Apple's Music Match: Innovation By (Record Label) Committee

from the is-this-really-so-special? dept

Well, pretty much everything in the announcement of Apple's iCloud "Music Match" music service was leaked or predicted prior to the announcement today, so there's not much that seems particularly surprising. Basically, for $25/year, you can have Apple scan your music and anything that it already has in the iTunes store will automatically be available to you on all your other (Apple?) devices. A lot of people noted that this appears to focus more on syncing rather than streaming. That is, almost all of the talk was how all of the music would be available to download to whatever device you had synced to the system, rather than any sort of streaming player. Still, none of this seems particularly revolutionary. The music match functionality seems identical to what Apple bought from LaLa nearly two years ago. The syncing features are nice, but plenty of other services have allowed file sync between devices. It sounds nice, but nothing all that amazing.

The real story may be in the terms of the deal. While the labels allegedly turned down $100 million from Google to offer the same functionality, they took $150 million from Apple for this deal -- as an advance on approximately 58% of all of those $25 fees. Depending on how much music you actually have, the $25/year might be a decent deal compared to other cloud storage offerings, but Apple isn't going to make much money on it. Between the storage/bandwidth fees and having to fork over so much to the labels, this has to be a loss leader type of deal, with hopes that it sells more hardware (probably not a bad bet for Apple). Of course, that explains why the Google deal may have been "unsustainable" in the eyes of Google. It doesn't really have the hardware revenue to fall back on.

Still, it makes you wonder what, exactly, Apple is paying the labels for here. What's really being licensed? Effectively it's the ability to match the songs and put copies in a locker, which basically means that the labels are getting paid -- yet again -- for songs that they already sold to people.

That said, the other interesting thing about this is that while the labels were pushing everyone else to figure out ways to block tracks that didn't have a clear authorized lineage from being included in such deals, that does not appear to be the case here. As a friend noted to me after this announcement, if someone creates a dropbox or other mountable hard drive with a ton of music, and people mount it and then run the matching software on it, they could technically "launder" unauthorized tracks through Apple and have them in their "cloud" pretty easily. Which means... expect stories in the very near future from RIAA-types about this horrible "new trend" of massive mountable drives that people use to then dump thousands of songs into their Apple music storage. How long until someone tries to pass a law about that sort of thing?

The other interesting bit? While the big four music labels apparently got that $150 million as an advance, all of the indie labels? They get nothing. Not only are they not getting any advances, but they get a smaller percentage than the major labels. Apple pretty much realized that if it had the big four labels, the indies would more or less be forced to come on board at whatever terms Apple wanted.

On the whole, lots of folks seem excited about this, and as with so many Apple offerings, I'm sure lots of people will use it and it will do quite well. But I just don't see what's so compelling about repaying to access my own (legal and authorized content) via other devices, when I've already set up plenty of ways to do just that already.

Filed Under: cloud, music, music match, record labels
Companies: apple

Why Google Should Buy The Recording Industry

from the pocket-change dept

Rumours about Google's music service have been swirling for a while now, but they certainly seem to be reaching a new stage with stories like this:

The latest rumor to emerge from the Google campus is that the company's much anticipated music service is just about at the end of their rope with the major label licensing process. A source close to the negotiations characterizes the search giant as "disgusted" with the labels, so much so that they are seriously considering following Amazon's lead and launching their music cloud service without label licenses. I'm told that, though very remote and my guess is that it would never come to this, Google may go so far as to shut down the music service project altogether.

When there are rumours that you're about to give up on a project, you know it must be real.

But what really caught my attention was the following paragraph and its final, throwaway line:

I'm told that this is when the idea of launching without licenses came up. Google may be starting to think that if the industry weren't going to sue Amazon, then why would they take on Google? After all, who needs whom the most in this scenario? Could you even wrap your brain around the legal costs? As a source pointed out to me, "Larry, Serge and Eric could buy the entire music industry with their personal money."

The fact that this is literally true tells us something that is often overlooked: the music industry is economically quite small and unimportant compared to the computer industry. And yet somehow -- through honed lobbying and old boy networks -- it wields a disproportionate power that enables it to block innovative ideas that the online world wants to try.

On a rational basis, the music industry's concerns would be dwarfed by those of the computer world, which is not just far larger, but vastly more important in strategic terms. But instead, the former gets to make all kinds of hyperbolic claims about the alleged "damage" inflicted by piracy on its income, even though these simply don't stand up to analysis.

