The Olswang Convergence Consumer Study 2008 was released today. It has some great insights into the downloading, purchasing and listening behaviors of British consumers. The survey reached 1,162 respondents -- 235 between the ages of 13 and 15, and 927 adults. Download the 55-page report (PDF) here. The music section starts on page 29 of the PDF document.

Respondents most frequently listen to AM/FM radio (62%) and CDs (54%) at least once a week. The third most frequent way to listen to music was listening to tracks ripped from a CD to a PC (44%). Listening to downloaded music and streaming music came in at 28% and 26%, respectively. A majority of two groups -- classified by Olswang as "tech laggards" and "kids" -- listen to CDs on a CD player at least once a week. A majority of both groups also listen to tracks ripped from CDs at least once a week.

Only 22% of the "laggards" listen to digital music on a portable device (that number is 81% for kids). The main reason given in focus groups was plain ol' disinterest. Laggards tend to listen to radio much more than other groups. For some in the kids group, YouTube has replaced radio as a form of discovery.

For all that music listening, only 14% of respondents said they purchase downloads once a week (and 10% said they download from illegal sites once a week). While record labels may shudder at knowing 10% believe the statement "Stream/download music illegally" best represents them, 39% chose "Don't obtain illegal online content -- it's wrong" while 36% chose getting caught or poor quality as reasons for not downloading or streaming from illegal sites.

Posted by Glenn at 2:32 PM | Link
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The use of the word "still" in the title really isn't necessary. iTunes isn't going to lose enough market share in just a few months to Amazon.com to drop below Wal-Mart. From today's NPD press release:

1. iTunes
2. Wal-Mart (Walmart, Walmart.com, Walmart Music Downloads)
3. Best Buy (Best Buy, Bestbuy.com, Best Buy Digital Music Store)
4. Amazon (Amazon.com, AmazonMP3.com)
5. Target (Target and Target.com)

Amazon.com moved from up one spot to #4 for two reasons: Online CD sales are stronger than brick-and-mortar CD sales, and the performance of its MP3 store. NPD used only the words "successful introduction" to describe the performance of the MP3 store, which is the subject of frequent guessing games about its share of the download market.

NPD bases its rankings on unit sales, not dollar value (no doubt a far easier way to do it). Given the higher sales prices of physical product compared to digital downloads, ranking retailers by revenue could lead to a different outcome. In addition, NPD converts individual tracks to albums at the rate of 12 to 1. The average album may have 12 tracks, but ten tracks have the same wholesale and retail value as an album download. Using a conversion factor of 12 rather than ten results in lower numbers for download stores.

Posted by Glenn at 4:15 PM | Link
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This Coleman Insights study, "What Happens When Music Gets Played?" (download 28-page PDF) came out last year but I didn't see it until recently. It looks at what happens when a new country song is played, what the differences are for male/female artists and new/established artists, and how long it takes for that song to peak (about 450 spins on average).

Among the findings: Country radio audience grows 1.8% two minutes into exposure to a new song, established artists perform better than new artists, uptempo songs perform better than slow songs, and male artists perform better than do female artists (the difference lessens for new artists).

Posted by Glenn at 11:25 AM | Link
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After going over the 41-page "Music Experience and Behaviour in Young People" study by the University of Hertfordshire and British Music Rights, I put together some thoughts.

Almost three in four said they favor a file-sharing service where a user could download any song with no usage or ownership restrictions (page 31). Interest was highest among those that use P2P the most (page 32). Not a surprise. People who don't use P2P aren't going to have as much interest in an unfamiliar technology. While its promising that 75% of respondents are potential customers for P2P services, the realities of today's licensing agreements are nowhere near the desires of consumers. The sort of P2P services that would elicit a great deal of public support would currently carry DRM (see Qtrax) or would carry so high a price tag as to eliminate labels' fears of unlimited downloading of MP3s.

An important bar graph comes next (page 33): 65% are not interested in a file-streaming service that does not let you own a permanent copy. Interpretation: We like to download files, we like ownership.

A question with serious economic ramifications comes next (page 35). About 48% of respondents in favor of a streaming service would stop buying CDs. Interesting that only 37% of those in favor of a download service would stop buying CDs. The implication is that using a streaming service will replace purchasing music (downloads, too, I assume). Those puny on-demand on non-interactive royalty rates need to take into account eventual lost revenue.

Forty percent of music spending goes toward recorded music while 60% goes for live music (page 27). Only 37% of the live music money goes toward tickets (page 29). The remainder goes toward transportation, beverages and merchandise.

The study needs more info on income by age group. This is an important factor because the thrust of the study is teens love music and will pay for it. But how will they pay for it if they don't have any money? On page 22 you can see that 61% of 14-17 years olds' MP3 tracks were not paid for. That seems like a high ratio but it really carries no meaning. There's no context. We need to know how much money the teens have to spend. We need to know where they got the money to buy the music, or how they got the music (friends, gifts, etc). Remember, an illegal download is not always a lost sale -- especially if there is no money in the kid's pocket.

Posted by Glenn at 5:53 PM | Link
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A University of Hertfordshire has found the iPod of the average UK teen or student has 842 illegal tracks. The average number of songs on each digital music player is 1,770, meaning each player has 52% legally acquired songs. The proportion of illegally downloaded tracks for youths aged 14 to 17 is 61%. No breakdown was given for songs ripped from purchased CDs versus those acquired from digital stores or ripped from copied CDs.

In 2006, Jupiter had found the average iPod had 5% of its songs acquired from iTunes. If a similar figure holds for UK youths, that would put the number of paid downloads per iPod at about 88. The remainder, 832 songs, would be ripped from purchased CDs.

In addition, the study found 96% of 18 to 24-year-olds surveyed engage in some sort of illegal copying, and nearly two-thirds copy CDs for friends and share songs via email.

The numbers will probably surprise many people, and they're sure to add to the common opinion that piracy is public enemy #1. That may or may not be true. Piracy could be in the top three or four reasons for the decline in recorded music sales. There are certainly other factors that need to be addressed: format substitution, games, broad technology changes, the decline of music retail and a general distrust of the music industry.

Update: You can download a PDF (1.57MB) of the study here.

Posted by Glenn at 11:52 AM | Link
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A new study by the Pew/Internet & American Life Project titled "The Internet and Consumer Choice: Online Americans Use Different Search and Purchase Strategies for Different Goods" (main page, 42-page PDF of study) examines how Americans use the Internet to buy music and search for information. It offers great insight into the importance of pre-Internet mass media like TV and radio as well as traditional word of mouth, and it shows how different age groups have different preferences for formats and pre- and post-purchase behaviors.

This study echoes many of the things I have written lately, such as the continued prominence of the CD and the importance of mass media in music discovery. Digital is growing and important part of the music marketplace, but I urge everybody to keep in mind that offline behaviors and purchases still play the dominant role.

Search For Information
• Only 7% of respondents said online information had a major impact on music purchases.
• Of the respondents that made the music purchase online, only 22% said online information had a major impact on the purchase decision.
• 86% of music buyers find out about music through TV, radio or movies.
• 64% of music buyers find out about music through family, friends or co-workers.
• 56% of music buyers find out about music through online tools such as artist websites or streaming samples.
• Only 42% of music buyers said online information helped them save money on the purchase.
• 51% of respondents said online information had no impact whatsoever on their music purchases, 37% said it had a minor impact and 12% said it had a major impact.

Formats:
• 82% of respondents (69% for people under 35) said they still buy all (62%) or most (20%) of their music in the CD format.
• 15% (27% for people under 35) said half the music they purchased were individual digital files.

Retail:
• 74% said their most recent purchase was done at a physical store, 22% said it was done online (download or CD).
• Of respondents whose most recent purchase was in a store, 56% of those that bought music recently said they could have made the purchase online while 37% said they could not have.
• Of the 22% whose most recent purchase was online, 61% said it could have been in a store and 35% said it could not have.

Sharing/Discovery
• 77% cited offline as the favored means of sharing music with friends and family.
• 57% said online resources introduced them to new artists.
• 68% said it helped them find more information on an artist they were interested in.
• 9% said they mix the music into their own creation.

Online Resources
• Artist or record label website is the most popular online resource (37%) followed by free streaming samples (34%), online stores (34%), downloading music (27%), Internet radio (25%), online music videos (23%), MySpace pages (18%) and emails from artist or label (11%).

Marketing
• 26% of Internet users who bought music in the last year said online resources led them to buy more music. That number jumps to 40% for people who bought music in the past and did at least one post-purchase activity (such as visit an artist website).

