I had a fascinating conversation with MediaNet CEO Alan McGlade on Friday morning. Unless you're deeply involved in online music, you probably don't know MediaNet, but it's the back end powering a lot of music services you might have used, including MOG's subscription service that launched earlier this week, as well as Microsoft's excellent Zune Pass subscription service and iLike's online music marketplace. (MySpace acquired iLike in August, and in November, links to iLike's service began appearing directly in music-related search results on Google.)
Fox Interactive used MediaNet's technology to embed this list of Aerosmith songs in a story about the band. Readers could then listen to a sample or buy the song.
(Credit: MediaNet)They've also got more history in online music than just about anyone. The company started off as MusicNet, with part-ownership by three of the then-Big Five major labels: BMG, EMI, and Warner. They powered RealNetworks' music initiatives before RealNetworks bought Rhapsody. They powered Yahoo Music. They powered MTV's online music store.
These early stores went nowhere. Content owners insisted on digital rights management (DRM) restrictions, which meant that content from these stores had restricted use rights and couldn't be played on every device--including, in most cases, Apple's iconic iPod. Setting up a store using MediaNet's platform often took 18 months and significant technical expertise. In the meantime, Apple focused on a dedicated online store for its own devices, and completely dominated the market for music downloads.
But the landscape has changed. Labels don't want to be beholden to Apple. They no longer insist on DRM for single-song downloads, and have realized that the more outlets there are for their digital music, the more customers they'll reach, and the more sales they'll have. (Amazing it took this long to figure out.) MediaNet is, in my opinion, incredibly well positioned to take advantage of this sea change.
In October, the company released a set of technologies called MN Open that make it almost trivially simple for companies to add a wide variety of music consumption options to their Web sites. Sure, companies can still use MediaNet to build an end-to-end service like MOG.
But say you're Fox Interactive and want to make a story about Aerosmith more engaging. Using a MediaNet component, Fox created a link for the first mention of the word Aerosmith that took users to a page with more information about the band, and links to play and buy some of their popular songs. Fox also posted Aerosmith songs in a box directly on the story page.
MediaNet handled all the heavy lifting: licensing the music, streaming the samples, and fulfilling the transaction. Fox kept its brand and design throughout the process, and users didn't have to leave the site to buy the song. Best of all for Fox, it didn't have to make any up-front payment to use MediaNet's technology. Instead, MediaNet takes the customary cut of any song purchased through the site (about 30 percent, if it's anything like Apple). The model's the same for sites that offer free ad-supported streams or subscriptions--MediaNet takes a portion of each transaction, then handles payment to the content owners.
Now imagine this kind of integration on sites for radio stations, record labels, or your favorite bands. Imagine your ISP or cell phone carrier offering you a music subscription service bundled with your Internet service or smartphone. In this world, users won't have to go to iTunes or Amazon MP3, or subscribe to Rhapsody (or MOG for that matter). Music will be available for consumption everywhere. And content owners will get paid regardless of where users buy it.
According to McGlade, it's already happening--he said MediaNet is adding about one new distributor per day, and has already got about 50 customers using the MN Open platform. One site, GetPlaylists.com, was able to add playable song samples and downloads-for-sale in only two days with MN Open, according to McGlade.
Thanks to this upsurge, the company--which is owned by a private equity firm and no longer has any direct ownership affiliation with the major labels--has recently crossed over into profitability. A rare situation indeed in today's online music landscape.
It's a great vision, and something that Microsoft, the original platform company, could have done. But Microsoft spent years pushing the Windows Media Platform, which made heavy use of Microsoft codecs and file wrappers (instead of MP3s, which were becoming the industry standard). Microsoft also spent a lot of effort trying to enable the labels' DRM demands--for example, by building a platform to enable subscription-based downloads to be transferred to portable devices. Then, just as the labels were getting ready to abandon DRM, Microsoft basically gave up pushing Windows Media as a general-purpose platform for distributors and device makers, and instead started trying to mimic Apple's end-to-end software+service+device with the Zune strategy.
Talk about an opportunity lost! Instead of struggling along with something like 2 percent of the digital media player market, Microsoft could have ended up powering the music technology on thousands of Web sites.
