Universal is the "is the next surprise for our investors," said the head of Universal Music Group's parent company. And he meant a good surprise.

Jean Bernard Lévy, the chief executive of Vivendi, gave the Financial Times an optimistic prediction for the fortunes of Universal Music Group and recorded music in general.

“I think [in] the music business, there is a strong likelihood that we are getting close to the lowest part of the cycle and we are extremely active in developing new business models, new sources of revenues.

"We are working with all the big names in the field of internet, in the field of telecom equipment companies, big media companies and this is a big opportunity."

He said Universal had emerged from the downside of the market as a clear leader of an industry that would soon be able to claim it had “reinvented a new era for the music business".

"I really believe we are at the turning point for the music industry and I didn’t say that two years ago."

Here's what Levy said in January of this year at Midem: "I think altogether today there is an exaggeration in the industry. Of course it is not doing that well, but look at us, we have flat revenues, a good two digit margins and it's not as dark as what many people describe." He even sounded fairly optimistic in October of last year.

Of course, in the last few years UMG has acquired not only additional publishing assets but management and merchandise interests. I sense his comments to the Financial Times were mostly about recorded music since it is the segment most associated with "the lowest part of the cycle."

These new business models are all racing against declining CD revenues. If they are successful, the combined growth of these new models have a chance to lead recorded music sales to a bottom and, not a moment too soon, an upward trajectory.

When I've modeled US recorded music sales, I see the bottom in 2010 or 2011 if some necessary -- and achievable -- outcomes take place. Ad-supported revenues need to really take off, subscriptions (as in bundled services like Comes With Music) needs to show very strong results by 2009, CD sales declines need to be in the very low double digits and digital downloads need to continue to grow at or above 20% per year (growth is good now, but it's been slipping). Mobile is a bigger question mark in my book. I'm more conservative there. I see ringtones being fairly flat and over-the-air downloads not playing much of a part in the market's growth. Subscriptions (such as Rhapsody and Napster) will lend little to no growth. Lots of 'ifs' there, but that is what is needed.

Unlike some optimism executives have offered over the years, Lévy's outlook is founded in actual progress rather than wishful thinking. Labels and publishers have been working toward new business models as if they recently found religion. They're not even close to being out of the woods yet, but I do agree with Lévy that their outlook today is better than it was two years ago.

Posted by Glenn at 6:13 PM | Link
|Universal Music Group|

Vivendi released its operating results for the first half of 2008 on Monday. Universal Music Group's EBITDA increased 17.7% to €259 million. Revenue for that period was €2,044 million, a 2.4% decrease.

Such a margin is far ahead of that of Warner Music Group (6% operating margin in its most recent quarter) and Sony BMG (-1% operating margin for its most recent quarter). Terra Firma does not release specifics on EMI's financial performance, but we can assume overhauling a struggling company takes more than a few years.

So why is UMG doing so well relative to the other majors? It has increased its market share, it acquired BMG Publishing and Sanctuary, and it regularly tops the charts in numerous countries. Rather than sit on its catalog, as EMI has hinted it may do, UMG aggressively goes after new acts. And the latter half of the year will see a strong release schedule, according to the release: The Killers, Fall Out Boy, Bon Jovi, Black Eyed Peas, Pussycat Dolls and Ne-Yo, among others.

There are, however, some underlying issues. UMG's revenue has been more or less flat in spite of continued acquisitions. Digital growth is tapering off, as it is at other music groups. Physical formats are under pressure and no new revenue stream -- not mobile, not ad-supported services -- is offering a clear path to revenue growth. Like everybody else, UMG is swimming against a current and trying to keep from going backwards. There is no silver bullet that will recapture lost revenues, but UMG is doing a very good job at muscling out one success at a time.

Posted by Glenn at 12:42 PM | Link
|Earnings Releases||Universal Music Group|

Universal Music Enterprises announced today the "Playlist Your Way," a digital-physical hybrid package with a greatest hits CD and a download card that can be redeemed for a podcast on the artist as well as the choice of six additional tracks and/or a full-length original studio album. Looks like the main point is to get CD buyers to test drive digital downloading. Another stated benefit is the podcast as a replacement for the more limited information that can be offered in a CD booklet. (More information, less practical.)

