I'm the Editorial Director for Billboard, Billboard Magazine,

billboard.com, billboard.biz.

And if I'm supposed to know anything, I'm supposed to know

a little bit about what goes on in the music business and

what goes on with music.

And so I thought today that since there was a cross

section of different cultural commerce leaders here in the

audience, that I'd put forth the theory that music--

the music industry-- is a little bit of the canary in

the coal mine, by virtue of file size, by virtue of the

ubiquitousness of music.

When the digital revolution happened, the music industry

was the first one to shit the bed.

[LAUGHTER]

In order to properly contextualize the conversation

that we're about to have, I promised I would try not to

swear too much.

That's one.

You guys can keep score.

In order to properly understand the conversations

that we're going to have here today over the next hour, I

want to take just three or four minutes and kind of take

you through the music business, where it's been,

where it is now, and where it's likely going.

This is a gratuitous slide in which I subtly remind you to

follow me on Twitter.

So starting shortly after World War II, people listened

to music on vinyl albums.

It was shortly after World War II, because after World War

II, Americans had the resources.

They had money, and they had the materials again.

And vinyl records started becoming very popular because

of this new craze called rock-and-roll music.

We fast forward.

We get to cassette albums, and suddenly

music is more portable.

It still sounds like crap, but it's more portable.

And you can see with each curve you get

a little bit higher.

Now this is the CD.

And you can see we're progressing through time.

And this period right here, this big giant spiral, that's

what the music business-- the recorded music

business, mind you--

likes to refer to as "awesome awesomeness." This is where

people are going out and repurchasing all the music

they already own at $17 a pop.

This is, at the peak of this moment, right-- that very,

very tip-top peak--

that's the teen pop explosion.

That's at the Backstreet Boys, Britney Spears, 'N Sync--

very good, an 'N Sync fan in the audience.

[LAUGHTER]

BILL WERDE: You can't be any happier at this moment in time

if you work in the recorded-music business,

because you've got these dying, passionate fans for

these boy bands, and Britney, and Christina.

And all they can do is go to a record store-- you remember

record stores--

and spend $18 to buy the album.

And then you know what happens right at that peak moment?

Napster happens.

And so here we are.

This is the sale of CDs, and you can kind of see the effect

that the digital revolution had on the sale of CDs.

It wasn't pretty.

I think, staying true to my role as the canary in the coal

mine, I'll tell you that there's a couple of things

that we all learned from the recorded-music business during

this period of time.

And the most important one, since we only have a little

bit of time here today, is that you

cannot fight the current.

One thing you may notice about all three of these cycles is

that once you hit your peak moment and you start going

down, you never start going back up again.

So you can either adapt and figure out awesome things you

can do with that current, or you can shit

the bed, number two.

That was ironic.

[LAUGHTER]

I got here late, and they told me that people laughed at Eric

Schmidt's jokes.

And that made me feel really good.

Because Eric Schmidt is a brilliant man, but he is not

Steve Martin.

So here we have digital album sales.

And we can see there's still a pretty big gulf.

And we can see that digital album sales didn't quite take

off the way some of these other formats took off.

The curve isn't as quick.

People are a little slow on the uptake.

But this is why I think the music business is actually

positioned to be a canary in the coal mine and not just a

bunch of people buried at the bottom.

Because when we add in track-equivalency sales--

so we take 10 tracks, and we consider that the

volume of an album.

Now suddenly, in 2010 and today, in fact, we've hit the

break-even point.

Now granted, it's a break-even point that's much lower than

where we were, where the music business was 10-12 years ago.

But it's a floor.

It's something you can build on.

Now that break-even point doesn't take into

consideration all the new ways people are making money since

the digital revolution began.

So you've got live music.

In the same 10-12 years that the recorded-music industry

has been in a free fall, live music has actually grown, and

grown pretty steadily with a couple of dips here or there.

People are making more money from touring.

People are making more money from merch.

And I think probably the biggest shift that has gone on

is that, once upon a time, people put out an album and

toured to support it.

And now, people put out music to support their tour.

Spotify--

services like Spotify, MOG, Vivo, YouTube.

What's interesting is that just a few years ago, iTunes

was basically responsible for 70%, 80%, 90% of a record

label's digital revenue.

And today, if you talk to someone at a record label,

what you'll find out is that digital revenue has become

roughly 40% to 50% of a typical label's revenue in

recorded music.

And of that 40% to 50%, as much as 40% or 50% is now not

coming from iTunes.

And that diversification is really important news-- really

good news--

for the health of the recorded-music business, and

for the health of everyone.

Competition is a good thing.

But if you want to talk about the power of YouTube and the

power of these platforms, I want to use a little example.

How many people, by a quick show of hands, know the song

"Gangnam Style?" So most of you.

I'm shocked, by the way, that so many of you haven't heard

the song, "Gangnam Style." But I will not publicly ridicule

you at this moment.

How many people here know the song "Whistle," by Flo Rida?

So decidedly fewer.

So what's interesting about this to me are these numbers.

"Whistle," by Flo Rida, was the number one song on FM

radio in all formats last week.

It was played almost 20,000 times.

That's 3,000 times a day in the United States.

That's amazing.

That's like a great, great song.

Psy's "Gangnam Style," in the last two months has been

played 220 million times, or 3.4 million times a day.

That is the opportunity that is created by the

democratizing platform such as YouTube.

You make a better product.

You make a better video.

You make something amazing.

People share it.

People see it.

Brand deals have gone up.

Pepsi, Coke, Chevrolet, Heineken--

all these labels that are spending all

this money on music.

Film and TV syncs have gone up--

Mad Men, Breaking Bad, X Factor, all these

shows that use music.

This is what's happened since recorded

music took its nosedive.

Kickstarter--

you're going to hear from Julia Nunes in just a moment,

but she put some great videos, some great songs, on YouTube.

Wound up with millions of people

checking out those videos.

Put up a Kickstarter campaign.

Wanted to raise $15,000.

Raised $75,000.

Pandora.

And at the center of all these is the artist with a different

kind of leverage point than the artist had before recorded

music hit the skids.

Because in the recorded music, in the old model, if you were

a really, really superstar artist, you might generate 20%

of the revenue that was created from

selling your albums.

And today, in a lot of these opportunities, the artist is

much more the partner.