Another aside: while MusicNet offers a lot of flexibility for distributors--downloads, samples, free streams, or subscriptions are all supported--McGlade is most bullish on subscriptions as the digital business model of the future. He admits that old fogeys accustomed to CDs and vinyl will have a hard time giving up the concept of ownership, but suggests that today's teenagers don't care--they want music on demand from any device, any time, in any location, and don't need to have the files physically present. McGlade thinks that subscriptions will have the best chance of taking off if they're bundled with some other product, like ISP service.
Scoff all you want about subscriptions, but the concept keeps coming up: music industry expert Donald Passman also believes they're the best chance for the music industry to thrive in the future. Even Apple finally seems to be bending to the idea of streaming music with its acquisition of Lala, although Lala isn't a straight subscription service, but more of an online music locker with some free streams, plus fee-based individual streams.
MOG offered me a free trial to its subscription-based streaming music service, MOG All Access, which launched on Tuesday. The service costs five bucks a month, and gives you unlimited on-demand streams of more than six million songs from all four major labels and plenty of indies. The site is trying to differentiate itself from competitors like Rhapsody and Napster with high-quality streams--all songs are 320kbps MP3s--and some fairly sophisticated music discovery features, like playlists posted by musicians (David Byrne got the featured spot on the day of launch) and other fans with similar tastes to yours ("Moggers like me").
(Credit:
Screenshot)
I've been sampling the service for about an hour, and I do appreciate the sound quality (although better volume-leveling between songs would be nice) and recommendation services. And I'd like to thank the designers personally for the ability to add any song to the already-playing queue--a feature I love on Grooveshark and my Zune HD and that I always miss whenever I use one of my iPods. But there's one big problem: song selection.
Because MOG is licensing content directly from copyright owners, there are big gaps from artists who simply don't want to participate in online music. The usual suspects like AC/DC, Led Zeppelin, and the Beatles are mostly missing in action. There are also strange gaps elsewhere. For instance, half the songs on the Pixies' "Surfer Rosa" are unplayable. Compared with Grooveshark, which relies on user-posted content, MOG has too many holes. And of course, Grooveshark remains free (although a $3/month subscription gets you a version without advertisements).
Song selection could improve over time as MOG signs more licensing deals, but I found some other related glitches as well. For instance, '70s folk artist Roy Harper, whom I often use as a test case to see how well an online service does with relatively obscure old content, has almost no playable content, but does offer a nice list of albums with links to Amazon. The only problem: when you follow the Amazon link on unplayable songs, it takes you to the Amazon Music front door--most of his songs aren't available for download there, either.
In its demonstration video, MOG touts its online radio service as a unique feature. When you're playing a particular artist, a slider lets you control how much variety you want, from "play only songs by this artist" all the way up to "play mostly songs from similar artists." It could use some fine-tuning, however. When I started a queue with a Modest Mouse song, it used Modest Mouse as the basis for its selection. Fair enough, but when I added songs by Talking Heads and Public Image Limited, the radio algorithm didn't account for those artists. It simply switched my radio playlist completely when the new songs started playing, showing all Talking Heads songs, all PIL songs, and so on. Pandora and Slacker do a much better job of creating custom stations based on multiple artists. (Although, of course, those services don't let you play individual songs on demand.)
Finally, as I wrote last week, I still think MOG's lack of mobile support is a fatal flaw, but one that could be easily remedied: Apple's approved iPhone clients for subscription services Rhapsody and Spotify, so why not MOG?
All of these flaws can be fixed, although licensing content takes time and convincing. I'm a big fan of competition, though, and MOG takes many of the best features of a lot of other services, combines them in one place, and improves on some of them. For that, the company should be commended.
For the last year or so, it's become clear that the economics of ad-supported streaming music services are not good for their creators or investors. As CNET's Greg Sandoval reported last week, the acquisition of streaming service Imeem by MySpace Music for pennies on the dollar is the latest bad news for the sector, following the bankruptcies of SpiralFrog and Ruckus and the similar fire sale of iLike to MySpace.
Offering your music via Spotify might help you fill up your piggybank.
Who's left? In the U.S., we've still got LaLa, which has the blessing of the major labels and seems to be enjoying dramatically increased traffic (as measured by Alexa) thanks to its recent deal with Google, and Grooveshark, which has kept a low profile. Neither of these services is purely ad-supported--particularly LaLa, which hopes to charge customers for downloads and "permanent" streams once they surpass a quota of 50 free streams a month.
