Record Labels, Once Again, Freak Out About Anyone Making Their Content Useful

from the moving-on... dept

Another day, another story of the major labels freaking out that someone (for free!) has helped make their content more useful and valuable. About a week ago, I was one of the folks who passed along the news (via Twitter) of a new service called Youtify, which took the YouTube API and built a neat media player on top of YouTube that looked quite a bit like Spotify, the popular music service that's not yet available in the US. The concept really isn't all that new. Muziic has been around for years, and has a YouTube-based media player, and TubeRadio has a YouTube-based music player that looks just like iTunes. Honestly, TubeRadio and Youtify are really quite similar, except one uses the iTunes look and feel, and the other uses the Spotify look and feel.

Either way, it's a pretty useful and neat setup for listening to and discovering new music on YouTube.

So, of course, the labels have to kill it. Adam Singer points us to the news that just days after Youtify's launch started spreading... the major record labels have somehow blocked their music from appearing. Note that most of this is via Vevo -- the major label-owned service for posting videos to YouTube. In other words, these are authorized videos that have been uploaded and made available on purpose by the record labels. And... then the Youtify guys went and made an interface to make it easier to access and consume that music... and the labels/Vevo freak out and block them.

Because, apparently, that's how the major labels roll. If something makes the music more enjoyable and more valuable for free, but doesn't "pay" the labels, then too freaking bad. Is it really any wonder why the major labels are struggling?

Filed Under: music, player, useful, youtify, youtube
Companies: spotify, vevo, youtify, youtube

Why Does The Entertainment Industry Seek To Kill Any Innovation That's Helping It Adapt?

from the it's-all-about-control dept

The LA Times recently had a good article about Hulu's struggles with its corporate parents, the various TV companies. While Hulu itself has been massively successful, the TV companies are suddenly claiming it's a threat (even though they own it) and are seeking to cripple the service in a misguided and shortsighted bid to "protect" their legacy offerings.

Combine that with our recent story about the record labels crippling Spotify and the Hollywood studios seeking to cripple Netflix, and you've got a pattern. Any time a new service comes along that helps drag the content industries into the present, the industry's hit back by trying to kill off or cripple the golden goose.

The simplistic answer is that the entertainment industry is all about control, and they freak out about these success stories (that make them money) because they realize they're losing control. I think it's a little more complex than that, but not too much. The established entertainment business, for many, many years, has operated under the principle of being the gatekeeper to their industry. They've (incorrectly) believed that their value and the key to their business is in being the gatekeeper. But the amazing thing about the internet is that it knocks down fences and walls with ease.

Gatekeepers don't make much sense.

If you view yourself as an enabler, then these new services seem great and wonderful and a huge opportunity. If you see yourself as a gatekeeper, you see these other services as a path to route around your gate. The mistake is in thinking that the answer is to shut down or limit that alternative. That's because, the alternatives (generally) are not really gatekeepers themselves. Of course, to the existing gatekeepers they look like gatekeepers, which leads to this reaction. But the reality is quite different. In a world where there are no real walls or fences, you don't need gates, and thus you don't need gatekeepers.

Instead, you need enablers: the curators, aggregators and filters who help you make sense of the wide open world. That's what Spotify, Hulu and Netflix all do, in a legal fashion. But it's also what various unauthorized sites and services do in an often less than legal fashion. But none of that changes the fact that the gates are no longer needed and the fences are down. Spotify, Hulu and Netflix aren't the new gatekeepers. They're compelling enablers who have built the new hotspot that people want to go to, because of the additional value they provide. Knocking them down doesn't bring back the need for the gates. Those are gone forever. It just takes away one of the more useful services -- which actually does pay the copyright holders -- and drives people to the many other (perhaps unauthorized) sources.

