Far better than my puny blurb about the file-sharing provisions in the Higher Education Act is William Patry's post on the subject. To whet your appetite:

This raises one of the features of Washington DC that rightly baffles those outside the Beltway: how is that a trade association gets an issue so wrong, but then still manages to get legislation passed that addresses a non-problem that the association deliberately concocted? The answer, supplied by Mr. Glickman, is: leadership.

MPAA’s initial efforts were defeated fortunately, and the history of the bill during late 2007 and early 2008 is recounted in a series of very informative posts by Anne Broache for Cnet here, here, and here. Congress, in the bill that just passed, instead of mandating filtering and bad boy lists, mandated various requirements for educators to undertake, all of which involve spouting MPAA and RIAA’s propaganda.

Posted by Glenn at 1:30 PM | Link
|Legal||P2P|

There's a good deal of news today about the British plan announced today that will see labels work with ISPs to curb piracy. The Independent reported that British ministers are backing proposals to tax ISP subscribers for music sharing. After reading up on the matter, I think The Independent jumped the gun (which led to a misled eruption across the Internet) and included a tax when the Memorandum of Understanding does not contain such a proposal. Billboard.biz has a good article on the anti-piracy plan and doesn't mention a tax. Here's the BPI press release and the IFPI press release.

The Guardian has a transcript of a call with the BPI that has a very good explanation of the plan. In it, BPI chief executive Geoff Taylor said the report of a tax was incorrect. "A widely-applied tax probably isn't the way forward here" and the idea "hasn't ever been tabled," he told reporters on the call.

What the BPI outlined was a five-point plan to educate and warn ISP customers as well as develop "innovative new music services" (the Sky-Universal service was singled out as an example).

Here's how this will shake out. First, ISPs adopt a code of self-regulation to prevent the government from doing it for them. Second, labels will continue with their education campaign to prop up the value of music. Third, ISPs will send out thousands of letters every week to suspected infringers. Fourth, steps will be taken to deal with repeat infringers (note that Britain does not want to take after France's "three strikes" proposal). Fifth, customers will be pointed to legal alternatives, which could be a new generation of music service formed in partnerships between labels and ISPs.

And what will happen If and when steps one through five fail to reach the desired outcome? That's probably when the reported tax comes in. I imagine the parties involved would like to keep the tax as a last ditch effort and let the five-point plan have its chance. In the end, they could end up pushing for a tax. I place little faith in a broader education campaign and a bit more in labels' and ISPs' ability to create viable, legal alternatives. Labels could be content if ISP-based music services ease piracy's sting and if ISPs can adequately convert infringers to their legal, paid services. Then again, I think labels will always have fits knowing that any piracy exists. Digital piracy isn't going away unless its taxed out of existence, so a tax will always be seen by some as a viable tool.

(By the way, the memorandum was signed by the Motion Picture Association as well as the major labels. Labels wouldn't be the only parties after that tax revenue.)

As for the revenue that could be gained if there was a tax, it could plug some holes. The Independent puts the number of broadband subscribers engaged in music piracy at 6.5 million. At a £30 annual tax, that's £195 million in revenue per year. Something in the range of £200 million would get UK recorded music revenues back to its 2003 level of £1.23 billion.

Posted by Glenn at 2:54 PM | Link
|P2P|

Wired's Threat Level has a good article on its interview with two lawyers from the MPAA. The blog was one of many that covered the MPAA's "making available" position in the Thomas P2P case. Said one lawyer, "It is a distribution by putting works in a shared folder. You can deem that copies are being made. That goes for the indirect proof. Having it in a shared folder is indirect proof of actual copying of another user."

The Progress and Freedom Foundation (see list of sponsors on its Wikipedia page) comes in on the side of the RIAA. You can read a post here.

Extra reading:

• Patry Copyright Blog on an amicus brief filed by the Progress and Freedom Foundation. "That’s one reason the RIAA should lose: it has no proof there was ever a distribution of a physical object, a copy. Forget policy arguments; that’s what the statute says. Everything else (including many of the amicus briefs) are irrelevant."
• "More on the Metaphysics of Making-Available" at the Silicon Valley Media Law blog.

Posted by Glenn at 4:13 PM | Link
|Legal||P2P|

In a first for a music trade group and an ISP, Virgin Media is teaming up with the British Phonographic Industry (BPI) to educate its customers on illegal downloading. The ISP will send to customers it suspects of illegal downloading will be sent information on legal download sources and other information. From the press release:

As part of the campaign, customers whose accounts appear to have been used to distribute music in breach of copyright will receive informative letters, one from Virgin Media and one from the BPI. Accounts will be identified to Virgin Media on the basis of information supplied by the BPI. Both letters will be distributed by Virgin Media, without the need to disclose customer names and addresses to the BPI.

And further on...

Geoff Taylor, chief executive of the BPI added: “Education is absolutely key to reducing the extent of illegal downloading, and we are pleased to be working with Virgin Media on this campaign. We believe that new partnerships with ISPs can help build an internet in which music is properly valued. That will benefit not just musicians, songwriters and labels, but all internet users who love music. This joint campaign with Virgin Media is the first step towards achieving that goal.”

I don't think education is the key to a material decrease in illegal downloading. Perhaps subscribers would get so annoyed by frequent receipt of "informative letters" that they'd change behavior just to avoid getting them. Anyway, I highly doubt this is the sort of partnership the BPI really wants. No, trade groups want filtering and revenue sharing. But "informative letters" are an improvement on the sour relations typically had by these parties.

Posted by Glenn at 12:01 PM | Link
|P2P|

(Update: The BPI says it does not have a deal with Virgin Media to monitor ISP traffic in order to curb illegal file sharing.)

