Seems like I'm the only person who thought Sony BMG's download cards were a good idea. Little plastic cards that are redeemable for music downloads? At least one other person likes the idea. On its blog, Phonelopie, Toronto Montreal indie record store Phonopolis encourages labels to sell download codes -- not cards, but codes -- and offers a rough sketch of how it could work.

Stores would stock a larger number of codes than they would CDs (they would of course still stock CDs). They would not immediately pay for these codes, however. The lack of immediate cost, and small amount of space that these codes would take would allow small record stores to carry a wider selection of stock and larger numbers of individual titles. The stores would validate the mp3 codes at the point of sale. During the validation process (which would be on a distributor or label website), the store would pay for the product.

For the stores, they could carry a wider selection in a smaller amount of space. Having a larger number of codes for each individual title, they would hopefully avoid running out of 'indie hits' after an especially good Pitchfork review. ...

For consumers, there are benefits to going to a record store, the first of which is getting away from your computer, getting out of the house, and talking with someone who is knowledgeable and enthusiastic about music. ... There are other possible benefits, perhaps labels could print extra copies of the CD booklet that could be included with sale of the code.

I'm sold.

Lables that have their own download stores and include download codes with their vinyl releases could throw this together more easily than others. Everybody else would need a third party (DiscRevolt comes to mind). If payment could come at the time of purchase, stores would be more likely to take a risk and carry a slow-moving title. After all, it's just a code. There is zero risk.

One has to wonder how exactly these codes would be merchandised. Hand-embroidered cards? Written on napkins? Compiled in the sort of catalog that used to grace every record store's counter? But this is an indie store recommending the product, so you have to figure it has a snowball's chance.

(Thanks to Sean from Said the Gramophone for the link.)

Posted by Glenn at 3:12 PM | Link
|Brick-And-Mortor Retail||Digital Distribution|

Digital distributor The Orchard filed its 10-K yesterday (go here for an easier to read press release). The company is a perfect example of the new music company: Revenues are steadily increasing, but margins are modest and the big question is when will there be enough scale to turn a profit?

Revenues increased 91% to $28.6 million for 2007. Net loss increased 26.6% to $7.6 million. Q4 revenue increased 99% to $9.9 million. The net loss for Q4 was $2.4 million. Hinting at the cost benefits of the Digital Music Group-The Orchard merger, operating expenses as a percent of revenue decreased last year to 50% from 66%.

• Total downloads sold in 2007 were 23,287,000
• The U.S. accounted for 76.6% of 2007 revenues
• iTunes accounted for 54% of revenue in 2007 and 51% in 2006. eMusic accounted for 11% and 12%.
• Mobile accounted for 10% and 5% of revenues in 2007 and 2006, respectively.
• Subscription revenue (which includes eMusic) was $3.02 million in 2007. Total subscription revenue was a shade under $5 million in 2007, meaning non-eMusic subscription revenue accounted for about 6.9% of total revenue.

Posted by Glenn at 1:19 PM | Link
|Digital Distribution|

• The Rick Rubin era at Columbia Records is upon us. Kyambo Joshua, formerly the SVP of A&R at Warner Music Group, has been named president of the urban department. Joshua recruited Chicago producer Dion Wilson to head urban's A&R department. (Billboard.biz)

• "So far, the RIAA is batting 1.000 when it comes to the 'making available' argument." (Ars Technica)

• CD Baby is now selling MP3 album downloads at its website. Each album download is priced the same as the CD and comes in a zip file with album art and liner notes. (Digital Audio Insider, via Listening Post)

• Verizon Wireless customers will get the chance to buy exclusive Bob Marley ringtones. Twenty-eight ringtones, all from songs from the greatest hits album Legend, are available for on Get It Now-capable phones. (Press release)

• How good is Starbucks at selling music? Almost half of the 511,000 units sold of Paul McCartney's Memory Almost Full has come from Starbucks stores. The chain can also help develop new artists. The article offers Ceu as an example, and it's a good example. The Brazilian singer's Six Degrees album has scanned 77,000 units. Just over 64,000 of those are CDs (83%) and about 56,000 of those come from non-traditional retailers (which covers Startbucks as well as online retailers like Amazon.com). (Financial Times)

• The always interviewable David Pakman of eMusic talks with the Hollywood Reporter. "The number of people in our focus and demographic is at least 5-10 million right now. ... (But a current study of baby boomers who retailers don’t really cater to) shows that 33% of boomers spend $50 on music a year. That’s 25 million people, and they are becoming increasingly tech savvy. If you are focused on selling music to a teen audience, that market is shrinking. For 2007 so far, people 25 and younger represents only 27% of music sales. We’re focused on the other 73%." (Hollywood Reporter)

• Ecast has signed an agreement with The Orchard to offer the latter's catalog to Ecast's multitude of broadband-connected, touchscreen jukeboxes. (Press release)

• Groan. MTV will produce a series of hourlong shows called "Celebrity Rap Superstars" in which B-list celebrities will receive mentoring and tutoring in an eight-week series of rap showdowns. Isn't it enough seeing them play during the NBA All-Star weekend? (Variety)

Posted by Glenn at 8:47 AM | Link
|Digital Distribution||Online Stores/Services||RIAA||Ringtones||Sony BMG||Starbucks|