By Age
• 90% of people ages 18-35 find out about music through TV, radio and movies. The number drops to 86% for ages 36-50 and to 76% for 51 and over.
• 53% of ages 18-35 find out about music through copies of songs given to them by friends, 33% for ages 36-50 and 23% for 51 and over.
• Younger adults are more likely to do search activities such as visiting an artist website or music store, download a song, reading online commentary or blogs and watching online music videos.
• Younger adults are also more likely to take part in post-purchase activities such as visiting an artist website or social networking page, post music to their social networking pages or post online reviews of the music.
• For ages 18-35, 29% said their most recent music purchase was online versus 18% for those over 35. 70% of 18-35 got their most recent purchase at a physical store versus 75% for those over 35.
• 43% of the 18-35 group said all of their purchases are on CD, versus 65% for the 36-50 group and 77% for those over 50.
• 11% of the 18-35 group said all of their purchases are digital, versus 3% for the 36-50 group and 2% for those over 50.

The Sample
• 53% of respondents said they had purchased music in the last year

Posted by Glenn at 1:57 PM | Link
|Research|

A new In-Stat report says digital will represent 40% of worldwide music sales by 2012.

How does that jibe with previous research?

A November 2006 iSuppli report put the 2010 global digital market at 40% of total global digital revenues of $14.9 billion. At the time I said that percentage was too high an estimate. That estimate of 40% share would be reached via an astronomical (and, from the looks of things today, unachievable) compounded annual growth rate of 40.7% for digital revenues.

The IFPI's Digital Music Report 2008 (download PDF) estimated 2007 global digital revenues at $2.9 billion and a share of 15%. That puts the global recorded music market at about $19.3 billion.

As for the U.S. and Europe...

In February, Forrester released a report that said U.S. digital revenue will increase at a CAGR of 23% and surpass CD sales by 2011. That report put 2012 U.S. digital revenue at $4.8 billion and CD revenue at $3.8 billion. Those numbers means Forrester puts 2011 U.S. digital revenue at at $3.1 billion.

In January 2007, JupiterResearch forecast a CAGR of 16% and 2011 U.S. digital revenues of $2.5 billion, or 22% of the total market. Those estimates are lower than those of Forrester, but Jupiter does not count ringtone sales as digital and that probably accounts for the difference. Jupiter's estimate for 2011 ringtone (all variations) revenue was 12% of the market.

As for Europe, a JupiterResearch report puts the European recorded music recovery at 2010 and total revenue of €2 billion in 2012.

Posted by Glenn at 12:45 PM | Link
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• Forrester's report titled "The End of the Music Industry as We Know It" (nice pun) says digital revenues to surpass those of CDs by 2012. Only "modest growth" is predicted for subscription services. (Press release)

• Live Nation has purchased 65% of Dubai-based Mirage Promotions. (Ticket News)

• Through a partnership with Babcock & Brown Structured Finance Fund, Spirit Music Group has acquired the publishing and masters rights to the post-1971 catalog of Marc Bolan (T.Rex) and plans an "aggressive marketing campaign." (Billboard.biz)

• Seattle-based KEXP is joining with Radio 91.5 FM in New York City to offer KEXP-produced programming via their Radio Liberation partnership. (Brooklyn Vegan)

• Yeah, MySpace's upcoming music portal will probably stream music...but offering a smattering of downloads would make sense. (CNET NewsBlog)

• The Orchard President & Chief Executive Greg Scholl will speak to institutional investors at the Roth Capital Partners' 20th Annual OC Growth Stock Conference, to be held from February 18-21. (Press release)

• From South Korea, a cautionary tale that explains why labels shouldn't just slash prices and jump in bed with every Tom, Dick and Harry: Labels underestimated the shift to digital away from CDs, and deals with telecom companies give them on average 25% of the download price. (DPA)

• The FCC has set comment dates for localism rulemaking. (Radio Ink)

Posted by Glenn at 7:49 AM | Link
|Research|

News is out about a study by "“Does Chatter Matter,” a study on blogs' impact on music sales by NYU/Stern professor Vasant Dhar and a former student. (Download PDF of paper here, read press release here).

The researchers looked at blog posts, changes in an artist's MySpace friend count and album reviews (online only) for an eight-week period around an album's release date -- four weeks before release and four weeks after. They removed the effects of marketing budget size and used regression analysis to find significant predictive value in the variables. The survey looked at 108 albums and tracked blog chatter using Technorati.

Unfortunately, the researchers looked only at CD sales ("information on digital music is difficult to obtain," they wrote). That's unfortunate because indies have a higher digital share than major label releases, and that will skew the numbers down for indies. Had the researchers obtained Soundscan data (it's not impossible) the study would have been better. Instead, they used Amazon.com sales ranks as a proxy for sales data (and used a technique employed in previous research to convert the ordinal sales rank into a sales quantity).

Here's a summary of the results:

• Blog chatter had the greatest correlation with sales two weeks after observation date
• The findings "strongly suggest" that blog posts and MySpace friends correspond to increase in future sales. Blog posts have a greater impact on sales than do MySpace friends
• Mainstream reviews (Rolling Stone, Entertainment Weekly, et al) were negatively related to future sales
• MySpace friends do not have as great a predictive value as blog chatter
• "Very high" sales came from major label albums with 40 or more blog posts in the period
• An indie album with 240 blog posts in the observation period could overcome the disadvantage of being on an indie label

Of course, a predictor may not be a cause for future sales. The researchers talked about this a bit and theorized that an unobserved variable (such as the quality of the artist) could cause both blog chatter and sales increases. Do blog posts create sales or reflect the attention an artist is getting at that point in time? I'd say both. Blogs certainly spur sales, but most of them -- especially the ones that pick up on the topics of the more popular blogs -- are merely a reflection of the online buzz and of the potential of the album.

The conclusions for labels and marketers is pretty clear: Bloggers carry a lot of weight. Blog buzz is a reflection of the anticipation for an album's release, and increases in blog chatter lead to higher sales. Mainstream album reviews are almost as strong a predictor but not quite, and MySpace friends are far less a predictor of future sales.

Posted by Glenn at 7:45 PM | Link
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I just read through the IFPI's Digital Music Report 2008 (download the PDF here, read press release here) The theme of the report is the duty of the ISP to help curb online piracy. In the introduction, Chairman and CEO John Kennedy wrote of a change in the actions of ISPs and governments. He singled out the efforts of French president Nicolas Sarkozy and his plan to curb casual piracy.

"Today, however, a sea-change is happening. The whole music sector, governments and even some ISPs themselves are beginning to accept that the carriers of digital content must play a responsible role in curbing the systemic piracy that is threatening the future of all digital commerce. After years of discussing and debating, I am convinced it is no longer a question of whether the ISPs act – the question is when and how."

A few bullet points from the report (all global 2007 data)

• Digital represented 15% of global recorded music sales
• Mobile subscriptions rose 11%
• Legal track downloads rose 53%
• Digital recorded music revenues rose 40% to $2.9 billion

If you have the time to thumb through the report, check out the uninspiring commentary on ad-supported services on page 15, the section on direct-to-consumer sales on page 16 and the section on ISP responsibility that starts on page 21.

Posted by Glenn at 7:38 AM | Link
|Research|

Job #1 is to stop the bleeding. A new Jupiter report predicts in 2010 European digital music revenues will offset declines in CD sales.

Jupiter analyst Mark Mulligan posted about the report today at his blog.

"The key finding is that although European spending will total €2 billion by 2012 revenues will not fully Compensate for Declining CD Sales Until 2010, and even then mobile digital revenues will be partially responsible for the turn around. The cold reality is that 2007 was a record year of revenue decline for the overall European music market and that although digital revenues experienced a record high of €401.2 million they represented just 13 percent of the drop in CD sales."

And he commented on (all too) recent strategies to apply pressure to those gaping wounds.

"iTunes is not the be all and end all of digital music. Less than 10 percent of European Internet users currently buy online. This is why the labels are beginning to pursue more adventurous (and risky) licensing strategies with initiatives such as Nokia’s ‘Comes With Music’ with Universal Music. This brave new approach by the major labels will help free digital music from its chains and will be as important to the future of digital music as the longer term drivers, such as MP3 player adoption and consumer awareness."

paidContent has a blurb on the report.

