A Great Simian or just a Monkey

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watson financial chatbot

We built a Watson Powered Financial Companion

I have wanted to share this for a while and it never seemed to be the right moment. Well, here it is! This started as a vision a while ago, originally based on an idea from my brother-in-arms Carl and together we brought it to this (Peter & Svante not to be forgotten as co-conspirators as well).

This is an IBM Watson-powered cognitive financial companion for your complex financial life.

The video walks you through a day in your life with your financial lifestyle companion.

Above, in the video, is your financial companion that wants to inject value in every transaction you make and improve your complex financial life.

The simple background is that our personal financial lives are complex and scattered all over the place, the customer experience is usually really bad and we are constantly ripped off by fees / bad advice. Today with cognitive platforms like IBM Watson and more intuitive user experience through chatbots and other methods, we can actually improve our financial lives with products like this one. One important thing is to actually empower the users and not only capitalize on them.

It is powered by IBM Watson APIs and a lot of nice mojo from our team.

cognitive pre-requisits

Tell me what I do not know!

Artificial Intelligence will be a huge part of our daily lives and in our businesses from now on, but what we see today is not always Artificial Intelligence or my preferred term, Augmented Intelligence. It is just re-packed machine learning with a conversational interface. AI and cognitive are not only algorithms it is so much more. Many high-end AI / Cognitive products today are not mainly algorithm, that goes for Google DeedMind as well as IBM Watson.

Without further rambling, I thought I would state my position on the topic. It is actually pretty simple. A product, service or process that will be an AI-enabled or cognitive shall have one single pre-requisite in my opinion.

An AI, cognitive product or process should tell us things we do not already know. If not, it is not AI or Cognitive!

If it does not meet that “general” term, it is not AI or Cognitive, period! AI and cognitive per se is to think, learn and reason etc, but to provide value in a business and to assist us, we need to guide our software in a way that they provide information, solutions and data that we could not generate ourselves with resources at hand.

The future of software in the enterprise is about elevating both us as humans, and our business. Efficiency and speed is fantastic, but that is nothing new, it is what we have today!

I think that in 5 years most processes and things we do in a company will be elevated by cognitive elements. AI and Cognitive will be everywhere.

Photo: From a morning walk last week in my new hometown.

Augmented Intelligence instead of Artificial Intelligence

Artificial Intelligence is a term that, for me, only causes confusion and also builds up caution towards new tech. It indicates that AI will replicate our intelligence and some are even afraid of AI taking over our jobs etc. It is a term that stunts the development and our progress to more successful companies. A term that much better describes what it is about is Augmented Intelligence.

Augmented Intelligence is actually what it is all about. Augmented send the notion of evolving and increasing our existing knowledge. The intelligence that systems will assist us with is not artificial, it is real and elevated. It is systems that are taught by humans and then elevated to assist and scale human expertise to help businesses and applications to assist people with well-defined tasks and help them make more informed decisions.

This heavily connects to the fact that collaboration between human and computer is a very important part of becoming a successful business in the future. This collaboration is about systems helping humans and humans helping systems.

As a side note, augmented intelligence also fits much better as term in the landscape of cognitive. Artificial Intelligence is one part of cognitive, but many tend to mix cognitive with Artificial Intelligence. If we replace Artificial Intelligence with Augmented Intelligence, it is much easier and more relevant…..at least for me.

 

Microsoft Cortana vs IBM Watson

IBM Watson is a brain and Microsoft Cortana is a personal assistant. That is the simple conclusion of Yesterdays Cortana vs Watson (sort of) at The Conference in Malmö. My biggest surprise was that Microsoft Cortana is 100% scripted. Watson is a cognitive platform that actually could complement Cortana’s great features as personal assistant.

Currently in Malmö in Sweden, the conference The Conference (ehh) is happening and I was very much looking forward to the session Artificial Intelligence in Services. Primarily to listen to Deborah Harrison from Microsoft, since my knowledge about Cortana is limited. To summarize, Cortana was a huge disappointment to me. After listening to Deborah I posted the below tweet that described my immediate feelings about Cortana (excuse the typo).