It's a throwback of a concept: Using a physical distribution system to promote digital downloading. Hey, whatever works. If that's how you reach potential customers, that how you reach them.

The press release does not give pricing information, but Amazon.com lists 16 "Playlist Your Way" CDs with an August 5 street date and a $10.99 list price. All 16 titles are already being sold as used items by third parties. They're going for less on eBay.

Strikes me as a crafty way of getting around retailers' requests for lower prices. A $10.99 price is a good one, but not as low as catalog prices could go. If additional digital content, which can be distributed in an affordable manner, can help labels hold the line on wholesale prices, this may turn out to be a profitable product. In any case, it will probably turn out better than that other physical-digital hybrid, the ringle.

Posted by Glenn at 10:14 AM | Link
|Universal Music Group|

Universal Music Group parent company Vivendi released its Q2 results today. (PDF of earnings release) First half revenues of €2,044 million were 4.9% improvement at constant currency and a 2.4% decline in actual currency. Digital revenues were up 33%, the same year-over-year improvement achieved in Q1. The company claimed growth in music publishing, merchandising and license income but offered no supporting numbers.

Q2 revenues were €1,011 million, a 3% gain at constant currency and a 5.3% decline in actual currency.

Not great but not bad all things considered. Revenue is only part of the story. Improved digital margins may be helping the overall but we weren't given any information. Unlike most Vivendi earnings releases, this one was void of anything but gross revenue numbers. No EBITA or operating profit numbers were given for any of its divisions.

Posted by Glenn at 11:14 PM | Link
|Earnings Releases||Universal Music Group|

• In an effort to improve margins, Universal Music Group will bring back deluxe editions of CD releases for the fourth quarter (at least in the UK). Standard versions will also be available. (Music Week)

• EMI has appointed Elio Leoni-Sceti as its new music unit chief executive. On Leoni-Sceti's resume are stints at consumer product companies Reckitt Benckiser and Proctor & Gamble. (AP)

• More executive changes at EMI. Billy Mann, EMI Music’s Chief Creative Officer is in for departing President, A&R Labels - International and President - EMEA, JF Cecillon. (Alley Insider)

• The Orchard "substantially completes" its acquisition of TVT Records' assets (which includes masters, artist contract and office lease but not publishing). (Press release)

• A campaign by McCann-Erickson for Universal Music Group will give MasterCard users free downloads at www.priceless.com. After giving away the first 100,000, each track will cost $0.80. Being a Mastercard user I went to the site to test it out. After jumping through too many hoops, I ended up an an Amplified.com page and just gave up after being asked to register again. The prize packages are cool, but the free download aspect is pretty weak. (Billboard.biz)

• In Australia, brick-and-mortar sales of #1 albums dropped 30% and #1 singles dropped 40% in the first half of 2008. Those figures are not for all albums or singles, just the #1 singles. (Herald Sun)

• I haven't posted an article about vinyl's popularity in a few weeks, so here's another one. The article says vinyl sales in Ireland were up 20% in the first half of 2008. That's puny compared to the 77% increase in the U.S. in the first half of the year. (Times Online)

• Live Nation has purchased a controlling interest in France's Main Square Festival. (AP)

• A profile of Soundtrax, which makes music download cards. (Duluth News Tribune)

Posted by Glenn at 9:20 AM | Link
|EMI||Universal Music Group|

Universal Music Group lost its lawsuit against an eBay vendor who sold promo CDs. I will link to a post by the EFF's Fred von Lohmann, one of the lawyers that represented the defendant. Here's an excerpt:

In an important victory for the first sale doctrine, a federal district court today ruled that selling "promo CDs" on eBay does not infringe copyright. The court threw out a lawsuit by Universal Music Group (UMG), which had argued that the "promotional use only" labels affixed to these CDs somehow conveyed eternal ownership on UMG, making it illegal to resell the CDs (or even throw them away). ...