Posted by Glenn at 2:31 PM | Link
|Research|

• A study by NPD Group (conducted for NARM and AARP) projected that incremental digital and CD sales to those born between 1941 and 1964 could reach $700 million and $1 billion. To achieve those incremental gains, it claims, will require improvements in product and support. "Most baby boomers are still buying only CDs, but many have also begun to add digital tracks and subscriptions to their music-buying mix," said NPD's Russ Crupnick. More than 67% of baby boomers purchase only CDs while 26% buy both CDs and digital. A scant 6% purchase only digital downloads. (Press releases)

• Metal Blade editor in chief, Phillip Freeman, talks about the staying power of the album format in an op-ed in yesterday's Los Angeles Times. "For a few years now, it's been possible to download leaked copies of new albums days or weeks before the official release date. That's worrisome to pop performers and the label execs backing them, who, like the producers of big summer movies, live or die by opening-week receipts. For more indie-minded artists, though, this sort of samizdat circulation of their work has become a valuable, even crucial, marketing tool because real fans treat a download like a test drive or a listening booth in an old record store." (Los Angles Times)

• First Apple blamed its licensing terms for charing British iTunes consumers more than customers in other European countries. More recently, Apple has claimed that Britain's Value Added Tax and higher cost of doing business are behind its pricing structure. According to a person present in yesterday's European Union hearing on the matter, Apple said there was nothing in its contract with Universal Music Group that required it to operate national stores or charge more in countries like Britain. (Forbes.com)

• The IFPI has shut down six eDonkey servers in Germany through a series of injunctions. The trade group claims file-sharing has been dramatically reduced as a result. Mm-hmm. (The Register)

• Here's a recap of yesterday's FCC media ownership hearing in Chicago. (Radio Ink)

Posted by Glenn at 10:56 AM | Link
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• Amazon.com's digital music store could launch next week, which would put it right on track for the rumored date we heard a few weeks ago. Billboard.biz reports something that really stands out to me, that the new store will have four different price points. Antony Bruno wrote, "Amazon also is planning a tiered pricing scheme that will sell new releases at one price, and older tracks at another. In all, the Amazon digital service will have four pricing tiers, which major labels find attractive." We'll get to see if Steve Jobs is correct in his belief that tiered pricing is not simple enough for consumers. (Billboard.biz)

• Gracenote has acquired Musicphone technology to beef up its Mobile Music 2.0 song identification platform. The Gracenote mobile platform is linked to its global media database of over 80 million tracks. (Press release)

• SpiralFrog, currently bleeding money as it awaits its U.S. launch, has licensed INgrooves' catalog for its ad-supported download service. With those 100,000 songs, SpiralFrog should have about 1,800,000 now. (Press release)

• iBiquity Digital CEO Bob Struble on HD radio's last step to the mainstream: "From the technology standpoint, the FCC has adopted the standard, and the broadcast industry has built out the infrastructure. The last major hurdle – and it is not insignificant – is to get people to go into places and ask for HD Radio," "The goal is that about five years from now, when you go into a store and buy a radio, it will already have HD. ... For radio to continue to be as ubiquitous as it is, radio has to be on these devices. And it is up to all of the radio business – not just us." (Radio Ink)

• Here's a tidbit that's related to the constant copyright-vs-fair use debate in music circles: Much of the economic growth of the last ten years, according to a study released by the Computer and Communications Industry Association, can be credited to the doctrine of fair use. Fair use exceptions to copyright law, it estimates, account for $4.5 trillion in annual revenue for the U.S. economy, 18% of growth and 11 million U.S. jobs. (That's a huge number considering the U.S. has a GDP of $13.2 trillion. After scanning the report, it looks like the authors include an industry's total revenue even though only part of it relies of the fair use doctrine. Keep in mind that this report was comissioned by a non-profit trade group of which Google is a member.) Download the PDF of the 45-page report here. (InformationWeek)

• The Washington Post's Marc Fisher has a good overview on the recorded music industry's push to receive royalties for terrestrial radio play and lawmakers' plan to push through legislation to grant them those royalties. (Washington Post)

Posted by Glenn at 11:07 AM | Link
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• Album sales dropped 5% last week and were 16% lower than the same week last year. For the year, album sales are down 14%. It was a slow week for new releases as Talib Kweli debuted at #2 with sales of only 60,000. High School Musical dropped 40% from its debut tally but still retained #1 with 367,000 scans. Digital track sales dropped 2% last week and were 40% higher than the same week last year. For the year, sales of digital tracks are up 48%.

• Nokia announced its new mobile music store, Ovi. The service, to go live later this year, will sell WMA files over the air and downloaded to PCs. Ovi will have access to existing third-party services like social networks. (paidContent)

• Luaka Bop has found a new, post-V2 home at Red Eye Distribution. (Pitchfork)

• eMusic has renewed agreements with some of its most popular labels: Beggars Group (4AD, XL and Rough Trade), Matador Records, Concord Music Group and ATO Records. (Playlist)

• Sony BMG's "Dave Matthews & Tim Reynolds: Live at Radio City," out September 4th, will be its first music Blu-ray release with support for Dolby TrueHD. (Afterdawn)

• Market research company iSuppli sees a slowing in digital (both downloads and subscriptions) growth through 2008, but expects a "small resurgence" due to greater broadband penetration. (iSuppli)

• Satellite news: XM is moving its Nashville studio to the Sommet Center (home of the Nashville Predators, owned by the City of Nashville and just around the corner from the current studio at the Country Music Hall of Fame), and Sirius is adding a Grateful Dead channel. (The Tennessean and Variety, respectively)

Posted by Glenn at 10:36 AM | Link
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• Monterey Peninsula Artists and Little Big Man will be integrated into parent company Paradigm Talent Agency, and both names will be retired. The agents expect the change to give them more time to spend developing their artists and use the resources of the larger, combined agency. (Billboard.biz)

• Universal Music Group has purchased Sanctuary Music Group for £44.5 million ($90.7 million) As part of the deal, UMG will take on £59.8 million ($121.8 million) of Sanctuary's debt. The goal is to integrated Sanctuary's other services such as merchandise and artist management. (The Guardian)

• The New York Post reported that Universal Music Group is ready to sell BMG's European publishing assets. As part of a deal with anti-trust regulators, UMG will sell the European rights to Zomba U.S., Zomba U.K., Rondor U.K. and 19 Entertainment. (FMBQ)

• Napster has hired Christopher Allen to be its new Chief Operating Officer. He starts on Monday. Allen was previously Vice President, Product Strategy, Design, and Marketing for Blockbuster Online and replaces outgoing COO Laura Goldberg. (Press release)

• Satellite radio companies' biggest problem is attrition, says Bridge Ratings. "Because XM and Sirius calculate churn differently, official churn rates are difficult to nail down. However, our interviews with current and former satellite radio subscribers coupled with gross and net subscriber figures reveal attrition is growing placing extreme pressure on new subscriber acquisition strategies for both companies." (Radio Ink)

• The average computer has 880 MP3 files. (Digital Music News)

• Sort of a good point from a PC World columnist. On the Verizon deal for AC/DC's catalog: "That’s too bad for the industry. The latest report from UK-based Entertainment Media Research say here in the US music piracy is down. You can thank the ease, price, and flexibility of finding and buying music on iTunes part for that." One or two of these deals, though, does not do anything to hinder the availability and compatibility of digital music. To draw a parallel, exclusives at Best Buy and Circuit City have lead only to bickering between retailers. From what I can tell, consumers have accepted them. (PC World)

• Denton, TX, currently a hot spot for indie rock, has a new record label. Magilum Records aims to capture the ""bizarre folk scene in Denton" and "start a whole new subgenre (of folk)." (Star-Telegram)

• In-Stat analyst Mike Paxton predicts ditching DRM "will likely be viewed as a music-industry-only experiment, albeit one that will be closely monitored to see if a viable business model emerges." (Twice.com)

Posted by Glenn at 8:26 AM | Link
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• Album sales sank 5% last week and were 11% lower than the same week last year. For the year, album sales are down 15%. Digital track sales dropped 6% last week and were 44% higher than the same week last year. For the year, digital track sales are up 48%.

• According to research by Informa Telecoms & Media, Universal Music Group was tops in both physical and digital music in 2006. The company had 25.7% of the global market, up from 25.6% in 2005. Independents amounted to 27.5% of the total market. (Reuters)

• EMI Music Publishing and Universal Music Publishing have entered into a joint venture with music search engine One Llama and APM Music, which has "the world’s leading production music library." Try to get through the long-winded and wordy press release if you're feeling spry, but the bottom line here is that all parties are trying to facilitate and improve the process of finding the right music for a project. One Llamas is backed by illinoisVENTURES. (Press release)

• It's the year of the widget. ReverbNation has launched a Facebook widget called My Band that has a band's profile, picture, play statistics, songs (that can be shared) and tour schedule.

