3rd Discussion- Existing Alternative Models

Soundtracks

• More effective
• John Cougar Mellencamp and Chevy
• Starbucks’ label
• Of Montreal’s Outback Commercial
• Only a niche can get on TV shows & commercials and such
• Also many don’t want the perception of “selling out”

Touring is increasingly important

• Bigger money generator than record sales in many cases

Ben Karis-Nix model

• Give away music and make money off something related
• Difficult to get numbers on revenue potential of giving away vs selling
• Musicians have to be talented enough to create something else to accompany their music (unless, of course, they have a label or someone paying someone else to do it)
• Physical goods (other than shirts and such) are a dicey area in the age of digital music
• However, if you can pull it off, it can really help build you as a brand and be have a real marketplace for all related goods
• Also helps branding when an artist isn’t much of a hustler (as many aren’t)
• All has to reflect the overall identity of the band/artist

Pay-what-you-want or free model

• Fine for established artists
• Prince probably gave his away 5 years too early, and the quality really wasn’t there
• Viable in theory—biggest key is just getting your music heard
• Difficult in practice—many things associated with recording and touring cost money
• Not necessarily viral—people who would buy it would buy it
• Can hurt the band’s branding through the fan’s sense of value of the music
• Though could also be more engaging—those who pay may feel like they contribute to the band and their value (probably not the majority use-case)
• Doesn’t make much sense to keep it open forever
• Could reduce price of music in general IF you could guarantee bands could make up the revenue in another way
• If you put a community feel there, ask people to share how much they paid and why, there’s a better chance for success (though you have to be able to roll with the punches when people speak their mind negatively)
• What about a pay-what-you-want for a show? It would be incredibly tough to convince promoters, but you could also do an airfare/amie st type model where the early ticket buyers get the tickets for cheaper

Offering up all material for remixes

• Makes music two-way, plus can create cool new music
• Create a community aspect surrounding a band (beyond just discussion boards)—have a place for fans to post their related material, and have other fans rate it
• -A little dangerous in that if fans don’t get along with other fans the band may suffer
• -Difficult to monetize

Discussion 2: Startup Roundup

Biggest consumers are only half into their music—don’t spend the time on sites, but enjoy hearing new music

• iLike has potential to surface some of the smaller stuff through Facebook (where EVERYONE is)
• Yet they haven’t gotten into the social graph stuff too much—can’t see who among friends likes the music

Music Discovery Engines: Last.fm and Pandora

• Discovery vs Radio: For avid music listeners, Pandora is predictable in its recommendations. However, it may be used for simple internet radio.
• Would be nice to have statistics on how long users stay on site and how heavily they interact with the site

Streaming: Imeem

• May be useful down the road when internet is ubiquitous, but currently not an alternative to purchasing
• Has inked lots of good deals, and continues to grow as a default tool for bloggers and such

Streaming: Songbird, SkreemR, & Seeqpod

• Songbird is a full application built like iTunes
• Songbird has SkreemR integrated-- crawls the web/scrapes blogs in much the same way Seeqpod does—finding mp3s on existing servers and giving you a simple UI to stream them in one spot—but Songbird also allows you to download the mp3s directly to your computer
• Is that legal? I guess they aren’t physically hosting stuff

Music sales- AmieStreet

• Really cool business model idea (price increases as more and more people purchase songs), BUT…
• Horrible UI—focus more on comments (who cares????) than on song/artist name
• Where is the draw for established artists? Unless the site takes off and everyone wants to use it, they are unlikely to make the same kind of $$ they can (and do) make elsewhere. And same goes for the flip side—no significant number of users will come if they don’t have lots of good music

Music Sales- Rhapsody

• How are these guys still around? Unless you buy into the concept fully and plan on paying your dues until you (or they) die, this seems worthless. You’re paying for music, but it never becomes truly yours—you can’t take it with you, and it disappears when you stop paying your fees

Music Sales- can Amazon be the next iTunes store?

• The 5 billion song giveaway will help gain notoriety, and it’s not like Amazon is going anywhere soon, but until they get some software and hardware to go along with it (and barring a royal F-up from Steve Jobs), they don’t stand much of a chance against Apple.