In its ruling, the district court found that the initial recipients of "promo CDs" own them, notwithstanding "not for resale" labels. The court rejected the notion that these labels create a "license," concluding that the CDs are gifts. According to the opinion, "UMG gives the Promo CDs to music industry insiders, never to be returned. ... Nor does the licensing label require the recipient to provide UMG with any benefit to retain possession." (The court also found that federal postal laws relating to "unordered merchandise" establish that promo CDs are gifts to their recipients.)

Posted by Glenn at 2:38 PM | Link
|Legal||Universal Music Group|

Citing improved digital sales and the integration of BMG Music Publishing and Sanctuary, Vivendi announced Universal Music Group's Q1 2008 earnings today. (Read PDF of earnings release.) Revenue increased 0.6% to €1,033 million (6.8% at constant currency) and operating profit increased 94.7% % to €111 million (the increase was 111.1% at constant currency).
Vivendi cited improved margins relating to a shift to owned product and away from licensed product.

While Q1 was an improvement, revenues were below the €1,027 million recorded in Q1 2006, and operating income lagged behind the €141 million achieved in Q1 2006. Keep in mind that UMG has made a number of acquisitions in the last two years that have helped bolster falling top line numbers.

Digital sales increased 33% year over year. As a comparison, UMG's digital sales increased 51% in fiscal 2007 (and represented 14% of total revenues) and were up 54% year over year in 2007 Q1. The rate of growth is slowing considerably, which is very unfortunate since the rate of the CD's decline has been accelerating over the last two years.

Posted by Glenn at 7:48 PM | Link
|Earnings Releases||Universal Music Group|

A few specifics on Nokia's "Comes With Music" initiative came to light today. (Read this December 2007 press release for more info.) Comes with Music is a plan the mobile operator to allow subscribers access to a large catalog of music. Nokia would pay a fee for access to a music company's catalog of music. The fee would be absorbed by Nokia and presumably passed on (at least in part) to the consumer.

The Hollywood Reporter's Mark Halper says an unnamed, "well-informed mobile industry executive" put the per-handset amount at $35.

paidContent's James Quintana Pearce did a bit of digging and found a source that said the per-unit fee starts around $33.50 for the first 2.5 million units and scales down at higher volumes. The plan is said to include "a limited but relatively high number songs." The most interesting tidbit is the source's claim that Comes With Music is based on a download -- not a subscription -- model.

For those of you doing some quick math on the back of the nearest envelope, UMG had 28.8% of the global recorded market in 2007. Divide the market share into the per-unit fee of $33.50 and you get $116.32. That's what access to all music would cost if the other majors and all indies negotiated equivalent rates on a pro-rata basis.

Posted by Glenn at 9:41 PM | Link
|Comes With Music||Nokia||Universal Music Group|

The Times Online's Dan Sabbagh has an interesting take on today's record business. He contrasts the unique efforts of pop artist Shayan Italia, whose new video amassed 190,000 plays in the first 24 hours in was on YouTube, with the more traditional story of Duffy, a singer signed to Universal Music Group. Italia has, with the help of investors' £500,000 (sold in £12,000 blocks), achieved a only a modicum of success but did it without the help of a record label. Duffy, who went to UMG from Rough Trade, has achieved great success with her new album, Rockferry, in a far more traditional manner and with very few YouTube views and little online fanfare.

Rockferry shifted 180,000 CDs in its first week, worth rather more than 190,000 views on YouTube, without the help of a television programme talent contest or any internet nonsense. In fact, the album was marketed conventionally to entice the mainstream buyer.

Nevertheless, despite these simple facts, people get very excited about the death of the record company and about finding clever ways to ward off its demise. But it is easy to get distracted: these companies are really creative businesses, allying marketing muscle with nothing more complicated than good music.

Spending too much time banging on about a new business model while failing to discover new acts, hiring management with little credibility in the industry or simply not bidding for talent when necessary are sure ways to fail, as Guy Hands may find out if he is not careful.

