Major label licenses for download platforms: The mountain is finally moving – but is it moving fast enough?

20 08 2008

The recent lunch hour session with Ted Cohen at Bandwidth 2008 in San Francisco triggered a strange Deja vu moment with last month’s Future content models conference in London.

An eclectic group of digital media entrepreneurs, marketers, and small label representatives gathered last week in the University Club to adjure the great potential of the Internet to enable new business models to distribute music online. After presenting and discussing potentially visionary concepts for a while, the entrepreneurs agreed that the main reason that so few of these models have been implemented was the inflexibility of the record labels to grant licenses under acceptable terms. The commonly used example is the blanket license subscription model of Playlouder in the UK, which has been around as a technology in development for 5 years without being able to offer a comprehensive service due to the lack of content. Without a deal with a major record label, it only survived due to the stamina of its founders Paul Hitchman and Paul Sanders.

But following a recent announcement to have signed deals with at least two major labels and a major ISP in the UK, the situation could be changing and at least some users in the UK will be able to enjoy unlimited access to shareable music for a monthly flat fee. How the service will really look like and what restrictions the deals with the labels impose on the freedom of the subscribers to use the music they have downloaded remains unclear for the moment. The good news is that the majors seem to have realized that stemming the dominant social practice without offering a realistic alternative is no sustainable option and that isolated deals with innovative download distribution platforms are appearing. But according to Ted Cohen, these deals are hardly profitable for the distributors at least as long as subscription fees are the only source of revenue.

Hence, the future of the blanket license model seems still precarious despite the wide support among entrepreneurs and marketers on both sides of the Atlantic.

by Wolf in San Francisco / London



DRM “Dead” for Streaming Music Too?

19 08 2008

EFF’s Fred von Lohman and Seth Schoen wrote a post a few days ago that landed with surprising silence in the blogsophere. Using a packet sniffer and a quick look into the “temp” file on a PC, the two discovered that iMeem and LaLa, two of the hottest new streaming music services, are not using DRM on their files. Although the files appear to users as streams, they are actual fully downloaded, open files. They write:

“Yet another nail has been driven into DRM’s coffin, this time for streaming audio (PCPro has a nice overview of the state of DRM for digital music).

Two of the leading on-demand streaming music sites, iMeem and LaLa, are not using DRM on their audio streams, instead sending the music as MP3s dusted with a dash of obfuscation. This is significant because both sites have been licensed by all the major record labels — the very same record labels that were just last year pushing Congress to require DRM on all noninteractive webcasts. So it looks like the RIAA companies have changed their minds, dropping DRM requirements for the on-demand streaming music services.”

It’s unclear whether this “obfuscation” that Von Lohman describes tricks the majority of users who think they couldn’t, for example, move their iMeem files to an iPod. But either way, it does not rise to the level of a “technical protection measure” under the DMCA. So, to all of the future music services developing innovative and new music download models (I hope). You may or may not have deals with the labels (yet), but don’t worry too much about being forced to lock up files or build systems around expected TPMs. DRM is on its way out the door, not just for retail downloads in iTunes, but everywhere.



First impressions: Google’s new ad-supported music download service

7 08 2008

By Eric Priest in Beijing

This week Google and its partner Top100.cn launched a China-only ad-supported DRM-free music service that could serve as a proof of concept for other such services around the world. A lot of people will be watching this service closely to see if it can successfully monetize music on the internet in the world’s toughest piracy market.

As my friend Maths has pointed out in his initial review of the service, this service is aimed directly at stealing market share from China’s leading search engine, Baidu, which gets a big percentage of its traffic from its comprehensive and extremely controversial free MP3 search and download feature. After poking around on the new Google service for a little while, I can say that this service has a long way to go before it threatens Baidu. But clearly the folks at Google-Top100 know that. This is a long-term play for Google.

A few other quick impressions.