• Universal Music Group will offer DRM-free downloads through a select group of online retailers -- but not iTunes. From August 21 through January 2008, UMG will sell "thousands" of albums and tracks without copy protection at Rhapsody, Best Buy, Wal-Mart, PureTracks and the upcoming Amazon.com download store. In addition, UMG will sell the downloads direct to consumer at some artist and label sites, and use Google AdWords to drive purchases at gBox. (Billboard.biz)

• Listen to a WYNC interview with with QSR editor Sherri Daye Scott about how fast food chains are using music in their marketing efforts. (Podcast at QSR Magazine)

• Video sharing website Veoh has filed a preemptive lawsuit against Universal Music Group. The company has asked a judge to prevent UMG from suing it for copyright infringement. (paidContent)

• Yet another article on the resurgence of vinyl. At least this one has a video segment and a really great quote. From Criminal Records' Eric Levin, "Vinyl is just out of control. It's like somebody pushed the cool button again." Indie retailers are selling more vinyl because of a few reasons. First, it's a tangible product that sounds better than downloads. Second, whatever chain stores are left sell little or no vinyl. I've got to wonder, though, that if vinyl sales keep going up if a chain like Best Buy will start stocking vinyl and carrying turntables. If vinyl becomes too successful, it will look like too attractive a market not to enter. (Chicago Tribune)

• Digital Music Group Inc. reported a loss of $1.1 million on revenues of $3.2 million for Q2 2007. The company attributed almost $330,000 of the loss to expenses related to its merger with digital distributor The Orchard. The merger will be completed in Q4. Last year's loss was $589,000. (Sacramento Business Journal)

Posted by Glenn at 8:46 AM | Link
|DRM||Digital Distribution||Marketing||Universal Music Group|

Digital downloading leads to all sorts of creative and different ways to distribute music. This is a great time for fresh ideas and new strategies.

Arts & Crafts band Stars are selling their new album online just days after its completion. The physical release date is not until September 25, but the band knows it will eventually leak. "We hope you'll choose to support the band, and choose to pay for their album," the band wrote at its website. "However we don't think it's fair you should have to wait until September 25th to do so." Since the promotional campaign won't kick in for a few months, it won't be evident to all that the album is even available. Maybe a few music critics will review the album (they tend to wait until the free CD shows up in the mail) but I'd be surprised if the band does much press until August or September.

Then again, just giving it away is an increasingly popular strategy. Music blog Stereogum is giving away OKX: A Tribute to OK Computer. The track-for-track cover of Radiohead's ten-year-old OK Computer was compiled by donations from 12 indie artists such as Cold War Kids, John Vanderslice and The Twilight Sad. It's a really great package, very well done. In effect, Stereogum is acting as an ad-supported non-label. This is in contrast to RCRD LBL, which aims to be an ad-supported proper label. Stereogum takes donations, though, while RCRD LBL will remunerate with more than exposure.

Additional reading:

• Peter Rojas talks about RCRD LBL at his blog. (Roj.as)
• Details on RCRD LBL (Coolfer)
• In 2003, Eminem bumped up the street date of The Eminem Show due to Internet leaks. (MTV.com)

Posted by Glenn at 11:07 AM | Link
|Digital Distribution|

• Album sales dropped 1% last week and were down 3% versus the same week last year. For the year, album sales are down 15%. Digital track sales were dropped 2% last week and were 47% higher than the same week in 2006. For the year, digital track sales are up 48%.

• The Orchard is planning a merger with Digital Music Group. Said The Orchard's Greg Scholl, who will continue to lead the company, "This company has been uniquely designed entirely around the exploitation of digital music rights. We’ll have more songs for sale so we’ll be a bigger partner for the retailers we supply and we’ll have more leverage in the market." (New York Times, via Digital Music News)

• Universal Music Latino has launched Rebel Music Group, a joint venture with Jack Gonzalez of rap group Psycho Realm. (Press release)

• The Los Angeles Times has a good recap of the copyright infringement lawsuit involving Avril Lavigne's song "Girlfriend." (Los Angeles Times)

• The Copyright Tribunal of Australia has issued an increase of music licensing fees for recorded music. The dance music community has taken notice. "...the fees paid by venues that play recorded music will rise from its former flat rate of seven cents per patron per song, to a rate that can go as high as $3.07 per person depending on the scale of the event. Breaking it down, clubs will now pay a licence fee of $1.05 a person based on the club’s capacity, which means that a club that holds 1000 people for instance will pay $1100, even if the venue is only half filled for the evening." (Same Same)

• iDupe is an application that finds duplicate and dead tracks in your iTunes library. (The Mac Observer)

Posted by Glenn at 7:55 AM | Link
|Digital Distribution||Universal Music Group||iTunes|

• Pop singer Fergie will reportedly make $4 million in product placement and endorsement fees for including fashion company Candie's in the songs on her second solo album. The Interscope Records artist will also appear in Candie's television commercials. (The Post Chronicle)

• Digital distributor TuneCore will distribute the next Public Enemy album, How Do You Sell Soul to a Soulless People Who Sold Their Soul. Said Chuck D, "I knew I had a fan base and I wanted to go directly to them. What good is a label? All they do is give you money. And in the area of digital distribution, they can’t do anything better or faster than anyone else." Of course, his label helped make him a star who can then take a more profitable D.I.Y. route, but a labe can't do anything for him at this point in his career. (New York Times)

• MusicRow now has a link to a country Internet chart provided by BigChampagne. (BigChampagne Country Chart)

