Want your Spotify account to remain? Better disable that Adblocker

Releasing a new version of their terms of service, Spotify has promised to take a harder stance on ad blockers, bots and fraudulent streaming activities, starting March 1st. 

Ad blockers have always been an easy loophole for consumers, and a headache for publishers. The company confirmed in March last year that it had 2,000,000 users using ad blockers on the free version of Spotify. While that sounds a lot, it's only 1.3% of Spotify's total user base, yet it warrants enough attention as it restates usage metrics. 

The new guidelines specify that “circumventing or blocking advertisements in the Spotify Service, or creating and distributing tools designed to block advertisements in the Spotify Service” may now result in “immediate termination or suspension of your Spotify account.”

During its last quarter earning report announcement yesterday, Spotify shows positive income and free cash flow for the first time since it was founded. Revenue, however, was below expectations because of intense competition from other streaming services, with subscribers increasing 36 percent to 96 million. Paid subscriptions now compose nearly 88% of Spotify's turnover - which is why Spotify wants to release the potential of ad supported revenue. And with Spotify's actual user base of 153,000,000 people across the world (and expanding), ad supported revenue can really bring in the billions. 

Spotify... changing an entire industry?

So after months of speculation that this amazing music service was going to arrive to the US... finally the time has come and this week Spotify launched its service into the american market... The media and the business world are very excited cretting huge expectations... is it going to be the same success than in Europe...? Does this notion of renting music for 10$ a month will be translated into other industries ? What happened with the idea of buying music...? How does this affect Intellectual Property rights...? Itunes already revolutionized the music store concept globally... so I'm sure than Apple will give it a big fight back... so why it hasn't launched a similar concept of service yet with their available music rights.... Do they think it won't work and maybe European purchasing habits are different than americans...? Let's see what happens but if there's a clear sign from this launching is that the way content is been sold might change in the near future if Spotify is a big success.

A new music revenue model: VEVO

Record labels are still searching for ways to earn money online and they may have stumbled upon a service that could bring them back into the value chain: it's called "Vevo". Universal Music started the site and they have already gotten a corsortium of the major labels to sign up.

Itunes has proven that there is still a market for downloading music singles. But it has also proven that people still love to watch music videos - and that they are willing to pay for them! Since MTV became a reality television show rather than a music video channel, there aren't many places these days to watch high quality music videos.

That's where Vevo comes in. Vevo is a music video site. It will host music videos from the major label, top grossing music artists. Universal plans to host music videos on its site and to complement the content with exclusive interviews, reality programming and live performances.

This time the music labels are not licensing and restricting content but making it all available in one easy to find space. And once they get a critical mass of users, they will be able to bring in the advertisers and start making big bucks again.

This model just might work. The videos on youtube are usually low grade and low quality. Vevo could ensure access to high quality and exclusive content. If it can pull it off, users may come en masse, and the music labels may finally be able to insert themselves back into the value chain.

Here's an article detailing a bit of what's to come...

Myspace Music - a failure?

A recent e-marketer interview with Courtney Holt, the President of Myspace Music, illustrates that growing number of chinks in the Myspace armor. Mr. Holt did not sound entirely optimistic that the Myspace music business model is going to succeed.

It sounds to me like there wasn't a lot of strategic planning in creating Myspace music. While many (mostly unsigned) bands still use Myspace as their home page because of the ability to create a one page profile with a music player and shows, the ways in which Myspace can monetize the popularity of their music-friendly site seem to be dwindling.

The ticket hub idea particularly seems like a complete rip off of classifieds or auction sites such as craigslist, eBay and Stubhub, where most online users go to find tickets. It's unclear to me how myspace will be able to provide

"key merchandise that (people) couldn't find other places"

I personally don't see how Myspace can become a major player in ticket sales even though they remain a popular hosting site for bands. It sounds to me like they are suffering greatly from losses in their ad-supported revenue as they slowly lose market share to Facebook. I wonder, if Facebook decided to set its sites on music, if they could also steal the music portion of social networking from Myspace. At that point, there'd be hardly any users left!

