Webware

Web-based chat company Meebo has partnered with Universal Music Group to bring ad-supported music videos to the service.

As a kickoff, Universal artists Kanye West, Ludacris, and the Killers will be featured on the Meebo home page. In return, Meebo chat rooms will be embedded on Universal artists' sites.

I'm still not quite sure why a chat start-up needs Kanye videos when Mr. West and his many pairs of sunglasses are already plastered all over the rest of the Internet, but I'll let that rest for now.

In the past year, Meebo has launched an application programming interface, partnered with media brands such as Hearst to power embeddable chat rooms, and launched a "Community IM" initiative for social sites.

But Meebo is just the latest of many video partners for Universal. Universal has made investments in Imeem, a music playlist-based social network, and Buzznet, a music fan community hub.

Earlier this year, the label struck a music video deal with Last.fm, a music-focused social network owned by CBS Interactive (which publishes CNET News) and Kiwibox, a community site for teens. Like the major other labels, it has a stake in MySpace Music.

Universal is also reported to be working on a "Hulu-like" site for its music video content. There's no word if that's still on the books, now that music video portal MTV Music has launched.

Universal Music Group has licensed its music videos to Kiwibox, a social-media site for teens that relaunched in August after quietly existing since the late '90s.

Under the terms of the agreement, Universal's music videos will begin being distributed on the "KiwiboxTV" video portal before the end of the year. Universal's labels and artists will receive a cut of ad revenue in compensation.

"Music remains one of the most important outlets of teen expression, and Kiwibox has long been a leader in promoting artists to its rapidly expanding community, " CEO Lin Daisaid in a statement. "This (Universal) partnership validates our long-standing relationship with the music industry and commitment to providing valuable content for teens."

Kiwibox's slant is that it encourages members to create videos, articles, and other content for the site; the best creations are featured in an online "magazine."

Universal appears to have embraced a wide distribution strategy when it comes to social media. Its catalog is already available on a number of social networks and youth-focused sites, including Imeem, and its U.K. arm sponsored an original series on AOL's Bebo. The company has taken a stake in social site Buzznet, and joined other major labels in backing MySpace Music.

At the many advertising conferences dotting Internet Week New York this week, speakers and panelists have been exhorting the ad industry to start thinking more creatively when it comes to tackling digital media--even creating elaborate branded series in lieu of traditional commercials.

They weren't the only ones who got that memo. Record label Universal Music Group's Universal Music U.K. announced Monday that it's partnered with social network Bebo to broadcast a series called The Secret World of Sam King: one part video blog, one part Choose Your Own Adventure, and one part Universal advertorial. It's being produced by Globe Productions, a division of Universal.

The premise of the new series is that Sam King, an extremely low-level fictional employee of Universal Music, decides to found his own record label in the company mail room. Along the way, he encounters real-life Universal artists, and viewers will be able to submit opinions, send in material, and suggest which bands Sam should scout.

The show will also be fueled by product placement, with handset manufacturer Sony Ericsson signing on as the inaugural brand sponsor. Apparently this will lead to the protagonist "winding his boss up with mobile phone-related pranks."

Bebo and Universal have not provided a concrete debut date.

Universal's concept of a "brand show" is a bit similar to Back On Topps, a series created by former Disney exec Michael Eisner's video start-up Vuguru, as a promotion for the trading card company (which Eisner himself owns). That series, premiering this week, also pits fictional company employees against the celebrities affiliated with it--in Topps' case, famous athletes.

For Bebo, which has its biggest audience in the U.K., and parent company AOL, its 42 million members get video content that will (ideally) be enjoyable and will keep them around. It'll also be cross-promoted across other AOL video brands. For Universal, creating an (ideally) hip show geared toward Bebo's young users could help recapture the attention of a generation that's turned away from the major labels and in the direction of BitTorrent.

Universal Music Group has invested an undisclosed amount in pop-culture social network Buzznet.

Beyond the financial investment, this means that Universal artists will post promotional blogs on Buzznet, and the social site will have access to the label's music and video catalog.

Last week, Buzznet CEO Tyler Goldman told CNET News.com to expect a partnership announcement that would bring more audio content to the site.