• The Independent previews James Blunt's upcoming court battle over the authorship of six tracks from his hit album. (The Independent)

• Yesterday's Soundcheck program on WNYC found guests Timothy English, author of "Sounds Like Teen Spirit," and Robert Clarida, an attorney who specializes in copyright issues, talking about the lawsuit against Avril Lavigne and other moments in music copyright history. In my opinion, Lavigne's song "Boyfriend" bears little resemblance to The Rubinoos' "I Wanna Be Your Boyfriend." There's an obvious Stones riff ("Hey! You!") in the Rubinoos' song, though. Check out this YouTube video that lays "I Wanna Be Your Boyfriend" over the video for "Girlfriend." (Soundcheck)

• SESAC, the performance rights organization, and MySpace have reached a deal that will pay SESAC members for streams at the popular social networking site. The deal does not cover songs uploaded to an artist's MySpace page. (Press release)

• A Bear Stearns analyst predicts the FCC will approve a merger of XM and Sirius. "We believe the merger likely will be approved on merits. ... We underscore though, if political forces are more powerful than the merits of the deal, the outcome may be different. However, our sense is that the deal will be judged on merits and is therefore likely to pass." (Radio Ink)

Posted by Glenn at 8:26 AM | Link
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• According to figures just released by the IFPI, the global recorded music market shrank by 5% in 2006. Digital accounted for 11% of shipments (odd that the word is used for a product that really isn't shipped) versus 2% in 2004 (ringtones are not included). Labels' income from performance rights collections rose 8% to $728 million. (Billboard.biz)

• Feisty Russian download store AllofMP3.com has been shut down. The site was singled out by U.S. trade representatives as Russia sought entry into the World Trade Organization. The same company that operated AllofMP3.com has already launched a similar site called mp3Sparks.com. (Times Online, via paidContent)

• The Kelly Clarkson saga continues. The singer has left The Firm and joined Starstruck Entertainment for management. (Bilboard.biz)

• T-Mobile has launched a mobile service in the U.K. that offers over 500,000 tracks at £1 each. The dual download service is called Mobile Jukebox. Each purchase results in an AAC file for the mobile device and a WMA file for the PC. (Mobile Choice U.K.)

• It probably won't have any effect on physical music, but the majors old Minimum Advertised Pricing (M.A.P.) came to mind when I read about the Supreme Court's decision that allows for minimum pricing by manufacturers and retailers. In a case that put Leegin Creative Leather against Kay's Kloset, Leegin defended its minimum pricing system by arguing in part that smaller retailers would be able to compete against discounters. Sounds just like majors labels' argument for their M.A.P. that denied cooperative advertising funds to retailers that advertised below a certain price. After the F.T.C. forced labels to drop M.A.P., mass merchants began their predatory pricing practices that has, along with digital downloading and the accompanying shift in listening habits, has helped put thousands of music retailers out of business. (AP)

• The final 700 or so employees of U.K. music chain Fopp were dismissed today. The company owes £10 million to suppliers who are not interested in extending new terms. Good call. Maybe they learned something from keeping Tower on life support as it failed to adequately update itself for a changed market. (Times Online)

• Napster issued a statement to investors about the possibility that the iPhone, with its lack of compatibility with Napster software, could harm its business. Pretty standard disclosure for a public company, in my opinion. And besides, Napster was always going to have to hitch its wagon to another device. (Information Week, via Engadget)

• At the Huffington Post, music writer Paul Bonanos on Beggars Banquet for its download scheme for vinyl copies of The National's Boxer album. Each vinyl LP comes with a code that allows for up to three album downloads (one for yourself, two for your friends). While "home taping" is hurting the recorded music business, wrote Bonanos, those extra copies benefit other revenue streams. "We're seeing CDs turn into promotional tools for the live tours," Festival Network head Chris Shields told Matt Miller in an article at The Deal. (Huffington Post)

• European antitrust regulators are stepping up their investigation into high-definition DVDs and possible anticompetitive practices in the format war. (Wall Street Journal)

Posted by Glenn at 11:11 AM | Link
|Brick-And-Mortor Retail||Mobile Music||Napster||Research|

• After a three-month delay, the European Union is going to restart its investigation into the Sony BMG merger. That will put date of decision at the second week in October. Regardless of the outcome, a thorough investigation is expected to offer signals that other companies will use for their mergers and acquisitions. (Times Online)

• The Harry Fox Agency and Ingrooves have inked a deal that will see HFA using INgrooves' proprietary software platform for licensing and payment processing. (Billboard.biz)

• BurnLounge has no plans to give refunds to its paid members but will waive all renewal and monthly fees for existing members through the end of 2007. (Hypebot)

• British website Slice the Pie is the latest to provide a fan-based financing tool for unsigned bands. Bands move through stages called The Scout Room, Showcase and Financing, the latter being the stage at which a band that has secured 1,000 £15 offers will release an album. (Get Reading)

• A former Columbia Nashville SVP of promotion has launched Nine North Records, a country label that aspires to break new artists through "innovative independent partnerships." We'll be aligned with several highly experienced professionals who can bring sales, marketing, public relations, digital and artist development skills to the mix on an a la carte basis. This business format will allow us to work with acts from the ground up and with less of a safety net." (MusicRow.com)

• Fortune's Dennis Hau on the economics behind Burgendy Records' contracts with older artists. "Burgundy usually limits itself to one-album contracts with its artists, sometimes with options to release more music. And because it has a full-time staff of only about two dozen employees, it expects to put out no more than two or three albums a year." It takes 24 people to sell about 150,000 units per year? Amazing. (Fortune)

• The Guardian has a very smart take on the move, by bands like Ash, toward releasing just singles instead of albums. "...the looming death of what is still known as the album should cause no little alarm. Doesn't the obligation to attempt a grand artistic statement serve as a reliable litmus test? ... Songs may powerfully denote passing moments, but you surely need more to truly soundtrack your time." (The Guardian)

• Groove Mobile wants to expands its direct-to-consumer trial to more labels and carriers, and has a deal with Vodaphone UK for lower data charges. "Services like this need to be cross-carrier - there's no point in promoting track downloads at a concert, for example, if only a quarter of the people there can take part." (Mobile Entertainment)

• While I try to appreciate both sides of every argument, I can't agree with Ann Power's take on the Clive Davis/Kelly Clarkson dust-up. What separates Powers' belief in artistic development and my belief in a balance between art and commerce is the fact that Clarkson won a singing contest, not a singing-and-songwriting contest. (Los Angeles Times)

• Jupiter Research's Joe Laszlo has a report on over-the-air music purchasing and says that there are obstacles in infrastructure, business models and carriers' ability to take advantage of impulse purchases (which goes for pretty much every digital music store or service). "Approximately 20 percent of online consumers are impulse music purchasers. This segment, already reasonably engaged in mobile music activities, represents the best target for becoming regular users of OTA music stores or services. Tying into key purchase motivators, such as radio play and friends' recommendations, can help drive OTA impulse music purchases more broadly." (David Card's Jupiter Blog)

• Universal Music Group's catalog division has a website, ilovethatsong.com, that currently has a Flash-based puzzle game in which you complete puzzles of UMG catalog titles. Each album's puzzle pages has a link to purchase at iTunes for $7.99 -- or less if you already own one of the album's songs. (Unscramble the Covers)

Posted by Glenn at 6:57 AM | Link
|Mobile Music||Online Stores/Services||Research||Sony BMG|

• 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|

Here are some statistics for your Friday. Today there are two items that offer some insight into buying habits in various countries.

At Billboard.biz, John Haywood points to statistics provided by the IFPI that show U.K. consumers are tops in the world when it comes to per-capita CD buying. At 2.1 CDs per person, the U.K. easily beats out the U.S. and Norway (both at 1.9), Denmark (1.8) and Begium, Sweden and Switzerland (all tied at 1.7).

But U.S. consumers love a good ringtone more than anybody else. Statistics offered in M:Metrics's April Benchmark Survey (read press release) show that 9.3% of mobile subscribuers in the U.S. have purchased a ringtone in the last three months. That compares with 4% for U.K. consumers, 6.2% for Spanish consumers and 4.6% for German consumers.

Posted by Glenn at 2:34 PM | Link
|Research||Ringtones|

• Universal Music Group is beefing up its digital initiatives. Dan Kruchkow and Ezra Doty were both promoted to SVP of Global Digital Initiatives. The two will oversee the growth of UMG's direct-to-consumer platform. (Press release)

• In an Elle magazine interview, Kelly Clarkson said she rejected $10 million from Clive Davis to walk away from five of the songs on her upcoming album My December for more radio-friendly songs. (Kings of A&R)

• According to figures released by the British Phonographic Industry yesterday, U.K. consumers are Europe's biggest mobile downloaders. MusicAlly estimates that U.K. consumers download 1.3 million mobile tracks per month. (BPI)

• In late July, BitTorrent will launch a self-publishing platform that will allows artists to upload their content to the BitTorrent ecommerce platform. Major labels will not be involved in the rollout because the company wants to wait until DRM issues are resolved. (Digital Music News)

• Attendance at this year's CMA Music Festival totaled a record 191,154 people. (MusicRow.com)

• Bad business model gets more money: Blog payola company PayPerPost got another $7 million in funding. (paidContent)

Posted by Glenn at 7:35 AM | Link
|Digital Music||Research||Universal Music Group|

• A joint study by PricewaterhouseCoopers, the IFPI and Singapore-based Soundbuzz predicts the global music industry's physical product revenue will drop 61% by 2009. (BusinessWeek.com)

• Amp'd Mobile, a mobile carrier with a music and video slant, has filed for Chapter 11 bankruptcy. Universal Music Group is one of the companies that funded $360 million that started Amp'd. (Wall Street Journal)

• A few news items on online music service Slacker: The company released a desktop application that allows users to manage their entire music collections. (Update: OK, not so new. I thought there was a new update, but maybe not.) In addition, Slacker just got $40 million in second round funding.