1. Google is lying low. This was a pretty soft launch. The hype has been muted, and there seems to be little marketing of the site right now. In fact, on the main Google.cn page there are no promos, images, ads, or even links to a music site. The only way I found it was—based on a tip from a friend—typing “google.cn/music” in my browser URL field. This seems to be a very early experiment, and Google/Top100.cn know they’re low on content so they’re really just taking it for a test drive at this point. Which brings me to point no. 2…

2. The content offering is pretty modest. It’s impressive that the site features content from several of the international majors as well as big regional labels like Rock Records. (In my initial poking around I’ve found tracks from SonyBMG, Universal, and EMI on the site, but nothing from Warner, though a friend who should be in the know has told me Top100 has cut deals with all four majors). However, there are significant limitations: there appear to be Chinese artists only—no international artists—and not all tracks are available for download (some are streaming-only). Some major Chinese artists are not available at all. (Incidentally, for those not familiar with the Chinese music market, each of the four major labels has a large stable of Chinese artists, so that’s why it’s the case that the majors are participating yet there are no international artists available.) I expect this limited content catalog, though, is only temporary. Top100.cn is no doubt working out lots of new licensing deals to build up the catalog considerably in the coming months. It appears though that the major labels are also in a wait-and-see mode here, as even their Chinese catalogs are far from fully represented, and in a number of cases the major Chinese artists on the site have just a small handful of songs available on the service.

3. The interface is (unsurprisingly) clean and Google-esque. The backend is powered by Top100.cn, but it’s clear that Google drives the front-end design. It’s clean, simple, no-frills. It’s somewhat less cluttered than Baidu’s main music page. In China, of course, this could be a strike against Google’s design as many Chinese tend to like their web pages “renao”! The music homepage consists simply of a list of the top 100 new songs on the service. Clicking on an artist’s name from either the search results page or the music homepage brings up an artist page with bio, and album pages that link from the artist page. Clicking on a song pops up a simple in-browser Top100 streaming player. The player has a scrolling lyric function, which is pretty much a must nowadays for online music services in China. For songs in which downloads are permitted, clicking on the download link pops up a separate download window. And that seems to be about it. But that’s probably enough in this market if the quality of service is good and content offering is rich.

Google.cn/music Homepage

Top100.cn pop-up music player

Top 100 download pop-up

4. MP3s! The service does not permit downloading of every song; some songs are available for streaming only. Those that you can download are in 192kbps MP3 format. That’s big news because this is the first instance in the world in which the major labels are permitting free, ad-supported MP3 downloads. That’s, no doubt, why they are not licensing international artists to Google at the moment; clearly the majors are worried about leakage outside of China, but aren’t too worried about leakage of local Chinese content, since Chinese artists have a very limited market outside Mainland China, HK, and Taiwan. Nevertheless, the downloads are supposedly limited to Mainland Chinese users.

5. Advertising is basic and unobtrusive. There are no ads on the google.cn/music homepage, on any of the artist or album pages, or the search results page. Banner ads appear at the bottom of the pop-up Top100 player and download windows. Additionally, there are no audio ads wrapping the songs, as I had thought might be the case, the way We7 embeds short radio-style ads at the start of each song.

6. Labels view this as a branding opportunity. So long as they are willing to license their content to this service, labels are clearly hoping to use it to build up a little brand recognition while they’re at it. The relevant record label logos are prominently featured when music is playing in the pop-up player.

So, where is this headed? Any service in China that tries to do things the “right way” by rustling up licensing agreements first before making music available is at a huge, often fatal, disadvantage. It’s just too hard to compete with ubiquitous free music. But Google and Top100 surely know that. That’s why they are not beating the drums loudly about this service now. They’re not looking to change the world with this today. This is a low-key, long-term initiative. But if they do it right, it doubtless has more potential than Baidu’s free, unlicensed music search model, which in my view is simply unsustainable in the long run. That said, the biggest question mark plaguing the Google/Top100 service is whether as an ad-supported service it can ever generate enough money to be lucrative enough to attract and retain good content. If it can, it could pave the way for such models elsewhere.



Licensed download service for music in Mainland China started

4 08 2008

Despite the conventional wisdom that in China money is only made with ringtones, Chinese ringtone provider R2G has dared to leave their safe haven and will provide DRM-free music downloads in mainland China. The Wawawa Music Store is an eMusic-like offering, which R2G operates in partnership with California-based indie music distributor IODA. Subscription starts at USD 3 per month and includes 88 downloads per month from a catalog of allegedly 1 million titles, which focuses heavily on US independent label music and oldies like Bob Marley.

If Chinese Internet customers will appreciate the offer and start paying for the downloads remains to be seen. Research conducted by MediaScrums authors Leah Belsky and Wolf Richter last year in Beijing has shown that a fair majority of users, who currently use unlicensed file-sharing networks would like to get more variety and less mainstream content, which dominates the unlicensed networks.
Recent research by Music2.0 confirms these findings and even indicates that one-third of Internet users in mainland China were willing to pay for licensed downloads. If this should turn out to be true, the lack of major label support could even be the crucial differentiating feature for Wawawa and position it in a premium segment currently not covered by the omnipresent “for free” networks. The Chinese market remains exciting and unpredictable.



