Fred Wilson on the New Streaming

Something Important Is On The Horizon In The Music Business

In an always-on connected world, nobody will need downloads. I'll reorganize what I think is Fred's most important message to content owners and distributors, and service providers.

For content owners and distributors:

We need someone to create an easy to search streamable library of all the recorded music in the world. We need to be able to grab a track and embed it on our blog. We need to be able to see how many people played it... This all has to be licensed and legal and it has to result in money flowing to the artists.

For service providers (this goes to my thesis that it's the services who will enable the crowd to determine what acts get discovered and what music becomes popular, rather than relying on big promotion):

We need others to be able to crawl these user pages with the embedded music and create algorithms based on who posted it, how often it was played, and how often it was reblogged and linked to. The services that do all of that need to be able to play the music that flows out of these social algorithms in the same way.

Music from the Ashes

The music industry as we know it (big labels, big promotion) will die before it is reborn. Get ready for the Darwinian survival of the fittest bands.

Promotion will become organic, enabled by social media services. Music recommendation will return to a person-to-person, word-of-mouth high quality -- but on a global scale. The services that enable this promotion will be the new hit-breakers.

A&R departments are superfluous. This is not to say that A&R development is not needed. Artists may need managers who understand promotion, producers who undertand development, but they will be free-lance, not amalgamated into huge labels.

Does the press cause recessions?

The Economist magazine, by counting the number of times the word "recession" occurs in leading American newspapers, claims the press predicts recessions by a quarter or two.

But they fail to establish cause and effect. What if the press actually causes recessions by scaring consumers and corporations with its lazy me-too, follow-the-leader reporting techniques?

Here's an article that does say doom-and-gloom talk could lead to recession, in this case a double-dip recession. If press coverage can cause a double-dip recession, press coverage can certainly cause a recession.

Global Warming Gilligans

All this global warming hysteria makes me think of the Gilligan's Island episode where everyone thinks the island is sinking because Gilligan keeps moving the Professor's measuring stick into deeper water.

Presidential Primary Calendar

Political parties pick their candidates through a screwy delegate system that includes proportional representation based on the number of party voters in a district, primary elections, and caucuses. But here's my proposal for an updated primary calendar simplified as if parties picked candidates the same way the Electoral College picks presidents. This model of "1/8-1, 1/4-1, 1/2-1, all" cumulative progression could be extended to the delegate system.

The goals I used were to break up the calendar so candidates could get to as many states to campaign in person as possible, to give small states a head start, but to not settle the races before all states got a chance to vote.

The last goal means that with 538 total electoral votes, 270 are needed to win a majority.

First start with small states in the Northeast and West to get to 51 electoral votes (about 1/8 of total votes).

Region	State	Electoral Votes
Northeast	Vermont	3
Northeast	Rhode Island	4
Northeast	New Hampshire	4
Northeast	Maine	4
Northeast	Delaware	3
Northeast	DC	3
Northeast	Connecticut	7
West	Wyoming	3
West	South Dakota	3
West	North Dakota	3
West	Montana	3
West	Idaho	4
West	Hawaii	4
West	Alaska	3
Total	14	51

Then go to more small states in the Midwest, South, and West to add 80 more votes to get to 131 total electoral votes (about 1/4 of total votes).

Region	State	Electoral Votes
Midwest	West Virginia	5
Midwest	Oklahoma	7
Midwest	Kentucky	8
Midwest	Kansas	6
Midwest	Iowa	7
South	South Carolina	8
South	Mississippi	6
South	Arkansas	6
West	Utah	5
West	Oregon	7
West	New Mexico	5
West	Nevada	5
West	Nebraska	5
Total	13	80

Then continue with mid-size states to add 136 more votes to get to 267 total electoral votes (just under 1/2 of total votes):

Region	State	Electoral Votes
Midwest	Wisconsin	10
Midwest	Tennessee	11
Midwest	Missouri	11
Midwest	Minnesota	10
Midwest	Indiana	11
Northeast	Massachusetts	12
Northeast	Maryland	10
South	Virginia	13
South	Louisiana	9
South	Alabama	9
West	Washington	11
West	Colorado	9
West	Arizona	10
Total	13	136