But the service most often cited as the future of online music is Spotify. It's only available in Europe right now, but it seems like everybody who tries it loves it, myself included. Spotify offers a premium service as well, which offers portability and higher-quality streams, but the free service offers unlimited ad-supported streams, and that's the service that has everybody so excited.
But there's one small problem with the Spotify-as-savior story: it doesn't pay artists very well. According to this story in a Swedish publication, as translated and explained by the TorrentFreak blog, Spotify delivered more than one million streams of Lady Gaga's hit single "Poker Face" over five months. From these streams, she reportedly earned about 1,150 Swedish kronor--about $167--from the Swedish agency responsible for paying royalties. That's not even enough to cover the cost of four tickets to her upcoming concert in San Francisco.
If this story's true, why would any artist agree to make songs available on Spotify? With these kinds of payouts, it looks like music business expert Donald Passman is right--advertising is never going to support an online music service.
If you work in the music business, you probably already know the name Donald Passman. For the uninitiated, his book "All You Need to Know About the Music Business," which was first released in 1991 and comes out in a seventh edition today, is the book on how the music industry works. If you ever wanted to know how major and indie label deals are structured, the different types of royalties that musicians can earn and how they're calculated, what a personal manager does for a band, how much money artists make on tour, where your ticket fees go, or any of countless other nitty-gritty details, this is the book. Music industry people sometimes call it the bible, and they're not joking.
The seventh edition contains numerous updates since the last release in 2006, including the final resolution of the battle over Internet radio royalties, details of how royalties are calculated for iTunes and YouTube, and the latest developments in label deals. I had a chance to talk to Passman on the phone on Tuesday morning about the changes he sees in the music industry and where he thinks it's going.
Q: Since the last edition of the book was published in 2006, what's the biggest change to the industry?
Donald Passman: 360 deals [in which record labels get a cut of the artist's revenue from touring, merchandise, and other sources apart from record sales] are a tectonic shift in the way record deals get done. There was a smattering of them three years ago, but now it's become the norm. Early deals with Madonna and other established artists were really banking deals, where everybody knew the artist's track record and they were making a bet on what the future would be. Deals with new artists are quite different. The labels are saying that they're the only ones really willing to spend money on a new artist's career, and they can no longer make money just in the record business, so they need a cut of this other income.
We're also starting to see some industry patterns in how royalties and payments are calculated for digital music. So far, none of the business models have made a lot of money. Even iTunes doesn't make a huge profit. But part of the problem three years ago was that if you started a streaming music service, you had no idea what you were paying. Now we're starting to see industry patterns.
Do you still think it's worth an artist's time to pay or find funding for a professionally recorded demo in a big studio? Or would you recommend that artists invest that time and money in buying a computer and other home recording gear and learning how to record themselves?
Passman: There's no one-size-fits-all answer. The software that's available now is better than what professional studios used to be like 10 years ago. You can create an extraordinarily good demo in your house. The key is to create a demo that sounds like a hit so they don't have to use their imagination to hear it. People will tell you they can hear a diamond in the rough; they can't.
Do you think the rise of do-it-yourself online services like CDBaby, Tunecore, and Sonicbids will lead to a new thriving "middle class" of musicians--folks that aren't signed to a label, but spend most of their time recording and touring and make a decent living doing it?
Passman: It's a reality today. If you're a niche-type artist and you don't mind staying in your niche, you can make a perfectly good middle-class living that way. If you're more mainstream, you can use those techniques to build buzz and attract a label. Nobody's yet had a major career without a label behind them. I'm certain that's going to change, but for bands that want to be truly international and mainstream, they still need a label.
In your book, you mention that you favor unlimited music-streaming--the "celestial jukebox"--as the most likely future business model to succeed. Do you think ad-supported free services (like Imeem or Grooveshark) will ever be viable?
Passman: I'm skeptical that ad-supported music services will work in a major way. People have had a hard time monetizing music to advertisers because the music is so diverse. Advertisers don't know what type of music they're going to be associated with, so it's hard for these services to get high enough CPMs [impression-based advertising rates]. YouTube's had the same problem: you don't know what kind of video's going to pop up next to your advertisement. Free services will probably be a model, but I don't think they'll be the model.
