March 25, 2009

Remember when David Letterman was moving from NBC to CBS and he had all sorts of special guests in his final week? It was quite an event. Bruce Springsteen, who had not yet played Letterman, performed "Glory Days" his final show. At one point, Letterman quipped that he was just moving, not going away forever.

Well, After five and a half years, I'm taking my act to a different network, so to speak. Starting Monday the 23rd, I am the Senior Editorial Analyst at Billboard Magazine. What this means to Coolfer readers is you can read my daily posts at Billboard.biz. Same analysis, different URL. In addition, I will have longer pieces in the weekly print magazine and will write regular research papers on important issues and trends. I'm excited to join the Billboard team and for the opportunity to reach a wide audience.

Today I have a short, Coolfer-like post on Ticketmaster credit rating downgrade at Billboard.biz. Much more to come.

Thanks for reading, commenting and emailing all these years.

And, Bruce, let me know if you want to play my going away party.

Glenn

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March 17, 2009

Coolfer will be light (or void of) posts this week. I'm laptop-less in Austin for SXSW. On Thursday at 11am I will moderate a panel on blogs and whatever level of awesomeness they have attained in the music world. Other than that, I will be roaming around from party to party, showcase to showcase.

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March 13, 2009

Before the BusinessWeek.com article by Douglas MacMillan on consumers' use of streaming services as substitutes for purchasing, I was the only one (as far as I know) to point out this harmful downside to free, ad-supported services.

In December 2008, I wrote that streaming services are not a boon for record labels because of two key reasons. First, they are a poor way to monetize recorded music assets. Here's what I wrote in December:

Consider a song sold at iTunes. The label collects about 70 cents (ignoring publishing and distribution). A typical on-demand streaming payout would be, realistically, around half a cent per stream. That means the song must be streamed 140 times to generate the revenue of a single track purchase. A sale results in an immediate 70 cents while streaming spreads out that revenue over time (the time value of money dictates that money now is better than money later). The sale of an entire album results in revenue equivalent to 1,400 streams. The buyer would have to spend about 5,600 minutes -- over 93 hours -- listening to music on a playlist site to generate the same revenue generated from the purchase of a digital album.

Second, they allow purchasers to forgo purchases for free streams. To paraphrase Dr. Liebowitz of the University of Texas at Dallas, each minute spent listening to a low-revenue streaming service is a minute that is not spent listening to purchased music.

In addition, I wrote that labels' excitement for streaming services misses a key point. While these services may induce someone to switch from file-sharing to free, legal listening, they can also induce a person to switch from purchases to free, legal listening. That is what MacMillan found.

Researchers and industry consultants say online music sites are being used by a growing number of listeners as a substitute for purchasing music, rather than serving as a catalyst for more purchases. (San Francisco-based graphic designer Gitamba) Saila-Ngita's experience shows that the sites allow music fans to spend much less money than in the past. "Most of this is substitutional. People go to [the Web] instead of buying records," says Jay Rosenthal, senior vice-president and general counsel for the National Music Publishers' Assn., a Washington (D.C.)-based trade group that represents publishers of songwriters and composers.

While the article lacks much hard data and offers only scant anecdotal evidence, I think it's on the right path. Streams are substitutional, as Rosenthal stated. Plus, the article offered a bit of evidence of a streaming service's ability to upsell to MP3s. The upsell, if achieved, is the silver lining for streaming services like Pandora, MySpace Music and Imeem. In theory, listeners use the services to find music they like and this discovery leads to purchases. To the contrary, the growth of download sales indicates the incredible amount of music discovery taking place on the Internet is not leading to a net increase purchases. These people would have bought music in the absence of an Imeem or a Pandora. Per capita spending on music is dropping as online discovery continues to grow.

MacMillan has information on the number of webstreams and MP3s sold by Lala.com.

Palo Alto-based Lala, a startup launched in 2007, shows how the music industry is struggling to profit from this new approach to music. Lala gives people the option of either paying 99¢ to download one song or paying just 10¢ for a Web-hosted song that they can access from any Web-connected PC. Lala users can also stream any song in the catalog once for free, and keep up to 50 songs in their online collection.

