Universal's CEO Once Called iPod Users Thieves. Now He's Giving Songs Away
By Seth Mnookin 11.27.07 | 12:00 AM


It's Monday afternoon, and Doug Morris, chair and CEO of Universal Music Group, is eating lunch in his private dining room at the company's Manhattan headquarters. Morris hasn't been here much in recent months, though it's hard to imagine he misses the place. For one thing, workers have been renovating the building: To reach his corner suite, you need to take an elevator to the floor above, walk down a hallway covered with plastic sheeting, and then descend a flight of stairs. For another, these are tough times for the music business. In 2006, the number of CDs sold worldwide fell 10 percent, the largest one-year drop ever — steeper than in any of the so-called Napster-era years from 2001 to 2004. Early indications suggest that 2007 will be at least as bad. The shades in the adjoining office are drawn, making the room feel a little like a crypt — albeit one outfitted with leather couches and tasteful art.
For the past several minutes, Morris has been listening to Rio Caraeff, executive VP in charge of the company's digital strategy, tell me how the sagging fortunes of the music industry highlight the need to diversify revenue streams. Caraeff explains that the company will eventually need to transition from running a product-based business to running a service-based one. He talks about ringtones, subscription services, and deals with mobile providers, stressing the need to raise the industry's "digital IQ."
Morris seems distracted. At 68, he looks every bit the prototypical New York big shot. What remains of his hair is slicked back along the sides of his head, and if his face is fleshier than it once was, the ever-probing, slightly combative intensity of his eyes hasn't dulled a bit. Morris has spent his entire life working with musicians and producers, finding and nurturing the talents that make his company a $7 billion-a-year business. It's safe to say that increasing his digital IQ and pondering a service-based business model aren't the topics that get him out of bed in the morning.
But digital strategies are important these days, and Morris has become entangled in them whether he wants to be or not. Over the past several years, he has been one of the most staunch and vocal proponents of aggressive copyright enforcement, at one point publicly blasting MP3 players as merely "repositories for stolen music." When he realized, after watching his grandson stream online clips, that portals weren't paying Universal for playing its music videos, Morris pulled the company's content off of Yahoo. Once the two sides came to terms, Morris went after YouTube and MySpace — "copyright infringers" both, as he put it. YouTube eventually agreed to a deal; a lawsuit against MySpace is ongoing. (Licensing of videos to Web sites now nets Universal more than $20million annually.) And in November 2006, Morris parlayed Microsoft's desperation to establish a true alternative to the iPod into a $1 ransom to Universal for every Zune music player sold — and that's on top of the licensing fees Microsoft pays to have Universal's songs in its Zune Marketplace online store. It's a sign of Morris' power that he is able to pressure so many players in the technology world to bend to his will.
Last summer, though, Morris seemed to change direction. After years of tightening controls on his company's content, he agreed to let Amazon.com and other online retailers sell unprotected MP3s of Universal songs. These contain none of the digital rights management software that media companies usually embed in digital files to prevent piracy. Universal wasn't the first big label to offer unprotected tracks; the EMI Group had begun selling DRM-free songs in May. But with its small market share, EMI's decision seemed unlikely to have much effect on the market. Universal, on the other hand, was setting out to change things. In particular, it hoped to end Apple's near monopoly on legal digital downloads.

Discussing Universal's various initiatives, Caraeff, an even-keeled 32-year-old in a crisply tailored suit, is explaining that it's important to be "invigorated and challenged by the opportunities of digital music." At this, Morris puts down his tuna fish on white, wipes some crumbs off his khakis, and clears his throat. I expect him to deliver an explanation of how he learned to stop worrying and love the MP3. Instead, he launches into a rant about a creature that resembles a misshapen bowling ball.
"There was a cartoon character years ago called the Shmoo," he says in a raspy tenor. "It was in Li'l Abner. The Shmoo was a nice animal, a nice fella, but if you were hungry, you cut off a piece of him and put onions on it, and if you wanted to play football you just made him like a football. You could do anything to him. That's what was happening to the music business. Everyone was treating the music business like it was a Shmoo.
"It was only a couple of years ago that we said, What's going on here?' Really, an album that someone worked on for two years — is that worth only $9, $10, when people pay two bucks for coffee in Starbucks?" Morris sighs. "People never really understand what's happening to the artists. All the sharing of the music, right? Is it correct that people share their music, fill up these devices with music they haven't paid for? If you had Coca-Cola coming through the faucet in your kitchen, how much would you be willing to pay for Coca-Cola? There you go," he says. "That's what happened to the record business."