But that throwaway comment also raises another interesting idea: how about if Google *did* buy the music industry? That would solve its licensing problems at a stroke. Of course, the anti-trust authorities around the world would definitely have something to say about this, so it might be necessary to tweak the idea a little.

How about if a consortium of leading Internet companies -- Google, Microsoft, Yahoo, Baidu, Amazon etc. -- jointly bought the entire music industry, and promised to license its content to anyone on a non-discriminatory basis?

At the very least, the idea ought to send a shiver down the spine of the fat-cats currently running the record labels, and encourage them to stop whining so much just in case they make the thought of firing them all too attractive to the people whose lives they are currently making an utter misery....

Cross-posted from Open...

Filed Under: internet companies, licensing, music, record labels
Companies: google

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

Moby Says The Major Record Labels 'Should Die'

from the again dept

Moby is no stranger to speaking out against the major record labels. After the original Jammie Thomas ruling, he spoke out saying that the RIAA should be disbanded. More recently, he's highlighted how giving away free music has been helpful in making money and pointed out that the major record label's entire strategy seems based on trying to "make the future die." So it's hardly surprising to hear him say that he thinks the major labels should die. Of course, that's just the quip that gets the attention. His full statement is a lot more nuanced and relevant:

"There was a time when the music business was incredibly monolithic and there were only two ways to get your music heard: sign to a major label, get your music played on MTV and get it played by big radio stations," Moby continued. "Thank God, that period has come to an end... Signing to a major, for 99.9% of the musicians on the planet, is the worst thing they could do... They've treated musicians badly. They've treated fans badly. They've treated the music badly, most importantly. For that reason, they either need to reinvent themselves or die quietly."

And that's the key point. They don't have to "die." They could reinvent themselves, but they've shown little indication that they're really interested in doing so. But the earlier point is also important: in the past you needed a major label deal to be successful. They were the gatekeeper. These days, you no longer need such a deal. A record label deal could still make sense for some artists if the labels are smart about things, and can actually help enable those artists, but artists now have a lot more options -- and signing to a traditional record label, where you basically sign over everything for what's effectively a pretty small loan, is not a very good business move.

I think we'll see a lot more interesting label deals start appearing, where the musicians actually have a lot more leverage and are able to relegate the labels to being supporting players, rather than the main dogs. So far, the majors have been resisting those types of deals, but I think they'll have to start caving pretty soon if they want to survive.

Filed Under: moby, record labels

Musical Chairs At The Major Record Labels

from the down-with-the-ship dept

The one thing that the major record labels could really use at this point is an injection of new blood from folks who actually understand technology and where the market is headed. There are a few such folks out there, but they seem few and far between. Instead, it appears that the major labels are simply playing musical chairs at the top. Hypebot has this rather ridiculous report of some ongoing shifts among major label management:

At the same time, Doug Morris, out as Universal Music's CEO, but still its figurehead chairman until the end of 2011, is negotiating an early release so that he can run Sony when CEO Rolf Schmidt-Holtz's tenure ends in April. Along with Morris some of his top lieutenants could reportedly jump ship as well.

If that weren't change enough, Barry Weiss, recent chief of Sony’s RCA/Jive, is talking to Universal Music where he would oversee Universal Motown Republic Group and Island Def Jam. Who is being tapped to replace Weiss at Sony? Strong rumors have the job going to Tom Whalley, who was recently forced out at Warners.

Doug Morris, of course, is the guy who publicly announced to the world that he was too clueless to understand modern technology or business models. Actually, he admitted he was so clueless he didn't even know enough to hire people who could help him. And he still kept his job after that. I still can't quite fathom how any board of directors allows such a CEO to remain in place. And I'm curious as to what Sony is thinking in now hiring someone who has publicly said that he's completely unprepared to deal with the modern challenges of the market. But, of course, since all of these execs are simply swapping seats, it's just an insider's club where they pat each other on the back as the companies they lead continue to fail to adapt.