So far, little money is changing hands. For every 1,000 songs streamed at Lala, users pay the 99¢ download fee for only 72 of them. They pay 10¢ for only 108 out of 1,000. The remaining 820 songs are played for free.

(I should note the article does not differentiate between song uploaded to Lala.com and streamed, for which labels do not receive payment, and streamed songs that are not in the user's permanent collection. If the track was already purchased and added to a person's Lala.com collection, there is not going to be a future ten-cent webstream purchase or $0.89 MP3 purchase.)

There is no doubt that music is moving toward access-based revenue models. Streaming is part of that shift. The shift may be inevitable. Giving consumers additional options may be the right thing to do. At the very least, streaming revenues are an acknowledgment that the boom years of the CD were far above the industry's historical norms and will not be revisisted. But the bottom line is labels need more revenue than less, and pushing consumers toward lower-revenue models may harm the record industry's chances for a soft landing.

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Posted by Glenn at 1:33 PM | | Comments (View)

• Sony/ATV Publishing is creating a television series called "American Storytellers." The series will turn the stories of country songs into one-hour dramas. (Billboard.biz)

• Bit torrent search engine Minivova generated €1,000,000 in revenue in 2007. Be careful of the wording in the article. It says Mininova "earned" €1,000,000, which implies revenue net of expenses. The €1,000,000 figure is actually top-line, gross revenue. Still, it's an important discovery. The Pirate Bay's ability to generate revenue -- which indicates the degree to which it is run like a proper business -- was a part of its recent trial. (Ars Technica)

• Country album sales are down 15.3% this year but its market share is down only half a point to 10.0%. (Music Row)

• A review of the recent upgrades to MySpace Music. Nothing great, in my opinion. (TechCrunch)

• Download the 39-minute In The City podcast of this week's first meeting of the Featured Artists Coalition. (Download MP3)

• Milwaukee's Atomic Records will soon close. "As the viability of record stores have dwindled over the years, I can’t help but feel that our importance to the community has dwindled also. We’ve received an enormous amount of love from people since we announced the closing but it’s been often accompanied by a hushed confession that music just doesn’t play as big of a role in their lives anymore." (Popmatters, via Daily Swarm)

• Arrington was right. Music is free. Download 1267 files, 6.15GB of music from bands performing at this year's SXSW. (Home of the (UNOFFICIAL) SXSW 2009 Torrent, via TorrentFreak)

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Posted by Glenn at 9:56 AM | | Comments (View)

March 12, 2009

The Tennessean has an article on the launch party for the Third Man Records building in Nashville. The label was founded by Jack White (White Stripes, The Raconteurs). Its headquarters will house the record label and will have a record store, photo studio and performance stage. Said White:

If one of the bands working here says, 'Jack, there's a great band that played at the End on Friday night, you should check these guys out,' Saturday morning, they can come to Third Man Studios and we can cut a couple of songs. They can come back to the photo studio and we can take a photo of them. We can cut the acetate and run it down the block, and within three weeks, we can have a thousand copies of a 45 that they can sell at shows.
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• U2's No Line On The Horizon entered at #1 on the album chart with sales of 484,000 units. Given the changes in the marketplace and the shift away from the album format over the last four and a quarter years since the band's last album, 484,000 units is about right on target. The 7.02 million units sold last week were down 8.6% versus that same week in 2008. Year to date, album sales are down 11.5%. (Billboard.biz)

• Chinese hackers have reverse engineered iTunes gift cards and are selling them at online auction sites. (Yahoo News)

• Nine more representatives have joined in support for The Local Radio Freedom Act, which opposes the Performance Rights Act. (mi2n.com)

• Through its CreateSpace disc-on-demand site, Amazon.com is offering hundreds of out-of-print and rare albums as ready-made CDRs. (Seattle Tech Report)

