglier than Schiphol airport on the first day of a school holiday in Holland.

Nevertheless, the trip was a positive one, if only for the opportunity to see that despite all the difficulties of the music industry– and it’s far tougher in much of Europe than it is here in the US– there are still signs of life out there in almost every territory. The Dutch seem to be building primarily around the television model, with publishers like Talpa and CP Masters/CTM Entertainment making the kind of synergistic moves that have worked so well for Simon Cowell and Syco. The Germans and the Japanese are regaining control within their own market– American and British English-speaking records are far less dominant on those countries’ Top 40 charts than they were five years ago. The French are in a bit of a creative Renaissance, with worldwide success stories that range from David Guetta’s reign in dance music to Phoenix’s rise to prominence in the indie rock world. And the English looked poised to once again break the big new musical trend, as dub step continues to climb into the world of mainstream pop and urban music.

Interestingly though, the biggest international stories out there at the moment are from places even further away– which means I’ll probably have to start waking up at the crack of dawn (definitely not a good look for me) or staying in the office till 10pm in order to bridge the time zone gap. Some of these territories are being fueled primarily by new technology, and some benefit from traditional revenue sources, but all of them are spots that could be major bright spots in what promises to be a tough couple of years ahead. They’re not for everyone, and the markets there will certainly have ups and downs– but if you think your music fights the culture, and you have some frequent flier miles saved up, maybe it’s time to check out a couple of new lands of opportunity. Here’s the top three of the moment…

1. Russia and Eastern Europe

The big news at the ADE conference this year was that the Russian bear might actually be warming up to the music business weasels. Not only is music being sold over there– which is not all that new– but people are getting paid for it. That’s a real revolution. Despite the massive size and economic power of the country, Russia has been a black hole for both publishers and record labels, with a lack of industry infrastructure and a level of piracy so severe that there was almost no expectation of meaningful income out of the territory.

But over and over again in Amsterdam I heard reports of people receiving surprisingly big checks from Russia this year. Even better, I met young, smart, ambitious entrepreneurs from that territory who are convinced that the checks will keep coming, and get larger. What turned the situation around? Phone calls, and lots of ‘em. It turns out that the craze for ringback tones has finally shown a way to beat piracy, and is starting to prove that there’s a lot of money out there when people actually have to pay for what they use. Because ringtones and ringback tones have to be purchased by the consumer through the mobile distribution networks, and those mobile networks are the ones responsible for paying labels and publishers, these transactions bypass the black market where royalties generally disappear into the ether. Consumers purchase and pay their money; networks report actual sales figures and pay accordingly. Sounds crazy I know, but it seems to actually work.

Taken in combination with a very active and profitable live market, which caters to the highly affluent party-goers in the cities, the ability to monetize music sales could be a massive opportunity for the industry. Clearly, Russia, especially when you begin to include its many Eastern European neighbors, is a vast territory, with plenty of spending money, a passion for entertainment, and not a lot of entrenched competition. As the market for mobile music and video increases, things should only get better. For those in areas like dance, pop, and rock, you have to start thinking about how to get a piece of this brand new pie.

2. Korea

And let’s hear it once again for the cellphone! As befits their reputation of being five technological steps ahead of every other market, the Asians are already using mobile music in all its various forms, from ringtone to ringbacks to music videos to live concert broadcasts on their cellphones. That’s a good thing. Unlike Japan, which has been a major music market for decades, Korea, along with Vietnam and China had been another musical no-man’s land, where it was certainly possible to sell music, but was very difficult to get paid. Now that the phone companies are collecting directly, the strengths of this territory are starting to show, and Korea has emerged as the production center for the pop music that dominates all of Asia.

These guys make Lou Pearlman, the mastermind behind Backstreet Boys, *NSYNC, and LFO, look like a kindly old uncle. With companies like SM (Star Museum) Entertainment, Korea is the hit factory of Asia, and they specialize in pop so scrupulously manufactured that now even long-established Japanese companies like Avex and Johnny’s Entertainment go there to jump on the assembly line. It’s not a model of inspiration or innovation, but acts like BoA, Girl’s Generation, and Super Junior connect with audiences across that territory– each group is often carefully planned to include Japanese, Korean, and Chinese members. In the grand tradition of star-makers everywhere, SM finds its potential idols young, keeps ‘em under lock and key, and lets the act die before it gets old– there’s always a new one waiting in the wings.

SM Entertainment's Super Junior

Funny enough, the Swedes, who invented this model, are already onto what’s happening in Korea, and are the major foreign players there. They must feel right at home.

3. Australia

This ain’t Korea, mate. Other than the Minogue family and the occasional star-turn from the cast of Neighbors, the Aussie soap-opera, manufactured pop is not the strength of this country. But when it comes to new rock acts, Australia has a very impressive track record, with acts like Jet, Wolfmother, and the Temper Trap. They’ve also got a wealth of fresh, quirky pop acts, from Sneaky Sound System to Zowie. Matched with a strong set of indie labels, and most importantly, an avid, affluent audience for live music, these acts have generated some important success stories, particularly for the mainstream rock market.

Temper Trap

The key here is a relatively late transition from physical to digital, due to limited access to broadband service in many segments of the market, a long, entrenched history of supporting live music (similar to the UK), and a strong A&R community not entirely reliant on the major label system. The weather doesn’t hurt either– as Nick Dunshea, director of Mushroom Group’s Liberator Music said recently in Billboard, “People want to come to Australia, people like Australia. Bands like to come here, labels like to talk to Australians”. Even if we can’t understand half of what they’re saying.

The point is, it’s easy to grow myopic about the music business, especially when you’re centered in the US market, which tends to see itself as the center of the entertainment industry universe. Just like financial guys constantly monitor the world markets to watch for new hot spots, you need to do the same, whether you’re a writer, producer, publisher, label or all of the above. Once you find a land of opportunity, be prepared to take advantage of any growth area, no matter how far from home. The Swedes are doing it in Korea; the dance community is doing it in Russia. The UK and American rock community is keeping a constant eye on Australia. You gotta go where the action is– especially when it’s in such limited supply.

The moral is:

No matter how dark it gets in your neck of the woods, the sun is always rising somewhere. Except in London and Amsterdam, where the sun never seems to come out at all.

Now I’m off to Nashville, just in time for everyone to shake off their CMA hangover…