Are Smart Phones the Future of the Music Business?

Terry McBride doesn't believe all the doom and gloom spread by the big record companies these days. And he doesn't consider it depressing that 95% of digital music is now being listened to for free—he considers it an opportunity.

The CEO of Nettwerk Music Group—the record label for such artists as Sarah Maclachlan, Coldplay, and k-os—sees the future of the music business not in downloads, but in metadata and smart phone apps, he told a packed house during Berklee's annual James G. Zafris lecture.

The secret is not to try to force people to buy your song when they can find it in a hundred places for free. "Suing consumers just created new technologies that couldn't be tracked," McBride said. "How do you sue millions of people? You can't."

Instead, McBride said, the goal should be to make your song easier to access and more valuable than anything consumers could get for free.

McBride envisions a slew of metadata added to each file that doesn't just make a song more searchable, but includes many different versions of that song: a karaoke version, a clean version, a fan mix. . . . Nettwerk is currently trying to add that value to their music themselves, but McBride thinks it'll ultimately be done by crowdsourcing: the community itself will add what it wants to hear.

Where will this information be used to make connections with consumers? On smart phones, McBride said.

Over 500 million applications have been downloaded since the iPhone App Store opened 9 months ago. And with consumers replacing cell phones every two years, McBride believes that the market for smart phone–related products will take off even more dramatically. Record companies need to be part of that action.

McBride held up music-identifying app Shazam as an example of the direction the music business should be taking. When you expose your iPhone to a song that's playing, Shazam identifies the song and links you to iTunes, where you can buy it immediately.

McBride dreams of other music apps, such as a virtual valet who finds new music for you and "parks" it where you want it, a virtual maid to clean up and sort all the music files on your computer, and concert tickets that are just a barcode on your phone.

But McBride didn't call these programs music apps. He called them social apps, emphasizing that ultimately it's not technology that makes you successful in the music business, it's the connection you make with listeners.

McBride talked about record companies aligning with causes that artists support, the clothing that they wear, and so on, in order to market the whole experience. But he cautioned that sincere interest can't be faked. Companies must make sure it's an "alignment of authentic causes."

Because today's consumers mistrust advertising, money spent on these more grassroots ways of outreach can often be more effective. McBride pointed out that peer-to-peer has always been the best way of reaching people.

"Radiohead, U2—they didn't break on their first album, they broke on their third album. Consumers found it by grassroots communication," said McBride. "Bands' success is based on their ability to get consumers to advertise for them."

And while the big record companies might be sweating, McBride doesn't think that the music business has anything to worry about. "Authentic relationships at a live performance cannot be duplicated," he said. "It becomes an emotional bookmark."