The Current State of Online Media Sharing

Online file sharing is a big business. According to a recent Times Online article, an average teenager’s iPod contains 800 illegal music files. Additionally, DrownedinSound.com reported that 95% of music downloads in 2008 were illegal. With its eyes set on all of this lost revenue, the music industry is successfully fighting back, leaving companies and individuals scrambling and looking for new (and still legal) ways to provide and share media, such as music, online.

Just in the past few years, several media streaming providers have popped up, including Hulu for television shows and Pandora for music.

Hulu, a collaborative effort by News Corp and NBC Universal, has seen rapid growth since its inception. With over 370 million streams each month, Hulu has grown into the largest streaming television site on the Web.

Pandora, a music site offers a novel approach to sharing music online. Labeled as a radio station, Pandora allows its users to create customized radio stations by entering their favorite artists into an engine, which then builds a playlist. While artists don’t seem to make money from the Site, Pandora does by referring listeners to iTunes to purchase music heard on the Site. Other major competitors in this space include Imeem and Last.fm.

As internet properties continue to launch media streaming sites, the industry will need to react. So the questions will remain – how long will these sites be viable, how will these sites impact the music and television industries and will new laws be enacted to stop this type of online streaming?

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

Total Music Experiment - Music Industry a step behind once again

No other industry has been as un-adaptive to the changes brought about by the web than the music industry. Forget web 2.0, they are still trying to figure out a Web 1.0 strategy. TechCruch recently posted about the death of the record industry's TotalMusic project.

http://www.techcrunch.com/2009/02/08/confirmed-totalmusic-is-dead/

Essentially the initial idea of the TotalMusic project was a joint venture between the record labels (Sony BMG and Universal) that would bake the concept and cost subscription music into MP3 devices (For example, pay $350 for a player instead of $250 and get unlimited lifetime downloads). For anti-trust reasons that strategy didn't work out to well so they eventually turned their attention to creating a free, advertising-supported streaming service that would be licensed or white-labeled to other Websites. Each stream would link directly to a paid digital download. Well supposedly now that has failed.

The question is how can the record industry stay relevant when they have been pushed out of the distribution chain? The answer probably doesn't lie in finding a way back into the chain (that opportunity has probably been long lost). But maybe its about creating value by finding new ways to target consumers based on their listening and purchasing behaviors (how Pandora's music project was not a project of the record industry is beyond me!).

The record labels still distribute a large portion of the music in the US and with that can come data. When a person purchases music at a Virgin Megastore what else do they buy? The music preferences of an individual may uniquely tell a story about the listener and that information compiled in an effective way could allow you to target not only music recommendations but also other consumer purchase recommendations. Ok, maybe the connections wouldn't be so explicit at first but I bet if they started collecting some data about listening and buying preferences they would see some solid connections.

Start with gathering information about your users, then see who would be willing to pay for that information.

Hey... thats what worked for Google.

The Future of Music from South Korea?

South Korean music entrepreneur JY Park was recently interviewed at MIDEM, the music trade show at Cannes. In addition to being a musicmaker in his own right, Park has a model for the music industry that just may be its future. Interestingly, it's based on the assumption that digital downloads will continue to dominate the music business and that CDs will disappear within 5 years.

Park was very open when he told a packed conference that he aims to make 50 percent of his artists' earnings from advertising endorsements and another 50 percent from films, TV and music downloads.

Inspired by Motown Records and Berry Gordy's pioneering approach to nurturing and molding talented musicians, Park also doesn't believe a star can be born overnight. He can spend up to seven years preparing his multi-talented youngsters for their artistic debuts.

"It's weird, because Motown is American, and American companies aren't doing it," he said at MIDEM during his first trip to Europe.

While the premise may be provocotive, the most important elements here are very compelling. Park is an extremely successful musician himself as well as a music entrepreneur; he's neither a disgruntled musician nor a hidebound music exec. He's making a lot of money now, with his model perfectly targeted at the where the music market is going, not preserving where it used to be. And, perhaps most ironic, his model is the American Berry Gordy's Motown label. The bottom line: digital media may destroy the old way of doing business (physical CDs) but it's salvation may be even older: develop good music that people want to hear, and they'll pay to see it performed.

