Month: October

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It has been five years since the RIAA began its legal campaign against peer-to-peer file sharing and illegal downloading. At first, the 261 lawsuits filed in 2003 seemed to deter illegal downloading. The number of people under 13 years old who illegally downloaded dropped from 20% to 11.8%, even though that was an anonymous survey of Internet users conducted six times a year. RIAA supporters point to the fact that if this number had not gone down and if they had done nothing about this problem at the time then illegal downloading would be much worse than it currently is. Still, 2/3 of kids aged 9-14 say that they surf the web unsupervised and 59% say they download music themselves with no parental assistance. The industry needs to do more to help children obtain music legally, probably through prepaid accounts and gift cards. This PR nightmare for the labels has also started to see the individuals targeted by the lawsuits start to fight back. These lawsuits have frequently targeted children, grandmothers, and unemployed single mothers because IP addresses cannot identify the individuals. Judges have vacated judgments, overturned rulings, and slashed settlement fees. The RIAA has been countersued by some defendents and some major universites of Maine, Kansas, and Wisconsin have begun to refuse to cooperate. Rather than target its own fans and create more label-basing press, the RIAA needs to consider new tactics in fighting illegal downloading. This new services available that offer free, on-demand streaming and DRM-free downloads, the industry needs to focus on promoting these new sites rather than attacking their own consumers.

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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Seven years ago, Apple came out with the iPod. Many thought that the expensive new device would fail not only because Apple was stepping into a new area, but also because the country was facing a recession. As we now know, the iPod was a great success for Apple and between that and iTunes, which came out in 2003 the music industry has changed as a result. Today, CD sales are still in decline, and unfortunately digital sales are not making up the loss. While the younger generations view music as free and piracy has become a large problem, a lot has been tried to try and bring in revenue. Giving away music and letting people give what they think the music is worth and subscription services are just two of the ways that the industry has tried to save itself, but nothing to this point has really worked. It has been hard to keep the music industry and its consumers happy with one another when it comes to people getting music. Consumers want unlimited music, while companies in the industry would like to use more of a subscription basis. The issues in the past is that the industry has had with the subscription model is that the people who use them can not access the music they have already received if they do not continue to pay for the subscription. At this time, seven years after the iPod came out , Nokia has decided to launch a product during a economical hard time. People are unsure if it will be successful, but it is a way that the industry can provide music in a way that will feel free for the consumer, yet generate revenue needed for the people and music involved. Nokia’s Comes with music model is a new one that is getting a lot of attention. When users buy a Comes with music phone, they will also be paying for a year subscription for unlimited downloads of music. The price of the subscription will be hidden in the cost of the phone. This model if it works, could be put to use in other areas of business. In the future, if this works there could be opportunities for other companies to bundle their products with a “free” music subscription, which could help it land loyal customers.

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: September

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There has been a lot of speculation as to why Best Buy purchased the struggling Napster for $121 million. The truth is that Best Buy is using the acquisition as a part of a broader platform to offer digital content and to leverage its market share in consumer electronics by bundling services that bring in recurring monthly revenue. They have already done this over the past few years with services like TiVo, DirecTV, and XM Radio. With Napster, Best Buy can persuade makers of consumer electronics like stereos, TVs, and computers to embed the service in their products in return for better shelf space and promotional support. They already have a lot of leverage in this area. Best Buy also may expand the platform beyond music, to movies and other digital content. An area to watch is mobile phones. The store recently opened new Mobile Shops and is experiencing increased mobile phone sales by 50%. If Best Buy increases its market share in this sector, it could wield the same leverage over mobile phone manufacturers and wireless operators to include Napster mobile services. Major labels are very excited about the acquisition and see it as a great way to drive sales in new ways on a lot of devices.

Month: September

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Due to "format fatigue" and lack of revenue coming in from the ringtone and ringback market, major labels are backing what they see as the future of the mobile music market: full-song downloads. The music industry wants to turn phones into a platform to enjoy music and not just showcase one's taste. Aside from being able to the wind out of iTunes' sails somewhat, the main reason for this is money. Wireless data revenue has been on the rise, but the amount of revenue gained from selling content via phone fell 1%, meaning people are paying to use basic wireless data services like Web browsers and are not paying an extra fee to use the same connection to buy and download content. This is where the mobile entertainment industry means to redeem themselves with this new generation of phones for full-song downloads. Nokia's Comes With Music phone is set for release in the UK this October. It comes with a one-year unlimited music subscription service in the cost of the mobile phone that supports it. MyPlay is a mobile music download store created by Sony BMG with UK operator O2. Verizon's partnership with Rhapsody is the first for a mobile service to link up with an already branded music service provider and in an integrated way.

Month: July

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Music piracy has reportedly contributed to 70% of the reasons why global sales of recorded music fell 8% in 2007. But it has provided business with at least one advantage: statistics. It is helping management companies and more get insight into music-lovers interests and into what is truly popular. For every song purchased legally, 20 are said to be illegally downloaded. BigChampagne is a firm that compiles data about file-sharing to sell to its customers, like how many times a song is downloaded and where. Music executives are saying illegal downloading is no reason to put your head in the sand, because you might as well take advantage of the data available. These statistics are helping managers, labels, and more plan tours using the locations where artists are popular and can pair artists with groups their fans have similar tastes in based on people who download the same artists. Even though the execs are reluctant at first to use data from illegal use, they are coming to terms with its benefits.

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: July

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Rhapsody and Napster are hoping their mobile phone-compatible services will change their fortunes in the music subscription business, but that has yet to be seen. The downloading of music has dwarfed the subscription service recently. Napster's partnership with AT&T since late 2006 has seen little change in the company's subscriber base and the service is only available with other-the-air downloads on one phone model, while the side-loading service is available on just a few others. Napster is also one of several music services available for AT&T phones. This is where Rhapsody and Verizon have the upper hand. Rhapsody is the default music service for Verizon phones and is compatible with ten kinds of phones. Verizon can also add the cost of the subscription to their phone bill, something AT&T has not been able to do. Verizon is far ahead of its rivals and is working to transform Rhapsody's business. The problem is that the music subscription business has always had more potential than success. Rhapsody is great for sophisticated music lovers, but hasn't had mass-marketing appeal yet.