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?
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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Wired's Epicenter blog has the skinny on why MySpace Music failed to create any big waves when it launched. A lot of mistakes were made, including an unclear Web address and lack of any independent music. But I think it boils down to something fairly simple: the designers of the service were focused on the wrong audience. MySpace envisioned the site as an online showcase for major acts on major labels. The labels, anxious for any help navigating the file-trading era, were excited. But nobody bothered to consider why users visit MySpace, and what they might want from a music service on the site. Consequently, playlists were hard to create and share. There was only a superficial connection between pre-existing artists' pages and the new Music pages. Instead of a community of music fans, MySpace Music looked suspiciously like a bunch of billboards.
Listen to the title track to hear what Neil thinks of digital downloads...and bloggers.
(Credit: Neil Young via MySpace Music)MySpace Music has apparently moved to fix a lot of these problems, and when I checked the site today for the new Neil Young album "Fork in the Road"--available there as an exclusive until April 7--I found it to be fine for the task at hand. Then again, why couldn't Neil have posted these songs on his own Web site? If it weren't an exclusive, I'm not sure I'd think to check MySpace first, or at all, to hear these songs.
I think a similar problem hampered Microsoft's September 2006 launch of the first Zune player. Its most interesting differentiating factor from the market-leading iPod was its built in Wi-Fi connection. But the only thing users could do with it was transfer songs to one another, and those songs could only be played three times or for three days before they expired. In other words, Microsoft gave up too much control over its one differentiating feature to content owners. Better to go back to the drawing board and launch stronger with things like Wi-Fi connectivity to the Marketplace than to draw the ire of customers and scorn of reviewers and end up stuck with a tainted brand for the next few years. (The latest Zune software and service are pretty cool, but nobody knows it--just check out the comments every time I post about Zune.)
Like I told an entrepreneur I met at South by Southwest who was asking me for guidelines for the next big music start-up: concentrate on helping music listeners solve a problem, or do something they couldn't do before. Frame your company around listeners, not artists, not venues, not managers, not promoters, not labels. Listeners.
iPod: lets you carry thousands of songs with you. iTunes: makes it easy to get songs from CDs onto your computer and iPod. Pandora: gives you the "surprise" element of radio, but tuned more to your taste. Shazam: figures out what song's playing right now. Yes, it's possible to build a viable business catering to artists, particularly the emerging "middle class" who would be happy to to sell tens of thousands instead of tens of millions of albums. But there are a lot more listeners than artists, and they're willing to spend money--or at least look at advertisements--if you help them do something they couldn't do before.
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Don't take my word for it that the major labels and the system that propped them up for so many years are dead. John Mellencamp, who sang a string of rock hits back in the 1980s and '90s, thinks the business is dead as well. In an articulate and passionate essay on the Huffington Post, he argues that the long slide started well before the rise of file sharing, back to when the business started relying on SoundScan and Broadcast Data Systems (BDS).
The old way of selling music is as outdated as '80s hairstyles.
(Credit: John Cougar Mellencamp via YouTube)With SoundScan, instead of relying on surveys from record stores, the labels could see exactly how many units were being moved in any given week, and where those sales were happening. With BDS, instead of relying on phone calls to radio program directors, the labels knew exactly how many spins a song was receiving in each city. Shortly thereafter, the Billboard charts began relying on these automated systems as well. The result: labels ignored the vast majority of the country and focused on a few hits that were getting airplay in the largest cities, and allocated their A&R and marketing budgets accordingly. We ended up, according to Mellencamp, with No. 1 hits that most of the country had never heard, and the rest was a long downhill slide to today's hyperfragmented and piracy-ridden market.
It's a great essay, and I particularly like his side note that the CD was created out of pure greed, as a way to get users to replace their collections of perfectly good vinyl records. (Remember how CDs were supposed to offer clear sound forever? Funny, my CDs from the early 1990s are already wearing out and skipping, but I have records from the 1950s that still play adequately.)