So, Cortana is:

  • Scripted
  • Only a personal assistant
  • Personality and tone driven

As Deborah say already in the first minute of her talk (embedded at the end of the post) “Nothing is programmatic, we write it all”.

This leads me back to my recent post where I say that the future is about cognitive platforms and not about Bots (aka personal assistants).

Cognitive Platforms are the future, not Bots and AI

And to continue with the embeds, the comparison between Cortana and Watson was by Felix Segerbrecht described in a true and funny (with a touch of sexism irony included) way.

Cortana is a Personal Assistant and Watson is a Brain.

The speakers were senior and knew the topic way better than most (both speeches embedded below). Deborah Harrison from Microsoft is one of the original architects behind Cortana as well as head of the team that creates all the content that Cortana is communicating (again, Cortana is all scripted). Her talk was focused on how Cortana communicates and how she interprets different situations. It seems that Cortana is more of a Siri for the enterprise (guess that Microsoft is still enterprise focused).

Maya Weinstein is design lead at IBM Watson in New York. Maya talked to the Robot Neo (the real robot, not an app), gave the standard examples of oncology (cancer treatment) and kids education (Element Path) etc. She gave the standard variety of examples of use cases for Watson from concierge services (Connie the Concierge at Hilton Hotels as an example) to dating apps and medical examples. Naturally, Jeopardy was mentioned as well.

To put it blunt, Cortana could be built with just three Watson APIs, if you add a few more Watson could do even more, but again, I hope that does not happen, they should not compete, rather compliment each other. Watson is a cognitive platform and not a product in that way. Watson could even be the cognitive parts (aka the Brain) of a very good personal assistant (Cortana). Cortana is the UI / UX and asks Watson for help with all the cognitive parts she is asked to help her users with.

Nevertheless, it is interesting times and this is a true paradigm shift in technology and business…..and it is starting now.

We are now entering the World of Cognitive!

Maya Weinstein’s talk at The Conference in Malmö 16th of August 2016

 

Deborah Harrison’s talk at The Conference in Malmö 16th of August 2016

Top image is from my daughters origami book

Cutting the Slack

Slack is taking over the world, Slack is killing e-mail, and so on, we have all heard the rants of the very much hyped company valued at billions and with an impressive user base. It does decrease e-mail usage and help teams stay in contact and solve problems quickly with everyone informed. It also comes with some real disadvantages.

I have used Slack since early beta and I have used it extensively, for the last years constantly and in several teams. I have used it for daily operations in companies I have founded and work with. I have also participated in external teams, like IBM Watson teams, external companies whose products I use and also teams like The Informations Slack channel. I really like the real-time aspect of Slack and the sense of everyone being onboard and up-to-date. The fast pace does solve problems and challenges quickly and it keeps everyone on the same page. So why am I hesitant to Slack?

Disadvantages with Slack

  1. In your face! Slack is mainly an always on product, which makes it very much “in your face”. It simply disturbed you all the time.
  2. No threading!
  3. Lost information! An important topic is discussed and suddenly someone posts another topic in the thread and the ongoing important discussion is very often interrupted or lost due to the new discussion, often with the result that the first discussion is lost and never closed.
  4. Loosing productivity! This is my main problem with Slack and also the main reason for this post. To be focused and productive you need about 30min to be fully focused. With Slack running that rarely happens. There is always a conversation going on and with today’s notification frenzy you’re already disturbed pretty often, but since Slack fast becomes crucial for your business you often prioritize Slack notifications and switch from whatever you are up to and read the new messages.

Notifications are the future?

I do not agree here. I hate notifications. I have lately analyzed my productivity and realized that notifications is a huge part of my productivity going down. Since a while I have therefore disabled all notifications on laptop / iMac. On top of that I have switched most of my work to iPad Pro, which actually promotes focused work due to the limited support for having multiple windows / apps visible on the screen. Like when I am writing this, it is in full screen on my iPad and all notifications switched off. I do have notifications turned on for most apps on my iPhone, so when the urge to get updated surfaces I just glance at the phone.

