Reading through Greg Sandoval's detailed reporting of SpiralFrog's demise, I once again found myself wondering--as I did many times during the late 1990s dot-com boom and subsequent bust--how anybody could possibly have thought this was a good idea. Ad-supported music downloads that are incompatible with the iPod, the device that basically created the MP3 player market? Who would possibly buy such a thing? SpiralFrog seemed like such an obvious nonstarter, I wrote about it once in 2007 and never wasted time revisiting it. But investors were spending serious sums of money on it, right up until the end.
Album art is fine, but I'm more excited about the music in the grooves.
Apparently, some folks in the music business still haven't learned the lesson about Apple and iPod support, as demonstrated by recent reports that the major labels are planning to launch a new format for digital albums. Operating under the working name of CMX (as a friend quipped, "8-track" was already taken), the new format will allow users to browse album art, read lyrics, and so on. Basically, it's trying to duplicate some of the fun of buying and unwrapping LP records.
Unfortunately, Apple's not playing ball, but is rather working on its own competing format, code-named Cocktail.
So let's get this straight. First, it's a new format. Unless it takes advantage of existing technology like Adobe's Flash, that means users will have to download some new software or plug-in to access these files. Second, this format is meant to be consumed from your computer. But in my experience, the main reason to put digital music on a computer is in order to move it to other devices. Third--and probably most important--without Apple's support, the format won't be compatible with iTunes, the iPod, or iPhone. You can count the market share of the other players in this field on your fingers. Finally, the entire premise assumes that people aren't buying complete albums in digital format because they're not getting the fetishistic experience they used to get--unwrapping the physical object, admiring the cover, reading the liner notes. But the sad fact is that a lot of albums aren't and never were worth buying, and customers grew tired of paying $18 for one song they liked. (Chumbawamba, anyone?). Digital downloads free us from bundling practices that we never liked in the first place.
Unless there's more to the story--a tie-up with another player like Sony's X Series Walkman or Microsoft's Zune, for instance--how can anybody possibly think this will succeed?
Update: 6:06 p.m.: To include iLike's hopes to open a download store in the next 30 days.
Facebook's most popular music service, iLike, is in talks with the four major music labels about opening a download store, multiple sources within the music industry said Tuesday.
According to the sources, iLike is close to reaching final agreements with at least three of the top record companies. The sources did not disclose which labels are close but added that iLike is hoping to open its download store within the next month.
A spokeswoman for Seattle-based iLike said: "iLike engages in ongoing discussions with the labels about a variety of ways we might work together. While we don't discuss the specifics...I can tell you that our goal remains the same: to facilitate music discovery and consumption across the Web."
Details are few about what an iLike download store might offer, but it almost certainly would sell songs in the MP3 format. Few, if any, of the top download services offer music wrapped in digital rights management anymore.
The talks come as many of iLike's competitors are already well into offering downloads backed by full-streaming music. Imeem has launched a test version of its download store, featuring music from major label Warner Music Group and multiple indie companies this year. MySpace has offered full-streaming music and downloads from all four top record companies since September.
Up to now, iLike's full-length music offering has been light. The start-up's 50 million registered users can sample 30-second music clips, but must go to iTunes or other Web retailers to buy songs.
Sources said iLike is hopeful that it can profit from cutting out those middlemen.
Last year, iLike struck a deal to offer songs in their entirety with Rhapsody, the music service operated by RealNetworks and MTV. That deal was never popular with the labels and eventually fizzled out.
The record companies don't want music services piggybacking on each other's libraries. According to one music industry source, Rhapsody's deal with the labels didn't include offering full-length songs on iLike.
iLike isn't a company that has generated a lot of positive press lately. All Things Digital reported last year that iLike was for sale. The blog also broke the story that the Rhapsody deal had gone sour when Warner Music and Sony Music Entertainment, had pulled their music from the service.
The idea of a digital music kiosk, where customers can walk up, press a few buttons on a screen, and download music to some sort of portable storage medium (disc, phone, flash card), has been around for a few years now. Starbucks ended a two-year experiment with in-store CD burners back in 2006, and U.K. music retailer HMV began offering free downloads to USB drives from in-store kiosks in 2007.