Media on main street

4 08 2008

Devon Copley in Brooklyn

My wife and I took a little break from the steamy city this weekend and headed out to Cape Cod. This morning found the two of us sipping coffee and gazing out at the ships in the bay at the Dunkin’ Donuts in Onset, MA. I had thought I’d be leaving the issues of internet content distribution behind for a couple of days, but I was wrong…

An older man, maybe 60, was at the counter. He had removed his white iEarbuds to order his breakfast from the teen girl at the till, and I couldn’t help overhearing their conversation. They were talking about a song, trying to figure out who played it. “Chuck Berry, I think,” the man said.

“Chuck Berry?” the girl asked.

“Yeah, I wish I had that song.”

“You should go on Limewire and get it,” she suggested. “That’s what me and all my friends do.”

The man hadn’t heard of it. “Limewire?”

“Yeah. Where do you get your music?”

“iTunes,” he said, waving his iPod. “It’s great.”

The girl laughed. “But Limewire is free!”

“Free?” the man asked. “So they’re not paying the musicians anything, right?”

I didn’t manage to hear how the conversation ended…



In search of some real online revenues

2 08 2008

Terry McBride, artist manager extraordinaire (Avril Lavigne, Sarah McLachlan, Dido, Barenaked Ladies), made some noteworthy comments recently at a MusicTank event in the UK about revenues in the new world of online digital media.

McBride reportedly said that plays of Youtube videos containing Avril’s music have collectively generated $2 million in royalties. (“There’s about a $2 million cheque waiting for her for all her YouTube plays.”) Terry has since clarified the remarks a bit on his blog, saying,

To date Avril’s songs have been used over 200 million times on Youtube with a good percentage being fan generated. Youtube has deals in place with the stakeholders of the IP (Publishers, Labels, Songwriting societies) that sees a share on a pro-rata basis in the advertising income created from these social activities. In time this will generate a few million dollars in income for all collectively involved. Thus my suggestions that Artist’s engage their fans creatively.

Terry is a true digital media luminary and I agree with his message that artists should be looking to creatively embrace rather than fear new online technologies and platforms. Unfortunately, it just seems though that real revenues still aren’t there for artists. Rather than portend a viable new revenue source for artists, Avril’s Youtube experience seems to be the exception that proves the rule that most artists can’t make money online. Revenues of $2 million on 200 million plays means a penny per play, and few if any other artists are going to be able to achieve the number of plays Avril has. Avril is among the last of a breed of 20th century pop artists built on big marketing budgets and radio play when people were still listening. Her popularity as an online phenomenon is largely a product of years of traditional media exposure. But for a new internet artist, 5 million Youtube plays would be considered a runaway hit, and would apparently net him/her all of 50 thousand bucks. Not bad for some Youtube revenues, perhaps, but no one’s going to be quitting their day job on that kind of income. If Youtube is the new source of royalties online, they’ll need to do better for artists than that.

I suspect Terry would respond that the point is really not how much you can make through online sources like Youtube; they are the promotional vehicle and you use them to leverage revenues from other verticals. And certainly that’s how things stand right now. But how much is really available in other verticals for the non-Avrils? And do they really have to settle? Youtube is a multi-billion dollar company and the biggest purveyor of online video by far. It’s still very early in the game, but if the royalties flowing from that golden urn are merely a trickle, there is reason to be worried about the future of ad-fueled online royalties in general.

I definitely agree with McBride that we’d see a huge uptick in retail music downloads if labels and retailers would drop the price. AllofMP3.com showed us that lots more people (in the West, anyway) are willing to pay for easy, convenient high-quality downloads if the price is right. Terry suggests a price of 20-25 cents per song. I personally think the sweet spot may even be slightly lower than that, but in any case by failing to embrace a low price point for downloads the recording industry has very possibly left a lot of money on the table.

Interestingly, Terry is also reportedly planning to make “a shitload of money” for Avril in China by setting up a Mandarin fan site. No doubt Avril is as big a Western star as you’ll find in China, but I’d love to know what Terry has up his sleeve; I hope it’s more than just selling online ads because that’s still a tough row to hoe in China. Video and music websites that get as many as 20 million or more hits per day often barely earn enough ad revenue to break even. I wouldn’t bet against Terry McBride, and there are ways to make money online in China–especially with a big-name artist like Avril–but it will definitely be some time before they’ll make a shitload.