According to a release from the two companies, this is "one of the first times that a music company will be directly involved in developing editorial programming for a social-media site, with both companies sharing in the revenue."

It's more extensive than Universal's partnerships with other social networks; the label has licensed its catalog to MySpace.com for its MySpace Music endeavor, as well as to music-focused social-media site Imeem.

With only 10 million active members--that's less than a tenth the size of News Corp.'s MySpace--Buzznet has some growth to do before it reaches its goal of being an MTV-caliber pop-culture influencer. The site has been aggressively bolstering its editorial content, acquiring music blog Stereogum and launching sister blog Videogum, with several hip blogging veterans at the helm.

Earlier this week, Buzznet announced that it had purchased another music blog, Idolator, from former owner Gawker Media.

Goldman hinted that more partnerships with big media companies were on the way for Buzznet. That's good, because having a single label behind a community and editorial site is a bit questionable.

Not only does Buzznet own music blogs like Stereogum and Idolator, but it also has deep partnerships with irreverent gossip blogs such as A Socialite's Life and Just Jared.

Let's hope that Universal's investment doesn't start tainting Buzznet's snappy editorial.

Beware, SpiralFrog and Imeem. A powerful new player is eyeing your ad-supported music turf.

MySpace.com is in talks with the four major record labels about starting a free-to-consumer music service, a source with knowledge of the talks told CNET News.com on Monday night. So far MySpace and the labels are just talking, the source said, but PaidContent, the blog that broke the news, reported that the music companies are being offered an equity stake in the News Corp.-backed start-up.

A MySpace spokeswoman declined to comment Monday evening.

There are conflicting reports about whether the new music service would offer downloads or stream music to PCs. PaidContent reported that it's downloads, but Silicon Alley Insider reported that its sources said the site would stream songs.

My source couldn't confirm either way, but I have a hunch that it's streams. Here's why:

The labels have shown almost no interest in giving away downloads via an ad-supported site. SpiralFrog has struck a partnership with only one top record company (Universal Music Group) in two years of trying. Qtrax, another ad-support download service, can't boast a single major label yet, but the start-up is still negotiating.

Ruckus is an ad-supported download service that has partnered with all the big labels but caters only to college students.

Meanwhile, social networks Imeem and Last.fm stream music to users' PCs and each has signed deals with all four majors.

The labels like streaming because it locks up their music on PCs and protects it from piracy. Streaming also encourages sales, or so the music companies hope. The thinking is that Imeem and Last.fm users will eventually purchase music they discover on the social-networking sites.

What could sink my theory is if MySpace is willing to pay so much for downloads that the labels have to say yes. With Facebook breathing down its neck, MySpace could bet that offering free music to users--in exchange for looking at some ads--would be a whopping advantage over competitors.

News Corp. has the kind of deep pockets that it could afford to keep a loss leader like this going for a couple of years.

Regardless, the big winners in either scenario are consumers. Free and legal music is getting easier to find all the time.

At first blush, Qtrax seemed like a good idea.

Executives there wooed reporters by promising to corral illegal file sharing. They built an interface on top of the Gnutella network where millions of songs are pirated. They pledged to offer users a legal way to download and share music.

Qtrax managers said they had convinced the big record labels that it could turn file sharing into a cash cow for them. They said all four of the most powerful labels were on board.

But on Monday, Qtrax was more than 12 hours late launching its music service. A day earlier, the big record companies made news by contradicting Qtrax. They said the company was not authorized to sell their music.

What was once an eagerly awaited debut is turning into a fiasco for the New York-based start-up, which has tried for more than a year to get off the ground.

The issues with Qtrax illustrate two things. First, the labels have clearly signaled that they are willing to give ad-supported music a try--just not with downloads. Secondly, Qtrax executives should know better than to announce deals when they don't have ink. Qtrax CEO Allan Klepfisz told CNET News.com on Sunday that the company had agreements, but acknowledged that they just weren't signed.

But everybody knows that without signed contracts, there is no deal.

Perhaps actress Kelly Preston said it best in the movie Jerry McGuire: "It's not 'Trust my handshake.' It's make the sale. Get it signed. There shouldn't be confusion about that."