• The Guardian has an interview with Slim Warrior, who just played Secondfest in the Second Life virtual reality site and (according to her) the first female musician to perform in Second Life. "I don't feel personally it will take over from MySpace, but I do think that it has tremendous potential for ANY musician signed or unsigned. You have not only the listening experience but also the real time interaction which you don't get unless you gig to a real audience." (Guardian's Game Blog)

• L.A.'s indie retail scene loses a few more stores. Sea Level Records, in Echo Park, will soon close for good. House of Records, in Santa Monica, will shut down as well. (Billboard)

• The Times Online looks at how Rough Trade and Fopp are succeeding in the U.K. They stand in contrast to flailing retailers like HMV and Music Zone. "(Fopp) targets '50quid man', who is rich enough to buy a couple of CDs, a DVD and a book on a single shopping trip. The new Rough Trade store is in a prime spot to attract similar browsers with plump wallets." (Times Online)

• The San Francisco Chronicle has an interview podcast with Goodstorm's Yobie Benjamin. Goodstorm's MixTape widget is part of the successful "Instant Karma" album's marketing campaign. (The Tech Chronicles)

Posted by Glenn at 8:01 AM | Link
|Brick-And-Mortor Retail||Digital Distribution|

• Terra Firma, the private equity firm that has placed a bid on EMI, is reportedly going to extend its deadline by which investors must accept its offer. The bid stands at $4.79 billion. (Reuters)

• Those DRM-free EMI downloads with user information embedded within? Privatunes has free software that will render those files anonymous. (Privatunes , via Slashdot)

• Guitar Center has agreed to be acquired by Bain Capital Partners for about $1.9 billion. The music equipment retailer's sales have nearly doubled in the last four five years. Net income rose from 2002 to 2005 and dropped in 2006 only because of an extraordinary charge related to a goodwill impairment. (Billboard.biz)

• Digital Music Group has inked distribution deals with Mush Records, Joyful Noise Recordings and Clockwize Online. (Press release)

• Ringtone sales are flat. Said one executive, "I think the ringtone business is in peril now because the operators have allowed into the market mobile phones which can sideload MP3s and use them as ringtones." What to do about it? "...innovative products are being introduced: EMI, for instance, has just unveiled a remixable realtone for the hip hop artist MIMS, while independent labels such as Ninja Tune are using them as freebie promotional tools. What is certain is that prices cannot remain static. And as with moves to incorporate VoIP services and flat-rate data charges, it is innovation that will move the market forward, rather than the protection of any perceived golden goose." (The Guardian)

• paidContent just posted a video segment of a panel discussion on social media and the music industry that was recorded at its EconSM Conference in late April. On the panel are Josh Deutsch (CEO, Downtown Records), Courtney Holt (EVP, Digital Music and Media, MTV), and Hadi Partovi (President and COO, iLike). (paidContent)

• Merrill Lynch loves Sirius whether or not it hooks up with XM: "We continue to believe the shares have upside potential using our reasonable, and often conservative, assumptions, including: 1) 80-85% of long-term gross adds are from auto 2) declining ARPU (ignores data impact), 3) combined 40mm subscribers in 2014 – comments by both Sirius and XM suggest this level in 2010, and 4) annual FCF exceeds $1bb in 2016." (Radio Ink)

• British music retailer HMV posted a slightly lower annual profit and announced a DRM-free download store that will launch in September. EMI is the only major on board for the download store. (Billboard.biz)

• The question of the '00's: To give away or not to give away? David at Digital Audio Insider lists his pros and cons of giving away his band's upcoming album. "If we're primarily doing all of this for the enjoyment of the creative process -- and we're not making much money from it -- would we be better off giving the music away?"(Digital Audio Insider)

Posted by Glenn at 6:45 AM | Link
|Digital Distribution||EMI||Earnings Releases||M&A||Sirius|

• Album sales were up 5% last week but were 8% lower than the same week last year. For the year, album sales are down about 16%. Digital track sales were up 2% and were up 40% year over year. For the year, track sales are up 49%.

• iTunes' entry into the (possibly free) live music business will allow it to sell downloads of the performing acts at iTunes. (Hollywood Reporter)

• U.K. download service 7digital has beefed up its service: DRM-free MP3s fro EMI, video downloads and online music lockers. (The Guardian)

• PassAlong Networks is getting EMI's DRM-free MP3s for stores (such as Trans World's download store) powered by its StoreBlocks technology. (Press release)

• At the Digital Hollywood conference, a panel discussed the "impossibility of the packaged product" and changing priorities in young consumers' budgets. (Digital Music News)

• The private equity train keeps on rolling. British company Chrysalis is reportedly in talks with a private equity group over the possibly sale of its radio division, Heart 106.2. (Reuters)

Posted by Glenn at 8:03 AM | Link
|Conferences||Digital Distribution||Online Stores/Services||iTunes|

• Justin Timberlake and Interscope Records announced a joint venture record label called Tennman Records. The label will be distributed by Interscope Geffen A&M. Ken Komisar, SVP of A&D at Sony BMG, will serve as president. (All Hip Hop)

• CD Wow has been ordered to pay £41 million ($81 million) over three years to the U.K. recording industry for selling parallel imports from Asia. (Billboard.biz)

• Digital distributor IODA announced a partnership with IMagine that will allow the company access to China, Hong Kong and other markets in the region.