Why do you think subscription-based services (such as Rhapsody) haven't really taken off?
Passman: They're not convenient enough, they're not truly cross-platform. For me, the ultimate would be anytime-anywhere access to any music for one subscription. On my computer, in my car, on a connected device, whether it's an iPod or something else, on an airplane when I don't have an Internet connection. Not just tied to one or two devices. I'm personally a believer in subscription services. People don't think twice about paying for cable, and when you stop paying it goes away. But with music, there's a kneejerk reaction because we're used to owning it.
We hear a lot of doom and gloom about the death of the music industry. Are you still optimistic?
Passman: I'm optimistic in the longer term. Not for the next few years. I think it'll probably get a little worse, and then we'll bump along the bottom for a while. I don't think we've hit bottom, and that's because I see the trends that are happening now. CD sales are declining and will eventually disappear, and retailers are making it happen. They're cutting back the floor space they devote to CDs, which means less CD sales, which makes them cut back more.
But the digital opportunity is huge. We can sell music to people who've never gone into a record store, people who never listen to music because they stopped listening to the radio at a certain age will now have access. Unfortunately, we're not there, technically or legally. The more pain the industry feels, the easier the legal side gets. The better the technology gets, the closer we get to delivering an experience people want.
Tuesday's post on using Craigslist to buy secondhand concert tickets drew a response from a company called FanSnap, which uses live feeds to aggregate ticket listings from online marketplaces and broker sites (such as StubHub and TicketNetwork) and eBay auctions.
FanSnap would argue Craigslist is fine for price-sensitive fans who don't need to go to a particular show and who are willing to meet and negotiate with other individuals, pay cash where necessary, and run the risk of buying a fake ticket. (Although the only time I've ever seen a fake concert ticket was in 1989 on the streets of Manhattan, when I bought a very realistic counterfeit to a Jane's Addiction show at the Ritz.)
Fans who want a slightly more convenient buying experience might go with eBay, where they can use PayPal and rely on seller ratings, while fans who absolutely need a guaranteed ticket can go with a marketplace like StubHub, which offers a toll-free customer service line, money-back guarantee, and other benefits. FanSnap operates on an affiliate-oriented revenue model, so it gets a commission from sites on which sales are made.
FanSnap shows you where tickets are located in a seating chart of the venue.
I ran a search on FanSnap for Pixies tickets, and it found more than 70 listings for the sold-out show this Friday, compared with about 30 listings on Craigslist. (The Craigslist screenshot in Tuesday's post showed only listings that had been added on that day.) Prices were similar to Craigslist--lower in a few cases--and the site has some great design touches, like a seating chart of the venue that maps tickets to particular locations. Craigslist, of course, is purposely and resolutely lo-fi. I still think there's something refreshing about dealing with a real fan, face to face, but I can see reasons why others wouldn't want to.
Correction at 8:00 a.m. PDT, Nov. 12: This post mischaracterized how FanSnap aggregates ticket listings. The site uses live feeds from its sources, which allows ticket listings to be updated immediately as prices change.
Ticket scalping has been a hot topic in the music industry for years, causing a lot of uproar and complaints among music fans.
The sad fact of the matter is that lots of parties in the music industry try to sell secondhand tickets for a markup. Ticketmaster owns a premium resale service called TicketsNow. It also owns a resale exchange, TicketExchange, which lets any individual (including scalpers) buy or sell a ticket. Even artists and managers frequently take their allotments and sell them on broker sites for a markup, as The Wall Street Journal has reported.
Worst of all is the fan club scam, where fans pay for the right to get in line for presale tickets--but joining the club doesn't necessarily get you a ticket before the scalpers have snapped them all up, as Keith Urban fans in Nashville recently discovered.
I can't get too angry, though. I haven't bought a ticket from a scalper in years, and I've never gone through a ticket broker. I get good seats well after they go on sale and can usually get into sold-out shows. And they almost never cost me more than the original retail price.
It's not magic: it's Craigslist. I wait until a few days before the show, then run a search for the band I want to see. Inevitably, I find a few people who bought a ticket then had an irresolvable conflict. These are normal people--not scalpers, just fans like you and me--and they almost always settle for what they paid, or even less. If I'm not happy with the price, I move on--there always seem to be more sellers, especially the on day of the show.