• PIAS America has signed with Universal's Fontana Distribution after a short run with EMI's Caroline Distribution. (Billboard.biz)

• CMT.com's Chet Flippo bids country radio goodbye and welcomes custom country radio (he's a Sirius fan). "I'm sorry, my friends in country radio, but I have long since moved on. No more commercials, no more wacky stunts, no more same 20 songs." I mention this only because country is bound at the hip to terrestrial radio. When that goes, chaos will ensue. (CMT.com)

Posted by Glenn at 8:29 AM | Link
|Distribution||Indies||Online Stores/Services||Radio||Research|

• After months (or was it weeks?) if speculation and rumors, Rick Rubin has officially joined Columbia Records as an (as-yet-unnamed) executive. Rubin takes with him his American Recordings label (previously with Warner Music Group). This marks the most exciting development at Sony BMG in a while, though there are no details yet on the "new model for the music business of the future" that will come with Rubin's arrival. (Billboard.biz)

• According to Berg Insight, digital sales will overtake physical sales in Western Europe in 2011 and the European music market will revert back to growth in 2008. The key to the 6.5% compounded annual growth rate will be mobile handsets. "We expect that the handset is going to become the primary portable listening device. Once consumers are provided with unhindered mobile Internet access, these devices will increasingly be utilised for accessing online music content." I don't doubt the mobile device could become the primary listening device, but I'm skeptical that as a purchase driver it will do better than MP3 players have done when tethered to personal computers. Mobile stores and services must improve greatly. (Press release)

• An article on the publishing assets just purchased from Dimensional Associates by Colonial First State. Said the CFS head of strategy and development, "It will be a high-yield fund that will appeal to investors with their eye on longer-term, low-volatility assets, that offer growth on the upside." (Herald Sun)

• Mike Oldfield is criticizing EMI for "devaluing" his classic album Tubular Bells by using at part of a newspaper giveaway. (Contact Music)

• MTV Networks will license a social networking media player that was created by Georgia Tech students for MTV's Digital Incubator program. (Press release, via paidContent)

Posted by Glenn at 9:04 AM | Link
|EMI||Research||Sony BMG|

• Will Apple offers a music subscription service? No, not if Steve Jobs' comments to Reuters in any indication. Said Jobs, "Never say never, but customers don't seem to be interested in it. The subscription model has failed so far. ... People want to own their music." (Reuters)

• Even a person with no legal knowledge could see this coming: In saying digital downloads do not count as public performances, a court denies ASCAP from double-dipping. (Hollywood Reporter)

• Research from Strategy Analytics Digital Media Strategies puts this year's global online music growth rate at 62%. By 2011, the value of the online market will grow to $6.6 billion from $2.7 billion in 2007. It predicts a "temperate increase in single track download revenues" due to EMI's decision to offer DRM-free, premium tracks. Their optimism is striking: "This year will likely be the turning point for the music industry, and a return to overall revenue growth." I doubt it, but it's possible if you include publishing revenue. (Strategy Analytics)

• The Guardian has a routine article on download stores and DRM -- it's the hot topic of the quarter -- but there's one part that may cause your eyes to open wide. Scott Cohen, founder of The Orchard, explains that dropping DRM is not technically complicated but the finer stuff can get a bit complicated. Details vary from store to store (things like bit rates and metadata identifiers). "There are 63 variants for mobile devices alone, and overall there are hundreds. Cohen notes, though, that the really hard work is marketing the music." (The Guardian)

• An interview with Last.fm co-founder Martin Stiksel. "We released our software in ten different languages before Christmas, and because of our unique 'scrobbling' within two weeks we had millions of tracks of Brazilian music and Spanish music and Russian music added to our catalogue." (Exclaim.ca)

Posted by Glenn at 8:11 AM | Link
|DRM||Music 2.0||Online Stores/Services||Research||iTunes|

Yesterday I ran across a report by NPD Group (comissioned by NARM) that was released around March of 2006. In hindsight, the report's optimism is hilarious. (Then again, I understand that research reports tend to be a bit too optimistic in their predictions. In this case, NPD probably wanted to put a positive spin on things for its frequent client.) A year ago, there was far more reason to believe the physical music market could rebound. Then Tower went out of business and the holiday season put MP3 players in even more consumers' hands. In 2007, CD sales are 20% lower than in 2006.

One line from the report says, "There are conservative scenarios where we could grow physical sales by 6-8%." Conservative? Really?!

How to achieve that 6-8% increase? One group of consumers (out of six), the heavy music spenders, needed to buy one more unit per shopping occasion, and two others needed to increase their total amount spent by only 3%.

How would it happen in the retail climate a year later? Labels would need to revamp their pricing structures, increase the number of physical retailers that sell music and become far more creative in their marketing and promotional strategies. But maybe I'm being too optimistic...

Posted by Glenn at 12:42 PM | Link
|Research|

• The IFPI issued its 2007 Digital Music Report (download PDF). The 22-page report has 2006 statistics for downloads and mobile music, looks at emerging business models and indentifies ISPs as the "key to the problem" of Internet piracy. As seen in the headline of this Bloomberg article on the report, the IFPI is framing the industry's continued losses more as a piracy issue and less as a circumstance brought on partly by a la carte downloads, the unbundling of the album and the decline of the CD. (Read press release)

• Executive shuffle at Universal Music Nashville. Co-chairman James Stroud is out and co-chairman Luke Lewis has signed an extension. (Read article at Billboard.biz)

• Somewhat related: Country music, like some other American genres, doesn't travel well. The Tennessean's Ryan Underwood took a look at country music's poor international sales. "But executives on Music Row say the amount of foreign sales they see is miniscule and actually may be shrinking, due in part to illegal downloading as well as the lack of a ready-made network of country radio and TV outlets abroad." Canada, once 10% of Universal Music Group Nashville's sales, now accounts for 4 or 5%. (Read article at The Tennessean)

• All over the (Internet) news yesterday was Skype's upcoming, Internet-based television service. Called Joost (pronounced juiced), the service is now in beta and Skype has lined up a deal with the always-happy-to-license-content Warner Music. (Read article at Forbes.com)

Posted by Glenn at 7:24 AM | Link
|Research||Universal Music Group|

Jupiter Research issued a digital music forecast (read press release) that says by 2011 digital music sales will account for 22% of all U.S. recorded music sales, or $2.5 billion. The forecasted digital growth rate is 16% compounded annually. "As detailed in our research, the music download business will remain a sampling medium for many users rather than a CD replacement," said David Schatsky, president of JupiterKagan.

Part of that $2.5 billion figure comes from subscription services. Jupiter sees a 32% compounded annually growth rate through 2011 from music subscription services. Card wrote that "on-demand subscription services will appeal primarily to niche audiences among music aficionados," just as they do now.

Before you do any math, read a blog post about the survey by Jupiter analyst David Card. He explains something the press release does not: Jupiter did not count ringtone sales as digital revenues. He wrote, "Digital music sales will total 22 percent of US consumer music spending in 2011, and ring tones another 12 percent." Combined with download spending, the adjusted digital figure is actually 34%. That leaves the CD with about 66% of the market.

I consider both ringtones and downloads (a la iTunes) to be digital. Major labels tend to group the two into one digital category when reporting earnings.

As a comparison, an iSuppli report predicts a global digital market of 40% by 2010 (ringtones included), which I think is too high an estimate. The IFPI forecasts a global digital share of 25% by 2010. EMI Music's Alain Levy believes his company will have a 25% digital share by 2010 (said at the October 2006 London Media Summit). According to my very rough calculations based on the given growth rate, Jupiter's 2010 forecast comes out to a 18% digital download share. That would put a combined download/ringtone number in the 27-29% range.

Posted by Glenn at 1:00 PM | Link
|Research|

In a report on the music industry's 2007 outlook, Pali Research's Richard Greenfield predicted recorded music sales will be flat at best this year. (Greenfield's comments are in this Hollywood Reporter article.)