• A profile of ArkivMusic.com, which offers many out-of-print classical albums on CD. The company is not worried about piracy. "You can't buy 100 discs on somebody else's credit card and then get rid of them on the street. It's a profitable niche to be in. It's a highly attractive demographic." (Philadelphia Inquirer)

• Dave Navarro's Panic Channel will self-release its next album to break free of record company "slavery" and a "failing corporate industry that is on its last legs and gasping for air." That sound about right for a band that failed at mainstream success the first time around. (andPop)

• As majors sign fewer artists in Canada, indie distributors are stepping up with more labels and more releases. Examples are Koch Records and Labwork Music, a joint venture between Sonic Distribution and EMI Canada. Collectively, Canadian indies account for 19.1% of sales, above all majors expect Universal Music Group. (Reuters)

• Once renegade music tab site MXTabs.com has announced some licensing deals with BMG Music Publishing, Peermusic, Famous Music, and Bug Music. The licenses cover both guitar and drum tabs. (Press release , via Digital Music News)

• This is not related to music or media, but Andrew Martin's great article on Coca-Cola's struggle to change reminded me of the recorded music industry. Coke is like a CD. Non-carbonated drinks are like digital downloads. The latter could hardly make up for drops in the former, but investment in the latter is crucial for the future. (New York Times)

Posted by Glenn at 9:08 AM | Link
|Digital Distribution||Distribution||Indies||Publishing||Sony BMG|

Today EMI announced it has retained the entire Paul McCartney solo catalog and is preparing for a digital launch as well as physical reissues. (Read press release.) McCartney's upcoming Hear Music album, Memory Almost Full out June 4th, will be his first to be available in the digital format. Capitol Records will have the titles in the U.S.

The news is more symbolic than anything else and is the closest thing to getting the Beatles catalog online. What people really want is the Beatles catalog on iTunes, not the Paul McCartney catalog. This announcement feels like a stepping stone to that ultimate goal. Frankly, it will be nice when the Beatles catalog is finally available, just so it doesn't have to be a topic any more. Let's get it over with so we can move on to the oddities of the Radiohead and Husker Du digital catalogs for a change.

Posted by Glenn at 12:05 PM | Link
|Digital Distribution|

• In an interview with Billboard, Paul McCartney said the deal to put the Beatles' catalog online is "virtually settled." The teaser article has no other details. The full interview will be in the May 19th issue of Billboard. (Billboard.com)

• Dimensional Associates, the private equity fund that owns eMusic and The Orchard, sold its music publishing division. (Billboard.biz)

• Talent search promotions are a dime a dozen these days. Here's another: Capitol Nashville is teaming up with Yahoo!'s Bix for an online audio and video karaoke contest called "The Road To Nashville." (AngryCountry.com)

• Silent Majority Group has joined Warner Music Group's Independent Label Group. SMG was founded by Creed manager Jeff Hanson (Press release)

• The Knitting Factory announced digital initiatives for its two venues. Knitting Factory Digital Services will provide to labels the ability to record live audio and video and distribute the content through content partners such as Rhapsody, AOL Music, Revver and Last.fm. (Press release)

• A very good article on the music retail scene in Columbia, South Carolina. The five ways stores are staying relevant: Used CDs, vinyl, catalog, accessories and customer service. (Free Times)

Posted by Glenn at 10:09 AM | Link
|Brick-And-Mortor Retail||Digital Distribution||Marketing||Publishing|

• Country label 903 Music has "ran out of money" and shut its doors. (MusicRow.com)

• The Arctic Monkey's UK chart domination looks like it could have been made possible by an error by iTunes. The store accidentally put up for sale the individual tracks for the band's new album, Favourite Worst Nightmare, before the album itself was available. Fans acquired the album by simply downloading each track. The result was 17 tracks in the UK Top 200 singles chart. (NME.com)

• Flat-fee digital distributor TuneCore announced a strategic partnership with music retailer Guitar Center -- which is a TuneCore investor -- that will promote TuneCore to Guitar Center customers. (Press release)

• Keith Wozencroft, currently president of Capitol Music and Virgin Records UK, has entered into a partnership with EMI that will see him launch a joint-venture label with EMI UK and Ireland. (Billboard.biz)

• The NARM website has a PowerPoint presentation from Nielsen SoundScan that was given at the recent 2007 NARM conference. The slide show has a good amount of information on album and digital track sales for both 2006 and year-to-date 2007. Slide 17 had a statistic I had not seen: In 2006, there were 75,774 new albums released, up from 60,313 the year before. Another good tidbit: In 2006, there were 50% more digital-only albums released than the year prior -- but 95% of those digital albums sold fewer than 100 units each. Slide 47 has some info on ringtone sales, which Nielsen began tracking in September 2006.

• There's a rumor that Atlantic will split with Vice Records and decide which artists it wants to keep. (Hits)

Posted by Glenn at 2:12 PM | Link
|Digital Distribution||Indies||Warner Music Group||iTunes|

• An Amazon.com acquisition of eMusic is not going to happen, sources told Digital Music News. Said one source on Amazon.com's digital strategy, "They are unsure of their plans, and very confused." (Digital Music News)

• The U.S. government will filed two complaints against China at the World Trade Organization that aim to stop piracy of copyrighted movies, music, games and books. The RIAA's Mitch Bainwol was quick with the quote: "This failure to abide by international standards and obligations is in no one's interest -- least of all China's, whose cultural and economic opportunities are completely stifled by the quagmire of piracy." (Billboard.biz)

• Now that EMI has pushed interoperability closer to a reality, it's time to think about digital kiosks. Some feel the segment's time already came and went. Some, like Mix & Burn (which has partnered with Trans World), are optimistic. The price of kiosks probably needs to come down, and interaction with portable devices is going to be more important than the ability to burn to CD. (Self Service)

