How (not) to act when disruptive AI hits your business

Let the music industry's failure in the mid-00s serve as a guide for a successful approach to the AI revolution. By understanding the mistakes of the past, you can create an effective strategy for the future. And the best thing? It applies for all industries and organisations.

Intro/TL;DR. As AI tools become increasingly more accessible, advanced and consumer friendly — the music industry mobilizes for a new war. Although their approach to digitalization in the mid-00s still serves as the perfect illustration of how not to act when your business faces disruptive change; we now see how they’re about to dust off that same old tactic again. Lawsuits, lawsuits, lawsuits.

If you study the DNA-strings of the music industry, you will find that wasting a great amount of dollars, energy and focus on protecting outdated technologies and models, are part of their core. But this time, with AI about to revolutionizing the world, it might be even a more disastrous strategy than in the past. The enormous power and the impact of what’s about to happen — in not just this sector, but in most industries — is almost difficult to take in. But the consequences of running against, and not along with new consumer behavior will be brutal.

In this article, I do not intend to point fingers at anyone or cry wolf, but rather to inspire you (the companies, the professionals, the creatives) to acknowledge, learn and embrace the new AI tools that are (literally) popping up every day. I encourage you to start exploring the possibilities already today, as waiting will only make it more challenging, complex and overwhelming.

Accepting, testing, and spending time with these new applications and models is the key to staying relevant and hanging on to your customers. By doing so you will find new opportunities and new use of your skills. You will find a way for your business to stay relevant. Hopefully.

The recipe for survival is as simple as always: Adapt, or die. Or more specifically: When shit (disruption) hits the fan (your business) — follow your users, customers and fans. They will be your best guide to the future.

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Full story: 'Yes, of course it hurts when buds are breaking'

2023, and we’re all enjoying the quantum leap in the accessibility of AI tools and applications. The power of AI has finally gotten in the hands of everyone — and we are in the midst of a new disruptive transformation that will affect most industries, businesses, workplaces, schools, creative processes and so on. And the reaction, the approach, by which we choose to meet this transformation, will determine how successful we will be in managing what lies ahead.

So how can we avoid being stuck in old habits when the world is changing? How can we avoid being the record labels trying to sell CDs when fans shifted to digital distribution years ago? How can we avoid missing the digitalization of photography even though we co-invented the digital camera (hello Kodak)? How do we avoid spending time and money protecting existing models about to fail, when thriving business opportunities are just around the corner? How do we avoid being outrun by competitors accelerating with the assistance of AI? How should we think?

The strategy is actually much simpler than you think.

But first, a whirlwind visit to the early 00s, where my perspective on dealing with disruptive tech was formed…

The Music Industry vs Music

I spent more than 15 years in the Swedish music industry, trying to accelerate the digital transformation. From the early 2000s and on, I (co-)developed record labels, artists, brands, clubs, festivals, distributors, sync agencies, marketing services, design studios, and.. what not. I was part of a tiny group of music professionals objecting the view/truth stated by the record industry. For us, it was nothing revolutionary — all we did was taking the perspective of the fans — but from the industry’s perspective, what we did was crazy and naive. Even treacherous…

Around year 2007 we founded a think-thank consisting of a handful independent music labels, who instead of fighting the digital transition welcomed new distribution formats and business models. Digital business models. A standpoint totally unique at the time. And we tried to convince the rest of the industry that this was the way to go, that we had to listen to the fans, our consumers, and stop protecting outdated business models and media formats. From a PR perspective the think-tank was a huge success: We were invited to debate our position in the largest national newspapers, national television and even in the Swedish Parliament. We also initiated seminars for the industry, dialogues with tech startups (among them a new thing called Spotify) and more. It was an interesting time, but also frustrating. We wanted change, not just PR — we wanted innovative platforms to be able to reach our customers. We wanted to make impact, share great music, and have the architecture to run a modern business. We used the MP3-format and file sharing sites as marketing & distribution tools for our releases. Not to anger the industry; but because that’s the best and most effective way to reach our listeners. Our market.

The fans loved us, our artists and our music. And they loved the fact that we did not start any lawsuits. But the industry treated us like pariah (or pirates); we were killing creativity, and the whole music industry from within.

[Spoiler: Years later, the industry followed]

The War-On-Fans carried on for Decades...