After all, people who buy or steal music do not care about how the music business should reinvent itself. What they want to do is listen to songs they like.

He has a point. Most people -- not all but most -- do not care a great deal about how the business needs new models. They want music and will not get involved with policy issues and the nuts and bolts of business. And the drive for new models and different ways to monetize catalogs cannot take away from music companies' entire reason for being: to find and develop (and quickly drop some) new artists.

Sabbagh shares my view on the death of the record label, as in it's not going to happen. But then again, he writes media analysis. Were he a tech journalist I'm sure our opinions would differ.

"For all his talent," writes Sabbagh of Italia, "the big break is yet to come and there is not yet any return for the investors who are taking part in an exercise that is supposed to prove that the great rock'n'roll swindle is dead."

One more thing...Duffy's album sold 180,000 in its first week...in a country with one-third the population of the U.S. This country's top seller last week was an Alan Jackson new release with sales of only 119,000. Sheesh.

Posted by Glenn at 6:52 PM | Link
|Marketing||Universal Music Group|

Vivendi announced its 2007 earnings last week (download PDF of earnings release). Yeah, I'm a bit late on this one. EBITA dropped 16.1% (12.9% at constant currency). Digital sales increased 51% (at constant currency).

These slight revenue drops are par for today's course, but they don't tell the entire story. It's important to keep in mind that UMG and the other majors are acquiring quite a bit of revenue. It's one thing to grow revenue organically and another to buy revenue. The only organic growth, digital, isn't enough to offset losses related to CD sales. Music companies have always been active acquirers, though, so there's no reason to look for any red flags that aren't already visible -- M&A happens in both good and bad years.

UMG's 2007 revenue most likely includes partial-year revenue from two main acquisitions, BMG's music publishing (bid in late 2006, got E.U. approval in May 2007, had 2006 revenues of €362 million but divested some publishing assets to gain E.U. approval) and Sanctuary Music Group (acquired in July 2007 and good for about £150 million in annual revenue). In 2008, UMG will add to its top line the revenues of Univision's recorded music and publishing divisions.

Posted by Glenn at 2:24 PM | Link
|Earnings Releases||Universal Music Group|

Interesting post at MocoNews from the World Mobile Congress. Rob Wells, Universal Music Group SVP of Digital, talked about the goals of the company with an almost cinematic flair.

The start and endgame for Universal and, indeed, the industry worldwide, is providing consumers with blanket access through a celestial jukebox anytime, at home, in the car. This is the next step in the utopian future for music...

And this about temporal pricing:

If an artist has just delivered an album from studio, we could potentially deliver it to a limited number of users for a higher price. It’s something we’re quite keen to develop; for example, through our own B2C channels - artists websites.

There are different definitions of "utopian future." UMG sees paid services as the future, as evidenced by its Total Music plan and Nokia's Comes With Music mobile service.. Others see the best route as unhindered P2P, which would certainly have more content and would be closer to a true celestial jukebox.

The pricing comment is worth taking a look at. Labels have yet to do a whole lot of direct-to-consumer stuff (other than merchandise) but that should change. Fan clubs and artist websites offer ways to deliver music and bring a sense of scarcity to digital downloads. If the iTunes and the Amazons of the world won't raise their prices for time-sensitive releases, artists and labels can go it alone.

Posted by Glenn at 2:37 PM | Link
|Comes With Music||Mobile Music||Total Music||Universal Music Group|

In general, I'm pretty tired of talent searches. There are so many of them. It's as if "American Idol" has spawned dozens -- if not hundreds -- of unimpressive and practically unseen copycats.

Though I wasn't aware of the "Crash The Super Bowl" promotion before I saw Kina Grannis's commercial during the first quarter, I'm intrigued by the joining of Interscope Records with Doritos that culminated in a very expensive ($5 million) Super Bowl ad. (The commercial also quietly tagged iTunes at the end. An EP with songs by the three finalists is already on sale at iTunes and Wal-Mart.com.) This article from yesterday's Boston Globe has information on the contest.