"We continue to believe 2007 will at best be down 0.8% (about flat at best with mobile/subscription included), and it could be significantly worse. ... Not only did year-end '06 digital sales fall short of our expectations, more concerning is the deceleration in growth during the fourth quarter. We are increasingly concerned that digital track sales will struggle to show 40% growth in 2007."

All very reasonable predictions. Short of a breakthrough of an entirely new product or service, digital track sales will be hard pressed to grow by 40% this year. I think there is a better chance for strong growth in subscription services -- both Internet and mobile. That would require improved collaboration between hardware manufacturers and service providers, and subscription services need to find a better way to position their products. (Is anybody interested in side-loading and remote downloading? Probably not. Mobile operators need to move on to Plan B.)

The wildcard will be P2P experiments. I predict a slim chance that Limewire paid downloads will take off -- if labels can be convinced to test drive the idea for six months -- and even less chance ad-supported P2P will make make a material impact.

Posted by Glenn at 7:02 AM | Link
|Research|

• The Digital Media Assn released a study conducted by InsightExpress that shows the positive effect of digital music. According to the study, digital music consumers listen to more music, purchase more music and attend more concerts that before they began listening to and purchasing digital music. A quarter of survey participants have discovered "a lot" of new artists. Almost 70% are listening to more musical genres. More than 35% are talking about music more than before going digital. (Read article at Billboard.biz)

• Digital Music News reports "a big four major is now preparing a significant, MP3-based push." The unnamed label is likely to release more information later this week. I don't know which label it will be, but I'd bet against it being from Universal Music Group. Doug Morris experiment with MP3? That would be a shocker. (Read post at Digital Music News)

• The Australian government wants its musicians to crack the U.S. music market. The 2007 Australia Week exhibitions in New York and Los Angeles will feature The Veronicas, Porcelein and Rockstar: INXS contestant Mig Ayesa. (Read article at the Herald Sun)

• Musicrypt, which offers secure digital distribution, finalized a deal that will offer it up to $10 million in financing. The company plans to use the funds to increase its growth in the U.S., expand its Adstream service in Europe and improve its radio and television advertising delivery initiatives. (Read press release)

• Long Beach, CA's VIP Records faces uncertainty after its location changed ownership last week. You may recall VIP as the setting for scenes from Snoop Dogg's "What's My Name" video. (Read article at Long Beach Press-Telegram)

• The Zune Marketplace is not carrying music from CD Baby. I occasionally run across some new releases (on majors and indies) that are not yet in the store. (Read post at Digital Audio Insider)

• RIP Atia Jo, guitarist for Orchestra Super Mazembe. (Read article at Kenyan News Network)

Posted by Glenn at 7:57 AM | Link
|Digital Music||Research||Zune|

The Wall Street Journal's Carl Bialik picks up on the ruckus caused by Forrester Research and The Register's overblown interpretation of a report on iTunes sales by Forrester's Josh Bernoff. "A Research Report on iTunes Sales Becomes Shot Heard 'Round the Net" starts with The Register's poor choice of words, goes to other research companies' claims that iTunes sales are way up in 2006 and then gets into how different analysts approach the numbers differently. Forrester's data set compared June to January. Not a good idea in my opinion. Comscore and NPD use different methodologies and have derived different conclusions than did Forrester.

Bernoff told Bialik that "the problem with a year-by-year comparison is it really doesn't tell you what's happening during 2006." The problem with that logic is that what is happening in 2006 varied from month to month. The reason for the variation is the very nature of the music business. Year-over-year data is the best way to measure trends in music sales -- especially when digital sales are growing at a high annual rate. January, for example, has few new releases but strong post-holiday sales. July, with school out and families on vacation, is a slow month for both sales and new releases. The release schedule picks up in August and September. Come December, labels' heavy hitters are in stores and both album and digital track sales increase rapidly. Comparing any one of those months to any other month will leave holes in one's conclusions.

In addition, each year's release schedule is unique because each new release is basically a unique product that is being introduced for the first time. Some connect with consumers, most do not. One slow quarter is often followed by a much strong quarter. Add it all up and what does it mean? It's easy to find a sales decline within any 12-month period.

As I wrote yesterday, weekly digital track sales have increased 16% since mid-October. There are two more weeks of sales growth left before the post-Holiday slide starts. Where sales level off in mid- to late-January will tell us much about expectations for 2007.

Posted by Glenn at 1:20 PM | Link
|Digital Music||Research|

Forrester analyst Josh Bernoff, whose name has been all over the news because of a report on slow sales at iTunes, offered clarification on his report. At a follow-up post at his blog, Bernoff called it a "a case study in how information -- and misinformation -- spreads on the Net."

News or the report started with a "fairly balanced" article at The New York Times. Then The Register and Bloomberg, he wrote, "decided to dive in and highlight one finding of the report -- that iTunes sales had dropped in the first six months of this year." With that came sensational words like "collapsing" and "dropping." Newspapers around the world followed suit. Apple's stock dropped 3%. All from a report that indicated what everybody already knew -- iTunes' sales have been flattenning out.

Bernoff laid out his opinion in very clear terms (emphasis his):

"Now for the record, iTunes sales are not collapsing. Our credit card transaction data shows a real drop between the January post-holiday peak and the rest of the year, but with the number of transactions we counted it's simply not possible to draw this conclusion . . . as we pointed out in the report. But that point was just too subtle to get into these articles."

He added that Apple's refusal not to comment either or or off the record "fuels speculation, pro and con, from their supporters and detractors."

So there you go. The sky is not falling. iTunes sales, while not breathing new life into recorded music sales, are not 65% down since January. Even just a cursory glance at Soundscan figures indicate positive year-over-year growth and slower growth in 2006.

Posted by Glenn at 10:31 AM | Link
|Apple||Research||iTunes|

• 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|

Research firm iSuppli released predictions for the global digital music market last week. The growth of mobile and broadband music services, it believes, will push the worldwide market for digital music to $14.9 billion in 2010 from $2.7 billion in 2005. It sees the physical market dropping to $19.6 billion in 2010 from $27.3 billion

The IFPI estimates "digital music will make up around a quarter of music sales by 2010" (2006 Global Recording Industry In Numbers).

Coolfer believes the IFPI has the more accurate digital estimate. There are a number of reasons to believe 40% is too optimistic:

• At the LBS London Media Summit 2006, EMI's Alain Levy said digital revenues should account for about 25% of the company's total revenue by 2010. The other majors should expect about the same. Indies may see even higher growth but currently they account for only about 20% of the global market.
• Music companies are still committed to the CD as ever because they are depedent upon the CD. Labels are dropping prices, adding content and improving packaging. All things being equal, major labels would prefer to sell music online. But all things are not equal. The majors' physical distribution systems gives them far better competitive advantages than do their digital distribution systems.
• Retail is not giving up on the CD. Brick-and-mortar retailers have not -- and probably will not in the next year or two -- figured out a way to sell digital music. They will protect their CD market shares. (This protectionist impulse has been seen with movies. Wal-Mart and Target have sought concessions from iTunes and threatened movie studios.)
• The vast majority of mobile growth would have to come from Western countries since many Asian countries are far more mature. While handset technology has greatly improved in the last year, subscription services have not taken root and download sales are slight.
• iSuppli acknowledges that vertical systems (closed ecosystems with proprietary DRM, a la iTunes/iPod) will be more plentiful in the future. That implies a continued demand for DRM-free CDs that give consumers flexibility and greater value.
• Satellite radio is growing faster than online subscription services are growing.
• Outside of revenue-sharing deals with YouTube, none of the new business models (ad-supported P2P, for example) show much promise. To reach 40% in four years, something new must click with consumers.
• Digital's flat pricing makes catalog CDs a far better value than their digital counterparts. Variable pricing would spur growth of catalog albums, which makes up 51% of all album sales. In addition, download stores do not offer as effective means for marketing catalog as do brick-and-mortar stores.

iSuppli should expect a slower rate of growth. Lowered expectations are proper when dealing with huge and important shifts in the recorded music market. Five years ago, many thought the global digital market would be far bigger than it is today. Analysts tend to overestimate the speed at which music companies change their mindsets, improve their infrastructures and adopt new models. They also overestimate the speed at which consumers adopt new purchasing habits.

There are handfuls of variables that must line up perfectly to meet most predictions. Such estimates are closer to best case scenarios than most likely scenarios. A digital market share of 25% might not please the digerati, but it's a better estimate.

