Attention! Monetizing Spotify Apps Is The Same As Monetizing Music

from the now-that-I-have-your-attention... dept

Recently Spotify launched its app platform, a significant step into a future where music licensing can function like an API. Which of course should have been made possible a long time ago, but corporations' loss of control was preventing that until they finally found a way to out-leverage the indies - or maybe that's just a coincidence.

So recently we've been seeing a phenomenon I like to call the Rage Against The Stream, where artists & labels have been pulling their content from services like the aforementioned. I probably don't have to point out that in a reality where everyone is competing with free, attention has become more scarce and valuable than ever before and thus the categorical dismissal of access models such as subscription services is unlikely to pay off in the long run (p.s. I love understatements).

The day after Spotify launched its platform, articles started popping up, commenting on the fact that it's impossible to 'monetize apps' and there thus being "no clear upside to developers." And that's where I grab my BS-defense-stick and start drawing the line.

No, you can't put ads in your app.
No, you can't charge for the app or create in-app purchases.
No, Spotify doesn't give you part of the revenue of music streamed through your app.
So?

It's the same lack of creativity of coming up with innovative business models that can be seen in other parts of the music industry... what's new is that this time it's coming from the tech side. What it comes down to is the same as competing with free - and saying you can't compete with free is saying you can't compete period.

Want to make money by building a Spotify app? Build one that uses Facebook Connect for user registration, focus on building a great experience that's non-obtrusive, make it easy to share this experience and funnel that back to your main platform (that's outside Spotify) - focus on discovery and then sell the premium. The SongKick app is a good example, but it can be applied in many more ways. Since it's going to be primarily power users and music geeks using the apps for now, items like vinyl copies come to mind. Focus on gaining & holding the attention - which is scarce, then build your way towards monetization by doing something that Spotify is not.

Spotify Apps are highly monetizable, you just have to be creative. Just like with music.

Filed Under: business models, monetization, platforms

How Labels Pulling Out Of Spotify Are Doing Massive Harm To Themselves

from the are-they-that-clueless? dept

Just a couple months ago, we pointed out how labels dropping out of Spotify were totally missing the point. A few labels had argued that Spotify only pays a tiny amount per stream, and that was somehow cutting into sales revenue. However, two recent stories we wrote about highlight how this is becoming an even more braindead move than before. And yet, the trend continues. Just recently there were stories about over 200 labels being pulled off Spotify by distributor STHoldings, who gave the usual song and dance about not cannibalizing revenue.

Here's why that's dumb. First, as we saw in the recent study about piracy, taking content away from where people want it doesn't lead to increased sales. As the professors who did the report explained:

When NBC removed its content from the iTunes store for about nine months in 2007 and 2008, there was an 11.4 percent increase in piracy, but no increase in NBC’s DVD sales — a loss of close to $20 million, given 23,000 lost sales per day at an average price of $3. And when ABC added its content to Hulu in July 2009, piracy dropped by 30 percent. Likewise, when a major book publisher stopped selling new Kindle titles on Amazon in 2010, there was no increase in hardcover sales, and when the Kindle titles were finally made available, their sales were 50 percent lower than they otherwise would have been.

Making your content available on these platforms drives sales elsewhere. Keeping them off does the opposite. It actually hurts sales.

Add to that the release of the new platform for developers. That means that soon there will be a ton of ways to build additional revenue opportunities on top of Spotify. It'll be easy to buy concert tickets. Or merchandise. Or collectable items. Or pretty much anything you want... directly through the Spotify music player itself. But if the bands aren't there, then people will simply ignore or forget about those acts... and they'll find others via Spotify.

Filed Under: business models, labels, music, platforms
Companies: spotify

Just Because New Artist Platforms Aren't Minting Millionaires Doesn't Mean These Platforms Have Failed

from the making-money-with-art-has-never-been-easy dept

Last week, the Tunecore blog, in a display of openness you won't find at most major music sites or labels, made publicly available its sales numbers for July 2011 (one of the slower months for music sales) in order to point out just how many artists were making money.

As is to be expected, a small percentage of artists made thousands of dollars while many others made far, far less. Tunecore was braced for the inevitable criticism, however.

But for all those that may comment suggesting most are making less, my response is, you've got to be kidding me. These artists, all of them, are outside of the traditional system. Some are earning hundreds of thousands and some are earning $20.

And this is bad because...?