To be clear, I do distinguish between productivity work and interaction work. When I write this blogpost, working on a presentation or creating a customer agreement I want to be left alone. A lot of my other time is dedicated for interaction (been working with sales for 20 years that is a big part of the day naturally) so this anti-notification strategy does not mean I am not fast in responding which most people who interact with me probably can vouch for.

Does Slack kill e-mail?

To give Slack some credit, it almost entirely get rid of internal e-mails and tiresome CC threads, so internally it does definitely kill most e-mail. Externally it does not, not at all. E-mail is here to stay as a protocol, but there is plenty of room for innovation and potentially some upgrades to smtp would be of help to improve innovations further.

But you have always hated e-mail, has that changed?

No, it has not, but over the last couple of years things have actually changed in terms of how we use e-mail. This is most notable in small companies and definitely not seen in most large corporations where huge CC threads and attachment bonanza (versioning and storage of all those Powerpoints, hello) is still a major problem.

  • We do rarely see the Friday fun e-mail threads anymore, they are now published on Facebook instead.
  • One to many e-mails are limited due to that many companies now use Slack, Yammer et al.
  • Small talk is now published in products like Slack and / or chat products.
  • News and links are now published in other channels then over e-mail (notifications might come via e-mail though)

The main benefit with e-mail is that it is asynchronous and not real-time. Which is another thing that has change over the years, prior many expected an e-mail response very quickly and treated e-mail as a real-time channel, that development is great progress for productivity. My main recommendation for e-mail addicts is to just go through e-mail early in the morning, mid/day and a the end-of-the-day. This to stop being interrupted and feeling the urge to check e-mail every 5min or react to the constant notifications.

There is still room for a lot of innovation in this space, Slack has done a great job, but it is not the end solution. I know Slack will implement some cool things in the future, but their foundation is mainly productivity hostile which has made me positive to choose other products if I was to choose tool today.

For further reading VICE media posted a post “Turning Off Slack” that also have similar thoughts as I do.

impossible foods burger (photo from Impossible Foods)

We need to change what we eat!

Lets change the way we eat or we will destroy the planet. We need to act now and food tech could be a large part of the solution for a better planet. Food innovation has already found ways to replace meat and eggs with plants and also insects.

Animal agriculture and livestock is the biggest environmental problem we have!

Not all of us are aware on how bad the situation is for our planet, and even if you are aware, you might not know that the biggest problem is that we eat too much meat and eggs. This is a bigger problem then all the transportation and CO2 emissions that everyone is talking about. We need to decrease the amount of food from animal significantly, that is a fact and all researchers and studies agree. The numbers wary in studies and research, but between 10%-35% of total global emissions (GHG) is what most studies say can be traced to meat agriculture, of those 80% is from livestock. It is not CO2 that is the gas in this sector, it is CH4 (methane) and N2O (nitrous oxide). .

This is not meant as a doomsday post, rather the opposite. Naturally there are companies and entrepreneurs that have realised this and started to find solutions to this problem.

We need to eat differently

Few of us want to give up eating hamburgers, a nice steak, baking bread etc. Since I have a hard time seeing all of us becoming vegans, we need to find other ways, and we need to act now! 

What we need to do is to find replacement for meat and eggs. Not only replace the taste, but also the ingredients, since they are important for our well being. Mainly it is about replacing protein. 92% of the plants on our planet has not yet been analysed, we are now starting to find out that we actually can do some really cool things with plants (see below), but also many insects have significantly less impact on the environment, so crickets are starting to be a trendy bug to eat.

80% of the worlds population already eat insects, but it does not happen that frequently in the western world, maybe we should change that. One of the worlds best restaurants actually have crickets on their menu. The Copenhagen, well awarded, restaurant Noma, serves pancakes with fermented crickets.