Nokia Predicts the Future of Entertainment
Dec 13
Posted in File Sharing / P2P, Music Copyright / Legal, Music Creation, Music Formats, Music Industry, Music Publishing, The Future
A study by Nokia predicts that up to a quarter of the entertainment consumed by people in five years time will have been created, edited and shared within their peer circle rather than coming out of traditional media groups. This phenomenon, dubbed ‘Circular Entertainment’, has been identified by Nokia as a result of a global study into the future of entertainment.
The study, entitled ‘A Glimpse of the Next Episode’, carried out by The Future Laboratory, interviewed trend-setting consumers from 17 countries about their digital behaviors and lifestyles signposting emerging entertainment trends.
“From our research we predict that up to a quarter of the entertainment being consumed in five years will be what we call ‘Circular’. The trends we are seeing show us that people will have a genuine desire not only to create and share their own content, but also to remix it, mash it up and pass it on within their peer groups - a form of collaborative social media,” said Mark Selby, Vice President, Multimedia, Nokia.
Selby continues, “We think it will work something like this; someone shares video footage they shot on their mobile device from a night out with a friend, that friend takes that footage and adds an MP3 file - the soundtrack of the evening - then passes it to another friend. That friend edits the footage by adding some photographs and passes it on to another friend and so on. The content keeps circulating between friends, who may or may not be geographically close, and becomes part of the group’s entertainment.”
Tom Savigar, Trends Director at The Future Laboratory added, “Consumers are increasingly demanding their entertainment be truly immersive, engaging and collaborative. Whereas once the act of watching, reading and hearing entertainment was passive, consumers now and in the future will be active and unrestrained by the ubiquitous nature of circular entertainment. Key to this evolution is consumers’ basic human desire to compare and contrast, create and communicate. We believe the next episode promises to deliver the democracy politics can only dream of.”
Of the 9,000 consumers they surveyed:
- 23% buy movies in digital format
- 35% buy music on MP3 files
- 25% buy music on mobile devices
- 39% watch TV on the internet
- 23% watch TV on mobile devices
- 46% regularly use IM, 37% on a mobile device
- 29% regularly blog
- 28% regularly access social networking sites
- 22% connect using technologies such as Skype
- 17% take part in Multiplayer Online Role Playing Games
- 17% upload to the internet from a mobile device
As part of the research they identified four key driving trends; Immersive Living; Geek Culture; G Tech and Localism. As these trends become more mainstream, they predict that they will have a collaborative, creative effect on the way people consume entertainment and, we predict, will lead to the Circular Entertainment phenomenon.
Immersive Living
Immersive Living is the rise of lifestyles which blur the reality of being on and offline. Entertainment will no longer be segmented; people can access and create it wherever they are.
Geek Culture
This triumph marks a shift as consumers become hungry for more sophisticated entertainment. Geek Culture rises, consumers will want to be recognized and rewarded - the boundaries between being commercial and creative will blur.
G Tech
G Tech is an existing social force in Asia that will change the way entertainment will look. Forget pink and sparkly, it is about the feminization of technology that is currently underway. Entertainment will be more collaborative, democratic, emotional and customized - all of which are ‘female’ traits.
Localism
The report uncovered a locally-minded sprit emerging in entertainment consumption and Localism will become a key theme of future entertainment. Consumers will take pride in seeking out the local and home-grown.
Now all that is great, but presents significant challenges to the notion of intellectual property, copyright and ownership - all subjects that have been discussed here before. It is one thing for young hipsters to want to create and mash-up their own material, and an entirely different matter to do so with other peoples property. How this will all shake out remains to be seen.
While I generally agree with the trends they are highlighting, I still wonder how this all plays into the business of music and the opportunities for careers in the music industry if everything is free and can be readily absorbed, modified and regurgitated without any concern for commerce or rights. This would be great for device makers like Nokia and others, but not great for the producers of art seeking to make a living off of that activity.
We have already seen how Apple has benefited dramatically at the expense of the artists, writers and record lables - and shifted the income stream out of their hands and into Apple’s own. Powerful motivation for Nokia to follow suit with an even bigger world view of media and their place in it.