With the music industry democratized more artists are making more money than ever before. All of this money you are seeing is going directly into these artists' pockets; this is money they would have never ever seen before.

Now add the songwriter money on top of this money.

Someone needs to explain to me why an artist earning something vs. nothing is a bad thing, as I truly cannot understand that logic. As far as TuneCore, as I have stated over and over, it's your music that causes it to sell. It's up to you to decide if the services and fees TuneCore charges work for you.

Well, Paul over at Digital Music News must have read nothing but the spreadsheet, because his post attempts to explain the "and this is bad because..." part (while glossing over the "something vs. nothing" angle) by pointing out that 99.9% of the artists listed make less than minimum wage.

But now, it turns out there's an even more depressing figure: 99.875% - or nearly all - of Tunecore artists are making less than minimum wage through the platform, based on revenue figures recently shared by the company.

And that only counts revenues - not costs for creating content or annual fees owed to Tunecore. It also assumes that Tunecore revenues are being paid to one, solo artist, instead of being divided by a group.

DMN takes issue with Tunecore's claim that more artists are making money than ever before, simply because "more money" doesn't equal "a lot of money." It even goes so far as to implicitly suggest that artists were better off with the old system, running through a set number of gatekeepers, by quoting Paul's (Tunecore) "democritization of music" line before asking, "But is this really true?"

Tunecore CEO Jeff Price came firing back, pointing out what's wrong with arguments that new systems don't work because everybody's not making thousands of dollars.

Paul, why do you put down artists for making money? These artists did it on their own, drove every sale, earned every penny without having to give up their copyrights or sacrifice control, something never before possible in the history of the modern music industry. I published the numbers in response to statements claiming artists cannot can sell music without a major label. So why on earth are these tangible, actual results being painted as failures?

Why are they painted as failures? Just ask regulars in our comment threads. These solutions "don't scale." Which tends to mean one thing: not everyone is making tons of money, therefore the system is a failure. But averaging numbers doesn't present the whole picture, as Price points out.

The "average income" formula you created may be the most useless, meaningless statistic I've ever seen. Here's an example as to why:

An artist that makes $20 a year in music sales sits alone in a room. Average made per artist = $20. Now an artist that makes $1,000,000 a year enters the same room. Average made per artist = $500,010.

So what did we just prove exactly? Same thing you did; nothing.

With this "argument" broken down, what exactly is someone who points out miniscule sales numbers trying to tell the artists? Is it a backhanded attempt to paint the artist as "screwed" by Tunecore? Or is it something even worse?

The truth is, most artist don't make that much in music sales a month, and we all know it. Most make much less. So what exactly is the point of your article? Are you saying that artists should give it up, as it's a tough business? What exactly is your news story? Drop your guitar and go work at a fast food restaurant?

Price goes on to point out what should be blatantly obvious, but often gets ignored during this sort of conversation: it's ALWAYS been a small percentage of artists that become very successful. This isn't new. This has always been true of the music business.

The "odds" of becoming a household name in music during your lifetime, of becoming a superstar, have always been microscopic, and we all know it. But until recently, every single one of the artists who "made it" and did not "make it" were forced through a system of gatekeepers, opinion-shapers, cultural and business guardians that took their copyrights and took advantage. Are you advocating a return to that system?

It can take years, thousands and thousands of dollars of investment, endless hours of work and sacrifice before something finally gives and the stone wall you've been banging your head against finally cracks. Your pseudo, baseless "analysis" suggests independent artists can't "make it". Bullshit.

Price says the best thing you can do is arm artist with as much information as possible, rather than attempting to scare them away from doing what they love with the insinuation that making music just isn't worth it.

Tell them the truth: it's hard, it's going to be tough, most of you won't become a superstar. Here's the information you need to know, here are the options, it's up to you to make it happen. Go into this with eyes wide open. No promises.

So some artists made a "mere $1,280" a month from digital music sales (this is a put down?). Newsflash, many made less, but had they gotten those sales while signed to a traditional record label, they'd have gotten no money and, most likely, six weeks after street date, they would have been dropped. That's the fate of 98% of the acts that came through the majors alone.

As he points out, the spreadsheet shows artists making thousands of dollars a month, which was conveniently ignored in order to shout, "THIS DOESN'T WORK!" 6,000 artists who would have made next to nothing (or nothing at all, if not recouped) are all making money. Things are getting better for the artist, but those who align themselves with the old system seem to think that because the music industry isn't awash with millionaires, new platforms are failures.