Thank you, United Kingdom, for beating the U.S. to the three-strikes-and-you're-out ISP policing that music trade bodies have demanded for years. You test it out, go through the public firestorm, work out the kinks, and then we'll decide if it's going to be part of the America's scheme to monetize/police music downloading.

How will it work? From The Telegraph:

The trial by the UK's largest residential broadband supplier will go live within months and disconnecting customers who ignore warnings, a sanction favoured by the record BPI, remains an option. The trial will also be open to film and television studios. ...

The BPI has teams of technicians to trace illegal music downloading to individual accounts. It will hand these account numbers over to Virgin Media, which will match them to names and addresses.

One can go back to October 2007 to a commentary by the BPI's Geoff Taylor to see the trade group's approach.

We are confident that the prevalent culture of online copyright theft will be curbed through a combination of consumer education, stricter enforcement by industry and government, new business models and more robust action by ISPs against online copyright theft. Simply put, we have too much to lose as a society, economy and culture if we do not ensure that creators’ efforts are rewarded, and we believe that the internet will become an environment in which creativity can be effectively monetised.

I'm surprised by the momentum this ISP policing scheme has attained in Europe. The difference may be those countries' tendency to treat music as a cultural issue rather than just one of business. (Entertainment companies are probably very good at playing the culture card to protect their interests.) Governments are more likely to step in when the nation's culture is perceived to be at risk. Just a few months ago, in January, most everybody thought U2 manager Paul McGuinness had gone off the deep end when he blamed ISPs for facilitating and profiting from illegal downloading and called for traffic filtering. But the British government warned it would pass legislation unless the ISPs voluntarily reached an agreement with content owners. And here we are.

Posted by Glenn at 12:56 PM | Link
|P2P|

The music industry has for a few months been attacking ISPs from all angles. Check out this article TorrentFreak (which cites this article at Ireland.com) about legal proceedings that have just began in Ireland against an Irish ISP.

Here's a blurb from the Ireland.com article:

Latest figures available, for 2006, indicate that 20 billion music files were illegally downloaded worldwide that year. The music industry estimates that for every single legal downloaded, there are 20 illegal ones.

Due to illegal downloading and other factors, the Irish music industry is experiencing "a dramatic and accelerating decline" in income, with the Irish market suffering a decline in total sales from €146 million in 2001 to €102 million last year, said Willie Kavanagh, managing director of EMI records (Ireland) and chairman of the Irish Recorded Music Association (IRMA).

Mr Kavanagh told the High Court he would attribute a substantial portion of that decline to illegal peer-to-peer downloading services and the increasing availability of broadband internet access.

I'd like Mr. Kavanagh to define "substantial portion" or at least offer a range. I'd ballpark it at 10-30%. Recall the CapGemini study that put piracy's impact on the drop in UK recorded music from 2004 to 2007 at 18%. Gaming and format substitution are silent but more dangerous predators.

Posted by Glenn at 12:09 AM | Link
|P2P|

A panel at Canadian Music Week predicted file trading would be a paid experience within a couple of years (read article at the Toronto Star).

The one thing in the article that just jumped out at me was a quote by David Hughes, senior vice-president of the RIAA's technology division. He foresees ISPs offering a subscription-based service ("as much as $12 a month") that will be charged according to bandwidth used. Wow. Sounds to me like an RIAA exec is predicting an ISP fee that will pay content owners. While his statements were not exactly an explicit stamp of approval, that's about the clearest endorsement of a legal P2P model I can recall hearing from the RIAA. What other subscription plan could he have been talking about? The panel was about future and legit P2P models, not ISP pricing strategies.

A system that increased broadband prices for low-bandwidth consumers, said BigChampagne's Eric Garland, was not a good solution. "Maybe the ISPs will have to find the bandwidth hogs and charge them extra," he said.

Gary Greenstein, who specializes in financing in digital media, sees the lack of ads in P2P applications as lost revenue. Users, he said, are "looking at an empty screen waiting for searches and downloads – that's a huge and untapped opportunity for advertisers." Ah, the SpiralFrog approach. I should point out that when I used SpiralFrog I toggled away from that window and did something else while my files downloaded. I assume others have the same ability to multi-task rather than stare at a screen and watch the download's progress.

Posted by Glenn at 10:22 AM | Link
|Conferences||P2P|

• The UK government is considering proposals that would force ISPs to look for illegal music downloads and cancel the service of repeat offenders. (MacWorld)

• Geoff Taylor, chief executive of the British Phonographic Industry, writes in an op-ed in The Times that telecoms are profiting at the expense of the music industry, and he calls for ISPs to monitor their traffic and sniff out illegal music downloads. (Times Online)

• This looks like a coordinated effort: Here's a report that file-sharing takes up 95% of web traffic at night. (Times Online)

• British ISPs want the music industry to pay for any lawsuits that arise from the suggested policing system. (The Register)

• An upcoming web site called Lovelive Channel, an Internet-delivered TV service for live concerts, has been developed by Beggars Group, Mama Group and Perform Group. Warner Music International will provide video production expertise. Most of the concerts, up to 300 a year, will be free and supported by advertising. Users can pay for an exclusive premium section. (Billboard.biz)

• Jupiter's Mark Mulligan on the MusicStation Max mobile music service: "MSM is a welcome and valuable addition to the digital music landscape. If it and (Nokia's Comes With Music) can get operators and remaining labels on board they have the potential to be critical additions to the digital music mix." (Mark Mulligan's Blog)

• An interview with John Webster of the Music Manager's Forum. "I don’t think the internet differentiates between major and minor or artists. It may well differentiate between well marketed and not." (e-consultancy)

• One of my few posts about the 2008 Grammy Awards: The winners list. (Grammy.com)

Posted by Glenn at 8:49 PM | Link
|P2P|

The International Herald Tribune has a good look at how the record industry is trying to define, offer and monetize "free" music.