So I followed the industry’s War On Fans (‘the era of threatening and suing all kids for listening to music’) from a close distance. I followed the actions and efforts the industry took to trying to stop music being shared over the internet. From suing individuals for downloading a few Roxette songs; to chasing every new tech-initiative launched (Napster, LimeWire, DC++, SoulSeek, Pirate Bay to name a few). It was a mess and a circus — but mainly, a tragedy.

Even though it was obvious to every teenager and music fan in the world; the record labels couldn’t accept or simply get the new reality. They were fighting a war they could never win, and no matter what resources they put into stopping the transition, the CD was dead.

?? My takeaways from this period were many, but essentially: Music is in the hands of the fans — not the record labels, the distributors or even the artists. Period.

And really, this has been the case forever. Regardless of lawyers, censorship, suppressive regimes, media or even the biggest and most powerful labels or artists in the world (Hello Lars Ulrich, Taylor, Neil etc). And when disruption (digitalization) is happening, there is no turning back. Come join the joyride. Or you’re out.

Suing Your Customers = Not Good for Business

Today, the insights and the first-hand experience gained from this period, suddenly became super relevant again. There is simply no better illustration of how NOT to act when disruptive technologies hit an industry. From the first indications that music consumption was about to change (back in 1998 or so?), the industry spent (wasted) millions (billions?) of dollars on protecting an existing model (the CD), instead of mobilize efforts for developing new ones (e.g. digital subscription models).

The industry — instead of welcoming, adopting or developing new business opportunities themselves — chose to fully back the old and failing business model with all its might. For many years, the music industry was all about lawsuits, lawsuits and lawsuits. They believed their business was the CD, not the music. And they were fighting for their lives as nobody wanted the CD anymore.

The ignorance and confusion from the industry — not even considering exploring the digital world — was astonishing back then, but even more so now, in retrospect.

The industry lost all the credibility and whatever goodwill they've ever had — and they lost at least 10 years of profit. And they blamed the market.

Side note: Did anyone calculate how much the lost years from approx 2002-2014 actually cost the industry (and the artists)? How much did they lose or missed out upon by hanging on to the CD and not exploring the digital all-you-can-eat-models earlier?

Hello wait a minute! The industry did finally adapt and embraced the digital world, you may argue? Well, yes. And no... From my position I saw something else: After years and years with nothing but lawsuits and lost sales — and the general public and even the politicians questioning the strategy of suing a whole generation of teenagers — the majors were forced to accept the new reality. Unwillingly. They finally allowed their catalogs of music to appear on streaming platforms (for huge license fees and equity in the platforms of course), but it was not a strategic call from the industry. From where I stood it looked more like an act of surrender. Nothing like a business plan.

Finally accepting reality = Good times ahead!

After 'the surrender' things started to move quickly. Within a year or two (In Sweden: 2010-2011ish), the new more open approach led to positive numbers: sales were finally trending up again. And really fast. The 2010s became a new golden decade for the music industry. Massive growth and profit, massive revenue from streaming, increased number of employees, new talents, larger offices, huge investments, re-activated repertoire, and labels spending more money on developing new artists (and less on lawyers). Music was once again a prosperous industry and a profitable investment.?

The major labels were back in business, back in control (back in power). And that’s how it was supposed to be, forever and ever-ever-ever…

Faced with New Challenges, Old Failing Tactics Reappears.

Now, February 2023, the music industry is preparing for a new war. An era of lawsuits, lawsuits and more lawsuits. This time it’s not just about distribution, it’s even more revolutionary and disruptive. And potentially threatening. What’s about to come will shake the very foundations of the industry. Everything music will be affected; from composing, recording, performing, owning, enjoying, and (this is bad news for the CEOs) the consumption of music as we know it will profoundly change during the coming years.

This time the acronym is not MP3 or P2P, it’s even shorter — AI, Artificial intelligence. And the industry will not approve. (”Let’s get those lawyers back in here again!”)

What's next? Personalized AI music for everyone!

At the moment, AI-generated music really sucks (Oh wait! I started writing this article a few weeks ago, and now Google LM arrived! Oh boy!). My point still stands though: AI-generated music is not great, but will soon be as good as any human created music. Yes. And it will be everywhere. First, the most generic genres will be AI-generated (background music for videos, instrumental yoga music etc. This is happening already today), followed by more sophisticated, still quite generic to be honest, radio hits. And then we're almost there: a 100% personalized music experience, instantly created for my specific need or situation; based on my personal taste, preferences, listening history and current mood.