Filed Under: control, entertainment industry, gatekeepers, innovation, movies, music
Companies: hulu, netflix, spotify

Record Labels Pressure Spotify Into Being Worse; Driving Users Back To Piracy

from the golden-geese... dept

I've spent a lot of time in Europe, over the past few years, at various music industry events, and one thing has become clear: all sorts of folks tell me that they stopped file sharing once they started using Spotify. It's uncanny. It shows, once again, that if you actually offer a good service, you absolutely can compete with file sharing. But there's no golden goose that the record labels can't kill, and they've been grumbling about Spotify for a while now... despite the fact that Spotify is making them more money than iTunes, in countries where it's available.

However, as we've seen, the entertainment industry has a special talent for screwing up a good thing, and their latest target is Spotify. Spotify still hasn't been released in the US, in part because some of the record labels (*cough* Warner Music *cough*) are demanding ridiculous restrictions on users, limiting any "free" parts to make the service a lot less appealing. Now it appears that the labels have also pressured Spotify into seriously cutting back on their free offer in Europe.

This will, undoubtedly, drive many of the users, who were making the industry money, back to unauthorized file sharing. In fact, many of the comments on Spotify's blog post about this say exactly that. For an industry that keeps claiming stamping out piracy is the number one goal, you would think it would know better than to take away the best tool they've had to compete with file sharing in a while. Spotify certainly isn't perfect, but it's amazing how quickly the recording industry seeks to destroy anything that starts making them money. They tried to do it with iTunes as well, but Steve Jobs fought back. Spotify apparently doesn't have the same clout just yet.

Really, this is symptomatic of the mentality of many of the bosses in the recording industry. They do absolutely nothing themselves to innovate. Instead, they resist and/or sue any innovation that comes along. Then, when an innovation finally breaks through and works, just as it's starting to really take off, the record label bosses get jealous and start complaining that these innovative services that are making them money are getting too much of the credit (and money) and demand a larger cut, making claims about how the service isn't the thing that's important, it's the music. Of course, if it were just the music that was important, these innovative services wouldn't be catching on. The service is important too, and each time the record label bosses overvalue their own music and undervalue the service, they end up killing off innovative offerings and driving users back to file sharing...

Filed Under: business models, free, record labels, spotify
Companies: spotify

If Spotify Is Making Labels So Much Money In Europe, Why Are They Still Demanding Crazy Upfronts In The US?

from the major-label-logic dept

For a few years now, people have talked about Spotify as the "next great hope" for the recording industry. For those who haven't seen it, it's effectively an "iTunes-in-the-cloud." I've played around with it, and it's definitely a hell of a lot nicer than most other things out on the market and the company continues to improve the product and to play around with some interesting additional models. I'm always a bit wary of anything that people think will "save" an industry, and Spotify is no exception. I think it's nice and useful, but it alone certainly isn't going to be the answer to the recording industry's inability to adapt to a changing marketplace. That said, one of the more amusing things to watch has been the fight over bringing Spotify to the US. It's been rumored to be "coming soon" for about a year and a half now and every time there's some rumor about it getting close, there's another rumor about the ridiculous terms and conditions the labels are insisting on to launch it here. They already have deals in Europe, but apparently, the labels want much better deals in the US.

The latest rumor says that Spotify is (once again) closing on deals with the major labels for a US launch, though it's going to involve massive upfront payments to the major labels (don't expect any of that to actually go to the artists). This has become pretty typical for the majors -- demanding massive cash up-front, which is why so many music-related startups have died an early death. The startups simply couldn't make enough money to cover those huge upfront fees. Now, Spotify might be a bit different in that it's raised a ton of money on the strength of its success in Europe and so it probably can handle the cash payment, at least initially.

But here's the thing that's strange. Just as the news of these huge upfront payment demands is leaking, Sony and Universal Music are both admitting that they're making more from Spotify in Sweden than any other retailer -- including iTunes (which, by the way, sort of puts a dent in Apple's attempt to spread FUD about Spotify to the labels).