Qtrax, a free, ad-supported P2P service that will launch tomorrow (in the U.S., Canada and seven other countries) is a centerpiece of the article. Qtrax, which has signed up all four majors, claims its music will be portable for PC users by February 29 and for iPod users by April 15. PC users will get Qtrax tomorrow but Apple users will have to wait until March 19, according to Qtrax chief executive Allan Klepfisz. (Read more about Qtrax at this Silicon Alley Insider post.)

The most sensible quote from the article is from Jamendo CEO Laurent Krantz: "Free is complementary. Free is not the opposite of pay. We see there is no cannibalization with free."

Update: Universal Music Group and Warner Music Group both deny they have licensed their catalogs for use in Qtrax's service. "Over the weekend, QTrax officials were still trying to convince Warner and UMG to sign on. On Saturday Robin Kent, who handles marketing for the company, allowed that its paperwork with labels might not be up to date." (Silicon Alley Insider)

Posted by Glenn at 1:28 PM | Link
|Online Stores/Services||P2P|

The Washington Post article I posted about yesterday is getting more attention. Journalist Marc Fisher and the RIAA's Cary Sherman were guests on NPR's Talk of the Nation. You can stream the show here.

I still don't agree with Fisher's argument. Regardless of the merits of the RIAA's position, Sherman did a fine job refuting Fisher. Fisher, on the other hand, did nothing more than show he has a bone to pick and is frustrated with how the RIAA has used the courts. Sherman easily picked apart Fisher's thesis and shed a light on his shabby journalism.

Posted by Glenn at 5:49 PM | Link
|P2P||RIAA|

This just hit the wires: A judge has thrown out an antitrust lawsuit filed by P2P client maker LimeWire against the four major music groups. From the AP:

"Lime Group had claimed the record labels sought to monopolize the online distribution of music and refused to license their works to the company in an effort to put it out of business.

The firm contended it sought to reach an agreement with the labels so that it could field a licensed music service, but the record labels refused to broker a deal, insisting it use a filtering system approved by the labels or reach an agreement with iMesh Inc., a rival file-sharing service that has been operating with the blessing of record labels since settling a copyright infringement case in 2004.

(Judge) Lynch concluded Lime Group didn't show any facts to suggest the record companies' actions were 'anything other than independent decision-making by each company to refrain from doing business' with Lime Wire. ...

Lynch also rejected claims by Lime Group that the record labels had engaged in unfair business practices, including hacking the firm's file-sharing network and claiming it promotes child pornography, on the grounds that the alleged actions were not anticompetitive."

Bonus reading: An article on LimeWire's October 2006 countersuit. "LimeWire’s complaint stated it was extremely difficult to negotiate with the music industry, which LimeWire felt took an uncooperative position. If LimeWire wanted to comply, it would have to conform to a standard similar to iMesh – which in LimeWire’s opinion is and was uncompetitive. Indeed, LimeWire’s counterclaim becomes hostile against iMesh, claiming it has an unusually close working relationship with the RIAA."

Posted by Glenn at 9:37 PM | Link
|Legal||P2P|

At the blog of Michael Geist, I saw that the back-and-forth about research on P2P's impact on music purchases is still going on (as if it was ever going to stop).

Birgitte Andersen, co-author of a study on P2P funded by Industry Canada, posted reactions to criticism by University of Texas economics professor Stan Liebowitz.

In the comments section to that post came commentary from Zeljka Kozul-Wright, an economist with the United Nations Conference on Trade and Development, who referred to an upcoming paper she is co-authoring titled "Creative Destruction in the Music Industry and the Copyright." She finds fault with Professor Liebowitz's conclusions and calls for

"To hold file sharing uniquely responsible for the decline in record sales i.e., largely unauthorized downloading, is basically erroneous and far too simplistic. Moreover, such an assertion indicates a lack of understanding of the dynamics of the current process of creative destruction and transformation to the digital paradigm in the 'recorded' music industry. The word 'recorded' itself denotes a kind of backward looking perspective, as it may no longer be the primary technological format for the rapidly converging music-ICTs-entertainment-telecommunications industry in the third millennium. ...

Our own research would support the arguments made in the Andersen and Frenz Study, 2007, that indeed there may be a significant positive relationship between file sharing and purchase or greater use of various other formats containing music content (although not necessarily record sales per se). ...

The more recent, healthy overall industry earnings indicate the opposite of Liebowitz' assertion that ...'file-sharing appears to have caused the entire decline in record sales and appears to have vitiated what otherwise would have been a growth in the industry' (Liebowitz, 2007). There is no empirical basis for such a facetious assertion. Additionally, there may be many other reasons for decline in record sales (the white elephant in the room), other than increase in file sharing (e.g., transformation to the digital technological paradigm, excessively high prices of CDs, i.e., excessive mark up, standardized quality, decline in purchasing power for luxury goods, lower degrees of choice and diversity, etc).

File sharing and downloading not only increases market exposure but significantly reduces marketing and advertising costs. File sharing, as the imminent dominant mode of music consumption, is proving to be more 'efficient' than simply purchasing pre-recorded music. Owing to diffusion of technical change, it is far cheaper, as it reduces the costs of intermediation and allows consumers greater choice over listening patterns; facilitating the growth of demand-driven patterns of consumption thereby enabling greater consumer participation, and more interactive modes of consumption. Global consumers as well as new producers can benefit greatly from the new P2P file sharing technologies that should be facilitated and legalised, rather than hindered."