More here. [cross-posted from DigitalEastAsia.com]

New Business Models in the Music Industry Focus on the Role of Internet Marketing in Turning a Profit

Last Thursday, Myspace announced that it had teamed up with Universal Music Group, Sony BMG Music Entertainment and Warner Music Group for a new online music venture which will allow visitors to browse the entire digital catalogs of all three music companies, as well as stream songs and purchase downloads.
Meanwhile, rapper Jay-Z, like Madonna and U2 before him, has signed a major ($150 million) deal with the concert promoter LiveNation, leaving behind his current record label, Def Jam Recordings, which is owned by Universal Music Group.
Both events have led to a great deal of speculation in the media as to what sort of structural changes are signified by these new business models, and how they will ultimately effect the overall functioning of the music industry.
On Valleywag, Jackson West argues that Myspace Music will fail for the very reasons that LiveNation will succeed: digital music is no longer a “product” but really just a form of advertisement for “branded events and merchandise”. I find this notion deeply problematic from the point of the view of the artist, whose product is, or at least should be, some form of art, and not a “brand”.
However, LiveNation is not the only one guilty of exploiting music as a vehicle for advertising. MySpace co-founder Chris DeWolfe tells PaidContent.org: “We will be able to develop many new streams of revenue, [. . .] “MySpace is a global company with 26 offices around the world and over 500 people dedicated to ad sales,” he said. The music will provide a foundation for display ads, streaming, music sales, ring tones and other forms of merchandising”.

Billy Bragg Thinks Musicians Deserve a Cut of Lucrative Bebo.com Deal

Musician Billy Bragg wrote an Op-Ed in the New York Times on Saturday sparked by the recent $850 million sale of Bebo.com to AOL; in it he argues that musicians who posted their original work on the site are entitled to a cut of that astronomic sum, since their work contributed to the site's high traffic. For those unfamiliar, Bebo.com is a social networking website akin to MySpace whose primary membership is in Great Britain. Bragg is an outspoken British musician and political activist, who in 2006 publicly shamed the creators of MySpace into revising their terms and conditions in order to clarify their previously cloudy policy regarding proprietary rights to the music posted on their site. While I tend to agree with Bragg’s politics, and applaud his efforts on behalf of MySpace musicians, I’m not sure that I can get behind him on this issue. While his ideals are in the right place, he fails to address the important structural changes that would necessarily unfold from the introduction of royalty payments to musicians.

Fundamental to any successful networking site is the symbiotic relationship that exists between member and website. The website provides a space where members can post and view information, and in some cases, media; in return the information that the user makes available to fellow members attracts new members and site visitors. Bragg’s suggestion that the sites should pay their members for their contribution would surely upset this give-and-take in multiple ways. Not only would it inevitably lead to the sites being forced to charge for memberships, it would also necessitate the formulation of a “pay-per-click” system by which those musicians whose pages had the most visitors were paid the most money. But how do you determine what, besides music, is worthy of financial reward? Would those members who poured hours of their time into witty and artfully written personal profiles also demand the same recompense?

Furthermore, Bragg’s suggested revisions to the structure of these sites fails to thoroughly address the fact that musicians, and artists of every medium, have almost always needed the help of an intermediary, whether it be a manager, a gallerist, or a PR firm, to achieve commercial success. In order to access the type of exposure and platform that sites like Bebo and MySpace offer free of charge, musicians have traditionally paid large fees to major record labels. Bragg briefly touches on this argument and denies its veracity:

The claim that sites such as MySpace and Bebo are doing us a favor by promoting our work is disingenuous. Radio stations also promote our work, but they pay us a royalty that
recognizes our contribution to their business. Why should that not apply to the Internet too?

Bragg fails to note an important difference between radio stations and networking sites, and that is selectivity. Not every song makes it on the radio. Only the songs that would seem to have the most commercial viability are selected, otherwise radio stations wouldn’t pay for them. If Bebo instated a policy whereby musicians who post their work received compensation, then they would most certainly be forced to become more selective about what music they allowed to be posted. Musicians whose songs were deemed less appealing to the masses would likely be unable to post their music. This quickly eliminates the concept of universal access within these forums, a destruction of the very foundation upon which these sites have prospered.