But like the folks at Idolator, who called Mellencamp old and dumb, I completely disagree with his conclusion. Mellencamp says that the irrelevance of radio and fragmentation of the market means there's no organic way for music to find an audience and grow. That's completely wrong--there's more opportunity for smaller bands today than there's ever been. Yes, beginning artists might have to do more work themselves, but recording, manufacturing, and distributing an album has never been cheaper or easier. From ProTools to Disc Makers to CD Baby and Tunecore, and more recent competitors like Routenote and Audiolife, these are tools that anybody can use and master. Sure, online marketing through vehicles like MySpace can't compete with mass radio play in 100 cities, but it's available to anybody--not just the companies' chosen few. When you get a bit bigger, you can enlist services like Topspin to hype your product in the digital realm, for far cheaper than an old-fashioned media blitz. Even getting gigs no longer requires a booking agent, thanks to services like Sonicbids.
In one sense, Mellencamp's right: if you're in music to become a rock star, now's a bad time to be a musician. But if you want to have your music heard as broadly as possible, there's never been a better time.
And for those of you who couldn't sing the chorus to Mellencamp's "I Need A Lover" when you read his essay, click here.
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Update, 3/24: An SXSW organizer contacted me to let me know that the show included 14 panelists from major labels, as well as 20 panelists from independent labels. The truth remains that I didn't see, hear, or meet any--but of course I couldn't attend every panel. I've corrected the post accordingly.
Almost a year ago, I posted about how two executives from major Web companies had taken new positions related to digital music: Douglas Merrill left Google to become EMI's president of digital operations, and Ian Rogers left Yahoo Music to become the CEO of Topspin, a then-new company specializing in direct-to-fan marketing.
A year later, Merrill's gone, following Guy Hands out the door. (Hands was the CEO of private-equity firm Terra Firma, which bought EMI in 2007.) I'm not sure what he did there, but imagine he was behind the portal site that EMI launched last year...to no effect whatsoever.
Contrast that with Topspin, which oversaw successful launches of several albums and was just at SXSW to announce a major update to its automated marketing platform.
Sure, EMI's taking in far more revenue than Topspin--it's still got The Beatles' catalog, after all, and Topspin's just a start-up--but look at the momentum, the level of excitement, the bottom line. There's no comparison.
At SXSW, the conventional wisdom from every panel I attended, every business meeting I had, and every artist and fan I spoke with, was that the major labels are technological dinosaurs with no chance of survival. I didn't meet a single major label employee in the entire four days I was there, though at the Guitar Hero-Metallica event, the PR coordinator spent a long time explaining to a TV crew that all interview requests had to be approved by the band's label. Ah, the good old major labels we know and love--barriers, not enablers.
(Aside: as much as Metallica may represent the old record industry, its SXSW set absolutely slayed, consisting almost exclusively of pre-Black Album material, and so fast and tight and loud and awesome in the original sense of the word that it seemed like it--and we--were all 17 again. Pitchfork's take is absolutely right; it's not fair to compare them with any of the other bands at SXSW. Long may they rock, with or without the recording industry as we know it.)
I'm rambling, but keep looking. U2's second-week sales dropped 75 percent--nobody cares. Sony hired Rick Rubin to come up with a digital strategy, but nothing's happening (although Rubin remains a successful producer).
The RIAA seems to serve no purpose except to sue customers and try to get damages that are many thousands of times the value of the product infringed. Warner CEO Edgar Bronfman Jr. took home a $3 million bonus after his company lost $35 million and earned his spot on the CEO wall of shame.
Established artists are going independent as soon as their contracts expire--the latest is Counting Crows--and reporting, again and again, how much better they can do without a label.
A year ago, there were still some arguments for the necessity of major labels to handle marketing, promotion, and other tasks. Not anymore. The conventional wisdom now: if you're interested in the music business, and you want to change the world and make lots of money, go anywhere else.