When we visited our Thai friends near the Laos border, the family had their own crickets farm so obviously we had to taste. I was about to post a photo of me eating, but it is not in favour of the post to give you a hint. Below are two pictures from that trip, the first one is how it was served (just fried in a pan with some spices and herbs) and the second one is from the cricket farm.

Food tech

How to replace eggs?

Hampton Creek is a San Francisco based company that create products like cookie dough and mayonnaise to be able to replace eggs, more products will come over time.  their products are sold on Whole Foods and others. Hampton Creek have made it possible to get bread to grow while in the oven and make omeletts tasty as well as great mouth feel. Pretty amazing. The below TEDx talk by the Hampton Creek CEO Josh Tetrick, is not a product presentation but rather about how bad the chicken industry is, well worth a watch.

How to replace meat?

Several companies have produced meat replacement products. Some do it based on plants, which naturally is the best, others do it by using real meat cells.

Memphis Meats does it with meat cells, but I am more in favour of making it from plants. That is what Beyond Meat and Impossible Foods does. In the below Beyond Meat video they explain how they do it.

https://youtu.be/RSDiCoEag9s

Naturally we want to continue to have our burgers etc and the top picture is how a burger from Impossible Foods looks like (photo credit to Impossible Foods).

Protein?

Above examples on how to replace meat and eggs are solved by innovation and research of plants (except Memphis Meat), but we also have other areas that provide a much lower environmental footprint even given that they are living things, that is insects and especially crickets. This is nothing new, we have been eating insects since the very beginning of time I assume, but lately we have been to posh for it in the western world. Well, now is a good time to change that. One way to apply insects is to create a protein flour from crickets. This what Bitty Foods does. the CEO Megan Miller also held a TEDx talk, this one in Manhattan, where she describes why and what they do.

A piece of honesty

I consider myself a fairly average individual with a decent intellect and I am also fairly involved and interested in trying to contribute to protecting our planet and keeping it safe for the generations to come. With that said, I admit that I, up until recently, had no clue to what extent the animal agriculture and livestock impacted our planet. Since then I have gained an interest and trying to decide what I, as an individual, can do. This both how I eat as an individual / family but also how I might be able to contribute in a bigger way.

If it was new to me, it is most certainly new to many others as well.

cognitive business

Future of Cognitive Business

The Cognitive Era is here. According to studies by 2018 50% of us will regulary interact with cognitive systems and the total market value for cognitive by 2019 is estimated to $12.5B. So how will this world of cognitive business look?

Cognitive is still a new word and for an explanation I have alredy written several posts on the topic, but in the “What is Cognitive” the word and meaning is described pretty digested.

Lets start with a glimpse of how it will be. It is mainly about 4 things:

  1. Collaboration between humans and computers.
  2. It is about cumputers learning, reason and understanding what it sees, hears and reads.
  3. It is about having real-time access to all needed information and never miss or forget that information.
  4. It is about making the right decisions faster, based on the right information.

https://youtu.be/WpA5IBDS9MQ

The case illustrated in the video can easily be applied to other areas as well. Think product development and research, think sales meetings, thing building a business case for a client.

Most of these cognitive solutions are available today

So what are you waiting for, lets start to build this for your company.

Wait, you do not believe me when I say it can be done today? Well do take a look at the below video and watch it in a none cartoonish, but very real life environment. Say hello to CELIA!

I would say that the two videos above are the main reason I am so absorbed by IBM Watson and Cognitive Business. I will start a serie of posts on use cases similar or different from above, but how cognitive business will change the business world we live in today. We are truly in a shift in terms of eras of computing. It might sound like a buzzword or marketing, but regardless of the word or name, the shift is hear and it is happening, computers do learn, think, reason and understand. They can also communicate (written or verbal) in an efficient and understandable way to each one of us, in our language.