Filed Under: management, musical chairs, record labels
Companies: sony music, universal music, warner music

Supreme Court Lets Price Fixing Claims Against Major Labels Over Digital Music Move Forward

from the fix-that dept

For many years, we wondered why the major record labels weren't brought up on price fixing charges concerning their various digital music deals. It involved all of the major labels working out deals where the price of music was exactly the same across the board and where it was the labels themselves who got to determine the end-user price rather than the retailer, which seemed like clear cases of price fixing. It used to be that manufacturers were not allowed to require a retailer to price in a certain way, as that would be prima facie evidence of price fixing but more recently rulings have dialed back that rule. Still, it seemed like some of the other aspects of digital music pricing still represented clear price fixing. It took long enough but finally some people sued. While a lower court had tossed out the lawsuit, last year we noted that the 2nd Circuit appeals court had reinstated it. The labels appealed to the Supreme Court, who has now allowed the case to move forward by rejecting an appeal from the labels. At this point, I wonder if the labels won't try to settle the lawsuit in an attempt to avoid a full trial. The chances that the labels might lose seems decently high and the costs to them could be quite high.

Filed Under: collusion, price fixing, record labels, supreme court

Jury Finds Terra Firma Just Made A Bad Deal In Buying EMI

from the well,-that-went-without-saying,,, dept

Way back when private equity firm Terra Firma bought record label EMI, we actually had some hope that by putting in place some folks with a different viewpoint, they might actually help EMI make the transition to the new world that the other record labels were unwilling to do, since they were too tied to the past. And there were a few encouraging early signs. EMI's new boss, from Terra Firma, Guy Hands, told everyone at EMI that Radiohead's business model experiments should serve as a wake-up call to respond to new challenges with "creativity and energy," rather than lawsuits. Along those lines, he also threatened to withdraw from the RIAA and the IFPI. Finally, he hired two big name techies: including Google's former CIO and Second Life's co-founder.

However, there were also indications that the company was still very much unable to adjust, and didn't really welcome those outside views. Part of it, apparently, was that EMI's attempt to negotiate new deals with its biggest artists was done in a somewhat tone deaf manner, which pissed off those artists, who got the impression that EMI was trying to take advantage of them rather than trying to help them. On top of that, the company backed down on its threats to leave the IFPI and the RIAA... and instead became one of the more aggressive record labels in suing innovative start-ups and directly suing their execs in attempts to bankrupt them. It wasn't much of a surprise that the two tech superstars EMI hired both left pretty quickly, as it became apparent they were marginalized within the company.

With this approach, not surprisingly, EMI has suffered massively in the market, and last year, Terra Firma tried to pin the blame elsewhere by claiming that Citigroup had mislead the firm into buying EMI, convincing the private equity firm to overbid. As we noted at the time, this seemed hard to believe. It was no secret that the record label business was in bad shape at the time and really needed a different approach if it was to survive. The problem was that, for all of the early talk, Terra Firma and Guy Hands never really figured out a way to change the company at all.

Now a jury has ruled against Terra Firma saying that Citigroup did not mislead Terra Firma and, basically, Terra Firma just made a bad deal. Considering how they've run EMI, perhaps this is not too surprising. Of course, this also means that Terra Firma is not going to get out of the massive debt obligations it owes Citigroup, which likely means that Citigroup will get to takeover EMI, meaning it will sell off the pieces (most likely to Warner Music) knocking the major record labels down to just three: Universal, Warner and Sony. It seems that, as long as they keep merging, they can pretend that it's okay that they refuse to adapt.

Filed Under: record labels
Companies: citigroup, emi, terra firma

Why The Major Labels Continually Fail To Adapt: They Can't Take The Risk

from the too-much-risk dept

The site Hypebot is running an excellent interview with Lee Parsons, the CEO of Ditto Music, where he succinctly explains why new music distribution strategies will win (and are already winning), as well as why the major labels have failed so miserably to adapt. Here's a snippet:

Record companies cannot look into problems from a fresh, artist based angle. Problems are often solved but not in the way they were intended...

Shawn Fanning created Napster firstly for his own purpose. The new music models embrace as much technology and revolution as they can contain in a chaotic attempt to find a new and better path. Revolutionaries are prepared to make mistakes on the way; labels do not have this luxury. Many battles win a war, likewise through constant chaotic growth, development will come. Developing a new model for a major label is fuelled with risk so it is more likely they will continue to look for ways of containing technological advancement rather than embracing it as a new way of income....

The labels by being at war with the revolutionaries set themselves up as "The Bad Guy." Major label fat cats aren't going to convince a 9 yr old kid that sharing a song is wrong just because it affects their jobs.

People LOVE free music. Free music is always going to win.

By continuing with their argument instead of reaching out to new technology they push themselves even further behind in public opinion.

Unfortunately it isn't as simple as the "home taping will kill music" argument they thought it might be because the advancement of technology has overtaken even the revolutionaries' expectations. For a new generation of people music is now free. You CAN'T fight that.