The fact is that the old systems won't work anymore and even in their prime, they weren't any better at turning artists into millionaires than the current systems. The real downside is that those who claim to be "for the artist" are often the first ones to paint the bleakest picture possible. How does that help?

Filed Under: business models, platforms
Companies: tunecore

Becoming A Platform: How RunKeeper Continues To Keep Competitors At Bay

from the business-model-jujitsu dept

Last year, we wrote about the very interesting case of RunKeeper, a small startup, which initially focused on software for iPhones for people to track their running information, and how it successfully outran Nike and other big sporting goods companies. This was in response to the claim we hear all the time that a small company "can't compete" with some big company that can just "copy the idea and throw lots of money at it." The reality is a lot more complex. Can big companies sometimes do that? Absolutely. Does it happen that often? No. The reasons aren't too difficult to understand. If the innovation is truly disruptive, the big companies are often at a steep disadvantage: (1) They don't fully understand the innovation or really why consumers/users want it. Instead, they understand the superficial reasons and that's all they copy. (2) They are held back by legacy issues, and their legacy business model, which might be undercut by the true innovation. That was definitely the case with RunKeeper, which could be brand-agnostic in its solution, whereas players like Nike and Adidas were somewhat held back.

Since then, I've been following the situation with RunKeeper pretty closely (and got to meet CEO Jason Jacobs a few months ago, where we got to totally geek out on innovation and business models). Anyway, the company has now taken things to the next level, distancing itself even further from the competition. Over the past few years, the company has added ways for other data and systems to hook into RunKeeper, which has become a wider "fitness" app rather than just a running app. One of the things that the company developed during this time was a "Health Graph" that pulled a lot of this info together in a very useful manner:

Imagine a system that can identify correlations between a user’s eating habits, workout schedule, social interactions and more, to deliver an ecosystem of health and fitness apps, websites, and sensor devices that really work, based on a user’s own historical health and fitness data. The Health Graph has the potential to completely alter the health and fitness landscape.

But where things get really interesting is that RunKeeper has now opened up the Health Graph API so that others can not just tap into Health Graph but build on it as well, basically letting all sorts of other services and devices build on this pretty cool and complete platform -- something which the other players in the space simply don't have:

What does this mean for device manufacturers and developers? They now have the opportunity to build an endless array of apps, that draw on the powerful data within the Health Graph. Health Graph developers also benefit from the social features on RunKeeper.com to gain exposure and drive sales. Social features, like our FitnessFeed and Facebook & Twitter sharing integrations, are a fundamental part of the RunKeeper.com experience; we’re opening up these forums to apps and devices that build on the Health Graph, to provide our 6MM+ community members with easy access to all the tools that integrate with RunKeeper.

I find this especially interesting considering our recent discussion on platform reliance, and how the big opportunities are in becoming your own platform. Think about this for a second: many people dismissed RunKeeper, early on, as a small app for tracking running info, and lots of people assumed naturally that once the "big players" got into the ring, RunKeeper would inevitably be crushed. But RunKeeper has continued to innovate and continued to focus on that core goal of making the overall "fitness" community better informed and better able to do things with their data, so that they're able to stay ahead of the big guys, even though we're talking about some of the biggest companies around, with tons of cash and the most recognized brands in the world.

Filed Under: business models, competition, platforms, small companies
Companies: adidas, nike, runkeeper

That Was Fast: News Corp's Just Launched iPad-Only Publication Losing Journalists

from the into-the-lifeboats dept

We had warned from early on that News Corp's "iPad-only" fee-based publication, The Daily, was a disaster in the making. After a ton of hype, and launching a few weeks ago to a ton of overwrought praise, all we've been hearing is that people aren't buying. A bunch of folks checked it out early, and then it more or less disappeared off the map. And now, it appears that staffers are bailing at a rapid rate. Of course, in the run up to launch, there was all this talk about how Murdoch was hiring a ton of big name journalists and staffers away from other publications. To see a bunch of them rushing out the door, barely weeks after the launch, suggests this may be a failure of epic proportions.

Filed Under: ipad, paywalls, platforms, the daily
Companies: news corp.