The language is probably one of the main areas that is needed to be upgraded for cognitive business to fully bloom. Most services support many languages, but only english is covered by all services and for Watson to be able to communicate with us in our language and understand what we are saying, he needs to now many more languages. Recently wrote a post on what languages Watson supports presented on a per service level for the interested.

And just for the record, I do not believe that AI, Cognitive or Watson himself, will replace humans.

Watson Ecosystem partners important to succeed

According to IBM and IDC 90% of the innovation will come from partners. In Watsons case this is the Watson Ecosystem.

What do the researchers say about the future of cognitive?

There is one guy that has a certain glory and glow to him when he presents cognitive. He also has the knowledge and the background to do it with authority. Do listen to Dr John Kelly, Senior Vice President Solutions Portfolio and Reaserch at IBM, talking about the Future of Cognitive.

The top photo is taken at Utö in the Stockholm archepelago. Thought the gate could symbolize that we now are entering the future

machine learning spotify pocket

Machine learning will save you from the flawed Follow friends

On oh so many services you do find the “Find My Friends” button that will help you get better content in service you use. You find those Facebook and Twitter logins everywhere that want access to your friends to bring you a better “experience”.

I find it mainly a flawed system. This due to the simple fact that the people I follow on Twitter and the friends I have on Facebook etc, might not be the ones I share interest with on the new service. I’ll just give two examples:

  1. Spotify. Spotify launched it’s social discovery feature a long time ago and did it together with Facebook. The thing is that my Facebook friends do not listen to the music I want to discover, they are mainly my friends on Facebook for other reasons.
  2. Pocket. Pocket is my favorite “read-later”-app. It just launched a follow friends feature, I tried it out the only result was that I found the same links that I had already seen on Twitter, from the same people that I follow on Twitter and now in Pocket as well.

There are many many more examples. There are occasions when this do work though. I love both the Newsle and Nuzzle services as examples. Newsle finds article and posts about my connections on LinkedIn, but also from my mail-contacts. Nuzzle simply digests the most intereseting posts from my network from a specific time based on shares etc within my friend / follower network, I do have Nuzzle deliver a daily digest every morning with the last 24 hours hot news in it.

Is there a solution to this flawed “Find my friends” thing?

Naturally there is. I actually took both the above examples since they have alternative ways or actually have changed there service since it launched.

The solution is to know the individual better , learn from the user and then from that, use the data at hand to discover top content for the user.

Spotify

This was for long a disaster and discovery was the Achilles Heel of Spotify (in my opinion). Spotify realized this and did two things. Spotify acquired Echo Nest and they set-up an additional internal machine learning team. The result speaks for itself. Today the Discover Weekly is a huge success and after 10 weeks since launch Spotifys Discover Weekly had streamed 1 billion songs.

Spotify naturally uses its own technology as well as the acquired Echo Nest platform. it uses natural language to understand blogs, titles and meta data. Then there are many other machine learning things as well as Kafka to work with the data in real-time.

Compared to the the list of what my friends on Facebook listened to, this is huge progress and today a big portion of my listening comes from either curated or automated playlists on Spotify. My user behaiviour have completely changed since Spotify started to work dedicated with Discovery.

To read up on the Discovery features in Spotify:

Pocket

So I am not a fan of Pockets “What friends share” in the Recommended section, but I am a fan of the posts that Pocket itself recommend to me. It is based on my reading and then presents personal recommendations for me. It is a much simpler use case then the above Spotify one. Pocket also uses natural language processing and simply uses the IBM Watson AlchemyLanguage API on its content. They look at my content and let the Watson service digest entities as well as extract conceps from that content and then use those to find other popular content that matches that info. The wast majority of recommendations I get from Pocket in the Recommendation section (not the ones shared by friends I follow) are spot on and I would say that about 50% of my saves in Pocket has originated from that part of the feature.

For me it is not about what others want to read, it is what I want to read. It took the Pocket team only a very short time to implement as well. There is a case study available to read some more (PDF).