The singer-songwriter instantly got a fair amount of attention. Grannis received about 5,000 hits on her MySpace page between the second quarter and the end of the third quarter (at which point she was over 15,000 for the day). She was one of three finalists in the contest. As the winner, Grannis will receive $10,000 and a record deal with Interscope.

Will it work? "We have absolutely no idea," Interscope's Ted Mico told the Globe. "No one has ever done anything like this. We’ve had all kinds of online talent contests but nothing has even been done on this scale."

Will we see more promotions like this? Absolutely. Labels are increasingly using the Internet to scout talent, and they are piggy-backing on the advertising budgets of consumer product behemoths like, as in this case, Frito-Lay. If somebody else picks up the tab, a label can remove much of the risk and gain an incredible amount of awareness.

Posted by Glenn at 8:25 PM | Link
|Marketing||Universal Music Group|

Vivendi, parent company of Universal Music Group, released its earnings for fiscal 2007 today. (Download PDF of full press release here.)

UMG's revenues dipped 1.7% to €4.87 billion for the year and dropped 3.1% to €1.6 billion in Q4. Excluding revenue from acquisitions (BMG Music Publishing and Sanctuary) revenues were down 7.2% for the year 10.2% in Q4.

For the year, digital sales rose 51% to €676 million and represent 14% of total revenues. For Q4, digital sales rose 54% (at constant currency).

Nutshell: UMG increased its market share in a shrinking market and revenue was helped by acquisitions. The outlook for '08 is gloomy, but there a couple encouraging things that make the continued fall of the CD a slight bit less grim. One is the speed with which the company is now changing -- or at the very least trying to change -- adapt to current realities. The other is 2007's release schedule, which was pretty miserable. It would be hard for all labels to collectively put out fewer big name albums than they did last year...although it's not totally out of the question (especially if EMI vigorously prunes its label rosters).

Posted by Glenn at 6:42 PM | Link
|Earnings Releases||Universal Music Group|

There are now a few reports online about a keynote Q&A with Vivendi president at MIDEM conference in France. (Vivendi is the parent company of market-leading Universal Music Group.)

A report by Billboard.biz highlighted Levy's comments on the CD format. Wrote Lars Brandle, "Levy ... defied widespread gloomy predictions for the CD when he told delegates the physical format would continue to play an important role in the recorded music industry for years to come, alongside digital formats."

The Canadian Press adds this quote on the CD: "It's not the migration of one physical format to another, I think it's a transition into very diversified business models of which CDs will remain a part. I don't believe at this stage for the next few years we will see a complete showdown (elimination) of CDs."

A post at paidContent has quotes on both the CD and Vivendi's stance on DRM. "We are still testing (DRM-free models)," Levy said, "but our policy is still that we are strongly attached to DRM, especially for advertising-based models and subscription-based models."

Reuters' headline is "Vivendi Chief Says Music Industry Gloom is Overdone" and included this quote: "I think altogether today there is an exaggeration in the industry ... Of course it is not doing that well, but look at us, we have flat revenues, a good two digit margins and it's not as dark as what many people describe."

Posted by Glenn at 3:36 PM | Link
|Conferences||DRM||Universal Music Group|

Silicon Alley Insider and Digital Music News have posted about rumored upcoming layoffs at Sony BMG and Island Def Jam. Sony BMG, according to Silicon Alley Insider, will shed "40 to 70 mid-level execs" before the end of the year. Digital Music News has picked up chatter that cuts are imminent at Columbia Music Group as well as Island Def Jam ("particularly within A&R").

Posted by Glenn at 12:21 PM | Link
|Sony BMG||Universal Music Group|

Nothing brings commentary like Universal Music Group's Doug Morris talking about his company's failure to grasp changes in technology. In an interview with Wired's Seth Mnookin, Morris painted a picture of confusion at the onset of the digital age.