• A review of the iTunes 8.1 new iTunes DJ function (formerly the Party Shuffle). "In the settings, when you click on 'Allow guests to request songs with Remote for iPhone or iPod touch,' it will enable all iPhones and iPod touches with the Remote app installed to find your iTunes Library. When those guests set your library of the source, they can then pick any song from your library to play next." (VentureBeat)

• Interesting: Rascall Flatts will stagger four pre-release songs in the month leading up to its new album. It has turned out that the a popular way to preview an upcoming album is to actually release a good portion of the album. (Music Row)

• An interview with MySpace Music president Courtney Holt. On the horizon: tools for DIY artists to add content to MySpace Music, more videos, more video-centric video programming, merchandise, ticketing ("We're going to be doing that in a big way in the near future," said Holt) and international launches. The company is shooting for the stars. Hopefully it can do at least one thing very well and move forward from there. (CNET)

• The State of New York has dropped its plans to tax iTunes downloads. The state legislature will use federal stimulus money to make up for what revenue would have been lost. (CNN.com)

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March 11, 2009

At last, the curtain is being lifted on artists' involvement in the secondary ticketing market. The Wall Street Journal's Ethan Smith has an excellent article on Ticketmaster, secondary ticketing services and the extent to which some artists and managers are profiting from legal scalping.

A focal point of the article is TicketExchange, a secondary ticket marketplace owned by Ticketmaster. Here's what the piece has to say about TicketExchange and common practices employed by artists and promoters:

• Ticketmaster "routinely" offers to list hundreds of top tickets per concert on one of its two secondary sites (the other is TicketsNow) and divides the extra revenue with artists and promoters.
• "Virtually every major concert tour today" involves the setting aside by artists and promoters of some tickets for sale on the secondary market. The tickets appear to be priced and sold by fans and ticket brokers. The article gave an example of a ticket being priced at an auction-like $1,164.01.
• Ticketmaster's senior vice president for legal affairs admitted the company's "marketplace" sites only rarely list tickets being sold by fans and that the vast majority of tickets are sold in cooperation with artists and managers.
• But TicketExhange had been billing itself as a marketplace where fans sold to other fans. Wrote Smith: "After inquiries from The Wall Street Journal, the 'tickets posted by fans' message was removed from the TicketExchange Web site. Prices also fell, narrowing the gap between Ticketmaster and TicketExchange Marketplace."
• "Tickets that do not sell at the inflated platinum prices can also be moved between TicketExchange and Ticketmaster's lower-priced main inventory, without any signal to consumers that the ticket's status has been reduced."

Additional reading:

"An Archived Senate Hearing, Surprising Proclamations" at Coolfer
"Ticketmaster, Live Nation, and the 'secondary market'" at Hitsville
"Scalping" at the Lefsetz Letter

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Posted by Glenn at 2:53 PM | | Comments (View)

• A profile on Jim Griffin and Choruss. "I think it's fair to say the business of music products has fallen and it just can't get up. … For any civilized society, it has to become very, very concerned when it becomes voluntary to pay for … the stuff of innovation, because those are the very things that drive civilized society, especially the one we live in." (eSchool News)

• Nokia plans to launch Comes With Music in Italy, Sweden, Mexico and other countries in the coming months. (PC World)

• Download Music Tanks report titled "Let’s Sell Recorded Music" that seeks solutions for record labels, ISPs and governments. (Music Tank)

• Mixwit's creators have just finished Mixwidget, an open-source mixtape project based on the late Mixwit mixtape. (Mixwidget)

• Some reality is setting in as ad-funded music models fail to deliver what content owners want. (New Media Age)

• Mixed results for recorded music in Australia in 2008. Total value dropped 8%, CDs dropped 12.2% by volume and 10.5% by value, digital tracks rose 33% by value and all digital rose 35.6% by value. (Billboard.biz)

• Auditude, which has deals with MTV Networks, MySpace, and Warner Brothers Entertainment, has raised a $10.5 second round of funding. The company's content identification technology identifies clients' videos and places ads over them. (VentureBeat)

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Posted by Glenn at 8:56 AM | | Comments (View)