• Cracker Barrel Old Country Store has formed a partnership with country musician Josh Turner. The chain will sponsor Turner's summer tour and will get an exclusive live CD that will be recorded on April 19th at the Ryman in Nashville. (Press release)

• It's that time of the year...time for Circuit City's "Best of Class" awards that honor vendors "who put customers first while demonstrating 'best in class' performance." Universal Music Group was one of the winners in the Merchandising Vendor category and was the only music company to take home an award. (Press release)

• A pricing expert talks about iTunes' pricing system. (Blogging Stocks)

Posted by Glenn at 8:34 AM | Link
|Digital Distribution||Legal||iTunes|

• An Enders Analysis report claims the recorded music market "could" stabilize by 2009. Lower CD sales are one reason why music publisher revenue is expected to have a cumulative annual growth rate of only 2.2% through 2012. (Enders Analysis)

• To celebrate his 80th birthday, EMI is offering 11 currently unavailable Rostropovich albums -- two of which have never been issued on CD -- at iTunes. (Playbill)

• The RIAA on its legal battle against P2P company Limewire: "They respond. We respond. They respond, etc. Then discovery. These things take a long time." (Digital Music News)

• The FCC approved Citadel's acquisition of 24 ABC radio stations. Commissioner Copps said the transaction is "narrowly" in the public interest. (Radio Ink)

• Jupiter analyst David Card on album sales: "The industry has to spread artist development risk more efficiently. That means that radio probably does have to pay, or share revenues. And artists have to get paid at the back end, not in advance. It's not just the labels who'll die if this continues." He's right, but as is always the case in a convoluted industry, it's easier said than done. (David Card's Jupiter Blog)

Posted by Glenn at 4:29 PM | Link
|Digital Distribution||Digital Music||EMI||Legal||P2P||Publishing|

• Today The New York Post reported that Jermaine Dupri, recently ousted as the head of Virgin Records' urban unit, "is in negotiations with Universal Music Group about joining its Island Def Jam label." Talks are focused on his role at the label but details have not yet been determined. (Read article at New York Post)

• Napster Mobile has launched on au/KDDI, Japan's second-largest mobile network with over 20 million subscribers. The service is already on Japan's i-Mode platform. Napster Mobile requires a $3-per-month access fee, and users buy credits that are redeemed for over-the-air song downloads and ringtones. (Read press release)

• Digital distributor IRIS Distribution has inked deals with dance/electronic labels Neurodisc, Scion and Subliminal Records. Artists added to the IRIS catalog include Erick Morillo, Bob Sinclair, Harry "Choo Choo" Romero and Spank Rock. (Read press release)

• Digital Music Group Inc. signed a three-year deal with Apple to sell its video content at iTunes. Two weeks ago, the company announced a distribution deal for nearly 200 hours of video content for content such as ""Hopalong Cassidy" and "My Favorite Martian." DMGI's shares rose more than 30% on the announcement. (Read article at Sacramento Business Journal)

• Apple's FairPlay DRM is illegal in Norway ruled the Consumer Ombudsman in Norway. (Read article at The Register)

Posted by Glenn at 8:45 AM | Link
|Digital Distribution||Napster||Online Stores/Services||Universal Music Group|

• Sony BMG and Warner Music Group announced an investment in ACCESS China Media Solutions, a mobile music provider. The two companies are attracted to the security offered by purchasing via mobile phone, as opposed to physical product. (Read press release)

• Ruckus, which targets the college market for its legal P2P service, now offers a free, ad-based version of its music download service. Files are protected by Windows Media DRM. The free service is available to anybody with an .edu email address. I have an .edu email so I signed up...and was terribly disappointed by the pedestrian quality of the entire service. I'll gladly pay for a better subscription service. (Read article at Red Herring)

• Even though one online store's digital shelf space is just as abundant as another's, look for niche download stores to flourish this year. Indie retail store Other Music (which has very few square feet) will launch a digital download store in late February 2007. Wired's Eliot Van Buskirk interviewed co-owner Josh Madell about the new site. "The thing about iTunes, which is by far the most successful digital store so far, is that despite the cool factor they have been able to hold onto, they are really closer to Best Buy than Other Music in terms of the shopping experience." (Read article at Wired News)

• The Orchard just signed two deals. One is with Ericsson and will distribute The Orchard's catalog to Ericsson in all major non-U.S. territories. In the other, The Orchard and Muzak announced a licensing and marketing agreement that will expose Muzak's 100 million daily listeners to The Orchard's deep catalog. The Orchard will provide turnkey music licensing, publishing administration, song research, and programming solution to Muzak. (Read Ericsson article and Muzak press release)

• Gracenote is expanding its presence in Europe through its Content Partner Program. (Read press release)

• Digital distributor IODA is launching a European divison. IODA UK comes after the company finalized the acquisition of London-based digital music distributor Uploader. (Read press release)

Posted by Glenn at 8:26 AM | Link
|Digital Distribution||Online Stores/Services||Sony BMG||Warner Music Group|

• EMI has filed a $100 million lawsuit against ringtone provider Infospace. The suit alleges Infospace and its subsidiaries have miscalculated royalties, sold restricted songs and sold in territories for which they are not licensed. EMI's auditor ran the numbers and found that Infospace had underpaid royalties results from third-party sales at Verizon and US Cellular web sites. The final straw was probably when Infospace touched a restricted, Beatles-related song, John Lennon's "Imagine." (Read article at Hollywood Reporter)