Posted by Glenn at 3:11 PM | Link
|Research|

• The Eagles follow in Garth Brooks' footsteps by creating a "long-term strategic marketing agreement" with Wal-Mart. The Eagles' stated reason for being attracted to Wal-Mart is the company's position on sustainable business practices. While Wal-Mart is indeed getting serious about its responsibility to stakeholders, I'm sure The Eagles were attracted to the control and expected revenue from the deal. (Read press release)

• Australia's music download tally is predicted by one research company to double next year. Analyst Marc Ganz of Ibis World sees the CD now going past the maturity stage and into the life-cycle's decline phase. I don't agree with one thing he said, though. Ganz thinks the lower price of digital music will drive down CD prices. All I've seen from labels -- other than Universal Music Group -- is extra content and stable prices, not less content and lower prices. Next year, EMI will add content to every CD. Do you think it's going to drop prices? I don't. Not in the next year or two. (Read article at ABC.net)

• Orange Country emo-ish band Midnight Hour has signed with Interscope Records. (Read post at Punknews.org)

• Not a surprise, but it's nice to have it in writing: JupiterResearch predicts the iPod's market share is safe from Microsoft's Zune for 12 to 18 months. (Read article at Digital Trends)

Posted by Glenn at 11:06 AM | Link
|A&R||Research||Wal Mart||Zune|

• Universal Music Group and Sony BMG signed ad revenue-sharing deals with YouTube. (CBS Corp inked a deal as well.) The article mentions the "new YouTube technology" that will allow companies to find restricted content and remove it, or leave the ad and share ad revenue generated from views of that video. Sony BMG said it will allow users to include some of the music group's catalog songs in their videos...which implies new releases will be forbidden. (Read article at MSN Money)

• More video deals: Sony BMG and Warner Music Group inked an ad revenue-sharing deal with Google. In the near future, the companies' audio-video content will be accessed through Google's Ad-Sense network. (Read article at Forbes.com)

• Brit music magazine NME is working on a greater presence in the U.S. through a US-oriented website (it figures it would be too expensive to launch a print magazine), an American news service and club nights to really hammer the point home (one done in LA, one coming up in NYC). (Read post at paidContent)

• It's not music, but it'll sell: EMI is going to release a limited editiion DVD of Steve (The Crocodile Hunter) Irwin's memorial tribute service. (Read press release)

• A Piper Jaffray survey reveals 79% of U.S. teens own an iPod, up two points in six months. Interest in music-playing mobile phones increased to 74% from 70%. (Read post at Digital Music News)

Posted by Glenn at 9:43 AM | Link
|Research||Sony BMG||Universal Music Group||Warner Music Group||YouTube|

• After news got out that Warner Music Group's Edgar Bronfman has been targeting EMI investors, shares of EMI rose 7%. At the same time, Bloomberg data indicates the perceived risk of holding EMI's bonds rose 3%, which shows an decrease in perception of credit quality. (Read article at Bloomberg)

• Network Live is gone and has parted with AOL, but its production team is going to start a new live music distribution deal with MSN called Control Room. (Read the details at paidContent)

• The RIAA's Cary Sherman testified to Congress that universities "resist taking action, or do as little as possible in order to brush off further responsibility" when it comes to P2P on their networks. (Read post at Digital Music News)

• A truce was called without as much as a press conference: Victory Records titles finally make an appearance at the iTunes Music Store. (Read post and comments at Punknews, via Idolator)

• Def Jam attempts to squash rumors that the label dropped rapper Method Man due to less-than-stellar sales. "Method Man is still part of the Def Jam family and he is currently on tour promoting his new CD," said a spokesperson in a statement. (Read article at SOHH)

• Rapper Beanie Sigel, on the other hand, says he is no longer signed to Def Jam or Roc-A-Fella Records. (Read article at SOHH)

• Study: HD radio still confusing listeners. (Read article at Radio and Records)

Posted by Glenn at 8:56 AM | Link
|EMI||EMI WMG Merger Talk||RIAA||Radio||Research||iTunes|

The website of the National Association of Recording Merchandisers has a bit of information on an NPD Group study on value-added physical product concepts (a.k.a. what bonus material or incentives motivate a consumer to purchase physical product). To read the full reports you must be a NARM member, but the post offers some information to all visitors.

• Consumers across all demographic segments prefer a CD coupon the most.
• DVD-based content appealed to about half of physical music buyers.
• Bundles won't increase store traffic, but they will increase impulse buying.
• Consumers don't expect to pay more for bonus content on a CD.

There's nothing surprising in those bullet points. I hope labels have got over the desire to use bonus content to rationalize their price points. A better strategy: Set a price point that is expected to be effective, then add content to increase impulse buying and lure the fence-sitters.

Anybody have a copy of the entire study? Send me an email.

Posted by Glenn at 12:47 PM | Link
|Research|

• NPD Group research reveals hip hop accounted for 23% of all ringtone sales in July. Roc was 17%, pop was 11% and alternative was 8%. Women downloaded 53% of all ringtones. (Hits Rumor Mill)

• The Internet is about democratization, but wireless has the starpower: Beyonce's music and fashion line will be the object of a mobile game being developed by Starwave Mobile. (Press Release)

• Add the Barenaked Ladies to the list of artists selling their music on their MySpace page. At the $0.89 per track price point, the band is actually taking in less than Snocap gets per sale; Snocap takes $0.45 per track and splits it with MySpace. (Barenaked Ladies at MySpace, via Digital Music News)

• This CNNMoney.com article says demand for MP3 players at Best Buy is cooling off. The retailers is shifting toward flatscreen televisions to compensate. (CNNMoney.com)

Posted by Glenn at 7:27 AM | Link
|Mobile Music||MySpace||Research||Snocap|

Hits breaks down the market shares at the two-thirds mark (not your typical mile marker, but why not?).

Antonio Reid's Island Def Jam has the best share for new releases with 6.3%, down 0.3% from last year. But remember, Reid has a history of letting expenses run wild, so who knows what he spent to get there. Warner Bros Records is right behind with 6.2%, down 0.1%.

Here's the top ten labels:

1. Island Def Jam: 6.3% (down 0.3%)
2. Warner Bros: 6.2% (down 0.1%)
3. Atlantic: 5.0% (down 0.2%)
4. Columbia: 5.7% (up 0.1%)
5. Interscope/A&M: 5.3% (down 2.1%)
6. Disney: 5.1% (up 0.7%)
7. Universal Group: 4.8% (up 1.3%)
8. RCA Music Group, 4.7% (up 1.6%)
9. Geffen: 3.1% (up 1.3%)
10. Jive/Zomba: 3.1% (up 1.1%)

And here are the market shares of the majors music groups. The doomsday predictions of the majors' demise couldn't be more premature. They account for 80.7% of the recorded music market, down a scant 0.5% from last year.

1. Universal Music Group: 31.6% (up 0.1%)
2. Sony BMG: 24.0% (down 1.5%)
3. Warner Music Group: 16.0% (up 1.5%)
4. EMI: 9.1% (down 9.7%)

Posted by Glenn at 2:11 PM | Link
|Research|

The International Federation of the Phonographic Industry released its 2006 global report today, which runs £400 for the 100-plus-page document.

As this Reuters article indicates, the market share data will be released later this year due to "squabbles over the methodology for counting digital sales."

Read an overview of the contents here, and a recap of the UK numbers here.

In the UK in 2005, rock and pop accounted for 62% of album sales. CD sales dropped slightly to 172.6 million from 174.6 million in 2004. Total trade revenues (think wholesale) edged downward to $2,162,200,000 from $2,226,100,000 (in fixed US dollars).

Posted by Glenn at 10:42 AM | Link
|Research|

• A concert promoter tells the Houston Chronicle that country radio refused to promote the Dixie Chicks' tour and wouldn't even accept the promoter's advertising money. In response, one station manager said the station doesn't advertise bands not on its playlist. How logical. (Pollstar)

• Research group Screen Digest predicts throught 2010 "online sales alone are not going to be enough to halt the decline in music sales." (Reuters)

• All of a sudden the ol' income statement is looking a lot better: Apple and Creative settled their patent dispute. Apple will pay Creative $100 million and will welcome the company's products into the "Made for iPod" series of accessories. (MacDailyNews)

• Mike Curb, founder of Curb Records and former lieutenant governor of California, gave California State University, Northridge a gift of $10 million. (Daily News)

Posted by Glenn at 8:23 AM | Link
|Apple||Research||Touring|

Hindsight is often harsh on analysts. What seemed like a good research paper that gets quoted by media outlets around the world can turn out to be way off base just a few years later.

