By Nick Krewen

Terry McBride is not afraid of throwing the baby out with the bathwater.
Faced with the prospect of increasing irrelevancy in a rapidly changing music industry world, McBride -- the co-founder and CEO of the Vancouver-headquartered Nettwerk Music Group -- felt it was time to shift gears.
"Three or four years ago, we started a process within Nettwerk where we basically looked at the whole company and went, 'We have a model that's not going to be functional in about five to ten years, so we need to change it,'" McBride explained in his keynote address to kick off the 25th edition of Canadian Music Week.
"So we made radical changes throughout the whole company. We took the management company, the record company, the publishing company, and we wiped it clean and created one company."
For McBride, who has played a significant role in the multi-million-dollar-generating careers of Sarah McLachlan, the Barenaked Ladies and Avril Lavigne, it was an opportunity to forego tradition and forge a new paradigm...without preconceptions and minus certain traditional corporate shackles.
"We took all the people who had titles and got rid of those titles," McBride told the packed Ballroom at Toronto's Fairmont Royal York Hotel.
"We created three distinct marketing teams, and put in those marketing teams everything that they needed in order to successfully promote, market and sell music -- to the point where they did not need to go out of their marketing team."
Nettwerk also combined IT people with designers, traditional sales and marketing people, Internet marketers and digital designers, and matched thee newly created "silos" with artists and managers.
"We basically said, 'Go do it a different way -- there are no rules,'" recalls McBride. "'We're not in a sandbox. You're on a beach and the tide is going to wash it clean. You're going to start with your imagination every morning.'"

 Moving Forward Without Fear

Throwing out the rulebook is just one aspect of McBride's innovative ideas concerning future music industry acclimatization.
In his wide-ranging 60-minute speech, McBride advocated three key ideas that the business needs to adopt in order to move ahead: Eliminate fear; remove the digital rights management (DRM) locks that prevent music from being moved from platform to platform; and collapse copyrights.
McBride began his speech by quoting two death knells: one rung by the radio industry in 1925 when the introduction of music "threatened" the extinction of the airwaves; and another in 1982 from the motion picture industry worried that the videocassette recorder would end the silver screen experience as we know it.
Of course, in hindsight, neither of things happened, with both the music and motion picture industries expanding and thriving to record consumer penetration and profit. 
"Fear is something in one's life that one should delete," states McBride. "Fear is simply a choice. You can fear something or worry about something. And it's meaningless. But if you keep thinking about it, all of your fears will come to be true."

Behavioural Shift

McBride notes that fear has insinuated itself back into the music industry, largely due to seismic shifts in consumer behaviour dating back to the introduction of the compact disc that the business itself failed to recognize, account for and ultimately embrace; the beginning of what he calls "The Pull Generation."
"When they introduced the CD, what they didn't realize is that they were beginning to imprint the new generation into a different way of consuming music," said McBride.
McBride said the fact that you could hit a button on a CD player and instantaneously repeat a song on personal demand led to a new dynamic.
"That was the start, 20 years ago, of 'The Pull Generation:' The imprinting of the fact that one can ask for something when and how they want it, " McBride asserts.
"The CD allows you to hit a button. The minute that that happened, a whole behavioural shift happened, and that impact is being felt now."
`        By failing to recognize this fundamental swing, the music industry continued to dictate the terms of business to its shoppers.
"If you think about the paradigm that you live within in the music business, we basically told people how to consume music," McBride explains. "And if you didn't like it, then you couldn't consume it. The only way to purchase to music was to go down to a store that we told you that you had to go to, to buy at a set price, with a little bit of price variation, and that was the only way you could do it."
The emergence of Napster, an online music file sharing service, in 1999 was widely viewed as an industry threat, but McBride describes it as "behaviour."
"Napster was simply a behaviour; a behaviour that came about from 10 or 15 years earlier, and a behaviour was about having access to what (consumers) wanted, how they wanted, versus being told how they should do it," McBride reasons.
          "When their behaviour shifted, we didn't shift. We didn't recognize it. Napster finally became a vehicle where they could express that behaviour, and start to consume in the way that they wanted to - and we started that progression from the tail-wagging dog to the dog wagging its tail.
          "The dog has some new fleas -- Rogers and the PSPs and ISPs and that's not a negative: it's a new set of people that are getting this space now.
The way that future generations are going to consume music is not within a push mentality. It's all about choice."
          McBride says the music industry missed an opportunity with Napster that would have saved millions of dollars in litigation and headaches and left the business in a healthier state. 