• Spiral Frog, which is almost set to launch its ad-supported P2P business, just sacked CEO Robin Kent. Could this delay yet again the service's launch? (Read post at The Key blog, via paidContent)

• News from MIDEM: The launch of Merlin, the world's first globa new media rights licensing agency. Founded by member groups like Beggars Banquet, K7, Tommy Boy and Naive, Merlin is meant to facilitate licensing to the new generation of websites like YouTube and MySpace. (Read article at Billboard.biz)

• Digital distributor The Orchard inked a deal with digital jukebox company TouchTunes Music. Its The Orchard's first licensing deal with a digital-downloading jukebox company. Basically, that really cool digital jukebox just got better. (Read press release)

• SoundScan International has added over-the-air full-track digital download sales from a number of mobile operators in Europe -- Vodafone in Spain and Ireland, 3 Mobile in Denmark and Sweden, TDC in Denmark and from Telenor in Norway. (Read press release)

Posted by Glenn at 10:45 AM | Link
|Digital Distribution||EMI||Indies||Licensing||P2P|

• The Times Online offers a guestimate of EMI's upcoming restructuring. "About 900 of the group’s 6,600 staff are expected to lose their jobs as EMI seeks to save £110m in overheads." (Read article at Times Online)

• EMI's Eric Nicoli calls "a million miles away from the mark" a report of a planned management buyout of EMI's publishing division. (Read article at Forbes.com)

• Digital Music Group, Inc. has acquired the rights to distribute about 200 hours of video content. The company does not expect "meaningful" revenue from the videos, which include episodes of "Hoppalong Cassidy," the "Master of Poker" series and "The Mr. Bill Show." (Read press release)

• Sugar Hill Records is leaving Durham, North Carolina and will relocate to Nashville, where it will operate with another Welk Music Group-owned label, Vanguard. As a result of the cost-cutting move, most of the label's nine employees will be laid off. (Read article at The News & Observer)

• Koch signed deals to distribute Bodog Music, Syntax Records, Indianola Records and upstart Latchkey Records. (Read article at Billboard.biz)

• Robert Hillburn interviews Clive Davis for the Los Angeles Times. "The mistake people make about 'American Idol' is that they think the show itself is enough to make anyone a bestseller, so there is no creativity involved. But the show's exposure is only worth about 350,000 to 500,000 record sales for an artist. To go beyond that, you have to have hit songs to get on the radio." (Read article at Los Angeles Times)

Posted by Glenn at 7:30 AM | Link
|Digital Distribution||EMI||Sony BMG|

• Mediabase announced the 2006 airplay leaders. The most played song of the year was Mary J. Blige's "Be Without You" (Geffen). Natasha Bedingfield's "Unwritten" was the most-played Top 40 song. With 901,206 spins, Kelly Clarkson was the most-played artist of the year. Nickelback was second and just 11,000 spins behind. Island Def Jam was the most-played record label of the year. Arista Nashville received the most country spins, and Interscope received the most alternative spins. (Read press release)

• FaithMP3, a digital music store featuring the Christian music of Integrity Music, launched a beta version yesterday. FaithMP3 is the first digital music store enabled by freedomMP3, the PassAlong Networks service that grants interoperability and respects the creator's rights. Songs from freedomMP3 can be transferred between computer and MP3 player (including the iPod) but cannot be uploaded to P2P services or mass copied. (Read press release)

• That Sony BMG rootkit settlement mentioned yesterday wasn't with just two states. In all, the company settled with 39 states for a total of $4.25 million. California and Texas received $1.5 million. New York received $315,000. Customers will be able to file claims for refunds up to $175 but there's a catch. To receive a refund, a consumer must give a description of how their computer was harmed and documentation of repairs incurred. That should present enough of a roadblock to deter a great many consumers from filing a claim. This all stems from Sony BMG's use of a rootkit in copy-protected CDs (read at Wikipedia). The invasive rootkit files leaves users' computers at risk due to security holes. (Read AP article)

• FYE has backed out of plans to move into two Tower Records stores in Sacramento. FYE had planned on opening stores at the Broadway and Watt Ave stores, but company CFO John Sullivan said the leases "weren't what they thought they were." Trans World, owner of the FYE chain, still has plans to take over Tower locations in Torrance, Philadelphia and Nashville. (Read article at Sacramento Bee)

• EMI chairman Eric Nicoli has been named to the board of directors for Vue Entertainment, a UK cinema chain. Nicoli will assist with growth of the company in the U.K. and Ireland. (Read article at Variety)

• A profile of XM Satellite Radio and walk around the company's Washington DC office. "The building itself is a century-old renovated printing press where National Geographic and Newsweek were once printed." (Read article at The Washington Post)

Posted by Glenn at 7:44 AM | Link
|Brick-And-Mortor Retail||Digital Distribution||Radio||Sony BMG||Tower|

• Capitol Records Nashville is releasing to all digital music stores the complete career catalog of late country star Chris Ledoux. The catalog spans thee decades and 37 years. Digital ringtones for some songs are also available. (Read article at MusicRow.com)

• Detroit rapper Trick Trick says he will sign with G-Unit Records in early 2007 and have an album out as early as July. Trick Trick was formerly with Universal Motown. (Read article at SOHH)