 

 

e-signing scrive

Accounting and audit as it should be

Audit and accounting is certainly an area that need a lot of innovation. Labour heave, administration horror and time consuming. This is a segment that are in desperate need of innovation when it comes to work-process and tools. The below three simple steps might at least be a start to make life for us that suffer audit an accounting annually.

I am in the middle of an audit for one of my companies. It is horrible, a pure disaster. The amount of information requests and documents to fill in, sign and stamp (yes in Singapore a company stamp is default for all agreements).

A typical iteration looks like this, now please note that this is one out of approximately ten similar iterations:

  1. An e-mail arrives from the auditor with request for some info and attached is also three documents to fill in and sign.
  2. I print and fill in the information, sign etc.
  3. Scan documents
  4. Attache scanned documents to e-mail
  5. Get reply from auditor with comments
  6. Re-print documents
  7. Fill in all the f**cking info again, with the small updates from auditor.
  8. Scan document
  9. Attached scanned documents to e-mail

Now this loop naturally continues and loops are still in progress. Since many e-mail with documents from the auditor contain several documents that requires action, several loops are now completely integrated in a huge catastrophically mail-thread that no oven ever will be able to make sense of.

On top of this much of the information is already available to the auditor, but for some reason it is needed to be sent again in their preferred format etc.

Thera are many potential threats in this behaviour.

  • Information will be missed in long mail threads
  • Naturally the auditor need hard-copies as well, how to keep track of all the changes and the most accurate printed document
  • Mixing topics is never good and not all tasks will be handled as swiftly as possible
  • Impossible to keep track
  • Time consuming
  • Environment unfriendly (just had to pull that card as well)
  • Mail is a disaster for these kind of topics, but still everyone uses it

Audit and Accounting #asitshouldbe

It is actually quite simple. Three things will solve most of the hassle. The benefits will be huge. The primary benefits would be:

  1. Time savings
  2. Full information trail
  3. No dependencies on other things then internet and a computer
  4. Still compliant and follows regulations

1. e-signature

Long live Scrive. Now this is the simplest and most efficient way to speed up this process. The benefits are huge and breaks down a lot of hurdles immediately.

The benefits are as follows:

  1. Speed to signed document will decrease dramatically since you can sign on the mobile and you will never need a pen or a printer. The outmost excellent product here is Scrive, love Scrive and use it as often as I possible can.
  2. You always know the status and all parties gets updates and final document when all have signed.
  3. Revision control and only the legit version is circulated.

Now, many do shout what about fraud etc. This is actually funny, in what way is a paper document send via post / courier and then signed (by someone) with a pen to lastly be posted back. How do we know it is the right person who signed etc etc. With e-signing we have full control.

e-Signing is compliant with regulations in the wast majority of countries around the world including both of my countries Sweden and Singapore. In Singapore they even take the paper thing to the extrem (even though e-signing is fully legit). Many times they send unsigned documents via post or even expensive courier instead of just sending them over e-mail or better uploaded on Scrive, that analog process is almost like the pony express in the old days.

2. Ticket / Collaboration software

In a business that is so heavily regulated as audit and accounting I cannot in my wildest dreams understand why e-mail is the primary tool. It is impossible to keep a trail of all conversations and all document versions. If all conversations, tasks etc would be managed in a easy to use solution. The benefits would be the following amongst others:

  1. Well document trail of everything
  2. Decrease the amount of time spend
  3. Always know where to look, searching is the e-mail is not always an fantastic experience (even though Google is making it OK for those on their products)

3. Document storage / sharing

Dropbox, Box et al. Some companies have actually started to use Dropbox or similar solutions for sharing and store all documents, receipt and agreements etc. That is also one step in the right direction and something everyone should do.

Increase client satisfaction and grow client base

This industry is usually very labour intensive and with only the three above suggestions the industry could decrease their cost significantly and let the talented people in these organisations focus on audit and accounting instead of admin that do not benefit the clients (rather the opposite since high fees for worthless time spent on un-necessary work). These companies would also get higher client satisfaction and would most definitely gain more clients.

e-Siggnatures and collaboration solution etc is just a small step, there is also a huge potential in actually really take this industry to a new level, but that will be a bigger task since scaling will demand customization for each country and in some countries even customisations within the country (kantons, states etc).

