Watch this man. 

3 October 2008 tbs.pm/950

This man is Cory Ondrejka, and he’s the new-ish Senior Vice-President of Digital Strategy at EMI Music – my old employers. However, I know him as a co-founder of the Second Life virtual world. The above is his keynote presentation at DMFWest and in it he talks about the recent past, and his view of the future, of the record biz. And it makes interesting, if breakneck-paced, viewing.

There are some hoary old chestnuts in here, as you might expect from someone in a major record company – Cory has obviously taken his company induction programme seriously. For example, he shows graphs of declining RIAA record sales, and then superimposes both iTunes downloads and P2P (“illegal”) downloads and notes that adding them all together you get an annual growth of 7% – not at all bad, so it isn’t all doom and gloom if you could monetarise that peer-to-peer stuff.

But you have to bear in mind it is quite likely that all this so-called “illegal” and “P2P” downloading isn’t illegal at all: a great deal of it is the result of actual sales which go unrecorded by the RIAA, which has no way of tracking them (though at least some of the time, it could).

For example, my friend Kirsty Hawkshaw is doing great guns selling her latest recording as downloads on Magnatune.com – in fact I believe she’s made more money from that outlet than from conventional record sales in the past. But does the RIAA count all that? Nope. Nor does it count the sales from many download sites, such as Beatport, which supplies the latest dance tracks to club DJs and does a lot of business.

The RIAA certainly doesn’t count the bands selling CDs at gigs – how can it? – and live music is currently at an all-time high, so this is getting more and more important (indeed the old circle of the tour-to-promote-the-album now goes round the other way). Nor people like Jonathan Coulton selling stuff off his website. Or people shifting tracks or CDs via MySpace promotion or whatever.

At the company I work for, CD player sales are up. What does that mean? Don’t they keep telling you that medium is going away? (It probably is, by the way – just not quite yet. Look at the graph of iTunes sales in Cory’s presentation, though.)

Research by some Harvard students a while back indicated that music sales might actually be going up at something like the rate Cory suggests: See Oberholzer, F. & Strumpf, K. 2004, The Effect of File Sharing on Record Sales An Empirical Analysis.

If you are basing your plans on a reported sales environment in which you think more people are stealing your IP than actually are, you may be tempted to take measures that are in fact unnecessary and may even be counter-productive. If you think that recorded music wants to be free, or is becoming free, then you’ll probably want to base a bunch of strategies on that assumption. And if that assumption is suspect (ie in fact, maybe you can persuade more people to pay for music if you are sensible about it – again, visit Magnatune to see how it could be done), those strategies may be invalid.

In a nutshell, people may be selling as much music – more, much more, in fact – than they ever were. They just aren’t doing it via major record companies, so those sales are not being recorded, making an upturn look like a mega-downturn. People are doing it themselves. Perhaps the old major record companies are like the giant Sequoias that have to burn to the ground every so often, leaving a thousand new shoots in their wake.

But while you may want to take those (admittedly potentially rather large) potential errors with a pinch of salt, the fact is that EMI as a major record company, and particularly Cory as an individual in an important future-looking position in a major record company, has a better handle on what is really going on in that end of the industry – and where that end of the industry is going – than almost anyone else.

Look at EMI’s pioneering position against DRM for example, essentially suggesting that people should be able to use the music they buy as freely as they have traditionally been able to do since the advent of the cassette recorder. And Cory’s experience with Second Life, apart from anything else, has given him an excellent insight into how people co-collaborate and share experiences and ideas in the Web 2.0 world – with extremely unexpected results.

Have a look at the video and come away with a clearer view into the crystal ball. Let’s just hope that other record companies follow his lead.

(And don’t worry, the video is only half as long as the progress indicator would suggest.)