The music biz and the internet

http://www.nytimes.com/2009/05/28/technology/start-ups/28music.html?_r=1&scp=1&sq=music%20lables%20cut%20friendlier%20deals&st=cse



I wanted to post about an interesting article that just came out in the New York Times. It describes how major music recording labels are forgiving music-hosting sites like Imeem the considerable amount of debt they are owed as a result of licensing fees. This is yet another interesting development in the continuing saga of the transformation of the music business as a result of the internet.

Coming from a music background and as an owner of a Brooklyn recording studio, I am fascinated by how music will eventually be distributed and/or sold over the internet. While legal downloading has helped bring in some revenue, it has not nearly closed the gap that the music labels are facing with 20% year over year declines in CD sales. I believe the idea of music being sold on physical media such as CDs is over. It appears that the labels are finally starting to accept the fact that they have no future without internet companies like Imeem and Pandora to help advertise and distribute their product.

However, I wonder if the subscription business model being used by sites like Imeem and Rhapsody will be sustainable in the long run. My feeling is that in the end people feel very personal about the msuci that they love and they want to OWN IT, whether it is stored on a physical medium or not. The idea of paying for a subscription to get access to a large quantity of music isn't quite the same because there is always a 'gatekeeper' like these sites who have to give you permission to access it.While this deal make allow sites like Rhapsody to sustain themselves, in the long run people will want to be able to access their music at any place and time. Having to log on to a site in order to do so will not be possible in a car, in a plane or other places where consumers might want to listen to their iPods. While I also disagree with DRM (digital rights management, where songs sold on sites like Itunes can only be played on the host computer and not shared), I still think a new business model will have to emerge for the music business to once again find a value proposition that customers are willing to pay for...

-Doug

Internet Radio Pandora and Tivoli

Saul Hansell in his May 29 New York Times article, “The Ascendance of Internet Radio”, discusses the Tivoli radio with its CEO, Tom DeVesto.

For those who are unaware, Tivoli radio is an Internet Wi-Fi radio that is priced from a few hundred dollars to as high a thousand dollars.  The user can select a station by genre or geography. There are probably at least 100 stations broadcasting via the Internet. Is this real competition for Pandora and Last FM? No, in my view.  I purchased a similar WI-Fi radio from Acoustic Energy a few years ago, and have disconnected it since my discovery of Pandora. 

The problem with Tivoli radio is just that. It is a radio. Pandora and Last FM are software based. These music solutions can be used with a desktop, a notebook or even a mobile phone like the iPhone. The computer can be easily hooked in to a stereo system with a mini pin to RCA adapter to get a big stereo sound.  Moreover the music is from Pandora is customized by the user. Software leapfrogs the hard ware again. 

Pandora can turn the corner

 Clair Cain Miller, in her May 24 NY Times article Ad Revenue on the Web? No Sure Bet ,

discusses the difficulty that Internet start-up are having in generating revenues. The article mentions an interview with the founder of Pandora, the Internet radio station. Pandora is finding it difficult to generate revenues from advertisers and well as subscribers. They attempted to charge a monthly subscription fee for the service. This did not go over well.  Now they are trying a hybrid model “freemium” .  This model charges the subscriber $3 per month for an ad free subscription.

 

The problem in my view is that it really hard to offer something free then later charge. We consumers are so trained that all on the Internet is free especially if we look long and hard enough for it. It’s just the way it has always been. 

 

Was just happening to consider the Pandora proposition over he weekend at my Memorial Day cook out.  We needed music for the out doors. Boom box radio was too much talk and the music from the station that my 20 year old nephew chose was too narrowly focused for a crowd of ranging from grade school to 1970’s era disco, Fusion, Funk.  Playing CD’s is too cumbersome. So I hooked my iPhone to my kid’s plug-in speakers.  I started the Pandora app- and the music that played for the next hour or two was mostly appealing to most of my guests.  The best part was the fact that there were no commercials or blabbing DJ’s.  There was enough appealing variety that some folks could tap a foot, strum an air guitar or sing along.

 

PANDORA IS GREAT FOR THE CONSUMER. Heck they have 10 million listeners per month. I would guess that as unemployment increased, this figure has gone up a bit – more people with more free time and probably listening to the Blues. My children listen to it while they do homework in the evenings. I listen to it in the car as I do my weekend choirs. It’s also great for my commute to Manhattan.  But in this type of economic environment how can service like Pandora survive as ad revenues drop off? Seems to me that at some point in time Pandora and Last FM (another Internet radio service) will have to begin taking audio ad’s after say the 10^th song.  Maybe it’s a 15 second commercial – a radio jingle Web 2.0 style for the Internet. I would imagine that banner ads on the web site would have limited appeal because this is an audio experience.

Personally this would not be obtrusive considering that 80-90% of the songs I hear are customized to my taste. This is still a small price to pay. The alternative is radio with way too much talking nonsense, or shuffle CD’s – lots of work and over half of the songs not so appealing OR play list from iPod.  The iPod  alternative is limited by the personal library- songs purchased. Satellite radio has always been a non-started for me – always got poor reception, and customer service was terrible. 

So could it be that Pandora and Last FM become the new radio media.  Customized selection of songs, with just a few commercial ads. Would need a dose of customized weather and news say every hour or so for a few minutes. Alternatively we could just press an icon to go directly to customized weather and news- something like a  RSS – Stitcher combination.   I see traditional radio on the way out in 5-10 years. Who needs it?