GrindEFX

“We’re good at failure.”

That was Mike Jbara, VP of Warner Music Group (WEA) , with a refreshingly honest admission from the Big 4, traditional music industry at the 2009 NARM panel “The Majors: Strategic Imperatives.” The panel also included Amanda Marks from Universal Music Group, Jennifer Schaidler of Sony Music and Darren Stupak from EMI Music.

Jbara wasn’t just hand-wringing though. Instead, he was stating what has been obvious to many in the industry for some time. He and the other panelists sounded optimistic about the state of the music industry. They discussed issues that showed a clear grasp of how technology has changed music consumption and how the industry needs to respond, a clarity that, self-admittedly, was lacking even a few years ago.

One of the key points that was repeated was the idea that the Big 4 – and the music industry in general – has to continue to find ways to connect with fans and give them a reason to buy in order to continue to grow and succeed. The panelists also mentioned several times that the time has come and gone for the Album as the default delivery mechanism for music.

Wait a minute. Was I listening to VP’s from the Big 4, or Michael Masnick?

After all, it was Masnick, founder of Techdirt and Floor64, who came up with the formula that summarized how musicians can succeed in the “music commerce frontier”: CwF + RtB = $$$

That is, a successful business model needs to Connect with Fans and give them a Reason to Buy.

While none of the panelists specifically mentioned this formula or name-dropped Masnick, most of the discussion revolved around that concept.

While the music industry in the US dropped another 4% last year, music consumption itself is at an all-time high. Listeners can discover and access music through so many different routes – social networking sites, mobile devices, Guitar Hero, in the background of their favorite TV show. The key for successful music business models is in tapping into that love of music and the opportunities to discover it, connecting with the fans, and monetizing.

And lest I’m losing the more cynical of you with all this talk of “monetizing,” the panelists all agreed that the most important element to the business model is the music itself. It has to be great music, songs and artists that consumers are passionate about and connect with when they do discover it. The Big 4 realize that their focus is on finding and nurturing talented musicians.

In order to do this, the music industry is finally excited, rather than threatened, by the possibilities of technological and business innovation. They don’t even make a distinction between physical and digital – it’s all about connecting with the fans.

The Compact Disc is on life-support, but so what? It’s only one delivery mechanism for music. It’s far better to concentrate on other ways to deliver music to consumers that fits their lifestyle than to keep pushing those round pieces of plastic.

Mobile devices will be central to this type of innovation. The keys here are device penetration and evolution – finding products and services that make sense to consumers and how they use their devices. Smart phones and apps already hint at the potential of mobile music. Since smart phones, like the iPhone, are such data-heavy devices, they require fast and always-on connection rates, both essential to delivering better music experiences to the consumers. And apps have already proven very popular and successful. These apps may focus on music itself, or in many cases, may contain background music – just one of many new revenue streams available to labels and artists today.

Social networking sites offer additional opportunities to innovate. The biggest problem with building revenue streams from social networking sites and mobile devices is the “click-gap.” Consumers want things to be easy. The more hoops they have to jump through to spend their money – the more links or buttons they have to click – the less likely they will spend it. Record labels and technological companies are looking for ways to improve user interfaces to make it as easy as possible for consumers.

While no one went as far to say “the album is dead,” they do agree that at the very least, the traditional album should no longer be the default package for music delivery. Instead of the conventional one-album-every-year/one-size-fits-all product cycle of an artist, labels are looking at a wider variety of different types of products throughout that cycle. Not necessarily singles, but certainly delivering smaller song blocks, like EP’s more often… hey, wait a minute! This sounds a lot like the ‘3P’ concept I recently read about on Hypebot!

Having said that, it may come as a surprise that special-edition, higher cost physical albums are doing surprisingly well, just as well for physical retailers as digital retailers. Consumers who are passionate about an artist find a lot more value in these packages than a mere CD. They are often limited-edition, of a much higher quality, and bundled with a smorgasbord of extras – anything from t-shirts, extensive liner notes, artwork, artist signatures, and much more.

Yes, the record label execs on the panel were looking forward rather than backward. They agreed that this wasn’t the case even a couple years ago, that their crystal balls haven’t always worked, that they are “good at failure.” But the focus for them now is on connecting with the consumer, the fans of the music they put out.

We are living in exciting times. Everyone from the VP’s at the Big 4 down to blogs such as this are asking the same fundamental questions. How do we get listeners to discover music they love? How do we get that music to them in a way that is easy and fits their listening habits? And how do we do all that in a way that ensures that musicians can make a living through their creative endeavors?