"There's no one in the record company that's a technologist. That's a misconception writers make all the time, that the record industry missed this. They didn't. They just didn't know what to do. It's like if you were suddenly asked to operate on your dog to remove his kidney. What would you do? We didn't know who to hire. I wouldn't be able to recognize a good technology person — anyone with a good bullshit story would have gotten past me."

At the Huffington Post, Howie Klein, founder of Reprise Records, countered by recounting how his desires to sell DRM-free music by the track was rebuffed by executives:

"As we were realizing and taking advantage of the huge efficiency and power of this medium, we also clearly observed the beginnings of illegal music file trading and distribution by fans -- and the ramping up of the demand for music delivered over the internet.

We viewed this 'threat' as an opportunity. Not an opportunity to sue teenagers and/or their parents, but a new opportunity to let people purchase their music the same way they do at record stores. ...

We proposed to our corporate masters that we sell 'unprotected' MP3 singles at a reasonable price-- $1/$1.50. We wanted to experiment and see if this model would stick.

Why unprotected? Because we were already in a vastly successful business of selling unprotected digital files: CDs. If people wanted to get them on the internet -- they should be coming from us... that would be the future of the business: an evolution of the day's success. ...

Our proposal, after lots of corporate headscratching, hummimg and hawing, was denied."

Silicon Valley Insider actually showed some empathy:

"What music label boss did have a working crystal ball in 1999? And while we're waiting for your answer, another request: Please tell us -- which one gets it now? And one more: Say you run one of the major record labels today, so you still make the majority of your money selling compact discs. How do you transition to the digital future, where people buy songs for $1 (if you're lucky) instead of albums for $10?

This last one is most interesting to us, because we've been watching the music business shrivel for 10 years, and we're not sure what other route the major labels could have (realistically) followed."

While acknowledging its mistakes and its failure to follow up legislation and lawsuits with anything of substance, I agree with the "Who had a crystal ball in 1999?" argument. Nobody -- from the biggest to the smallest label, to the book to the movie industry -- would have welcomed Napster with open arms, dropped DRM and overhauled copyright law in a few short years. Not that the industry hasn't shot itself in the foot on occasion, but it was destined to have plenty of mistakes from which everybody could learn.

New York Magazine came in with the worst take: "We give this industry six months to live."

Posted by Glenn at 8:24 AM | Link
|Universal Music Group|

The last we heard about USB drives was HMV's plans to include the storage devices in its renovated retail stores. Today I saw an article that said Universal Music Group is going to release upcoming U.K. singles by Keane and Pussycat Dolls on USB memory sticks. Each USB drive would cost £4.99 ($10), a 67% premium over a comparable CD single.

These wouldn't be the first USB drives on the market -- Barenaked Ladies, for one example, has released music on 128MB drives -- but the larger labels have yet to actively pursue flash drives as a viable physical format.

Posted by Glenn at 1:32 PM | Link
|Universal Music Group|

• Album sales dropped 6% last week and were down 17% versus the same week last year. For the year, album sales are down 14%. Kid Rock's Rock 'N' Roll Jesus debuted at #1 with the modest sum of 172,000 units (zero digital). Sales of digital tracks were flat last week but were up 56% over the same week last year. For the year, digital tracks are up 47%. Soulja Boy Tell'Em's "Crank That (Soulja Boy)" remained the #1 digital track last week even though the album sank 64% last week and fell to #16.

• Jean-Bernard Levy, chief executive of Universal Music Group parent Vivendi, told Reuters UMG will retain its superstar artists. In the wake of the mega-deal between Madonna and Live Nation, Levy predicted artists "feel good" working with UMG and mentioned that UMG is already signing artists to 360-degree contracts. (Reuters)

• Lime Wire will sell DRM-free INgrooves tracks at its upcoming digital store. INgrooves' catalog has about 100,000 tracks. (Press release)