As Qtrax struggles with licensing deals, the big record companies are partnering with a growing number of ad-supported sites that stream songs to listeners but don't allow the music to be downloaded to computers or digital music players.

Services, such as Imeem and Last.fm, which only stream songs, offer music from all four major labels, Universal Music Group, Warner Music Group, The EMI Group, and Sony BMG Music Entertainment.

Meanwhile, SpiralFrog, one of the best-known services and one that enables people to download to a PC and a handful of portable devices (but not the iPod), has been toiling in the sector for nearly two years and has managed to land a music deal with only one top label: Universal.

But how did Qtrax get mired in this mix up? Is the company a victim of a misunderstanding? Were executives overly confident when boasting to reporters that they had signed the top labels?

After interviews with managers at Qtrax and the record labels, it appears that a bit of both occurred.

Previously, Qtrax had succeeded in striking agreements with at least two of the record companies as the start-up was preparing to ramp up. But sources with knowledge of the deals said those deals have expired.

Qtrax is close to getting signatures from Universal and EMI, said the source but, "Qtrax spoke too soon."

How this public relations nightmare affects Qtrax's prospects for the future is unclear. But don't believe the old adage that all publicity is good publicity. As it stands, the debacle undermines Qtrax's competence, if not its integrity.

UPDATE: 7:12 A.M. (1-28-08): Qtrax continues to delay the launch of its much awaited legal file-sharing site as more record labels confirm that the startup doesn't have permission to sell their music.

For weeks, Qtrax, an ad-supported P2P site, had promised to offer free and legal music downloads from all four of the major record labels when it opened for business.

But despite earlier reports, Qtrax's Web site will apparently not feature legal downloads from any of the majors when it debuts. On the eve of the site's launch, Warner Music Group and Universal Music Group said that Qtrax was not authorized to offer their music.

Both companies said they continue to negotiate with Qtrax, but emphasized that they don't have a done deal. A spokesman from Sony BMG echoed the other two companies by confirming on Monday morning that the label has not signed on to Qtrax either.

The Los Angeles Times reported on Sunday that New York-based Qtrax is also without a final agreement with the EMI Group. The blog, Silicon Alley Insider, was first to report on Qtrax's troubles.

Meanwhile, Qtrax has missed it's launch time of midnight Monday morning ET. More than eight hours later, visitors were still not allowed to download music. Robin Kent, a Qtrax marketing executive said that it might be another 24 hours before the company can enable downloads.

Qtrax CEO Allan Klepfisz acknowledged in an interview with CNET News.com late Sunday evening that his company may not possess agreements "written in stone," but that it doesn't mean Qtrax is without the labels' consent to feature their music.

"This is a tempest in a tea cup," Klepfisz said from the Midem music conference in Cannes, France. "It's true, some of the deals may not be locked in ink, but it's also true that we had understandings. In some cases, we had endorsements."

Klepfisz said it was likely the Qtrax Web site would debut featuring music from all four labels despite the public comments by UMG and Warner. Is he worried about a lawsuit?

"The answer is nobody has threatened us with a thing," Klepfisz said. "We plan to release music the way we said we were."

Qtrax's business model is based on offering people an attractive and legal file-sharing site.

The company's music offering sits on top of the Gnutella file-sharing network. Once a user downloads Qtrax's software client, they can look for songs with the help of the company's finger-printing technology.

Qtrax guarantees to protect customers from spyware or viruses that plague illegal sites. The way Qtrax makes money is by placing ads on its Web pages. The company then splits the ad revenue with the labels.

Recently, the labels have embraced ad-supported models. What they don't seem keen on are ad-supported sites that offer downloads.

For example, services such as Imeem and Last.fm, which stream music to listeners but don't allow them to download it to a computer or portable device, offer songs from all four top labels.

SpiralFrog, one of the best known services and one that enables people to download to a PC and some portable devices, has been toiling in the sector for nearly two years and has only managed to land one of the biggie labels: Universal Music Group.

Musicians aren't merchants.

We certainly learned that through Radiohead and Trent Reznor's separate experiments with choose-your-price album promotions.