So, here's the thing: if the labels are making so much money from Spotify in Europe, why have they fought so hard against doing a deal in the US without huge upfronts and/or guarantees? Part of it may be that the money in Europe has really only ramped up in the past few months, but part of it might just be how the major labels deal with music startups these days -- as seen by various quotes from major label bosses that suggest a jealousy of any other company being successful in the music business even if it helps them succeed as well. Basically, if another company is successful, these execs seem to think that they must have been given a bad deal. It's as if they don't understand how a non-zero sum market works. They believe if someone else is doing well, they must have been ripped off, so they want to make deals that practically cripple any other company, so that at least they're not doing as badly as those new companies.

Filed Under: europe, licensing, music
Companies: sony music, spotify, unversal music

Apple Trash Talking Spotify As It Prepares Its Competitor

from the all's-fair-in-love-and-competing-with-steve-jobs dept

There's yet another rumor going around that Apple is getting ready to launch a subscription music service. That's been rumored for ages, and it would be surprising if the company didn't do it. In fact, many were surprised that after Apple shut down music locker Lala that it didn't immediately launch a cloud based subscription offering. But, perhaps more interesting, is the fact that Apple has also been spending time trash-talking Spotify to music industry execs. We had mentioned, when Apple shut down Lala, that it would be a good time for Spotify to figure out how to launch in the US. The company has been trying for quite some time now, and the record label demands are basically impossible to meet. And it sounds like Apple is encouraging that. As Greg Sandoval reports:

In meetings in Los Angeles recently, Apple executives told their music industry counterparts that they had serious doubts about whether Spotify's business model could ever generate significant revenues or profits, according to two sources with knowledge of the discussions.

But Apple executives worried about the effects of a free music service might have on the rest of the market. They noted that it's tough to sell something that someone else is giving away, the sources said. One industry insider said it is only logical that if Spotify were allowed to launch a free-music service here, at a time when Nielsen recently reported that the growth of digital sales has flattened out, it could eat into the businesses of proven revenue-producers like Apple and Amazon.

Ah, the amazing ridiculousness of confused short-term thinking. While I also have questions about Spotify's ability to generate significant revenues long-term, the recording industry is making a huge mistake if it buys into the idea that Spotify is likely to cannibalize digital sales. If you look at reports in places where Spotify is widely available, such as Sweden and the UK, the reports suggest that what Spotify actually cannibalizes is unauthorized downloading. Yes, there are a bunch of reports that suggest Spotify gets people away from The Pirate Bay and into a system that at least gets the labels some money.

Filed Under: cloud, music, streaming
Companies: apple, spotify

Apple Bought Lala To Shut It Down?

from the can't-have-competition... dept

I've been a pretty harsh critic of Lala over the years. The company was long on hype and short on substance with its ever changing business model. First it was a CD swapping service. Then it was a free streaming music service. Then it was an iTunes-in-the-cloud. Still, the final product was decent, and with a bit of work could take on Spotify in the market. When Apple swooped in and bought Lala late last year, many people got excited over the possibility of Apple creating its own streaming music service that really could be seamless.

Instead, it looks like Apple bought Lala to shut it down. Just five months or so after purchasing it, Apple has announced that Lala will be closing at the end of May, pissing off lots of users. Now, it's entirely possible (or even likely) that Apple is timing the shutdown with a launch of a totally new streaming iTunes-in-the-cloud type service, but it does seem weird to buy a company and shut it down so quickly, and raises questions of whether or not the purchase was really about building out Apple's offerings, or about shutting down a nascent competitor just before Apple launched its own version. Also, if the plan is to launch its own version, why "shut down" Lala? Why not just transfer them over to the new service?

In the meantime, Spotify still hasn't launched in the US, but you would think that now might be a good time to step in and sign up disgruntled Lala listeners -- before Apple really enters the market...

Filed Under: cloud, itunes, lala, music, streaming
Companies: apple, lala, spotify

Spotify May Not Spur Music Sales; But What If It Makes Music Consumers More Valuable?

from the lifetime-value? dept

There was some news a few days back about how people who use Pandora end up buying more music, while people who use Spotify do not. Of course, if you understand these two services, this should be completely obvious. After all, Pandora is like radio -- with a bit of randomness, and no real way to just play what you want. Spotify, on the other hand, is designed to replicate your music collection -- a cloud-based iTunes. Unfortunately, those who focus too narrowly on the idea that music sales is the music business may find this news as further support for moving away from services like Spotify. On top of that, I've heard from people who were at the conference where this "research" was announced, and it turns out that the guy presenting it never mentioned Spotify at all. It's just that the press is assuming he meant Spotify.