Even if the trend hasn't exactly taken off, companies continue to try them out. Earlier this week, Seattle-based start-up MOD Systems entered the fray, announcing that it had signed deals with all four major labels, allowing it to package more than 5 million DRM-free songs for digital distribution via in-store kiosks.
There's a bit of irony in the announcement, as MOD co-founder Anthony Bay used to lead Microsoft's Windows Media Division, whose business model relied heavily on DRM (digital rights management). Microsoft hoped to convince content owners that it had a robust DRM system so they'd use Windows Media technologies to encode and host their content. But that was almost 10 years ago, and now that the recording industry has come around to the idea of selling DRM-free tracks on iTunes, Amazon, and countless other online stores, there's no reason to restrict retail kiosks from doing the same.
So is there any future for digital music kiosks? It's hard to imagine shopping at a digital-only record store when it's so much easier to buy MP3s over the Web on my home computer--which is where I store them anyway--or over the air from a phone or wireless-connected player. But kiosks might find a place in multipurpose retailers and big-box stores, where they'd take up a lot less space than the CD racks currently in place, or in other places with lots of foot traffic--hotel lobbies, malls, university campuses, and so on. I can even imagine a jukebox that not only lets you play songs, but also lets you download them to a flash drive--great for those late-night impulse buys.
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The struggling music units of Sony Corp. and Bertelsmann AG merged in 2004 so that a combined company could better fend off illegal file sharing and shrinking CD sales.
(Credit:
Ellen Ng/CNET Networks)
The new recording company, named Sony BMG, was expected to wield the kind of resources that could challenge Universal Music Group as the largest of the four top labels. Sony BMG would own a chunk of U.S. music sales almost as big as Universal's.
To say the deal failed to deliver on the promise is probably an understatement. More than four years after the merger, there isn't a more troubled major label around.
In fairness, Sony is trying to regroup after buying out Bertelsmann late last year. It remains the second-largest recording company and currently has the No. 1 album in the country: Bruce Springsteen's Working on a Dream. Sony Music could also become the first major to renew its music licensing agreement with YouTube, according to sources close to the deal. For the recording industry, YouTube represents a potential new market.
But in recent weeks, Sony's woes have taken center stage, overshadowing at times the accomplishments of its stars. Last month, Sony Music reported a 22 percent decline in revenue from the previous year. In December, the Federal Trade Commission fined the label $1 million for collecting information on 30,000 children without obtaining parental consent. The New York Times recently reported CEO Rolf Schmidt-Holtz was steamrolled in negotiations with Apple's Steve Jobs. There is the unflattering press about the unorthodox managerial style of Rick Rubin, the record producer hired to run Colombia Records--he doesn't wear shoes or show up at the office--and the controversial hiring of Amanda Ghost, a songwriter with little administrative experience, to run Epic Records. A Sony spokeswoman declined to comment for this story.
As for Sony Music's digital efforts, the news isn't any less gloomy. The company's market share of digital album and song sales has plunged from 28.6 percent at the time of the merger to 22.5 percent, according to Nielsen SoundScan.
The setbacks at Sony's music division were a hot topic in Los Angeles last week as the industry gathered for the Grammy Awards. To outsiders, the label's troubles can be traced to Sony and Bertelsmann's conflicting corporate cultures. The deep fractures at Sony BMG first became public when executives from the Bertelsmann side of the venture worked to oust Andy Lack, the company's first CEO. Lack had been handpicked by Sony Chairman Howard Stringer, but he lasted just two years.
On the technology side of the house, insiders say Sony has struggled to recover from the Rootkit scandal. In 2005, Sony attempted to quietly place copy-prevention software on CDs. The technology, however, opened security holes on a person's hard drive when a CD was loaded into a computer. The software made the PC vulnerable to malware.
Sony was sued by several parties and was widely attacked by the public and press.
Behind the beat
Since then, Sony has rarely been out in front of the music industry's most important digital initiatives. For example, Universal was the first major recording company to sign a licensing deal with social network, MySpace, and was instrumental in the formation of MySpace Music, the jointly operated music service founded by all four major labels and Rupert Murdoch's News Corp.