?? "Hey Gxxgle, please generate a playlist suitable for tonight’s dinner with friends. How about Nina Simone singing the Nebraska album? And add some Burt Bacharach arrangements, Lana del Rey vocals and Vini Reilly guitars as well. Oh, and mix it all up with the Adele vs Aretha vs Amy duets I generated yesterday!"

...we’re not there yet (i think?), but probably within a few years. Certainly before the end of the 2020s. (Hard to believe? Have a look at Jay-Z raps Hamlet .. that was 2 years ago..)

Then what happens? What will be the role of the labels, the songwriters, the publishers, the distributors, the marketing teams etc? What will be the significance of the history of music when you can generate and create your own personalized versions — with the vocals from any of your favorite singers? (Or even yourself?!). Will a platform like Spotify still be relevant, or will they be outperformed by AI only-platforms? What will happen to creativity, the artist, the music fans, the live shows? What will happen to music as an art form??

And what will happen to the music industry?

I'm glad I'm no longer in the music industry. But these are exactly the type of questions they needs to start working on, immediately. At least if they want to stay in control of their destiny and keep their relevance. Putting too much energy into the “how can we stop this!”-approach will only make things harder.

?? Now replace "Music" with your specific sector or industry. I'm sure the same challenge also can be applied to your industry, your organisation and in your business. So how will you react? What will be your approach?

The Consumers are in Charge, Not the Industry

So, really, what will happen to the music industry? Of course, nobody knows how this will 'end'. Maybe things will stay as they are for many many years too come. Maybe not. Probably not. All I know for a fact, is that it’s not up for the industry to decide; nor the artists, nor the labels. It’s up to the rest of us — the consumers, the users, the fans.

How high will we value new AI-generated Amy Winehouse songs comparing to her (way to small) recorded catalog. How will we value surrealistic Nirvana-meets-Janis-Joplin-mashups; Billie Holiday and Billie Eilish duets (!) and so fourth. Will we care about the involvement/assistance of AI, or will we simply sit back and enjoy great music? Will we talk about Amy's 'real' songs (the song's recorded during her lifetime) vs her AI generated ones? Will new generations even know the difference?

A good song is a good song is a good song, right?

How to Kickstart Your AI Strategy.

Ok, enough about the music industry... How should you and your business act to avoid ending up as a new example of how not to do? By reading this, It means that you at least take it seriously (why else should you have read 3000 words?). That's a good start! To support further; I have compiled a few questions to get on with your AI expedition.

And remember; it's not the theory that's difficult here, it's the practice. You will have to adapt, or your business will die. Start using the AI tools, start following the news, start talking to your kids. Oh, and most importantly: Follow your followers. Follow your fans. Follow your consumers. Follow your users ...and whatever you do.... do not, never-ever-ever, follow the music industry.

Best of luck.

Kalle Magnusson, feb 15, 2023

Here’s a few questions to get started with the AI discussions in your organization:

• What available AI tools are relevant for your business (and/or your competitors)? List at least 15 and get to know them well. Learn their strengths, weaknesses and limitations. How will they affect your business if they were fine-tuned and implemented? Update the list every month.
• What tasks in your organization are most likely to be automated with AI? When will the tools/models be available? Are you ready to implement?Why/why not? How will this decision affect the future of your business?
• What resources (including budget, team, tech etc) do you have available for AI research and implementation?
• What data do you have available for training your own unique AI models? Is that data sufficient or do you need new a new data strategy?
• How will your industry look like when AI is implemented at “full scale”? Will there be new competitors entering your the market? What unique values can your organisation provide to the customers/users by then?

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Disclaimer: I do understand there might be both copyright issues as well as ethical issues with generative AI trained on copyrighted material. I have no strong opinion on what's right or wrong, what's fair use and what's not. And it's not for me to decide. And in the end, the AI transition will happen anyway. Before the legal aspects have been fully investigated (also since it’s not teenagers developing the disruptive tools this times, but some of the largest companies in the world...) my guess is that the behavior of generative 'AI music' will be cemented in new generations since years back.