Why The Arguments That The Huffington Post Must Pay Bloggers Is Misguided: Payment Isn't Just Money

from the you-made-the-choice dept

We didn't mention the whole AOL buying Huffington Post story earlier this week, because there just didn't seem to be that much to say about it. It was an interesting deal, to be sure, and I'll be curious to watch what AOL does with the property, but, beyond that, it seemed like just another content acquisition deal. However, almost immediately after the deal went through, I started seeing some rumblings on Twitter, picking at the scab that has always annoyed a certain group of people about The Huffington Post: that it doesn't pay most of its writers. Sure enough, it didn't take long for this issue to start to spread, with the inevitable summary line of: "Hey, HuffPo became famous because all these people worked for free, and yet, they don't get a cut of the sale."

That story is now snowballing. Dan Gilmor wrote a blog post arguing that it was the "ethical" thing to do to start paying bloggers. Douglas Ruskoff said that he'd no longer blog on the site for free. And, of course, a bunch of cranky HuffPo contributors have created a whole campaign arguing that Arianna Huffington had no right to sell the site, since it was built off of their free labor.

They're all wrong.

Of course, we've been through this before. Five years ago, Nick Carr tried to argue that all the various big Web 2.0 sites like (at the time) Digg, YouTube and MySpace were really digital sharecroppers exploiting labor. As we argued at the time, this was hogwash. People were using those sites because they provided a valuable service. The reason they provided labor was because they got something of value in return -- whether it was attention or hosting or distribution or reputation.

Three years ago, we saw an almost identical controversy after AOL bought Bebo and musician Billy Bragg demanded some of the $850 million AOL paid (in retrospect, a massively bad decision). Bragg argued that Bebo made this money based on all of the "free labor" of musicians who used the site. But that ignored the fact that those musicians got tremendous value in using the Bebo platform to connect with fans and distribute their music... all for free. The folks who got to keep the money were the ones who took the actual risk. The ones who had to cover the expenses to keep the site and the service running, even when it wasn't making enough revenue. They took the risk, they should get the reward. The people who used the site did so of their own free will knowing quite well that the benefit they got from using the service was worth it to them at the time. Along those lines, if Bebo had struggled and faced bankruptcy instead of a massive buyout, would Bragg have felt obligated to give them money to keep it going? Similarly, if HuffPo had been running out of money, and Arianna had gone back and demanded that those who used the platform pay up retroactively, how would these people have reacted?

There are more ways to "get paid" than with money.

The reason that people chose to blog for free at the Huffington Post was because it's a fantastic platform for exposure. It brings traffic like no one else out there, and if you want to present something in a way that's likely to get more attention than on your own blog that no one visits, posting at HuffPo can be quite a good way to go.

And that's the point: the people who chose -- of their own free will -- to post at the Huffington Post for free did so because they clearly got value out of doing so. Otherwise, why would they have done so in the first place? To then say that the only proper thing is to pay them is completely missing the point. It's an attempt to retroactively go back and change the terms of a deal. If you wanted to get paid directly for what you write, fine, don't write for the Huffington Post. It's that simple. Go out and pitch your stories to publishers who pay freelancers. But don't go back and complain afterwards when the folks who actually did take the risk of putting together the site, financing it, organizing it, hiring the staff, buying the servers, paying for the bandwidth, and building it up so that it was such a successful platform, then get paid for their efforts.

Filed Under: business models, payment, platforms, value
Companies: aol, huffington post

YouTube Motions Highlight How Entertainment Industry Lawsuits May Have Slowed Useful Platforms

from the letting-business-models-develop dept

We've already written up an analysis of the motions for summary judgment in the Viacom/Google YouTube lawsuit, suggesting that Google's arguments seem stronger. It still seems unlikely that either motion will persuade the judge to skip a trial altogether, but the motions are certainly a bit of a preview of what to expect at any trial. Most of the analysis out there sort of reiterates the talking points in the two motions, but Eric Goldman highlighted an important point that got me thinking in that time is working against Viacom here, as YouTube becomes more and more entrenched as a useful platform by the day:

Perhaps more importantly, the intervening time has been good to YouTube as a business and as a brand. In this sense, compare Grokster to YouTube. At the time of the Grokster cases, it was still very much an open question whether Grokster would ever evolve into a tool where legitimate activity dominated. While we might still have had that same question about YouTube in 2006, by 2010 YouTube has answered that question resoundingly. YouTube's business practices have matured, everyone has had positive legitimate experiences with YouTube (even behind-the-curve judges), and it's clear that major legitimate players have adopted YouTube as a platform for their legitimate activities. For example, YouTube's brief makes the point that all of the 2008 presidential candidates published YouTube videos as part of their campaign. I'm guessing no 2004 presidential candidates used Grokster for campaign purposes.