When it came to partnering with YouTube, the Web video powerhouse, Warner Music was the first to sign a licensing deal. Sony Music was even the last of the majors to join Sony Ericsson's PlayNow online music store, according to an October story in The Los Angeles Times.
Sony Music's missteps have opened the door for rivals. As the company's share of digital music has declined, Warner Music's has increased. Warner's share of digital sales jumped from 18.10 percent in 2004, to 22.08 percent in 2008, according to SoundScan. This is a vital area, as digital download sales are expected to replace CD sales in coming years.
Certainly, Sony Music has plenty of resources to fuel a comeback. The company owns one of the largest music libraries as well as a stable of established and promising young artists, including Springsteen, Beyonce, and the band Franz Ferdinand. Sony also has a long history in music. The Sony Walkman, its iconic tape and CD players, were synonymous for decades with mobile music.
Of course, the Walkman was eclipsed by the iPod as the public's favorite mobile music player years ago and Sony's attempts to compete with the iPod and iTunes have gone nowhere.
Nobody can say that Sony Music hasn't tried new approaches to building a recording company equipped to compete in the digital age. The trouble is that few of the company's ideas have caught on.
In 2007, Sony raised eyebrows when it began turning to the industry's creative wing for managerial talent. The label hired Rubin, the bushy-bearded co-founder of hip-hop's pioneering record label, Def Jam Recordings. Rubin has produced hit albums for the Beastie Boys, the Red Hot Chili Peppers, Johnny Cash, and Neil Diamond, but his maverick managing style--he continues to produce records for bands at other labels--has irked some at Sony Music, according to The Times' piece.
Sony hasn't had much more success on the digital side. Remember the Ringle?
In 2007, Sony BMG spearheaded an effort to combine songs with ringtones and package them on CDs. This half-single, half-ringtone offer was supposed to help record stores cash in on the ringtone craze as well as help boost physical sales. At best consumer adoption has been lukewarm.
Unfortunately, the same can be said for much of what Sony Music has been trying to sell.
Rumors coming out of Europe that claim Apple will begin offering unprotected music files from the three largest recording companies on Tuesday are bogus, according to my music-industry sources.
Yes, Apple is in negotiations with the three biggest music labels, Universal Music Group, Sony Music, and Warner Music Group about acquiring licenses to sell music free of digital rights management software.
No, none of the deals is final as of Monday afternoon and one source told me it's unlikely Apple will have anything to announce regarding DRM-free music from the top labels before the end of the year. According to AppleInsider, a French tech-news site, ElectronLibre claims Apple will remove DRM from tracks published by the top three labels on Tuesday.
An Apple representative could not be reached for comment.
It's important to note that Apple and the music industry have been in talks before. Only one label, EMI, the fourth largest of the majors, offers DRM-free tracks on iTunes.
Many iTunes' competitors offer music stripped of copy-protection software and some fans of Apple's digital music store want Apple to follow. DRM software prevents music owners from freely moving their music to different devices. Another risk DRM poses to music owners is if a music vendor should stop issuing server keys the music will be locked onto whatever device it resides on.
According to the Financial Times, music label EMI is planning to launch its own music portal to sell songs and videos, and offer some free content as well.
My first reaction was similar to that of the anonymous music executive quoted in the FT article: dead on arrival. Listeners don't know and don't care about labels; they want to buy all their music in one place, and so on.
But surely EMI's digital team, led by former Googler Douglas Merrill, is smart enough to realize that it can't take on Apple's iTunes with a label-specific store.
I suspect that this is more of a cross-marketing play instead. Users will google an EMI artist like--just to pick an example at random--A Perfect Circle. Instead of directing them to a boring alphabetical list with a link to the band's MySpace page, users could land on a label-owned page with actual songs and videos and CDs, both free and for sale. Once there, EMI might intelligently discern that a fan who likes A Perfect Circle might also like Korn and Iron Maiden, two other metal bands with recordings on EMI, and offer those recordings for sale as well.
And now, just because I haven't linked to it in a while, here's the Sex Pistols.
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