Month: October

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MySpace launched its separately operated music service under the support of the four major labels. It allows users to stream music on demand, create playlists, add music players to their profiles, and buy DRM-free music downloads (via Amazon) and ringtones (via Jamster). Soon MySpace Music will allow artists to sell concert tickets and merchandise on their pages and will get a cut of the revenue, as well as exclusive content like new tracks and videos to encourage consumers to download albums and music. MySpace has recently made deals with the four major music publishers. This launch took place during a time of steep drops in physical sales and iTunes dominating the online digital music market. MySpace Music is facing some problems. Converting MySpace users into music purchasers, the division of equity between major labels, and the under-representation of the independent labels' music repertoire. Despite this, Amazon looks to be the most likely guaranteed winner since they are not involved in any of those listed problems. The majors have 40% equity in MySpace Music, valued at $120 million. It is interesting to see them so involved with the service after not supporting services like Last.FM, Pandora, etc. One reason could be because of the inclusion of sponsors such as McDonald's, Toyota, Sony Pictures, and State Farm, which will be rotating ads around the site. Many independent music publishers and agencies have still not been able to reach agreements with MySpace Music over rights to their songs. Another advantage the majors have in their 40% stake is the access to sales and other data from MySpace, especially that of independent artists that their labels will not have access to. While it does not have the same amount of music as iTunes, yet, MySpace Music seems set to be a success. They will need to sell a large number of ads on their site for around $10 per 1,000 impressions, much higher than the standard US rate of $3 per 1,000 impressions, in order to generate long-term profits. Thus far, Amazon seems to be the only player set to be the definite winner.

Month: October

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In 2008, Amazon has made several deals to help further itself as a download service for digital music. They signed up Pepsi to offer redeemable codes for downloads and other merch at Amazon, as well as making a deal with Rockstar Games to allow players to tag songs from the soundtrack while playing Grand Theft Auto IV to download off Amazon at a later time. Now, Amazon has made two new moves. It is now the digital music sales provider behind MySpace Music and is also the mobile music vendor for Google's new Android mobile phone platform. These are important moves and Amazon has come a long way, but it is still far behind Apple and not yet a threat to iTunes. At the end of 2008, Amazon will have sold 130 million songs, compared to the 2.4 billion songs expected to be sold off iTunes. It is expected for Amazon's sales to surge 60%, up to 208 million in 2009 if they continue to make such deals. Amazon also has the backing of the industry in the sense that everyone is looking for something to seriously compete with Apple's iTunes to have leverage in digital music sales. Other companies like to partner with Amazon because it has DRM-free digital music, unparalleled ecommerce research, providing affiliates with 20% of the revenue from any song purchase (compared to Apple's 5%), and also there is Amazon's Web Services developer program. Its designed to integrate its commerce features with a given site without requiring users to navigate to Amazon's site. Execs say that all the ingredients are there for Amazon to drive rapid expansion.

Month: October

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MySpace Music shows a turning point for the recording industry. The four major labels and MySpace, a News Corp. subsidiary, are taking part in this joint venture of a brand new music service and business model. This is the culmination of over 18 months of research in business models and digital music strategy for the labels. During that time, the majors signed deals to open the door for ad-supported free streaming, digital rights management (DRM)-free music sales, and reduced licensing costs while getting revenue share and/or company equity in return. The new model is meant to be more of a template for future agreements, rather than an experiment. Many indie labels are upset with MySpace. They were not included during the launch of the site, mainly because theyre still working out their agreements with MySpace. This is because many of the indies are fighting to get company equity like the majors have, but it is off the table in the discussions. They are still discussing the terms of ad revenue from streaming and purchased music and video. The focus on major labels could also be a problem because the vast majority of artists on MySpace are unsigned or on indie labels. The Orchard and major label-owned indie distributors have licensed their catalogs to MySpace Music in time for launch.