The internet has turned the music industry on its head, and the major record labels have suffered the most; they failed to see it coming, and they continue to fail to address it in progressive ways. As Bragg notes, most musicians are also still trying to figure out how best to navigate the new possibilities of distribution and marketing that have been opened up by the internet. While I wholeheartedly support Bragg’s efforts to promote an open discourse about these issues, I don’t know that introducing a fee structure to social networking sites is necessarily the best solution.

DMR and Piracy

I have been argueing for a long time now that DRM has two different effects: 1) completely piss off users; 2) make users break the law and become pirates.

The following article from Wired, "How To Explain DRM to your Dad", gives a lot of examples that support my thesis. In summary, what usually happens is that after buying legally music, DVDs, ... there is one point in time when you have no choice that break the law to keep enjoying your legally acquired content. In my personal experience, my DVD collection with more than 100 titles that just play in Europe not in US.

How does my Garage Band get discovered?

This was the general topic debated on the Music Panel at Columbia's own MBA Media and Entertainment Conference last Friday. The panel included distinguished members of the music label world, music subscription services, and A&R folks. All pointed to the fact that the fragmentation of albums into singles has pushed many artists into the world of creating only singles. (re: Kelly Clarkson)


Tip #1: Write all Singles for your next "Album"

Remember when you finished listening to Achtung Baby and thinking, "That is a great album!" Well, these days, artists are pressured into making radio friendly songs and slapping them together on an "album." This is to satiate the demands of buying songs one at a time in the iTunes model. Mr. Carreras, of RCA Records, spoke about the worried nature of traditional record labels as they pour the same or more money into album production & marketing, only to helplessly watch one particular song sell for $0.99.

Tip #2: Sign with a Major Record Label

As we asked on the panel - how do I distinguish my band from all the others on MySpace? Answer: Sign to a Major Record Label!!

A vicious cycle indeed.

Steve Jobs' letter against DRM

For all of you that have not clue of what DRM means, let me say that DRM stands for Digital Rights Management. In other words, it's the piece of software that controls the way you share your music, videos, pictures, etc.

For example, if you are a user of iTunes and buy music from the internet store, DRM will set that the maximum number of times that you can copy the music to a CD is 6 and that you can share the music with other 4 computers.

There is a lot of movements in Internet against DRM with the argument that controls your freedom as user to do what you want to do. Seriously, DRM is not Steve's idea or Gates' idea. DRM is an initiative that music companies have put in place.

Recently there has been a lot of talk about it because a) iTunes has been declared ilegal (due to DRM) in Norway, and probably the rest of Europe can follow the idea (same to Vista DRM, ...); b) the implementation of DRM from Vista is really strict.

Steve Jobs has react with this letter showing some interesting points:

1) DRM is not his idea
2) He would support any movement to freeDRM music but the industry doesn't let him
...

I found it really interesting. In other words, SJ is trying to push the users to fight the battle against the music companies, cleaning iPod+iTunes name at the same time :-) Really smart.

Here you have a link with more details.

Quite an interesting (and expected) Google development:

Google said it would distribute advertising alongside videos from Sony BMG Music Entertainment and Warner Music Group (NYSE:WMG - news) over its AdSense online ad system to Web site publishers in a four-week test now underway.

"Over the past few months, we have run tests to figure out how we work with our partners and advertisers to combine high quality video content with ads and then distribute them (over) the Google AdSense network," Google said in statement.
The test with the two music labels follows an earlier public trial of Google's video advertising system with Viacom's (NYSE:VIA - news) MTV Networks, which provided music videos to run on a select number of Web sites running Google ads.
As part of the test, advertisements would be billed on a cost per thousand impressions (CPM) model, the traditional billing method for mass market advertising as opposed to the pay-per-click billing model Google popularized with text ads.
Google has been pushing ahead in recent months to expand beyond its hugely successful text-advertising system into new advertising formats including video, radio and mobile phones.
As a example, Warner Music has defined multiple video channels along themes like "rock music" or featuring the "Divas of Pop Music." A Web site owner can select a video channel and embed it on a section of the site dedicated to running Google AdSense ads. Visitors then can click to watch ad-supported videos within the video channel on sites running the ads.
The Google advertising system splits the resulting revenue three ways to the video content owner, the Web site publisher and Google. The exact revenue splits were not disclosed.