With above three steps most auditors and accountants can still maintain their local knowledge as well as expanding globally with much less effort.

I know there are some pretty innovative companies out there that actually have started to include these things in their offerings and also some companies aiming for the global scaling potential. Which ones do come to mind for you?

 

State of the Music Industry

The industry is flawed. Both Apple / iTunes and Spotify have sincerely tried to changed the industry and both have had great impact on the industry, but we still have some major hurdles to battle before we get our creative and artistic industry back.

Now what has happened to the music industry since ABBA, Bruce Springsteen, Bob Dylan, Jimi Hendrix, Janis Joplin, Beatles etc?

Two things I would say.

  1. The first is that the record labels got greedy and wanted too much power. They started to create their own products like Britney Spears and Backstreet Boys (yes, Swedes are to blame, I know). They are products and completely lack the ART in the term ARTIST (from a music perspective). They are performers, entertainers and commercial successes, they are not artist in the original term.
  2. The second thing that have happened is that when the record industry started its free fall and made it even harder for artist, as well as products, to succeed commercially they tried even harder to lock artists with contracts that only favoured the labels and not the artists. Labels are still trying to cannibalise on the artists contracts to squeeze revenue and not update artists agreements to reflect the evolution the industry have been going through. This is the reason artists are upset with Spotify.

I have been thinking about this post for a long time and finally took the time to write it down. I believe that there is a lot of misunderstanding of how the industry works and what is actually wrong with it. There are good things and bad things, but to put it blund (and generalising).

All the bad things in the music industry the record labels deserve to be blamed for.

I was almost born into the record industry, only two years old my mother started to work at CBS Record that later became Sony Music, I grew up in music studios and have a lot of great memories from growing up in the music industry (except when Nicko McBrains drumming blew my ear-drums in the Polar Studio in the early eighties, that hurt. On the other side it was compensated with that I got to play on Jeff Porcaros drums when Toto was in Stockholm). I later started to work in a record store in Stockholm (Skivakademien in Sturegallerian that actually was owned by Sony Music) for many years prior to joining the military. I have seen the industry at its peak and was still in when the downfall started.

This post is mainly written off the top of my head, so have patience, but these are my reflections on the state of the music industry today and the components involved in the process.

Record labels

Let’s start with the real evil. The term you have heard so many times and the ones many thinks actually are there to help the artists. If the industry would restart itself, record labels as is today would not exist. The record label does a few things in its core, they market, sell and distribute the media. Yes, the only have rights to the actual compilation of songs (aka an album or a single etc). In the good old days this was a cumbersome thing and they provided real value to the artists. They often also did advance payments and financed record studios and producers etc. On top of that the plastic was needed to physically be shipped to he consumers. This via stores, post order or other ways.

I will not go into details about who these things are today, just look at how you consume your music and go figure.

Labels are trying to re-invent themselves today by transform into A&R powerhouses, but still with the same business model.

Labels today compete with both Youtube and Live Nation as platforms for aspiring artist as well as the biggest ones, both Madonna and Jay Z have Live Nation as their “record label” as an example. Live Nation hijacks the role as record label, but mainly act as a promotor. Other artists that have signed with Live Nation is U2, Shakira and Nickelback.

I am just waiting for a new type of music company that innovates this model completely. I know there are some innovation in this segment, so I am hopeful. I also know that the labels are trying themselves, but it is like turning an oil-tanker or thinking a bank as an agile startup, it will take time. We all love music and that won’t stop, so it is inevitable that it will happen.