A few comments. First, which "recent, healthy overall industry earnings" is Kozul-Wright referring to? (I know quite a few companies, from recorded music to brick-and-mortar retail to digital distribution, that have found "healthy" earnings -- or any earnings -- to be pretty elusive lately.)

Also, she says file-sharing reduces marketing and advertising costs and increases market exposure. Yes, but in practice it's no panacea (which explains why free music is a difficult proposition). P2P can eliminate some costs (related to physical distribution and point-of-sale promotion) but will be replaced by other costs. (And since some consumers will still desire a physical product, the higher costs will not be removed completely.) Building awareness is still an expensive undertaking even if distribution costs are removed. Since P2P is a search-based technology, awareness must exist before a download can take place. Without awareness, market exposure is just untapped potential.

Anyway, I look forward to reading Kozul-Wright's paper and a continuance of the debate.

Posted by Glenn at 2:46 PM | Link
|P2P|

• French president Sarkozy has introduced an Internet policy plan that will cut off the Internet access of repeat offenders. A new government agency is to be created to demand data on suspected offenders from ISPs. The plan, drawn up by a retail executive, includes a few concessions to consumers: Downloads will be available without DRM, and movies will be released on DVD six months after they are shown in theaters. (The Register)

• The New York Times' Freakonomics blog has a Q&A with singer-songwriter Jonathon Coulton (you may have read about him in the April 2007 Times article on Internet-based musicians). One quote, having to do with the differences between mainstream and niche media, really stood out: "I think the best way to talk about the distinction is to say that Internet buzz has a very direct correlation to traffic and therefore sales, whereas mainstream media love tends to have more long-term benefits." So very true. Internet advertising can offer an immediate return on investment -- which can be falsely reassuring to those who have for years blindly accepted that advertising works -- but the effects can be very short-lived. (Freakonomics, via Digital Audio Insider)

• EMI Music UK is working with Art Vinyl, a designer frame manufacturer, to market its vinyl records along with frames. Art Vinyl frames flip open and allow the user to insert a vinyl record sleeve. (Press release)

• In Australia, PayPal and Warner Music are expected to start selling tickets and mobile concert tickets before the end of the year. (The Age)

• Two music companies made Mashable's list of 2007 turkeys: video site Bolt.com (Universal Music Group is an investor) and the ever-morphing Snocap. On Bolt.com: "Bearing in mind that rival YouTube also turned a blind eye and saw massive growth as a result - while more diligent law abiding startups failed to get any traction - we can put this down to a calculated risk that didn’t pay off this time around." As the old saying goes, First get an audience, then worry about licensing content. (Mashable)

• Record Mart, a Latin music store located in the Times Square subway station in Manhattan, has reopened after being closed for nine years. (NY1.com)

Posted by Glenn at 11:29 AM | Link
|P2P|

The debate over piracy is one that has no end. One one side you have Capgemeni's recent "value gap" study pegged piracy's impact on the U.K. music industry at 18% of its decline from its 2004 level. The majority of the decline, Capgemini estimated, was due to the unbundling of the album, or the substitution of a small number of digital tracks for an album.

But wait. A new Canadian study by academians Birgitte Andersen and Marion Frenz found that online piracy has no impact on CD purchases. (Download a PDF of the report here.) However, in the subset of Canadians who do use P2P services, file-sharing was found to increase CD purchasing (by 0.44 CDs per album download). The study assumes 29% of Canadians are P2P downloaders.

"In the aggregate, we are unable to discover any direct relationship between P2P filesharing and CD purchases in Canada. The analysis of the entire Canadian population does not uncover either a positive or negative relationship between the number of files downloaded from P2P networks and CDs purchased. That is, we find no direct evidence to suggest that the net effect of P2P file-sharing on CD purchasing is either positive or negative for Canada as a whole. ...

However, our analysis of the Canadian P2P file-sharing subpopulation suggests that there is a strong positive relationship between P2P file-sharing and CD purchasing. That is, among Canadians actually engaged in it, P2P file-sharing increases CD purchasing. We estimate that the effect of one additional P2P download per month is to increase music purchasing by 0.44 CDs per year."

Professor Stanley Liebowitz, who has studied the relationship between file-sharing and CD sales, commented on the Canadian study at his website (he refers to the authors as A/F):

"With these seemingly innocuous assumptions, the results of A/F imply that obtaining music illicitly should have increased record sales by 50% (since each illicit album increases sales by half a unit and there are as many illicit albums as legitimate sales). Contrary to the large increase in album sales predicted by A/F, album sales in Canada have fallen considerably since 1999. According to IFPI statistics unit sales were down 30% by 2005 whereas CRIA statistics indicate that unit sales were down by 20%. ...

To believe the results of A/F you must accept that sales have dropped by half in 6 years, due to some factor that no one can identify. Does this seem even remotely plausible? This would be such a steep decline in such a short period of time that it would seem impossible to not have a clearly identified cause. And A/F’s results rule out the possibility of other entertainment activities siphoning off record listeners."

So is online piracy a problem or isn't it? Judging from FCC Commissioner Deborah Tate's speech last week at Vanderbilt University, Washington D.C.'s perception is still that online piracy is a major problem. Commissioner Tate talked almost entirely about piracy -- online and physical -- and laid out numerous examples of piracy's negative impact on the entertainment industry and the economy as a whole. (Of course, Commissioner Tate knows what topic to focus on when in Music City.) Even though most of the figures could be questionable (e.g., sourced from trade groups like the RIAA and the IFPI), it was obvious that Commissioner Tate is dedicated to helping content owners fight online piracy.