• Insound.com now sells digital downloads. Only complete albums are sold, priced at $8.99 or $9.99. Files are 192kbs MP3. A quick glance at the indie rock offerings revealed a catalog that is also available, for the most part, at eMusic. (Via Digital Audio Insider)

• Dennis Romero, aka, Danceblogga, has an article on dance-oriented digital download store Beatport. It sells unrestricted, CD-quality .wav files for prices between $1.99 and $2.49 per track. (Read article at LA City Beat)

• Wired reviews applications that organize MP3 tags. (Read article at Wired)

Posted by Glenn at 1:52 PM | Link
|A&R||Digital Distribution||EMI||eMusic|

• Impala, the Independent Music Comapnies Assocation, released a statement on the European Union investigation into Universal Music Group's purchase of BMG Publishing. "Our only request is for a level playing field and market access -- exactly what competition rules are intended to guarantee. In other words, give European music space on the market, let the consumer decide and give European citizens a Europe to be proud of." (Read press release)

• Universal South has hired Fletcher Foster to be its SVP and GM. Foster, previously the marketing chief of Captol Nashville, will start early next month. (Read article at The Tennessean)

• Performing rights organization BMI and Spiral Frog, an ad-supported P2P network, have completed a licensing agreement. Spiral Frog is set to debut in early 2007. It requires users to watch advertisements in return for free -- though rights-protected -- music files. Former BMI president and CEO Frances W. Preston is on Spiral Frog's board of directors, as is Jason Berman, former president of the RIAA and chairman of the IFPI. (Read press release)

• Jason Mraz, who is signed to Atlantic Records, has released a digital-only release through digital distributor Musicane. Selections For Friends, to be priced at $12.95, is a 13-track collection of live recordings. Consumers can purchase the album directly from www.jasonmraz.com. (Via Digital Music News. A week-old press release is here.)

• Artists manager Peter Jenner told The Register CD prices would increase as a result of a blanket license that enables legal file-sharing. The physical market, he figures, will dry up and prices will rise accordingly. I think that's an accurate assessment, though Jenner must know there are powerful retail forces that will fight higher wholesale prices. Prices won't jump wildly, though. Labels are still bullish on the CD format and will stay behind it. The Register sees the CD's longevity; audio quality is one reason for its resilience. (Read article at The Register)

Posted by Glenn at 7:45 AM | Link
|Digital Distribution||P2P||Publishing||Universal Music Group|

Other major labels have done small experiments with the MP3 formats and now EMI's Blue Note joins the small fraternity by selling a new Norah Jones single in the MP3 format. Immediately, a chorus of journalists proclaimed, "It's about time." After reading yesterday's articles and blog posts, you would get the impression that the MP3 format will usher in unparalled growth in digital music sales. Hold on. Sales growth will require more than a format change. Consumer's motivations involve price and convenience, too.

Why sell MP3s? The popular explanation is that consumers dislike DRM and are better off without DRM. The two real reasons are iTunes' dominance and digital sales' lack of growth in the middle of 2006. Blue Note's consideration of the MP3 format has nothing to do with the benefit of consumers and everything to do with making money. Consumers may end up benefitting from the MP3's greater freedom, but this is not an excercise in corporate social responsibility. EMI wants to increase sales of digital music. One possible way of doing this is to allow the sale of MP3s, which the majors have not done only with isolated experiments.

The main sales driver in the case is the degree to which people value the MP3 enough to shop around. Apple will be the first to brag about its digital sales record, but has success come simply in spite of DRM? Coolfer believes the average consumer does not mind DRM -- and doesn't even know exactly what it is. Today at Digital Music News, Paul Resnikof expressed the same opinion.

"Protection schemes have been blamed for dampening overall download purchases, though pricing lurks as a potentially bigger culprit. Remember that Apple sells an overwhelming percentage of paid downloads, all wrapped with its FairPlay protection system. Yes, FairPlay is a DRM system like any other, but do users really care? Probably not, especially since tracks rarely trip a usability wire within the iTunes+iPod circle."

There is, however, a (possibly small) market to be tapped. Call it the disgruntled techie segment. These consumers are knowledgeable about file formats and stubborn enough change their purchasing habits. Offer them MP3s and the segment will return to buying major label music.

Since labels do not have variable pricing, and therefore cannot price discriminate (although subscription services fill that void a bit), an option is to segment the market by desired file format. Selling MP3s fits in that strategy. Imagine a website that licenses music to sell only the Ogg Vorbis format. It would contrast nicely and probably overlap very little with consumers who won't leave iTunes regardless of the DRM.

We can look at this from a plain old distrubution standpoint. If iTunes only works with the iPod, and labels want alternate routes to the iPod, and labels are unhappy with iTunes' Rockafellerian market share, then they need to try selling MP3s at other online stores. The best way to diminish the power of one retailer is to prop up other retailers.

Just how much can MP3 offerings at a store not named iTunes succeed? Let's look at the two biggest MP3 experiments to date. Jessica Simpson's "A Public Affair" single and Jesse McCartney's Right Where You Want Me don't appear to have changed the status quo. I don't know what Yahoo has sold, but McCartney's album has sold an overall 4% at digital stores (nothing out of the ordinary). There were over 530 different, customized versions of the Jessica Simpson single, and Yahoo! sold a total of 7,636 tracks, according to Soundscan. In contrast, the regular "A Public Affair" single has sold over 414,000 units. Almost all most certainly came from iTunes. If iTunes is responsible for 80% of "A Public Affair" sales, then sales of the Yahoo! MP3 version are only 2.3% of iTunes' sales of the regular single.