First Discussion: Give the people what they want

So here's the deal: as TechJam goes on throughout today and tomorrow, I'll be posting a quick summary of key notes from each discussion on here. These won't be as in depth as the end summaries that will come in the revised packet of readings, but it's a quick catch-up for folks who are joining the weekend's discussions late in the game.
Our first discussion revolved around determining what are the wants and needs of artists, labels, and fans. Here is a quick overview of some of the stuff we hit on (please comment and keep the discussion going!):

Bands: want to easily and effectively get their music heard by as many people as possible

• Need someone pushing the marketing button all the time—something that labels can offer
• Interaction with media—more mentions spread virally

Labels: want to promote their artists, make money doing so, publishing rights

• New metrics for determining whether a band will be successful—but you can never take the human aspect out
• Healthy number of retention and repeat visits to myspace (etc) page
• Want to have stake in every aspect of bands

Users: want access to music, want access to bands

• MTV people: want “the show”
• Indie shop people: dig for the most obscure
• Majority: like it for what it is and don’t pursue it much beyond that—really the key to distribution
• Want tools to be able to “communicate” with bands—don’t like one-way conduit of information (OMG I LOVE U GUYZ SOOOOOOO MUCH!!! LOL!)
• Love opportunities to generate their own band-approved content related

iTunes 1 Everyone Else (look deep into scientific notation)

Peter Burrows over at Business Week wrote an article with some nice sentiments in it on the potential downfall of iTunes. While, no doubt, the toppling of iTunes would be a wonderful thing in many ways (DRM, pricing, etc), it's unlikely to happen as quickly and easily as Burrows seems to suggest. Amazon certainly has the best shot, at least in the short run: an equally trusted name offering a superior product (DRM-free and 256kbps encoding) for a lower price. So they're going to win, right?
Wrong. The biggest barrier for any new company or product is the status quo. In this case, iTunes is incredibly well established--not only as the world's largest internet music retailer, but also as possibly the most popular music player and a portal for transferring music to the world's most popular portable music players (and now phones). As a rival points out in the article "Apple's never been in the music business; they're in the iPod business." Even if you chip away at their market share on music sales (which initially will come almost exclusively from the minority of folks who use alternative mp3 players to the iPod or know about and care about the music quality difference), you still miss the convenience factor that most people see in iTunes--it's their one-stop-shop for music.
The status quo is incredibly tough to beat. It's what makes Seth Godin's idea in Purple Cow-- that you need to be "remarkable" to be truly successful--hold ground. Imeem, at least in theory, has Amazon beat. Whereas Amazon's store is evolutionary, Imeem's idea is revolutionary. Or is it? Imeem runs the risk of being ahead of its time--wifi is not ubiquitous, so we can't stream music everywhere we go. As a result, they are still not a single music solution--people will still go elsewhere to actually purchase or download music so that they can take it with them.
The idea of alternatives brings me to tell eMusic founder Bob Kohn why his website is not the ultimate solution either. In the Business Week article, Kohn asks: "People spend $10 a month to get an extra 400 minutes on their cell-phone plan. Why wouldn't they spend that to get access to all the music that has ever existed?"
Well, Bob, people don't see options in cell phones--it's something they need, and all the providers offer nearly identical prices for nearly identical products with a few very slightly differentiated features. In music, on the other hand, people have lots of options, and lots of payment options--including not paying at all. In the end, the products aren't very highly differentiated, and most people are going to go with what they know--which at this point means mostly iTunes or BitTorrent.
So how does one take down iTunes? Come up with something completely revolutionary that people find easy and useful (meaning they don't have to learn much or change their habits drastically), at a price they appreciate (though I insist that comes late in the determining factors), and doesn't make too many enemies with the suits. Ready, go.

Imeem makes an aggressive lurch

This may make Imeem an overwhelming success, or it may steal every dime they make. Apparently, they've inked a deal with Universal to allow users to stream and embed any song they want anywhere. Pure genius of an idea that everyone should get behind. The idiot factor? They have to pay Universal every time the song gets played, plus Universal gets a cut of Imeem's advertising revenue. Sounds okay, except that once you think that by the time Imeem makes similar deals with the other big labels, they're going to have no revenue left for themselves!

On the other side, it's a pure profit play for Universal. I think Matt Buchanan over at Gizmodo said it about as well as anyone can:

No wonder labels don't want to deal with iTunes, this kind of deal is pure money: Imeem's paying the labels so that its users can do free promo work for them! Why pay to advertise your artists when someone else can pay you to do it? Hell, users even do all of the uploading work. If you recall, this kind of arrangement's familiar to Universal—they got kickbacks on every Zune sold—and more immediately, they've got a service going with Nokia that intuition says they're not hooked into for charity or a good time on your part.
While this deal's not really making too much headway in their battle against iTunes, it shows they're looking pretty much anywhere and everywhere that'll make 'em a buck while they look for an endrun around Steve. They probably won't get his contract with the devil canceled anytime soon, but it looks like they've found that internet thing they were looking for. Maybe they'll find that "Facebook" thing next.

Update: Sorry, I just noticed Imeem already has deals with the other majors. I still say that doesn't change much, but it is noteworthy.

Fitty gets it!