You can't fight it, but you can embrace it. Unfortunately, as Parsons notes, the major labels, for the most part, are unable to embrace it because to them it still looks too risky. The problem for them, however, is that others are embracing it, and are willing to take the risks, and by the time "what works" is totally figured out, it'll likely be way too late for the majors to make the jump. Anyway, the whole interview is worth reading. Go check it out (and the link above is only for part I -- which has now been continued with part II).

Filed Under: industry, lee parsons, music, record labels, risk

Rather Than A Record Label, How About A Musical Affinity Group?

from the bringing-it-all-together dept

For years, I was involved in a "CD of the month" club -- not from BMG or Columbia House or one of those ancient "buy a bunch of CDs for a penny and we'll keep bugging you for years" offerings, but from a tiny, tiny label in Chicago that released the kind of music I like. It was run by one guy who also would scour the world for similar artists, and then act as their US distributor. The "club" was limited to a small number of customers, who would send over their basic "tastes" and basically this guy would act as their filter, and every few months (it wasn't quite monthly) would send over a big box of CDs of fantastic music that fit my tastes perfectly -- from bands around the world that I'd usually never heard of. It really was a useful service.

I was reminded of this a bit, two years ago, when Topspin's CEO, Ian Rogers, penned an open letter to Guy Hands, the head of (struggling) EMI, suggesting that rather than think of itself as a "record label" focused on promotion and distribution (two things that are easier and cheaper than ever before), it could instead focus on being the smart filter for music listeners today, struggling to find the music they love amidst so much musical abundance in the world. The suggestion was to take some of the key, iconic, bands under the EMI roof, and put them under affinity-based "mini-labels" with other less well known bands, that would appeal to people who liked the more well known band. It seemed like a great idea, which, of course, EMI has not done.

I'm thinking of both of these things now, as I read an open letter written by Bruce Warila at MusicThinkTank of what letter he would write to all bands on his roster if he ran a record label today -- and it's somewhat similar to what's described above. The label would build up a brand of its own, to bring together a bunch of affinity bands/musicians, and present them together -- thereby acting as an affinity filter. Of course, related to that, he would also shift strategies to give the bands true ownership of both their own works, and a piece of this overarching "venture," -- even allowing them to take their works elsewhere if they're not comfortable with how things proceed.

To be honest, I'm really surprised we haven't seen more of this. To date, there are some small, independent affinity labels, but they haven't really put together much of a comprehensive strategy. On top of that, there are various recommendation engines online, from Last.fm to Pandora and such, but that's not quite the same thing, and don't really take advantage of much more than recommending songs or artists you might like. This concept is about taking that even further, and building a real community of affinity around a group of artists that fans might like. It seems like a powerful idea.

Filed Under: affinity groups, record labels

Rolling Stone Offers 'A Big Fat Thanks' To The RIAA For Screwing Up Music Online [Updated]

from the nice-work dept

Hypebot points us to the news that in the latest issue of Rolling Stone, the magazine supposedly (can anyone confirm that this is real? -- Update: thanks to commenters who pointed out that this is real... but it's from 2002) has a nice 'big fat thanks to record execs' for pretty much screwing up their chance to embrace the way music is being shared and exchanged online: If you don't have images turned on, here's the text:

A big fat thanks to record execs

Thank you for fighting the good fight against Internet MP3 file-swapping. Because of you, millions of kids will stop wasting time listening to new music and seeking out new bands. No more spreading the word to complete strangers about your artists. No more harmful exposure to thousands of bands via Internet radio either. With any luck they won't talk about music at all. You probably knew you'd make millions by embracing the technology. After all, the kids swapping were like ten times more likely to buy CD's, making your cause all the more admirable. It must have cost a bundle in future revenue, but don't worry -- computer are just a fad anyway, and the Internet is just plain stupid.

Rolling Stone

Of course, it's probably worth pointing out that Rolling Stone isn't exactly known for embracing the internet, either -- recently letting a bunch of other publications get the first mover traffic on its story that resulted in a shakeup in the military chain of command. Still, assuming this ad is accurate, it's only taken the industry's leading magazine, what, a dozen years to catch up with what many music fans have been saying since Napster came on the scene. Update: Well, now that it turns out this is from 2002, we can give Rolling Stone at least some props for figuring this out earlier -- but note that the RIAA execs absolutely did not listen. 2003 was when they ramped up their legal campaign against file sharers directly.

Filed Under: music industry, record labels
Companies: rolling stone