Bonus reading: An April 2004 article at the New York Times about the well known Harvard/UNC study that found no link between file-sharing and CD sales.

Posted by Glenn at 8:46 PM | Link
|Academia||P2P|

• Radiohead is reportedly close to signing deals for the physical release of In Rainbows that will circumvent major labels. XL Recordings will handle the album outside of the U.S. while Side One, an offshoot of ATO Records and part of the Coran Capshaw empire (that also includes Red Light Management and Music Today), will have the album domestically. (New York Times)

• Music publisher Primary Wave has inked a deal with television production company Reveille to administer the latter's music publishing rights. (Billboard.biz)

• Word is the Danish branch of the IFPI has "seriously proposed" allowing peer-to-peer downloading in exchange for a small monthly fee charged to all ISP users. (O'Reilly Radar)

• At a Zune party at CMJ, a Microsoft representative hinted that an upcoming Zune feature -- to use its Wifi to allow other people to see what you've been listening to -- could be used to let people see what artists and celebrities are listening to on their Zunes. Not only that, but the representative said the ability to view celebrity song plays would require an invitation (e.g. fan club members or people who bought a special edition CD). First thought: the infamous Beyonce iTunes playlist and the predictable and often boring nature of celebrity playlists. Second thought: This creates a better network effect that does the Zune-to-Zune sharing that requires that two devices be within a short range of each other. Third thought: Lots of free Zunes will have to be given to musicians and celebrities. (Listening Post Blog)

• In this podcast at The Register, we're told the average price paid for Radiohead's In Rainbows is around $5.00, far lower than what people tell pollsters and less than what the band could have made from a major label. (Open Season, via The Open Road)

• Songkick, which launched recently, is a website that offers music fans a database of concerts (in the U.S. and U.K.) by tracking 14 ticketing websites such as Ticketmaster.com and StubHub. One feature lets users search blogs for artists in the Songkick database. (TechCrunch)

• The Canadian Music Creators Coalition, a collection of artists such as Sarah McLachlan and Broken Social Scene, is pushing for copyright reform without suing music downloaders and without using DRM. (The Set List)

Posted by Glenn at 9:19 AM | Link
|P2P||Publishing|

• Napster's free, ad-supported music service has been laid to rest. (Digital Music News)

• Australian music sales fell 13.64% in value in the first half of 2007. CD sales were down 15.72% in units and 17.34% in value. Downloads and ringtones rose by 89.67% in unit value and only 47.48% in dollar value. (Billboard.biz)

• Monday Night Football unveiled its new music features last night. Snippets of a song by Kanye West, who has a new album out today, were played before commercials and during the halftime show. In the coming weeks, MNF will offer a prime-time audience for new releases by Foo Fighters, Matchbox Twenty, Kid Rock, Eddie Vedder (who has a solo album coming) and Irma Thomas & Marsha Ball. (Billboard)

• Another CD Baby post. (Why not? They're good stuff.) This time we have a breakdown of the value of CD Baby digital sales at all services. iTunes has accounted for 67.8% of all sales. iTunes Europe is at 5.5% and iTunes UK is at 4.6%. With its other territories, Apple accounts for 82.8% of total CD Baby digital sales. At number four is the best non-Apple store, Rhapsody, which has 4%. Napster is fifth at 3.6%. Further down the list are eMusic (2.3%, which may seem low but this is dollar value, not unit sales), Sony Connect (0.4%) and Ruckus (0.1%). (CD Baby, via Digital Audio Insider)

• SpiralFrog has had a rough four years but doesn't rule out going public. ZDNet points out the company must begin paying the interest on the $10 million in raised through the sale of secured notes. (ZDNet)

• Qtrax, the legal P2P service that will hopefully launch of these years, has hired a chief technology officer. Qtrax's CEO told Silicon Alley Insider the service would be ready by mid-September. Place your bets. (Silicon Alley Insider)

Posted by Glenn at 10:33 AM | Link
|Napster||P2P|

• Hallmark has launched its "Use Music Summer Tour." The seven-city tour coincides with the launch of 100 new Cards with Sound. In addition, the retail chain now offers iTunes gift cards at most of its stores. (Press release)

• The advocate general for the European Union of Justice said ISPs are not required to identify subscribers in civil copyright infringement cases. Promusicae, Spain's music trade group, had sued Spanish ISP Telefonica to force it to turn over information on subscribers suspected of sharing music via KaZaA. (Ars Technica)

• Blockbuster had its credit facility trimmed by $50 million and is thinking about reducing the footprint of some stores. (Video Business)

• What does Terra Firma have in mind for EMI? The Independent puts forth some good ideas. (The Independent)

• Universal Music Group chairman and CEO, Doug Morris, was elected to the board of directors of Columbia University's National Center on Addiction and Substance Abuse. Morris is a Columbia graduate. (Earth Times)

• The worst prediction of the week comes from Music Week editor Martin Talbor. On Prince's direct marketing campaign he told Time magazine, "If we keep moving down this particular route, companies will only release records that are sure home runs. That means either stuff by established artists or unknown artists doing cover versions. There is the danger that it will no longer be worth it for companies to invest in new, up-and-coming artists. And if record companies don't invest in them, who will." (Time)