Month: September

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Presidential candidates Barack Obama and John McCain have their campaigns for the White House in full gear. While they typically discuss big-ticket issues, there are several issues at hand that directly affect the music industry, especially in the digital realm. While not necessarily a digital issue, radio royalties are the main concern on the agenda of the RIAA. They believe the next Congress is when the matter will be settled. While there has been a lot of progress to get performance royalties paid to artists, there is also a strong lobbying presence for broadcasters who do not want to pay the royalty. The Democrats have more openly backed the music industry's side, and any gains they have in the House or Senate would be a help. Net-neutrality is where the two candidates differ the most. McCain does not believe in regulation of the Internet and bandwith, while Obama strongly supports network neutrality to preserve open competition on the Internet. McCain wants an open market approach, whereas Obama says he will appoint FCC commissioners to reinstate the original net neutrality projections that the FCC eliminated in 2005. The music industry has not taken an official stance on the matter, but many artists (especially indie) have voiced their support for net neutrality. Their concern is that independent artists will suffer from bigger labels and sites getting preferential treatment with higher Internet speeds and bandwith. Both candidates have pledged to put an end to piracy and protect intellectual property, but neither has given any specifics on how they intend to do so. Although, Obama's VP candidate Joe Biden was the founding chairman of the Congressional International Anti-Piracy Caucus. Internet sales tax is not a main issue for the music industry, but the possibility of such a tax would raise prices for digital downloads and would not help in convincing consumers to pay for music and not steal it. While neither candidate has directly addressed the issue in their campaign, McCain has in the past advocated for a permanent ban on taxing Internet access fees and online commerce.

Month: July

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An Access To Music Charge (AMC) paid to rights holders by Internet Service Providers (ISPs) has been proposed as a solution to the problem of illegal downloading over peer-to-peer (P2P) networks. This possible solution comes from a meeting of the Steering Group (SG), an influential international forum composed of ISPs, online music services, independent and major record labels, authors' societies, lawyers, technology experts, and a futurologist. Such a system could provide revenue to the rights holders that are currently at a loss for them. In return, users would have access to the global recorded music repertoire without DRM restrictions and no direct cost to exchange downloaded files. ISPs and music service providers (MSPs) would have the opportunity to generate additional revenues if a significant percentage of P2P sharing was monetized. This comes at a time when ISPs are finding the benefits of creating partnerships with music rights holders, while national governments are preparing or threatening to make legislations in this area. More work still needs to be done on the proposal, including how it will affect current business models of services such as iTunes. The cost of distributing the monies would be very expensive, too. Numbers were projected by a group, Deltica, in the UK that studied ISP user activities. According to them, the ratio of P2P downloads to legal downloads is 20:1. So if the ISPs converted 5% of the P2P downloads into revenue, the gross figure would be something around $326m, something ISP executives say that ISPs would be very interested in. This is projected by Music & Copyright to have increased the pro forma total digital recorded music revenues in 2007 to $4.1bn from 2.9bn.

Month: July

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Many Internet Service Providers (ISPs) are predicting that the Internet may soon break down. In a recent survey, 51% of ISPs think that the current rise of demand for bandwith will overwhelm the Internet. A quarter of those who said so believe this will take place in the next two years. This is a serious problem, especially for the music industry. With digital downloads on the verge of eclipsing physical sales, as well as being a great way to discover new music and more, the music industry cannot afford to lose the Internet as a form of monetization. Streaming video and illegal downloading of large music files over BitTorrent trackers are blamed to be the main culprits of the bandwith problems. Many different ISPs have presented possible solutions, but none are very popular with all interest groups. One possible solution presented to charge media companies and Web services premium fees for guaranteed fast lanes to their content. The Net neutrality movement has already lobbied for this to be outlawed, saying it will edge out smaller companies and turn the Internet into TV. Another option is traffic prioritization, where ISPs monitor what kind of content users are accessing with "deep packet inspection", where they delay certain types of traffic to clear lanes for more important information. Comcast had problems with this earlier in the year when they delayed BitTorrent traffic. BitTorrent may be used to download illegal files, but the program is used for legitimate purposes as well and Comcast underwent an FCC investigation. Even if Comcast saw if the content was illegal or not, there still would have been a backlash. Tiered pricing systems, where you pay more for more bandwith is another option. According to some, this is only a way to restrict traffic artificially to fit more customers into the network and raise prices. It is also a problem in areas where there is only one ISP. Ultimately, a solution will have to come soon and it will surely have a profound effect on the music industry and how it monetizes the Internet.

Month: June

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TopSpin is a new company emerging with an online service that looks to revolutionize the way bands manage themselves and become noticed. TopSpin Manager is a website with several technological tools that are perfect for up-and-coming artists to manage their careers with. The idea is that artists can use these tools on their own website to improve their careers and abilities to increase their fanbase and get noticed. The site includes: - A content management system that hosts music, photos, video, etc and a rights management interface that allows the artist to decide how their music will be made available. Includes a commerce engine to take care of sales and orders with abilities to set prices and usages (some songs can be given away, expire of set period of time, or only made available to fan club members). - Fan management system that collects emails and organizes demographic information on fans like age, location, how many times music or video is streamed, sales history, music sharing, etc. - Product creation tool that lets artists develop their our content like membership subcriptions, ticket and track products, email offers, and other ways to offer their catalog to fans. - Reporting feature that tracks site visits, song streams and downloads with user detail all with customized charts.