I’ve just come back from a day at the UK music event the ‘Great Escape’. Though it was a bit of a flying visit, I had the opportunity to listen to a Q&A with Universal Music Group International’s VP of Digital, Francis Keeling, and to co-judge a panel of new British digital music startups. Here are my highlights.

Universal Music understands the value of product innovation.

Francis Keeling was interviewed by Music Ally’s Paul Brindley and covered a decent amount of ground. Regular readers will know that I’m a big fan of UMG’s digital strategy. They get digital in a way the other majors do not, and they have the necessary appetite for risk to innovate hard, even when it may accelerate the decline of traditional revenues. Despite all this, Q1 revenues weren’t great for UMG; in fact digital revenues dropped a little. Though Keeling ably dodged my question about whether joint venture income from digital services such as Spotify might have offset this decline, the drop is testament to how fragile the formative digital ecosystem actually is. Piracy is still music’s biggest problem. Although the UK posted recorded music revenue growth in 2009, Keeling was keen to temper any optimism with a stark assessment that piracy remains the music industry’s key unchecked problem. Unsurprisingly this led to some discussion of the Digital Economy Bill and how it might fare with a new Liberal Democrat-Conservative coalition government. (Bearing in mind that the Conservatives are largely in support of the bill but that Lib Dems have called for it to be repealed.) Keeling was realistic in his assessment that this is a period of uncertainty for the bill, and perhaps with this in mind he was keen to stress that any implementation of the notification-to-disconnection measures would need to be measured, consistent and – crucially – fair. He went as far as to suggest an alternative, less intrusive, implementation than straight disconnects: that of browser redirects when a P2P network is accessed.

ISPs remain the key to fighting free.

At the risk of oversimplifying and of raising the ire of my colleagues with telco expertise, my view is that when there is enough meat in the game for telcos they will become active enforcement partners. They have the capabilities to make file sharing difficult for their users at a network level (arguably a much less burdensome task than subscriber-level policing); they just need enough revenue incentive for them to want to flick the switch. And of course Universal have tried to put this very approach into practice with their unlimited MP3 subscription offer with Virgin Media, in which the UK ISP agreed to self-police and enforce piracy. Over one year on and the other majors are still giving the service as wide a berth as they would a leper. All this despite Virgin demonstrating what Keeling described as ‘a major statement of intent as a business partner’.

Startups must answer a question.

Following the Francis Keeling interview, I co-judged a panel of British startups that were either squarely music orientated or had a strong music focus. The full list was: Silence Media, Psonar, Pledge Music, Music Metric, Music Glue and RjDj. My starting point for assessing the validity of any startup is whether the company answers a question that needs answering. In my 10 years of analyzing the digital music space, I’ve seen many startups come and go, and most of those that went did so because they weren’t answering a question, however snazzy their offering may have looked, or indeed however much investment they may have secured.

In all honesty it was a mixed bag of companies but a couple stood out from the pack: Music Glue and Pledge Music (though an honourable mention also goes to Music Metric for having a very clean interface for music data management and analysis). For those who aren’t familiar with them, Music Glue (to heavily simplify a very nuanced and sophisticated offering) help artists take many of the middlemen out of the live equation and build and sell to live fan bases directly. Pledge Music – who you are less likely to know of than Music Glue – provide an interesting and innovative twist on the artists-funding-their-artists business model. Fans pledge money to artists in order to help them record a track / EP / album. Unlike services like Sellaband, the fans don’t see how much money is being asked for. This subtle difference seems to effectively remove any sense of commercialism from fans, resulting in them pledging very large sums of money.

Pledge Music and Music Glue come out on top.

I like Pledge Music and Music Glue (but Pledge Music in particular) because they try to answer the question of how to generate revenue from the emotional value music still holds, now that the monetary value of recorded music is collapsing. They’re not all of the answer of course, but services like this that build upon the intrinsic value that exists in the artist-fan relationship will be key to creating new value in the post-Music Industry Meltdown age. I stated back in December that I thought 2010 would be a key year for this sort of service, and it’s encouraging to see two services that look capable of picking up that mantle and running with it.