Then finish in one big bang to allocate the last 271 needed electoral votes and pick the winner:

Region	State	Electoral Votes
Midwest	Ohio	20
Midwest	Michigan	17
Midwest	Illinois	21
Northeast	Pennsylvania	21
Northeast	New York	31
Northeast	New Jersey	15
South	Texas	34
South	North Carolina	15
South	Georgia	15
South	Florida	27
West	California	55
Total	11	271

Kill the Dollar Coin

In addition to getting rid of the penny, I think Congress and the Mint should stop fooling around with the idea of a dollar coin. After two attempts at coins featuring people nobody knows, at least the Mint is now putting presidents back on their next dollar coin attempts. They're also introducing inscriptions on the edges of the coins, which may help give the coins a feel in your pocket different than quarters. However, it's unfortunate that the first dollar coin will have a portrait of the same president (Washington) who's also on the quarter — the coin most confused for the dollar coin.

The pocket factor is the primary source of my opposition. Let's try an experiment: open your wallet right now and count how many $1 bills you're carrying. I have 6 in mine.

Now imagine having to carry the same amount in big, heavy coins in your pocket, or digging through the contents of your change purse just to find a dollar. Ask anyone in the UK how they feel about having to carry their large, heavy pound coins and most will say they'd rather carry paper.

Get Rid of the Penny!

It's time to get rid of the penny. With news that pennies now cost more than a cent to manufacture, it's time to reconsider the penny coin's usefulness.

With today's prices, where even a gumball goes for 25 cents or more, there is no need for pennies in cash transactions! Pennies simply accumulate in old coffee cans and jelly jars.

I propose that every cash transaction be rounded up to the nearest nickel, with shop owners (not the government!) keeping the difference. All non-cash transactions would still be calculated to the penny.

In the average transaction, a customer would only pay 2 cents more when rounding up to the nearest nickel. In the best case, there's no difference at all. In the worst case, the difference is only 4 cents. That averages less than 1% of the typical cash transaction above $2.

Let's take a look at all 100 possible combinations of change in a cash transaction: from 0 cents change, to 99 cents change. In all 100 of these transactions you use the following numbers of each coin:

• Pennies: 200 coins, 2.0 average per transaction


• Nickels: 40 coins, 0.4 average per transaction


• Dimes: 80 coins, 0.8 average per transaction


• Quarters: 150 coins, 1.5 average per transaction


• Total: 470 coins, 4.7 average per transaction

Now lets look at all 100 combinations of change in a penniless world (where each transaction is rounded up to the nearest nickel):

• Pennies: 0 coins, 0.0 average per transaction


• Nickels: 40 coins, 0.4 average per transaction


• Dimes: 80 coins, 0.8 average per transaction


• Quarters: 150 coins, 1.5 average per transaction


• Total: 270 coins, 2.7 average per transaction

You can see that in a penniless world, we would use zero pennies and exactly the same number of every other coin! The average number of coins in change drops from 4.7 to 2.7 per transaction - more than 42% fewer coins!

Opponents of eliminating the penny include charities who raise money by collecting pennies. My God! I see a huge opportunity there - collect nickels and dimes instead!

Some claim that the poor transact mostly in cash, placing an undue burden on them. In that case, the rounding could be made neutral by changing the rule to round down to the nearest nickel any transaction that would result in 1 or 2 pennies in the change, and rounding up to the nearest nickel any transaction that would result in 3 or 4 pennies in the change. On average, this results in zero difference from actual amount paid using exact change to the penny.

Other opponents, like the Congressional delegation from Illinois where Linclon spent most of his adult life, want to see Lincoln continued to be honored with a coin. Well, he's already on the $5 bill - a much greater honor than the lowly penny!

Cash only adds value to the economy when it is used - but most pennies are simply stored, meaning the cost to manufacture them must be borne for little economic value. Eliminating the penny will reduce the overall cost of minting coinage, and reduce the frustration of storing a surfeit of pennies.