You can't get tickets to this Friday's Pixies show through the official site for the venue, STG Presents, but there are plenty of tickets at fair prices on Craigslist.
This month alone, I've scored floor seats to Steely Dan well after they were gone from Ticketmaster's site, and a pit ticket to Friday's Pixies show, which is entirely sold out. I've had such good luck that I'm considering abandoning Ticketmaster and other ticket sellers completely. The seats are better, they're the same price or cheaper, and I'm usually helping a fellow fan out of a jam.
There are ticket brokers and other professionals gumming up the ads on Craigslist, but you can scope them out pretty quickly--they often list ticket prices as $1 (because they're actually selling lots of tickets at different prices) or have some other giveaway like an overly generic headline ("Great seats") or obviously inflated prices. Regular fans tend to list the exact seat number in the ad and a price that's pretty close to what they paid.
There will always be some demand for professional ticket brokers; people who want to impress an important business client with great seats don't want to wait until the last minute and risk striking out. And for some shows, fans would rather sacrifice a body part than sell their tickets--I'm thinking of the early shows on the 2007 reunion tour by The Police, for instance. But for many shows, Craigslist is a far better deal than the professional sites. Which makes me wonder how long they'll last.
Record label EMI this week announced that it will begin selling on-the-spot recordings of concerts.
The name of the initiative, Abbey Road Live, is a bit misleading--it doesn't have anything to do with the Beatles album or the recording studio after which it was named.
Rather, EMI is using its Abbey Road brand to indicate that these aren't low-quality bootlegs but professional multitrack recordings, mixed and mastered on the spot, and sold on CDs, DVDs, or flash drives to fans at the venue. EMI also said on Wednesday that it plans to make the recordings available as streams or downloads, so fans can access them from home.
Instant concert recording isn't new: EMI sub-label Mute Records has had a similar program in place since 2004--according to the press release, 10 percent of fans at a recent Blur concert downloaded the show afterward--and Willie Nelson has been selling flash drives with on-the-spot concert recordings for several years.
But having a large record label like EMI on board legitimizes the practice. It's a no-brainer way for live acts to earn some extra cash--and great for fans as well. I can think of many concerts I've attended, after which I would gladly have paid another $20 for a recording. This should become standard operating practice in the next couple of years.
Last week, a music site called BlueBeat made headlines by offering Beatles songs as free streams and 25 cent downloads. The Beatles are known for not making their songs legally available on iTunes or any other online forum, so observers rightly asked "how are they doing this legally?"
EMI, the record label that owns The Beatles' recordings, has a simple response: they're not doing this legally. But here's where the story gets very strange.
The legal reasoning in this case is straight out of "Alice in Wonderland."
(Credit: Wikimedia Commons (public domain illustration))BlueBeat is owned by a company called Media Rights Technologies, which specializes in digital rights management technology. DRM is supposed to be used to prevent copyright infringement. But according to a 2007 blog post on HuffingtonPost.com by the company's founder, Hank Risan, MRT backed into this business after being--get this--targeted by the RIAA for copyright infringement.
As Risan explains in his post, he and a partner had posted a bunch of streaming-audio files to a Web site about the history of music. The RIAA issued a takedown notice, and the site took the streams down.
The streams had been protected by Windows Media DRM, but according to Risan, an update to the Media Player broke the DRM. In response to this flaw, Risan created MRT and built his own DRM system, which he claimed would be far more robust than the systems on the market at that time. Then, in 2007, MRT sent cease-and-desist letters to Microsoft, Apple, Adobe, and RealNetworks, ordering them to use MRT's DRM technology instead of their own, on threat of legal action.
The legal reasoning was twisted--basically, MRT argued that the Digital Millennium Copyright Act should force these companies to use the most robust DRM technology available, even if that technology was created by somebody else. Predictably, nothing ever came of this demand.
MRT's legal reasoning is equally funny this time around, as Ars Technica reports. According to the report, MRT claims that it didn't post the exact Beatles recordings. Instead, it posted "psychoacoustic simulations," then added simple video content to them. This constitutes a new audiovisual work, and isn't covered by the existing copyrights, MRT argues. In fact, MRT even went so far as to apply for copyrights on the "new" works!