• The British press is really eying the opening of a new Rough Trade store. BBC News has another article on the indie retailer's expansion plans. I suppose it is newsworthy given that the new store will have ten times the floor space of the old store, and this comes as so many have written off physical formats. Rough Trade believes the selling of music has been lost. "If anything, the people I talk to appreciate vinyl and CDs more than ever in this digital age. It's just that they've gone off the way it's sold. The High Street has, unfortunately, commoditised music. When you walk into a High Street record, or entertainment, store, it's about three-for-two and the price message is what hits you. And if you're interested in music, it's quite a demeaning, quite demoralising message to hit you." (BBC News)

Posted by Glenn at 7:49 AM | Link
|Brick-And-Mortor Retail||EMI||P2P|

• The European Commission cleared Terra Firma's takeover bid of EMI. Today is the last day of Terra Firma's extended bid period. (Dow Jones)

• The rootkit is back in the news. Sony BMG has sued The Amergence Group (formerly SunnComm), the maker of the anti-piracy technology included in Sony BMG CDs that resulted in public outcry, lawsuits and government investigations. (AP)

• Senator Russ Feingold is checking in with the radio industry to make sure they're complying with the FCC's directive to enforce the ban on payola practices. He sent a letter to executives at Clear Channel, CBS Radio, Citadel and Entercom that asked for information on access the companies have given to artists and labels. "Have you taken any efforts to increase the amount of access provided and to facilitate submissions?" he asked. (Billboard.biz)

• The Wall Street Journal's Sarah McBride has an article on radio stations' analysis of P2P traffic to help create playlists. Clear Channel's Premiere Radio Networks has a venture with BigChampagne that offers traffic data to radio stations. She tells the story of Shop Boyz' "Party Like A Rockstar," which was big with file sharers but wasn't getting requests. Eventually, the requests started to roll in -- especially in text messages from mobile phones -- and track downloads increased as well. (Wall Street Journal)

• Fox and the production company behind "Laguna Beach" and "The Hills" are planning a reality TV series called "Nashville" that will follow musicians trying to make it in Music City. The show will feature Sony BMG artists Chuck Wicks, Matt Jenkins and Mika Combs. (Music Row)

• Just as Kelly Clarkson's My December album dropped 60% in its second week, rumor is that RCA pulled Clarkson's summer TV and print campaigns and are focusing on the upcoming Carrie Underwood album. (Kings of A&R)

• Swiss consumers will have to pay a tax on digital music players and some types of A/V recorders. (SwissInfo)

• Napster unlimited over-the-air download service launched with NTT DoCoMo in Japan. The service is integrated with the PC-based Napster To Go service. Here's a new twist for Napster: Customers have the option of paying for Napster through their DoCoMo bill. Whether or not mobile subscription services will take off is still up in the air, but these are positive steps. I like the billing option a lot. (No link to press release yet.)

• EMI and management company Union Entertainment Group have formed a joint venture record label called Audionest. The label will be distributed by Caroline. UEG manages rock bands Nickelback, Default and Candlebox. (Billboard.biz)

Posted by Glenn at 8:09 AM | Link
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• Telecom company Sprint has become the first company to underwrite a song that is aimed for P2P networks. "According to sources familiar with the deal, Media Defender will push 16 million Plies song files embedded with the Sprint logo onto peer-to-peer networks over a three-month period in return for a "substantial six-figure" fee." (New York Post)

• The fighting over Prince's free giveaway CD has reached comedic levels. Billboard.biz reports that Virgin Megsastores is angry that HMV has decided to sell the Mail on Sunday, with which Price's Planet Earth CD will be bundled. Said a Virgin exec, "Simon Fox [HMV chief executive] labelled the Mail on Sunday deal as 'devaluing music' and 'absolute madness', now they appear to have joined forces to sell more copies of the very same paper. It's not only retailers that suffer; the public will suffer in the long term by restricting choice on the high street. Of course people will take a free CD by a platinum-selling artist like Prince but you only need to look at what's happened to Fopp going into administration to get an idea of the potential long-term impact." Fopp, of course, would be in financial distress whether or not the rare artist gave away his album. With this decision, HMV is showing something that is all too rare in music retail: the ability to adapt. (Billboard.biz)

• Statistics to be announced this week are expected to show that U.K. album sales are down 10% (much better than the 15% drop in the U.S.) while digital sales are expected to almost double. "At Easter, industry bosses forecast a 4-8 per cent decline in revenues, but at least one of the four biggest companies is preparing for an 11 per cent tumble as the shift to digital starts to make its impact felt." (Times Online)

• A Mayoral Forum will be held in Nashville on July 11. The forum will gather 11 organizations such as the AMA, Nashville Opera, Nashville Chamber Orchestra and NSAI. (Music Row)

• The Tennessean's Jenny Song on Christian ringtones: "So far, Christian ringtones occupy only from 3 percent to 5 percent of the ringtone market at most, many in the industry estimate. But while the general ringtone market has flattened out ... sales and optimism for Christian ringtones are on the rise. EMI Christian Music Group of Brentwood, the largest label in the Christian music industry, for example, says daily sales of its ringtones have gone up by more than three times since AT&T separated Christian ringtones into a major category in April. "(The Tennessean)

• The life, times and semantics of indie. (The Guardian)

Posted by Glenn at 7:41 AM | Link
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• Only 3.6% of EMI investors accepted Terra Firma's $4.8 billion bid, which led Terra Firm to extend the offer to July 12. (Bloomberg)

• Overall sales were down 1% last week and were 8% below the same week last year. For the year album sales are down 15%. Sales of digital tracks were also down 1% last week, and were 40% ahead of the same week last year. Year to date, sales of digital tracks are up 49%.

• Clive's fears came true: Hannah Montana topped Kelly Clarkson last week. Montana debuted with 326,000 while Clarkson's My December debuted with 291,000.