Removing DRM Locks

"If we had struck a deal with Napster, if we moved to an advertising model, we'd realize that you can not control behaviour," he says. "You cannot legislate it. You cannot litigate it. It won't work.  Force never works."
McBride says energy would be better spent trying to monetize the system, and one of the first steps he suggests on the road to exploitation and profitability is through removing the digital locks placed on music.
At the very least, he says it would allow people to move music they purchased from one platform -- i.e. a cell phone download  -- to another  -- i.e. computer. At the most, McBride suggests it could lead to the type of big box retail website outlet on the Internet that doesn't currently exist.
"In physical space, we have specialty retail and we have big box. Big box represents anywhere between 50 to 60 per cent of all the business done in the physical space.  In the digital space, you only have specialty, which I consider to be iTunes. Rhapsody, eMusic, etc.
"But what we don't have is proper big box within the digital space. What we don't have are the Googles, the Yahoos, the eBays, the places where tens of millions of people either shop or spend an awful lot of time poking around. A place where they buy clothes, other forms of entertainment, sometimes food -- basically a lot of what they used to do when they went to malls. They don't exist in the digital sense and they don't exist simply because they don't want to deal with the locks that are associated with DRM (Digital Rights Management)."
McBride says the reason big box retail is discouraged from setting up Internet sites is that the DRM locks make the venture cost-prohibitive.
"They do not want to deal with some soccer mom in Saskatoon who has bought a song and can't move it from their computer to their phone," says McBride. "For what might be a $.59 purchase, it's not worth (the retailer's) time."
McBride also states that through the twofold approach of implementing DRM measures that are quickly being sabotaged and compromised by hackers and launching lawsuits against consumers for illegal downloads, the music industry is also losing another valuable commodity: research data.
"The minute that you started litigating a number of years ago, you forced those kids into a new behaviour, to new ways of doing it so they can't be traced, so they can't be sued," McBride explains. "Probably the greatest exchange of music right now that is happening in person via Instant Messaging.
"It's faster. It's cleaner. There's no trace. So you've gone from a situation where we could trace everything to a place now where really what we're seeing is not everything: the means of measurement for peer-to-peer really are no longer accurate. So we're losing one of the most powerful tools, which is data. Nettwerk builds its whole career around data, starting with the micro-marketing principles of the late '80s and '90s."

Employing Internet Data

McBride says data gathered specifically via the Internet gives him a clear picture of "who's coming in, where they're going, what's making them stay, what they're buying, what they're listening to and which city and country they're in."
He and his staff specifically used the information to prep consumers for Avril Lavigne's upcoming album The Best Damn Thing, out April 17.  Lavigne recorded the track "Girlfriend" in eight languages, including English, Spanish, French, German, Italian, Portuguese, Japanese and even Mandarin, and McBride said it was information that he gathered from the Web that told him three of the Top 10 cities that downloaded the single were in China, including Bejing.
" Her consumption in Asia is greater than what it is in all of the Western Hemisphere combined," notes McBride.  "And some of those cities outweigh some of the biggest countries as far as the demand and consumption."

Implementing A Subscription Model

McBride said the time has come to monetize China, and he suggests a model that could be applied worldwide, not only to the Pacific Rim:
"It's very, very simple," he insists. "You go into the universities and you go into the colleges and take $5 to $10 a month of (their) tuition fee and it goes into a pot."
McBride says the fee will give people "complete, unfettered access to all of the intellectual property that you want through our pipelines.
"That pot is then shared in various ways, first to enable the technology behind it and to the copyright holders, and it's based on the same way you're basing radio play - on a pro-rata basis."
"Those who opt in get paid. Those who don't opt in don't get paid, but their intellectual property is still getting used. So if the four majors don't opt in, they'll be the only ones not getting paid."
McBride recommended that independent label jump on the bandwagon as soon as possible.
"There's money to be made when all of the majors sitting on the outside," he states. "It's only a matter of time before the majors go in."

Collapsible Copyrights

The third idea that McBride forwarded was the collapsible copyright - a mechanism that he feels would align the interests of the main copyright holder.
In these new record company contract models, artists keep their intellectual property and through creative control, McBride says, "gain their imaginations back."
"In traditional models, someone owns the master (recording), someone owns the publishing and hopefully the artist kept their likeness. By splitting that copyright, your interests are not all as aligned," McBride explains.
"When you move to the new artist model, you basically collapse the copyright, which means you take the master, the publishing, and the likeness, and you move it all into one spot. 
"By collapsing those three interests together, you can maximize that copyright in a way that could never happen. Prince, in giving away CDs for every concert ticket bought, was an example of collapse copyrighting - the ability to give part of the copyright away free to maximize another part of the copyright."
McBride says a collapsed copyright also helps simplify clearances needed to increase commerce.
"Moving into where we are now in this new paradigm, the telcos look at us and go, 'What do you mean I've got to go to three different people to get permission to do this one simple thing' The hell with it.'
"So collapsed copyright is something that you can push for a model."

5 Wishes.com

McBride also revealed an aspect of the current Lavigne marketing campaign, a manga comic called 5 Wishes that will be online, available for download, published in print form and "designed to engage her audience in a meaningful way on a constant basis."
5 Wishes enables and encourages Lavigne fans to create their own stories, and McBride is hopeful the promotion will gather steam under its own momentum.
"If we can do it right, we'll have millions people consuming it on a weekly basis," McBride reasons. "That behaviour can be monetized. It's not all about Avril, but the consumer that is Avril."
McBride says in the new paradigm, record companies and the music industry in general is going to have to relinquish control to the consumer.
"When you're releasing something new now, you need to think about the behaviour of the audience that's going to be pursuing this, because they are going to dictate it," says McBride.
"We live in a world now where the minute that you release something, it's public property. The only control that a label has, an artist has, a manager has -- anybody has -- is when and how intellectual property is first introduced, because the minute it's introduced, it's public property, and at that point you're either trying to monetize their behaviour, or you're trying to force their behaviour - whichever suits your current needs.
"I prefer monetizing the bad behaviour."
A radical visionary: perhaps. But as CEO of the Nettwerk Music Group, a recording, management, merchandising, publishing, boutique and graphic design company with offices in Vancouver, London, Nashville, Los Angeles, London, Boston and Hamburg, McBride says business is booming -- and encourages people to face its future with optimism rather than fear.
"It's not the future of music - music is the future. Just take it and just go with it."