However, either way, just looking narrowly at music sales is a mistake. As we've discussed, selling music is not a very good business any more, but that doesn't mean that there aren't good music business models -- it's just that selling music probably isn't one of them.

With that in mind, it's worth taking a look at a recent report put out by Will Page, an economist for PRS in the UK -- and the guy who put out that report last year showing that the music industry was actually growing, not shrinking, when you looked at all the component parts. In his latest report, Page takes on the question of "average revenue per user" (ARPU) when it comes to the music consumer out there -- with a specific look at Spotify (and, unlike the NPD report that's getting all this press, Page actually has real info about Spotify).

Around here, we're used to hearing about ARPU in the context of telcos. It's a stat that telco execs and Wall Street money folks obsess over. Five years back, we warned why the telcos obsessive focus on ARPU was dangerous, and could lead to bad long-term strategic decisions. Page's report effectively suggests the same thing is true in the case of the music business. With the move to various music services, such as Spotify and Pandora, there is a sudden push to look at "ARPU" of music consumers as well -- and if the average music buyer in the UK spends £63 on music, and Spotify can get them to sign up for a £120 plan, that seems like a pretty good thing. Right?

But, as Page notes, the real story is a hell of a lot more complicated than that. What if Spotify is picking off just the "top users" who were actually spending £150 per year? Or, what if it's getting people who didn't buy music at all to pay for subscriptions? Then, any direct revenue is incremental, and the pricing could really matter -- since lower prices could bring in a lot more total revenue by bringing new "buyers" into the market. Furthermore, just focusing on the ARPU from direct payments for music (sales or subscriptions) misses a big part of the story. Live shows are a large and growing part of the market, but don't make it into such calculations. Merchandise and other direct-to-fan offerings also probably aren't included in many of those calculations. And, in fact, we've heard that Spotify is looking to enable those other business models as well -- and isn't just focused on the obsolete metric of "music sales."

As such, services like Pandora and Spotify shouldn't necessarily be judged on how much they contribute to plain old music sales, or even direct ARPU -- but how much they drive people to spend money within the music ecosystem -- and then figure out where that money goes, and whether or not it's allocated in a way that benefits or harms the various players in the space. If Spotify helps make every other aspect of the music industry more valuable, but depresses the market for direct music sales, that shouldn't be seen as a bad thing at all.

Once again, it reminds us of the necessity to not get too narrowly focused on a subsegment of the market when trying to figure out what's happening -- but to explore the larger ecosystem of how much money is being generated around music -- and then we can look at where it goes and what it funds. That is, we shouldn't be worried about how much people spend on horse carriages, but on transportation. So remember that whenever you hear numbers being thrown around about how much money is being made or "lost" in various industries. If you don't look at the overall ecosystem, you often miss what's happening.

Filed Under: arpu, ecosystem, lifetime value, music, music sales
Companies: pandora, spotify

Warner Music Shoots Self In Head; Says No More Free Streaming

from the you-can't-be-serious dept

A few years back, it seemed like Warner Music actually had a better handle on where the music industry was heading than its 3 major label rivals. In the last two years, however, it seems like WMG has consistently gone further and further in the opposite direction. It may have hit a new low today with the announcement that it will pull out of all free streaming music licensing offers. Yes, Warner Music just told the one thing that was effectively competing with unauthorized downloads to shove off. Brilliant.

"Free streaming services are clearly not net positive for the industry and as far as Warner Music is concerned will not be licensed.

"The 'get all your music you want for free, and then maybe with a few bells and whistles we can move you to a premium price' strategy is not the kind of approach to business that we will be supporting in the future."