• A Belgian court has ruled that Internet Service Providers must use the technical means available to stop illegal file-sharing on their networks. The IFPI is, of course, thrilled. (Press release)

• Sony BMG is trying to renegotiate the terms of its music publishing joint venture with Michael Jackson that will allow it to sign songwriters. The current terms of Sony/ATV does not allow Sony to sign competing songwriters. Talks are reportedly at an early stage. (Times Online)

• David Cameron, leader of the Conservative Party, has a deal for the British music industry: Stop with the misogyny, guns and materialism and he will support an extension of copyright to 70 years from 50 years. (Times Online)

• Edna Gundersen writes about Live Earth and "benefit fatigue" that could limit its effectiveness. My fear is that people move on," said Grammy producer Ken Ehrlich. The Pet Shop Boys' Neil Tennant worried about "the idea of rock stars lecturing people as if they know something the rest of us don't." (USA Today)

Posted by Glenn at 7:49 AM | Link
|EMI||P2P||Publishing||Sony BMG|

• Album sales were down 7% last week and were 5% lower than the same week last year. For the year, album sales are down 15%. That's a two-point improvement in just two months. Sales of digital tracks rose 2% for the week and were 44% higher than the same week last year. For the year, digital track sales are up 49%. Two months ago, digital tracks were up 52% for the year. Three months ago the number was 53%. One might find it odd that album sales are improving against last year's pace while digital track sales are worsening against last year's pace. I have two thoughts on that. First, it confirms the popular belief that last year's album release schedule was weak. Second, digital track sales' pace could be the result of slowing digital music player sales (see second-to-last news item below).

• Finally, somebody comes out and admits that the iPhone isn't going to impact the recorded music business (at least in the near term). AP's Alex Veiga is right when he wrote that sideloading still trumps the unfilled promise of ubiquitous, over-the-air download. That means the iPhone is a very expensive version of the iPod...which is already pretty ubiquitous. Forrester's Charles Golvin didn't have to go out on a limb when he said, "I imagine most of the people who'll buy the iPhone will be iPod users already." (AP)

• As part of Universal Music Publishing Group's acquisition of BMG Music Publishing, UMPG is combining its Nashville operations. Pat Higdon has been named EVP and GM of UMPG Nashville and will report to chairman and CEO David Renzer. (Nashville Business Journal)

• Vanessa Carlton has signed with Irv Gotti's The Inc. Her third album, already recorded, was produced by Stephan Jenkins (Third Eye Blind) and includes songs co-penned by Linda Perry. (Billboard.com)

• The Format is giving away for free its "Dog Problems EP" at the band's website. The freebie lasts until July 16th and is happening because the band owns its own publishing and master recordings. "We'd be doomed if we sat around and waited for things like radio play to come around," said singer Nate Reuss. The EP was released through The Vanity Label. (The Format, via Out The Other)

• Here's the next RIAA heart attack: Is Google better than LimeWire for sharing music? One person things so, and has shown how using the search tag "index.of" will lead Google to reveal directories and not actual web pages (view YouTube video). Those directories shows files that people have stores on servers but have not linked to web pages. His website, JimmyR.com, has instructional videos and tips on how to get audio from YouTube videos, how to put a Google MP3 search on your website, and it has its own Google search that simplifies searching for MP3s, albums, torrents, PDFs and ringtones. (Slyck)

• Sanctuary's radio promotion department is closing. (Billboard.biz)

• I missed this on Friday: Digital music player sales are down 20% this year. Analysts are giving two key reasons for the drop: Music-enabled mobile phones and a penetration rate that is approaching saturation. (AP)

• Edison Research says the Internet is approaching television as the "most essential" medium. Among those surveyed, 36% voted for television and 33% voted for Internet. "In almost every category we surveyed, the Internet has doubled or tripled where in consumer's minds it bleeds into all facets of their lives." (Internet News)

Posted by Glenn at 7:09 AM | Link
|Apple||P2P||Publishing||Universal Music Group|

This morning the New York Post's Peter Lauria reported that online music service Qtrax will launch in October of 2007 and has deals with all four major music groups. Brilliant Technologies will merge Qtrax with a company called Flooring Zone so the music service can be traded publicly. The scope of Qtrax's offerings is immense.

" With a full complement of songs from the major labels as well as the esoteric live recordings and personal tracks stemming from users' own collections, Klepfisz estimates Qtrax will have access to between 20 million and 30 million copyrighted songs at launch in October.

At that size the service could not only be considered a legitimate threat to Apple's iTunes, which only features 5 million songs, but also a better economic proposition as well (record labels collect about 70 cents on each iTunes sale)."

The company estimates its initial revenue will be as high as $175 million and as low as $20 million.

Qtrax is what I like to call "fake P2P" because unlicensed content if filtered out and restrictions are placed on the file format. The company calls itself "P2P2A," meaning peer-to-peer-to-artist, and boasts that is the world's first licensed Gnutella client. This April 2007 article at the New York Times is a good introduction to Qtrax and its ad-based business model.