So as time goes on, YouTube solidifies a brand as a legitimate part of our information infrastructure. As we learn that the YouTube story has a happy ending, I suspect judges become less interested in punishing YouTube for past practices. For this reason (and others), I thought a lot of Viacom's inducement arguments ran hollow because they ran counter to my brand impressions of YouTube. I would also note that Viacom appears to be giving up its litigation over activity after May 2008, so even Viacom seems to be happy with YouTube in its current form.

Goldman goes on to point out that this may bring up some challenges heretofore unfaced in determining how the "inducement" standard works -- but, to me, it brings up an even more important issue: similar lawsuits against Napster and Grokster moved faster. Lots of people have commented on the fact that this particular lawsuit has taken three years from filing just to get to the summary judgment motions to be filed -- and during that time, Goldman is correct, YouTube has had a chance to mature, refine its business model, and do many things that we now find to be quite beneficial to society.

The same thing likely would have happened to both Napster and Grokster, if they had been given a chance to live. Executives behind each company repeatedly laid out strategies to mature their business models and to work as partners with the industry. It's just that they never got a chance to put those into practice because these sorts of lawsuits and rulings from judges forced them (effectively) out of business. In YouTube's case, the slow pace of this particular lawsuit has allowed it to firmly establish tons of viable, useful, valuable non-infringing uses -- to the point that it's a platform used by tons of companies, politicians, individuals and more. If Napster and Grokster had been given half a chance, they likely would have been able to evolve similarly.

And this is what is so painful about watching all these attempts by the entertainment industry to kill off any new technology that disrupts an old business model. These lawsuits kill off those technologies before the natural progression and maturation is allowed -- and because of that, we all suffer.

Now, some will scoff and claims that Grokster was never going to turn into what YouTube is today, but you're saying that with the gift of hindsight. A large part of Viacom's motion tries to suggest that the two companies actually were quite similar -- but even Viacom is now admitting that YouTube's business model was able to mature and adapt. Considering that we still don't have music discovery, promotion and distribution tools as convenient as Napster was back in the day, this can be seen as a real shame. These lawsuits killed off a useful path of exploration for legitimate business models, and that's not only shameful but a waste of innovative effort. It's only through the random quirk of a slow court that YouTube may avoid suffering the same fate.

Filed Under: copyright, innovation, lawsuits, platforms, stifling
Companies: google, viacom, youtube

What If Microsoft Had To Approve Every App On Windows?

from the playing-the-what-if-game dept

I've been pointing out why an open platform beats a closed platform over the long haul with regards to the iPhone, and linking to various stories concerning the arbitrary nature of being allowed (or not) on the iPhone. But, Harry McCracken, over at Technologizer, does a great job illustrating the point by playing the "what if" game, and thinking about how Windows would have developed had Microsoft similarly controlled every app. It doesn't take long to realize how much slower innovation would likely have been on the PC platform (though, it might have opened up more of an opportunity for other platforms):

Would Microsoft have distributed Microsoft Office rivals such as SmartSuite or WordPerfect Office via its app store?

Well, maybe, in theory at least-after all, it doesn't sell Microsoft Office as part of Windows, so it couldn't use the "it duplicates functionality that's already in the product" excuse. Call me a cynic, though, but I suspect that competitive office suites would have run into trouble if Microsoft had controlled all Windows software distribution. And hey, didn't WordPerfect duplicate features in Notepad?

How about Netscape Navigator?

When Netscape first appeared in 1994, the current version of Windows (3.11) didn't have a browser. Even Windows 95 didn't have one at first--Internet Explorer was part of the extra-cost Plus Pack. Then again, Windows 95 did ship with the dreadful client for the original version of MSN, a proprietary online service which definitely did compete with the Web. That might have been reason enough for Microsoft to nix Navigator for duplicating Windows functionality. And once IE was part of Windows, Microsoft could have given Navigator the boot retroactively.

Safari? Firefox? Chrome?

They all appeared long after Windows got a browser as standard equipment. No, no, and no.

And it goes on from there. Fun thought experiment if you're one of the believers that Apple's closed iPhone system is somehow "good" for innovation.

Filed Under: closed, innovation, openness, platforms
Companies: apple, microsoft