Take this Jupiter Media prediction on music subscription revenues from January of 2002, as posted at The Velvet Rope (bold mine):

"...U.S. digital music sales - via digital subscription models and single paid downloads - will generate $1.6 billion in revenue by 2006, with $1.0 billion, or nearly 63 percent, coming from subscriptions alone. ... By year-end 2003, subscriptions will be the dominant digital music product format. According to Jupiter analysts, the growth of subscriptions as a product category will open a new front in the online music wars, pitting retailers against media companies. As the product category matures, Jupiter analysts envision digital music subscriptions to look less like traditional music products and more like programmed, entertainment environments found on media sites or on TV"

In the first half of 2006 there were 281 million digital tracks sold. A modest increase of 20% in the second half of the year would mean of 2006 total of 618 million. Jupiter's 2006 prediction was for 37% of $1.6 billion, which very roughly comes out to 592 million tracks. That part of the prediction is very close. The subscription prediction is way off. That leave roughly $1 billion for subscription revenue, but Research and Markets predicts that amount will be $340 million this year, and that includes streaming revenue as subscription revenue.

Continue reading "The Digital Future Isn't Easy To Predict" »

Posted by Glenn at 1:18 PM | Link
|Research|

If you're in the mood to download a 42-page PDF, check out this paper by University of Bristol economist Thierry Rayna on the economics of selling versus renting music.

Rayna's paper covers durable goods, problems with DRM systems, the reason behind the rental strategy (switching costs) and the argument that selling companies (like iTunes) aren't in competition with the renters (like Rhapsody), but rather with CD sellers.

(Via Digital Audio Insider)

Posted by Glenn at 11:27 AM | Link
|Research|

• Universal Music Group is interested in two music publishers. Sources told The FInancial Times the company has had talks with EMI about buying Warner Music's music publishing in the event the former buys the latter. UMG is also prepared to bid for BMG Music Publishing, for which Bertelsmann is currently seeking a buyer. (Financial Times)

• A Bridge Ratings surveys shows how MP3s, podcasts, Internet radio and satellite radio have lessened time spent listening to terrestrial radio. (Bridge Ratings, via Digital Music News)

• An Ipsos Insight report says one in five Americans over the age of 12 owns a portable music player. One in 20 owns more than one. (Ipsos Insight)

• The Record Exchange will close its five remaining stores in North Carolina and Virginia. (The Charlotte Observer)

• RIP Johnny Jenkins, guitarist who played with Otis Reading. (Hollywood Reporter)

Posted by Glenn at 8:39 AM | Link
|Brick-And-Mortor Retail||Research||Universal Music Group|

Research and Markets has released a market report that claims that by 2010 at least a third of the UK spending on recorded music will come from legal downloading. The growth potential, it believes, is in the live music market. Only 18% of adults attend concerts regularly, it states. (What defines regularly? In the US, only 2% of the population attends three or more concerts per year.)

This report should help clear up any doubts as to the longevity of the CD format. Back in January of 2004, CNN.com tweaked the conclusions in a Forrester report and came up with this statement: "Music downloads will render compact discs all but obsolete in the next five years." What the report actually said was that digital downloads would comprise 33% of the U.S. recorded music market by 2008, which looks like an overly optimistic target.

The timing of the Research and Markets report coincides with a report from Telephia on over-the-air downloads, as reported today by Digital Music News. It found that despite growth in over-the-air downloads to cellular phones, "subscribers still rely heavily on their personal computers as the central hub of their music activity." Those personal computers have disc drives. People put CDs in those disc drives. And given the lack of rights management on CDs, consumers have an extra incentive to choose CDs over downloads hampered by DRM.

In March of this year, Forrester research predicted digital music will make up 36% of the European music market's value in 2011.

Posted by Glenn at 1:30 PM | Link
|Digital Music||Research|

Investors are starting to worry about digital sales. Through April, digital sales has slowed and the second quarter of 2006 is looking like it will have lower digital sales than the first quarter. Analysts don't like a sales trendline that is anything but postiive, even for a six-month period.

Frank Green of the San Diego Union-Tribune has an article that points to two studies on digital sales, but overall the tone is level-headed. Sales are flattening out, and seasonality of both portable media devices and digital sales -- and the connection between the two -- need to be taken into account

Pali Research released a report last month (PDF hosted by Digital Music News) that notes the seasonality but was worried that digital sales would be down in the second quarter. (June has actually been a better month than April, which is the most current month in the Pali data.)

A slowing is to be expected. Post-Christmas sales could not be maintained through the halfway point of 2006. Summer could very well be slow, too, but it's nothing to be concerned about. (Digital track sales dipped last summer, then rebounded in September.) There will be few big releases until the August back-to-school season. Seasonality is the nature of the beast. Because of this, the best measure is the same year-to-date sales measure that is used to track album sales against sales in previous years.

If one looked at album sales since the beginning of December the trendline would have a disasterous downward slope. Again, nothing to worry about. It happens every year.

Posted by Glenn at 12:45 PM | Link
|Digital Music||Research|

• Virgin France was fined for offering illegal Madonna downloads. The download site had ignored an exclusive given to a competitor by downloading Madonna's "Hung Up" single and re-selling it on its own site. Virginmega is to pay a fine of 600,000 euros. (BBC News)

• A profile on Downtown Records, which has the press-adored Gnarls Barkley on its roster. (BusinessWeek Online)

• Hispanics listen to the radio more than the average American -- 22 hours and 15 minutes per week versus an average of 19 hours per week -- but time spent listening is dropping. In the last 12 months, Hispanics' weekly time spent listening has dropped 15 minutes, reflecting changes seen in other listeners. That drop is due to men's listening habits only as women's time spent listening has remained constant at 24 hours and 30 minutes. (Billboard Radio Monitor)

• Jamie Foxx, Mary J. Blige, Chris Brown and T.I. were winners at last night's BET Awards in Los Angeles. (AP)

• Three men were arrested for allegedly writing a computer virus that used Sony BMG's infamous rootkit as an entry point into victims' computers. (Technology Review)

Posted by Glenn at 9:26 AM | Link
|Indies||Radio||Research||Sony BMG||Warner Music Group|

Market research company Forrester released a report yesterday will all sorts of predictions for the European market. Some of them are:

• Digital music will make up 36% of the legal music market's value in 2011. (That figure has got to assume that P2P will not be legaized with some sort of broadband tax, otherwise that number would probably be much higher.)
• The 30% drop in CD and DVD sales will be more than offset by digital downloads.
• The shift to download sales will mean more singles than albums sold. (That's already the case. Right now in the U.S. in a week there are about 30% more single downloads than total albums.)

Flashback: In early 2004, speaking about the U.S. market, Forrester predicted that by 2008 33% of music sales would come from digital downloads. (In 2005, digital accounted for about 6%.)

Here's what Coolfer said in response:

• "Five years is much to optimistic."
• "Retail will fight to the bitter end. Best Buy and other mass merchants have built up a market share that they will not soon give up." And they're doing just that. Best Buy, Circuit City and Target regularly sell CDs for less than iTunes sells digital albums.
• "Analysts--and especially reporters--too easily overlook the power of the older generation's purchasing power." What's happened since then? Starbucks has got in the music business, Ray Charles had a hit and won eight 2005 Grammy awards, and Barry Manilow and Rod Stewart have topped the album chart.

Flashback: In June of 2004 Jupiter's Joe Wilcox predicted digital downloads wouldn't represent 5% of music sales until 2008 (scroll down to bottom of article).

Posted by Glenn at 2:01 PM | Link
|Music Industry||Research|

Market research company TNS found that the average Brit spends £21,000 ($37,121) on music during his/her lifetime. A music enthusiast (whatever that is) spends just over £44,000 ($77,778) in a lifetime. That all-encompassing figure includes things like pre-recorded music, concerts, nightclubs, musicals and magazines.

More tidbits, from the BBC.com article on the study:

• Average amount spent on CDs, concerts and magazines is £425 ($751) per year.
• Seven out of ten people go to a musical event every year.
• About half of those questioned claimed they spent nothing but the number ended up being about £250 ($442) a year.
• The average person owns £891-worth ($1,575) of music-playing equipment.

Here's some rough math for a typical music enthusiast: One show a week in New York costs, on average, about $14 per week, which is just a rough estimate that balances out the cheap shows with the incredibly expensive ones (drinks not included, and that's the real killer). Subscription to eMusic is $15 a month. A few new albums a month go for about $50, and throw in $15 for used CDs found on eBay and at sidewalk sales. Who reads magazines any longer who doesn't get them free at clubs? Fine...let's throw in a $15 annual subscription to some music rag. Let's add $300 for an iPod and another $100 for accessories.

Already that's $2,103. Ouch. That doesn't include the computer and broadband access that fuels the music addiction (and downloads heaps of music), nor does it include taxi fares for those late night trips home after a show, or the round-trip ticket to SXSW or Coachella.

To quote Spinal Tap, that's too much f**king perspective.

Posted by Glenn at 9:35 AM | Link | Comment (2)
|Music||Research|