Posted by Glenn at 10:45 AM | Link
|P2P|

• A PriceWatershouseCoopers report predicts a -0.4% compounded annual growth rate through the next five years. The report refers to the "typical" music business of recorded music, not the music publishing or other segments that are part of the entire picture. With music groups getting involved in other revenue streams, those figures will need to be adjusted in the coming years. (Billboard.biz)

• Rolling Stone continues its series on the new music industry, this time laying out five possible outcomes in the future of the business: ad-supported music, legal P2P, endless access points (only generalities were given), different revenue streams and consumers as retailers. Yeah, I know, I've heard it all before, too., but in the era of the 200-word article this is about as "think piece" as Rolling Stone gets. (Rolling Stone)

• Sonos digital home music systems are now available in more than 440 Best Buy stores. The national chain will offer in-store, interactive Sonos displays in all stores offering Sonos products. (The Independent)

• Universal Music Group has joined up with Delivery Agent Inc. to launch a custom online shop for Interscope recording artist Pussycat Dolls. Consumers will be find and purchase clothing products seen on the Pussycat Dolls. The stores will also sell exclusive, branded merch. Check out the "shopisodes," a cross between VH1's "Pop Up Video" and the Home Shopping Network. (Press release)

• Jupiter analyst David Card on Paul McCartney in an iPod commercial: "Boomers need to be more comfortable buying digital music, too, you know...almost 60% of paying downloaders in our survey base were under 35." (David Card's Jupiter Blog)

• Representative Henry Waxman has reportedly grown concerned over the possibility of sensitive personal and government information being inadvertently shared on P2P networks and has sent letters to Limewire and StreamCast Networks executives to inquire what steps they have taken to prevent such sharing. (Hollywood Reporter)

Posted by Glenn at 7:20 AM | Link
|P2P||Research||Universal Music Group|

Sony BMG became the third major to license its tracks to legal P2P system Qtrax (read press release).

The New York Times has an article today on Qtrax. According to Qtrax's president, the company is in talks with Universal Music Group and Merlin, an indie label trade group. News.com reported today that former SpiralFrog CEO Robin Kent is doing consulting work for Qtrax.

To call Qtrax a file-sharing service is misleading. So what if Qtrax uses the Gnutella client? There's no actual sharing of licensed tracks between users, and the protections glued into Qtrax files are nothing like the unprotected files acquired through real P2P. Though the Qtrax site boasts "unlimited free downloads and plays," the Times article said "listeners will be able to hear songs a certain number of times — probably five in the case of most major label acts" -- before they must purchase the song. (And what protected format that does not work with the iPod will users get to purchase?)

The Times' Robert Levine gets it wrong. "From the user’s perspective, Qtrax works much like any file-sharing program," he wrote. That's not true, and because that's not true Qtrax has a very tough hill to climb. I don't have much faith that its initial model will get anything more than a tiny niche of users.

Posted by Glenn at 11:48 AM | Link
|P2P|

NPD Research released some information today on America's P2P usage (read press release). Legal downloads grew considerably in 2006, but those sales are dwarfed by the volume on music acquired on P2P networks. By the end of 2006, NPD counted 47 million "digital music households" in the U.S., of which 15 million took at least one song from a P2P site (and 8% increase over 2005). iTunes users increased almost 66% to 12.6 million.

With that 8% increase in P2P users, though, came a 47% increase in the number of files acquired (5 billion versus 3.4 billion). In a New York Times article, NPD's Russ Crupnick pointed to access to hard drive space as an impetus for heavy P2P usage. "When I talk to people who are involved in a lot of peer to peer, they’re running around with external hard drives," he said.

NPD noted a slowdown in the growth of P2P traffic, which it called "remarkable given the growth in digital music users overall, the emergence of digital video, and the expanded consumer exposure to broadband."

I can imagine news of NPD's report will revive calls to legalize P2P. Last week, former EMI exec Ted Cohen had an op-ed in Billboard magazine that called for a six-month experiment that would monetize existing P2P traffic. The time is right for such an experiment, but labels have other ideas. Earlier today, EMI announced it would drop DRM from its downloads -- showing that is is far easier to simply charge more for DRM-free downloads (and continue to prosecute illegal file sharing) than it is to negotiate the kind of revenue-sharing agreement that would enable legal P2P. Consumers get interoperability, but EMI get to stick to their preferred (more centralized) methods of distribution.

Posted by Glenn at 7:19 PM | Link
|P2P|

Former EMI exec Ted Cohen has a piece in the latest issue of Billboard that is making the rounds (for those of us who do not subscribed and are locked outside the password-protected website). Cohen left EMI to form a consulting group. A few months ago, Reuters reported that Cohen was hired by P2P company Limewire to lobby on its behalf for the type of proposal he had now put in writing, so keep that in mind when reading this opinion piece.

If music is about freedom, Cohen says, then it's time to give it a shot. His short-on-details plan is for a six-month trial period to gauge the effectiveness of a legitimate, revenue-sharing P2P network.

"What I propose is an aggressive six-month trial by a major P2P service (any takers?) that could finally give us clear insight into the behavior of P2P users. Is it about interoperability, community and deep catalog, or is it all about free? We need to know.

Here's how it would work: Leave the service exactly as it is: no filtering, no DRM, no changes to its current offering of unprotected MP3s. The rare tracks, bootlegs-they all stay there. Just charge for each piece of content and split the revenue between the service and the content owners.

Yes, I know. Deals aren't in place with labels and publishers. Some content out there (bootlegs, etc.) isn't 'cleared,' and yes, it might keep some accountants working overtime. But wouldn't it be better to figure out how to allocate all the revenue than not to have it at all? For the 'gray' content, I suggest labels consider a 50/50 percentage share with the artists, obviating arguments on who owns it.

Cohen's idea comes at a good time, and the fact that this piece ran in Billboard and not Wired means his idea will probably gain a lot more traction within the industry. After years of tooth-and-nail litigation, the RIAA has made its point as well as its going to make it. Consumers, through their P2P-loving behavior, have also made their point. Why not try out Cohen's plan? Putting a sunset clause on this kind of experiment gives labels and publishers an exit plan and should cause them to be a lot less squeemish about the whole idea.

Posted by Glenn at 12:01 PM | Link
|P2P|

• 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
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