Perhaps this is all some kind of metacommentary on the frustrating inconsistency of U.S. copyright law, but I predict that MRT is going to be laughed out of court. In the meantime, if you want your Beatles music online, it's still available on BlueBeat as of the time I posted this. I didn't want to give the company a credit card to test the whether the downloads work, but the streams sound pretty close to perfect...especially considering that they're only psychoacoustic simulations.
In 2008, the Council for Research Excellence, a research group funded primarily by Nielsen and staffed by researchers from various media and advertising organizations, studied the media consumption habits of U.S. adults. Researchers followed about 300 people around for two days, in the spring and the fall, using a handheld device to track every single 10-second interval of media that they consumed. The study was mainly focused on video, with the unsurprising result that we watch a lot of TV (more than five hours a day on average).
On Tuesday, the group released a follow-up analysis focused exclusively on audio. The results are somewhat surprising for those of us who have been steeped in digital music for the last decade: the most popular form of media for audio is good old broadcast radio.
In fact, it's not even close. About 77 percent of U.S. adults listen to some broadcast radio on any given day--much more than listen to a CD or tape (37 percent). Satellite radio came in third with 15 percent. And the vaunted digital music revolution? About 12 percent of users listen to portable MP3 players on any given day, about 10 percent listen to digital media files stored on a computer, and only about 9 percent listen to streamed audio (including online radio). The study has tons of other data about age groups and time spent listening to each form of audio and so on, but an important point is that even digital music consumers still listen to the radio: nearly 82 percent of people who listen to MP3 players on a given day also listened to the radio. (This 38-page PDF has all the details.)
Now, the caveats. The study had a small sample size--300 people in only five cities. It didn't try to adjust for demographic differences between the sample audience and the population at large. And it didn't measure the type of audio content being consumed. So while we know that nearly 80 percent of U.S. adults listen to the radio, it's harder to know how many are listening to music. My suspicion is that people with MP3 players are turning to radio primarily for news and sports and other talk formats, and sticking primarily with their own collections for music.
How far we've come in such a short time. When I began this blog in 2007, finding a particular song online was an exercise in frustration. You could subscribe to an all-you-can-eat service like Rhapsody, but cheapskates and occasional music listeners either had to dig deep, engage with a questionably legal file-trading service, or settle for 30-second previews from iTunes or one of its Web-based competitors.
Search results for "U2 Beautiful Day" earlier today. The box at the upper-right is an embedded version of the Lala player, which let me play the complete song multiple times.
Since then, as readers of this blog know, dozens of sites offering free streaming music have emerged, from the dead-simple like Songerize and its successor Songite (enter a song title to play it now) to the fiendishly complicated Imeem (whose original user interface gave me a headache, although it's since gotten much better).
But, let's face it, most people don't read this blog. Again and again, nontechnical music fans are blown away when I show them a site like Grooveshark, which lets you play any song, any time, and even arrange songs in queues and playlists. "Is that legal?" they often ask. (Answer: it depends.)
Today, that all changes. Google announced the integration of playable songs into its search results yesterday, and is slowly rolling the feature out to U.S. searchers. I finally saw the feature in action this afternoon, when I ran a search on "U2 Beautiful Day." (You can test it here.)
To an experienced online music listener, the feature seems a little bit random because Google is using both iLike (recently acquired by MySpace) and
Some searches also give you links to Imeem, Rhapsody, and Pandora, each of which offers yet another experience--Rhapsody lets you play up to 25 songs per month for free, Imeem is best for finding unusual versions of popular songs (like live takes), and Pandora requires you to create a virtual radio station based on a particular artist or song, which can be useful for discovering other music you might like, but doesn't give you an instant fix.
Whatever. For the average Internet user, this distinction doesn't matter. What matters: when users go to Google to search for an artist's name, song name, album name, or even a snippet of lyrics, they won't just get random text links or YouTube videos. Instead, the first set of links will be to the audio recording itself--in many cases, the entire song. Everybody knows that there's free music available on the Internet, but most casual listeners don't bother to find it. Now, the most-visited site on the Internet will put it right in front of their faces. As awareness spreads, it'll be another nail in the coffin of traditional music media--why listen to the radio?--and a boon for the five companies who signed this deal with Google. Artists and record labels might also get a shot in the arm, as users discover new music for free and perhaps eventually buy a copy to keep.
As for the rest of the online music start-ups out there? They better be on the phone right now, looking for a benefactor.