Trent Reznor of Nine Inch Nails

(Credit: Rob Sheridan)

In October, Reznor, the leader of the band Nine Inch Nails, and Radiohead attempted to promote and distribute albums online without the help of a major record label. Both offered fans the opportunity to obtain the music for free. Both saw some success.

But they also illustrated that the music business is probably better left in the hands of businessmen. Musicians are not the new labels. Artists need someone to provide financial support and business acumen. If we end up ridding the world of labels, we'll only have to re-create them--in some other, probably more nimble form.

Last week, I interviewed Reznor about the online promotion of rapper Saul William's album The Inevitable Rise and Liberation of NiggyTardust. In that interview, Reznor said he was disappointed that only 18 percent of the more than 150,000 people who downloaded the album paid for it. He and Williams offered two options: pay nothing or obtain a higher-quality audio version for $5.

By backing Williams with his money, name, and know-how, Reznor essentially thrust himself into the role of a music label. That is, a music label with a lot to learn. The first lesson was that you don't always back a winner. A music company's fortunes can often rest on its ability to discover superstars. Profits generated by a few marquee acts have always kept the companies going while all the other performers break even or lose money.

EMI said this week that only 5 percent of its acts are profitable. This kind of prospecting requires a huge investment.

Reznor said he didn't get involved with Williams to profit, but acknowledged that he spent too much making the album and said he hasn't yet recouped his money. A record company can afford to make bad bets once in a while, said Chris Castle, a music industry insider who has worked as a vice president for both Sony Music and A&M Records. Musicians, even successful ones like Reznor, probably can't.

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If the digital music business were a game of poker, Imeem can now claim to have a royal flush--sort of.

(Credit: Imeem)

The music-centered social network, which focuses on ad-supported streaming music and video that its members can arrange into "playlists" on their profiles, has announced a deal with Universal Music Group that gives Imeem access to full-length recordings of the recording giant's entire digital music and video catalog. This means that Imeem now has deals with all four major labels as well as a large number of independent labels.

The sprawling catalog of Universal Music Group, a division of Vivendi, encompasses artists like Kanye West, Amy Winehouse, Fall Out Boy, Black Eyed Peas, Gwen Stefani, The Killers, Snow Patrol, and Maroon 5.

"If (the Universal deal) isn't a vindication for what we're doing, I don't know what is," Imeem co-founder and CEO Dalton Caldwell said in an interview with CNET News.com. He highlighted the fact that Universal has recently cracked down on the use of its content on most social-networking sites, requiring its streaming music clips on MySpace.com to be limited to 90 seconds rather than full songs. Imeem, Caldwell said proudly, has access to the entire files.

It's a sharp change in fortune for Imeem. Just over six months ago, the company--which then allowed users to upload and stream music despite not having deals with the labels in place--was sued by Warner Music Group for copyright infringement. Social-networking leader MySpace, too, had blocked Imeem widgets out of piracy concerns. Imeem then settled with Warner and got to work on licensing ad-supported content. It was a smart move; otherwise, the Palo Alto, Calif.-based start-up could've gone under entirely.

But Imeem is used to changing course. The company was originally founded in 2005 as a generic social network in the form of a downloadable client that allowed members to communicate, share files with each other, and create interest groups. Since then, it's shifted its focus almost entirely to streaming music and music videos, and user accounts now tally about 19 million.

So what's next? "The thing we really need to do is monetize this thing and prove that we can make money," Caldwell said. And some critics have hinted that the user experience could use some attention, too. But if the free, ad-supported streaming model (there are no downloads or subscriptions involved) proves successful, Imeem executives hinted that they may try applying it to other forms of media like TV or film.

"In the beginning of 2008 you'll see a flurry of things happening on the video side," chief marketing officer Steve Jang said in an interview.

For now, executives have ruled out selling the company and cashing in. "This is the good part. We've been working so hard on these deals that we don't want to entertain (acquisition offers)," Caldwell said. "We just want to soak in the goodness of accomplishing our goals for a little while."

He clarified that even though virtually the entire music industry is on board, Imeem is still an unproven product. "I feel like we just ran a marathon, and we finished it, and I'm so proud of us," he explained, "but let's see if this works. We really are excited to prove the model out and all of the good vibes that went into getting here, we want to see them bear fruit."