It's not often that I find myself agreeing with (or even interested in) stuff coming out of 50 Cent's mouth, but for once, he seems to understand his surroundings in the music world. An excerpt follows:
Pål asked 50 Cent: “How are G-Unit Records doing in these times of file-sharing?
“Not so good.” he responded. “The advances in technology impacts everyone, and we all must adapt. Most of all hip-hop, a style of music dependent upon a youthful audience. This market consists of individuals embracing innovations faster than the fans of classical and jazz music.”
“What is important for the music industry to understand is that this really doesn’t hurt the artists.”
Thats quite a statement. Organizations like the RIAA are always talking about how the artists get hurt by file-sharing but 50 Cent clearly doesn’t agree. In fact, he appears to appreciate the value of a good fan, whether he buys or file-shares his music, as he explains:
“A young fan may be just as devout and dedicated no matter if he bought it or stole it.”
Indeed. It’s been said time and time again - get the music out there by any which way, fill the gigs and capitalize on the merchandising and ends will meet. 50 Cent agrees:
“The concerts are crowded and the industry must understand that they have to manage all the 360 degrees around an artist. They, (the industry), have to maximize their income from concerts and merchandise. It is the only way they can get their marketing money back.”
He finishes up: “The main problem is that the artists are not getting as much help developing as before file-sharing. They are now learning to peddle ringtones, not records” he said.
“They don’t understand the value of a perfect piece of art.”

A little humor for your Friday...

What happens when you download music?

Even the hard drives are against us!

Apparently Western Digital won't let you share media files on their networked drive. So if you legally downloaded music from, say, Amazon, and you wanted to listen to it on a different computer in your home via the networked hard drive, it would be blocked. Restricting access to one's own hard drive makes even less sense than AppleTV only playing media purchased via iTunes. As the blogger points out: "sure, sharing 1 tera bytes of text files looks very appealing."

Oh, Canada!

Oh, those crazy canucks. The Songwriters Association of Canada (SAC) has proposed a $5 monthly fee on the internet, collected by ISPs, in order to compensate artists for songs being transferred via P2P sharing. Yikes. Not that many people would really notice that extra charge (considering they probably already pay a good bit in weird taxes and fees above their rate quote), but this just ISN'T a solution. First of all, how does the revenue from this get distributed fairly and evenly? Chances are pretty good that the vast majority (if not all) of the funds will go directly into the pocket of the major labels. Not only that, but since this would be a new thing, the labels wouldn't be contractually obligated to pay ANY of it to the artists. And if the labels needed another way out of paying the artists, there's no way of tracking exactly how many times each artist's music is downloaded. So what it would come down to is essentially the government taxing people because they're not making as much money as they're used to. Great.
But think further--wouldn't the movie industry want in on this, too? I mean, clearly music isn't the only thing getting pushed and pulled through those tubes of the internet. Heck, I don't have the numbers in front of me, but isn't porn likely to have about as many downloads, too?
Let's break down a few numbers:
Canada's Population= 32 million
Multiply by approx 2/3, since presumably not each individual has their own internet account= 20 million
x $5 = $100 mil
x 12 months = $1.2 billion (1/1000th of Canada's GDP--that's a pretty significant tax)
That's no chump change they're throwing around. Especially since not everyone (in fact, percentage-wise, relatively few) downloads music and movies for free. In fact, it's double punnishment for those who choose not to steal--not only are they taxed for things they don't get (taxation without representation!), but they're also still paying for the music they want.
Am I insane, or is exploiting loyal customers a bad strategy? Clearly the labels are not flat broke (by any stretch), so the majority of people still do evidently pay for their music--why make them pay again?
If, somehow, this proposition gets through, don't be surprised if download rates skyrocket and music sales plummet in Canada. The oldest lesson is business is if you piss your customers off, they'll find alternatives. Why can't industry folks put their money and business accumen to use towards a constructive, rather than destructive solution?

No steps forward and two steps back

Apparently, it's Universal's policy that artists can only post 90-second clips of their songs on their MySpace pages, or anywhere other than the company site where songs might be streamed. Just when it seemed like the majors might finally be catching onto this whole DRM-free thing and were starting to get back into the good graces of their listeners they go and create a disaster like this.

Is classical a step ahead of the game?

Not known for innovation, the classical genre has taken a step ahead of its pop/rock/rap counterparts, at least in the major label sector. Deutsche Grammophon now sells high quality (320 kbps), DRM-free tracks and albums on their own site from $1.29 a song to $11.99 an album, available worldwide. Are major labels going to go the way of Radiohead (okay, it's a stretch) and bypass the retailers altogether? Or does classical's relative immunity from BitTorrent and other illegal burning allow them to do things that other genres can't (or won't)?