If consumers really want MP3s -- and the jury is out on the lengths they will go to get them -- more experiments will be needed to know for sure. Not one very six weeks, but large-scale experiments that will lead to entire catalogs being sold in the MP3 format.

Posted by Glenn at 12:06 PM | Link
|Digital Distribution||Digital Music||EMI|

• JupiterResearch has found that adoption of the iPod and other MP3 players has driven awareness of digital music products and services. That and other findings are detailed in the company's new US Music Consumer Survey, 2006. There are some good stats in the press release (and undoubtedly more in the report) but here's my favorite: Only 18% of online adults have more than 1,000 songs on their computers. (Read press release)

• Ken Parks, formerly the SVP of Strategy and Business Development at EMI, was hired by Brilliant Technologies to be the Chief Operating Officer. Brillaint is preparing to launch Qtrax, an ad-supported P2P music service. (Read press release)

• IODA scored a good one with the additional of ATO Records to its roster of digitally distributed labels. The label was founded by Dave Matthews and his manager. Its roster has David Gray, My Morning Jacket, Gomez, The Whigs and others. Also new to IODA are Barnaby Records, Blind Pig Records, Estatic Peace and KOCH Records. IODA counts over 40,000 new tracks in the last six months. (Read press release)

• Asylum Records signed rapper Freekey Zekey to a multi-million dollar deal -- just days after he got out of prison. The deal, he said, "took two minutes." Better check the fine print. A mixtape will precede the Asylum/Diplomat Records debut that is slated for March or April of 2007. (Read article at All Hip Hop)

• How MySpace and YouTube are changing the careers of musicians in Missoula, Montana: Booking their own shows, virtual tours, homemade videos and networking with other bands. "It forges a nice community… that enables us to hear each other’s music," said one artist. Great article. (Read article at New West)

Posted by Glenn at 7:58 AM | Link
|Digital Distribution||EMI||Research|

Back in August the reviews of Chris Anderson's The Long Tail were popping up and the Wall Street Journal's Lee Gomes had a critical review of the hit book. Gomes called out the "current popularity of Web utopian fantasies about the way sales of niche products can rival those of hits." Looking at the economics of the long tail, I wrote that aggregators and distributors, not creators. Makes perfect sense. Somebody, something must handle the incredible volume of content. Per-transaction margins will be low, but volume will be high. Pennies to a creator are just pennies. Aggregators, though, will get mountains of pennies.

Now a Bear Sterns analyst has come out with a report that says the sweet spot of the content supply chain may be in the middle. The tile of the report is "The Long Tail: Why Aggregation & Context and Not (Necessarily) Content Are King In Entertainment." It tracks the changes in content distribution over the years (TV stations, cable, Internet).

"Most believe the balance of power is shifting to content owners," it says. "However, technology is altering economics of content creation as well." Lower costs and greater flexibility in the creation, storage and distribution of content have resulted in a proliferation of content. The result is what Bear Sterns calls an "economy of abundance." Filters are "required to connect users with content that appeals to their interests" and aggregators such as Google, AOL and Yahoo are tagged as viable competitors, but lack a detailed long tail strategy, says the report.

Posted by Glenn at 12:16 PM | Link
|Digital Distribution||Long Tail|

• "American Idol" contestant Jennifer Hudson has signed with J Records. The singer will start recording her debut in January of 2007. (Read post at Access Hollywood)

• The Game's business partner, John Abbey, was arrested last Friday for allegedly laundering money from gansters. Abbey and The Game are partners in the label Black Wall Street East recording studio. The Game was not indicted. (Read article at Baller Status)

• Record labels lost their case against Chinese search engine Baidu.com. A court found that use of the search engine did not contitute an infringement because the music files -- which was found via searches at Baidu.com -- were hosted on third party servers. The IFPI said it would support the labels if they chose to appear the decision. (Read article at BBC News)

• Digital Music Group has added four more labels to its roster: Hacienda Records, Evangeline Recorded Works, Brilliant Classics and The Loser's Lounge. (Read article at Sacramento Business Journal)

• An article on the legal battles surrounding a $15 million bid for Jimi Hendrix's songs. (Read article at Law.com)

Posted by Glenn at 8:30 AM | Link
|Digital Distribution||Legal|

• Vivendi received approval to acquire BMG Music Publishing from Bertelsmann. The combine music publishing company is bigger than current leader EMI Music Publishing. (Read article at Billboard.biz)

• IRIS Distribution and Sonific created a partnership that will add tens of thousands of master recordings to Sonific's catalog of songs available for use with Sonific's SongSpots widget. SongSpot can be placed on a blog or website and will stream music from Sonific's catalog. (Read press release)

• Research and Markets has released the second volume to its "Ringtones: Past, Present and Future" report. Among the reports conclusions: labels are in "an explosive growth phase," "the outlook for pure-play mobile content aggregators is bleak" and covertones, or ringtones comprised of cover versions of popular songs, "are here to stay as a viable component of the market." (Read press release)

• Apple scored a deal with six airlines to place iPod docks in passenger seats. One key component: Each seat must have its own video display, which rules out most of the planes I encounter. Expect to see the new system used mid-2007 by Air France, Delta, Continental, Emirates, KLM and United. (Read post at Digital Music News)

• The FCC announced a public hearing on media ownership that will be held in Nashville on December 11th. (Read article at Radio Ink, download PDF of