The companies able to walk this tightrope will be the ones who maintain their relationships with artists. Those that run scared and cannot balance the commercial advantages of machine learning with creative thought will be left behind.
The companies that will do the best are those that think of technology not as a threat but rather an opportunity for growth. Changing the mindset to be positive can be a lifeline. Just look at the music industry when they were faced with the birth of streaming.
When we bought EMI in 2007, we realised that streaming was a big opportunity for the music business but it required a complete strategic overhaul. My view was very simple yet very contrarian at the time: the CD would become obsolete and technology would redefine how music was sold, distributed and used.
Most of the music industry rejected digital and dug their heels in. They focused on suing companies like Napster and hung onto the CD.
On the other side, our contrarian approach allowed us to grow the cash flow at EMI from a £100m negative to a £250m positive in three years.
What was interesting at the time was that despite our performance, our valuation was still falling. EMI’s valuation fell from 20 times to eight times even though we were demonstrating the financial benefits of embracing technology.
People could just not understand which way the tide was turning and they did not want to bet on an industry that they thought was doomed.
Seeing the direction an industry is heading in is, of course, not the only thing that is required for success. With EMI we ended up in a very costly seven-year legal battle where we ultimately lost all our money.
However, if you are not able to see the need for change in the first place and embrace it, you are bound to be left behind. Seek out the innovators and make friends with them, rather than suing them. Know things will move fast and move faster.
Read More: I lost my shirt in the music industry, but tech keeps creating opportunities