If you're a musician, and you want your music to be heard, go anywhere else. If you're an investor looking for a business with a lot of upside, go anywhere else.
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As I said in my 2008 sum-up, people tend to overestimate the amount of change that will happen in one year--which means my best bet for 2009 would be to simply reiterate my almost-there predictions from 2008, like the death of DRM and the decline of the concert industry.
But that would be boring. Thus, behold my all-new-and-improved predictions for music and technology in 2009:
Zune phone--sort of. 2009 will finally be the year that Microsoft takes the wraps off its mobile-entertainment strategy, and the Zune brand will be prominently featured. Perhaps as early as next week at CES, Microsoft will announce a version of the Zune Marketplace and accompanying client software for mobile phones--perhaps only Windows Mobile, but perhaps some other platforms as well. There's an outside chance that the company will also announce plans to build its own music phone, but not at CES, and only if the third-party approach fails to gain traction against the iPhone and RIM. I don't think the Zune-phone strategy will be tied to Windows Mobile 7, though, as I don't think that platform will come out until 2010.
$99 iPhone. Apple will introduce a 4GB iPhone that will sell for $99 with a two-year AT&T data contract. (Or, less likely, lower the 8GB price to $99 by mid-year.) With this new lower price, the iPhone will continue to gain market share at the expense of Symbian and Windows Mobile. Apple will also lower the price on the iPod Touch at the same time.
RIM will get music right. Research in Motion continues to do well against the iPhone juggernaut, although the Storm was widely considered a stumble. But so far, RIM has focused on its core strength--communications--and left music as something of an afterthought. This will change in 2009, as RIM upgrades its phones with more memory and a better media interface and signs deals with Rhapsody or other online music services. Or maybe RIM will just up and buy Rhapsody owner RealNetworks: according to Yahoo Finance, RIM's cash on hand ($1.68 billion) is greater than Real's market cap ($479 million) .
Sony will surprise. Not by lowering the price of the PS3 enough to start taking market share from Xbox 360--sorry, but that horse has left the barn--but by releasing a touch-screen Walkman-branded audio/video player at a competitive price point in the U.S. (Read: $1 less than the equivalent iPod Touch). Wi-Fi will be included, as will a link to a new online music and video store that's owned by Sony, but features songs and videos from other companies. (I agree with Donald Bell that a partnership with Amazon seems unlikely.) Reviewers will gush over it, and it'll help Sony recapture some of the old magic that's eluded the company. Music gadget of the year.
A big online music store will fail. It's never fun to predict failure, but the recession will claim at least one of today's major online music sellers--Napster, eMusic, or perhaps Rhapsody.
The Big Four will become the Big Three. Hard economic times lead to consolidation, and the music business was having trouble even before the latest downturn. Look for Guy Hands to unload EMI to Universal or Warner before the end of the year.
Ticket competition won't lower prices. Ticketmaster's contract with Live Nation ends on Jan. 1, meaning that there will be two national ticketing agencies handling sales for big arenas. But this competition won't lower prices--both agencies will still tack on service charges worth up to 20% of the list price. Why? Because big concerts still operate like a monopoly--your favorite stadium band is probably only coming to one place in your city this year, and whoever sells those tickets will have an exclusive.
Online-first releases will become the norm. Radiohead, Nine Inch Nails, David Byrne and Brian Eno, Girl Talk, and a handful of other acts released albums in 2008 in online form well before they came out as a CD. By the end of 2009, at least one of the major labels will make it standard release practice, and dozens of releases from big-name artists will come out online first, perhaps even with a couple of free MP3 samples.
One major act will (temporarily) abandon albums. At least one major artist--maybe an aging legend with a strong touring base, less likely a hot pop or hip-hop act--will announce that they're no longer going to release full-length CDs. They'll go on to release at least a dozen singles--some exclusively online--with no intervening album. Their grosses will suck, though, and eventually they'll compile the singles into a good old-fashioned greatest-hits CD, sold for $20 at HMV and Amazon.com.