And thus, WMG will go out of business that much more quickly. That is the model that the market is moving to, and Bronfman and WMG appear to have decided to ignore what the market wants, to cover their eyes, stick fingers in their ears and go down with a ship that could easily be righted. Incredible.

Now, Warner may be a bit gun-shy after its investment in iMeem (a free online music streaming service) became a total disaster, but what Warner doesn't seem to realize is that a big part of why it failed was the ridiculous demands Warner put on iMeem in terms of how much it demanded in payment per stream. The problem is that WMG has totally unrealistic expectations of how much money should be paid per stream, and that's because the company's top execs still don't seem to handle basic economic modeling particularly well. And thus, the company will fail.

You don't compete with "free" by taking your ball and going home. You don't compete with "free" by pretending that old artificial scarcities are coming back after the wall has been broken down. You don't compete with "free" by suing customers. You don't compete with "free" by shunning those who have business models that work. You compete with free by offering a better product and a better business model. WMG is choosing to go in the other direction. Best of luck to them...

Filed Under: business models, edgar bronfman jr., free, licensing, music, strategy, streaming music
Companies: imeem, last.fm, spotify, warner music group, we7

Is Spotify Looking To Enable CwF+RtB For Musicians?

from the that-would-be-cool dept

There's been plenty of buzz around Spotify, the online music service that is available in Europe, but not in the US. Having played with the product, it's really nicely done, but there's always been a huge concern over whether or not there's a real business model there. The record labels have been notorious for burdening any useful startup with ridiculous licensing terms that make it close to impossible for any such business to survive (let alone profit). Spotify had said it was going to launch in the US, but hasn't been able to, and while the company keeps saying it's close, other reports suggest that the major labels still haven't reached agreements with the company.

However, what's much more interesting is this interview with Spotify CEO Daniel Ek, where he suggests the company wants to branch out well beyond the subscription/ad-based business models and start enabling musicians to offer other business models that sound an awful lot like the CwF+RtB business model we talk about here:

"We want a platform where we can [allow] lots and lots of experimentation. We don't know what will work for an individual artist. Some will benefit from scarcity. Some will benefit from it being widely available, even free. They might make their money by giving away all their music for free ... In the best of world, Spotify will become the platform where you manage your music and because you do that, we will figure out what kinds of offerings you're interested in. For certain types of artists, you might be interested in something unique. You might do a meet-and-greet. It might be that you want it on vinyl because it feels better. Or just go and see the show. Or have the merchandise."

Who knows if Spotify can pull it off (and if it will build this itself, or partner to do so), but this is a much more ambitious play than what's been talked about in the past, and while it's risky, seems like a much better long-term bet.

Filed Under: business models, cwf, music, rtb, spotify
Companies: spotify

Oxford University Bans Spotify, Apparently Prefers Students To Get Music Secretly, Rather Than Legally

from the that-doesn't-seem-helpful dept

For years, the recording industry has pushed universities to block file sharing apps and promote legal alternatives. In the US, the industry even pushed legislation that would require universities to support legal music services. Apparently, the folks over in Oxford are going in the other direction. IT folks at the prestigious university have banned Spotify, one of the most well-known legal music services out there, claiming that any P2P technology is not allowed, and then also claiming that it's a bandwidth hog. Finally, when confronted about it, the University noted that the service "cannot be justified as educational." There are lots of things online that cannot necessarily be justified as educational, but are totally allowed.

Given the multiple explanations, you get the feeling this may have been an overreaction on the part of the University by someone unfamiliar with Spotify. I would doubt that the application is really that much of a bandwidth hog -- and even if it is, you would think that there are better ways to deal with it than an outright ban. Either way, it's not like it will actually stop students from using it or some other means of accessing music they want to hear -- it's just that they'll do so in more secretive ways.

Still, a bigger question is why such an esteemed university seems to think that all P2P applications are somehow bad. You would think that an educational institution would recognize that P2P is just a way of using the internet -- often in a more efficient manner -- and it's been used in all sorts of beneficial and educational settings for years.

Filed Under: bandwidth, oxford university, p2p
Companies: oxford university, spotify