Important partners to artists

  1. Publishers. Artists are artists, they want as many as possible to like their music, they want to perform, they want as many as possible to love their music. It is a hard task to keep up with where and when your music is played. The composers (yes, the ones who actually writes the music and lyrics) partner with a publisher to keep track of this. The publisher have in no way played out its role, they are probably more important then ever since music now is played in so many new channels.
  2. Management. As with all talent industries it is important to have someone that helps you benefit the most, not all music live forever. Management usually takes percentage of the deals the bring in to the artists.
  3. Promotors. As the revenue streams in the industry is coming more and more from non-recorded products, the promotors have a more and more important role. Live Nation is naturally a leader in this segment. Live Nation usually does not fund future recordings, but focuses on the live part (Jay Z got future recordings in his deal) also the artists usually keeps the ownership over their back catalogue.

Why are artist upset with Spotify?

In general, they shouldn’t, they should be angry with their record label.

Since artists have signed agreements with record labels to produce compilations of songs aka a record, they are bound to follow these agreements. An artist is compensated very little per record sold. iTunes came along and the agreements between artists and record labels where sometimes updated, but not always, many became a piggyback agreement on the already existing agreement the artist had with the record labels.

Spotify is another thing since it does not sell songs or full albums but subscriptions. Therefore Spotify is classified as a kind of radio, which means that they pay royalty to the labels, please note that it is the labels that get payed and then the labels should pay the artist (see more on this below). This is based on actual amount of times a song is played, or in reality this is through a very complex formula. So why are artists upset with Spotify? For the same reason as with iTunes 10 years ago. Spotify needed to get access to the catalogue or as many artists as possible, so they had to negotiate with the labels. Spotify took it even further and gave away 17% of their company to the labels (that is now diluted to a less stake, but the labels are still one of the largest equity owners in Spotify) to make the labels share both the potential success as well as the vision (I guess).

Naturally this creates controversy since artist might have bad agreements with their label and the labels might also hide payouts from Spotify that the artists never gets a part of (see next section in this post). As an example, my belief is that the reason Metallica first appeared on Spotify was after taking back the control of their entire back catalogue. This since (I assume) they could negotiate a deal directly with Spotify and now did not have to share their revenue with their previous record label but kept everything for themselves with their label Blackened.

Spotify vs artists should be Artist vs Record Label?

Just yesterday the contract between Sony Music and Spotify was leaked and that confirms that it is actually not Spotify that is the bad part in this, but the record labels. Spotify is paying 70% of all its revenue to the labels according to the simple formula, but the small print states that there are many other paragraphs in play which creates payouts that the artists most probably do not get part of.

And we do not even know how much of the “standard” record label payout from Spotify that actually goes to the artists.

Sony Music is likely getting considerable payouts from Spotify each year, but what it does when it gets that money — and how much of those payments actually make it down to the artists — is still unknown. Some artists have clauses in their contracts to get a larger share of the streaming revenue, and some artists are still operating under CD-era contracts that only give them 15–20 percent of their streaming revenues.

The above quote is from the extensive post on The Verge that in detail walk through the Sony Music / Spotify agreement.

If you find doubt in what I write above and feel that some actual data is needed, do read the actual contract that is embedded in the article over at The Verge.

UPDATE: On the Spotify event the 20th of May Daniel Ek shared that Spotify represents 54% of the music industry revenue from streamed music.

Why do so many artists still want a deal with a record label?

Vanity and appreciation. It is a way to be recongnized as doing something good. Outside of that I would say that the labels are obsolete.

Many artists today have their own labels and control their work and only uses the label for distribution. That is an interim hack I would say, but still understandable since the labels have all channels for distribution in place. Many artist do it this way, big ones are mentioned Metallica, but also Swedish Robyn with her brilliant Konichiwa Records and many others.

Today you can record almost everything in your living room, you can put it on Soundcloud, YouTube etc and then use social media etc to market yourself. Use a publisher to keep track of your rights and when things take off sign a promotor and a management company.

For statistics the IFPI statistics page is a good place. Also their Digital Music Report 2015 might be of interest.

Photo from Flickr: Amodiovalerio Verde

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