The next hip music town will be in an unexpected country. It's been a few years since we've had a ton of hype about a local music scene--I'm thinking about the kind of mainstream media fascination that found San Francisco in the late '60s, New York and London in the early punk days, or Seattle in the grunge era of the early '90s, complete with chart-topping innovators, flash-in-the-pan imitators, and movies featuring beautiful but tragically addicted twenty-somethings in period settings. We're due for another, only this time it won't be in North America or Western Europe. Brazil, India, or Eastern Europe could all fit the bill--are you ready for the St. Petersburg version of Singles?
On Saturday, Warner Music pulled all videos involving its music from YouTube after failing to reach a licensing deal with the Google-owned video site. (More accurately, it asked YouTube to pull them, and YouTube was forced by law to comply.)
Now, Silicon Alley Insider reports that Warner and the other three majors--Universal, Sony, and EMI--may be in talks to create their own YouTube competitor.
Before you scoff, recall the lesson of Hulu. First announced in late 2007 by NBC Universal and News Corp, Hulu was originally scorned as the "clown company"--everybody assumed that these old media dinosaurs wouldn't be able to figure out how to offer users a clean Web experience, and that users would never sit through advertisements. A year later, it's getting about a quarter as many unique viewers as YouTube--and with much less content and no presence outside the U.S. AP just picked it as its Web site of the year.
A label-sponsored video site may be a similar winner, if they design it for ease of use and are able to negotiate all the rights to post the content we really want. (Like videos of the one-off Zeppelin reunion last year, which were pulled from YouTube almost as quickly as they appeared.)
There may not be a ton of demand for watching music videos on the Web, but think of all the user-generated videos featuring major-label music. The big problem is that nobody really knows how to sell advertising against online video yet, but look ahead five years, and this is a good bet.
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.
The recording industry has tried a lot of tricks to shore up their revenues as CD sales have fallen: installing CD anti-coyping software that is almost impossible to remove, suing customers for allegedly downloading songs without paying, and floating the idea of adding a few bucks to monthly ISP bills to compensate rights holders for illegal downloads.
Now, several labels are dreaming up a scheme to charge music fans any time they get a song stuck in their head. The technology is a few years away, but according to several well-placed sources in Hollywood, the labels are funding an organization known as Earworm Research Labs to come up with a speciialized low-cost variation of MRI technology. Unlike the MRI machines used in hospitals, these scanners would focus only on a specific part of the brain--the part that shows activity when you have a song running through your head.
The goal is to get these scanners small enough and cheap enough to be built into cell phones. When users lift the phone to their ears, the scanner would beam a stream of electrons at the appropriate part of the brain and transmit the scan results back to a centralized database containing the brain patterns for millions of popular song. If a match is found, that would mean you had a particular song in your head at that moment, and cellular company would add a few cents to your bill. The proceeds would be split among rights holders, with the phone company taking a cut for enabling the service.
Sounds like a great idea to me--I know there's plenty of music in my head that I've never paid for, like George Harrison's "I've Got My Mind Set On You," "We Will Rock You" by Queen, and Billy Squier's "The Stroke." Those artists have obviously reached me in a deep, substantial way--why shouldn't I have to pay them?
Rob Sheridan, a designer who's worked in the music industry, has posted a 6,000-word diatribe bemoaning the shutdown of file-trading network Oink and predicting (and encouraging) the death of the major-label system. It's an entertaining read, and should be required for Guy Hands and anybody else in the executive offices of the major labels. And he's not the only one who's predicting the death of the label system.
I'm currently reading a fascinating book, The World Without Us, which imagines what the world would be like if humans suddenly disappeared. So here's my thought experiment: what if we woke up tomorrow to headlines that all four majors had decided to get out of the music business and had freed the artists from their contracts? What would the business of music look like? ... Read more