• In an email sent out to its affiliates this morning, Amazon.com said it will pay its affiliates a 20% commission on MP3 sales through the end of 2007, and 10% thereafter. In comparison, iTunes pay affiliates only 5%. That will obviously hurt margins on sales generated by affiliates, as Silicon Valley Insider points out, but what percent of total sales comes from affiliates? Honestly, I have no idea but I can't imagine it being too great. Affiliate programs use a break-even or loss-leader strategy to get incremental revenue and convert that to future business. Don't be concerned about Amazon.com's music margins. This is the price of building awareness and repeat customers. (Silicon Valley Insider)

• Groove Mobile has inked a licensing deal with Redeye Distribution to offer Redeye's catalog -- which includes Yep Roc, Arena Rock and TKO Records -- though Groove Mobile's mobile music service. Groove Mobile powers the Sprint music store in the U.S. and 3UK's mobile music store in the U.K. (Press release)

• Nettwerk Records has joined with Passalong Networks and Digonex Technologies to create a variable-priced MP3 pilot program. Using Digonex's pricing technology, the price of Nettwerk MP3s will be adjusted weekly based on demand. Albums will range from $3.30 to $9.99 while singles will have three price points: $0.33, $0.66 or $0.99. Tracks can be purchased at Passalong's StoreBlocks site. (Press release)

Posted by Glenn at 1:01 PM | Link
|Amazon||Mobile Music||Universal Music Group|

Universal Music Group's proposal for the Total Music service -- rally the other majors, get a hardware manufacturer to absorb the monthly fees -- has the Internet all abuzz. In a blog post, Jupiter's Mark Mulligan pointed to some potential trouble spots but gave a thumbs up to the idea of getting hardware manufacturers to absorb the service costs.

"The idea of working with device manufacturers to get revenue directly for music is not actually that crazy an idea. In fact, we’re working on a report which incorporates that exact theme. We’re still working on the numbers, but based on the scant (rumoured) details we have on Total Music, I think the approach we’re suggesting is more workable for all parties."

Can't wait to hear about that winning approach. Mulligan began the post by explaining how labels make for far better scouts and promoters than they do service operators (MusicNet and PressPlay are examples A and B). Very true. Over the last eight years or so, labels interests have not overlapped well with the needs of consumers Labels' unending desire to convert consumers to a DRM'd music service probably won't be met by a stampeding crush of consumer demand (and it probably won't help that somebody else has the domain). Billboard's Antony Bruno has been told the specifics of Total Music are still changing and the final product -- if it ever makes it to market -- could be very different than what was portrayed in recent articles.

For a different view, read Podcasting News' "Five Reasons Total Music Will Be A Total Failure."

Posted by Glenn at 3:39 PM | Link
|Universal Music Group|

• Finally, somebody other than a technology writer or music critic takes a good, long look at the music industry. (No offense meant, but those two camps tend to enter the discussion with a bias that prevents whatever objectivity could have existed to begin with.) I expect a balanced and thoughtful post from the writers of the New York Times' Freakonomics blog, and that's just what Stephen J. Dubner has given his readers. (Freakonomics, via Digital Audio Insider)

• An update from the hearings in Brussels: Vivendi chief executive Jean-Bernard Levy told reporters that Universal Music Group's contract with Apple is "indecent" and that its "contracts give too good a share to Apple." (Reuters)

• Clive Gardiner, a former BMG Music executive, has been named VP of Digital Content for upstart download store We7. The innovative site, with backers that include musician Peter Gabriel, offers ad-supported downloads with the audio advertisements embedded into the actual sound files. (Press release)

• Well lookie here...pitting one artist against another results in higher sales for both parties (something the British have long known). The "battle" between Kanye West and 50 Cent has Billboard.biz looking at the upcoming street date "battles." On October 2 we'll get a battle royale between Bruce Springsteen, Dashboard Confessional and Matchbox Twenty. A better three-way fight occurs on November 6 as Alicia Keys, Garth Brooks and Jay-Z will release new albums. (Billboard.biz)

• For a good overview of the secondary ticketing market, check out this article. Here's a fun fact I didn't know: Only six states still outlaw the reselling of tickets. (Tickets News)

• The WMA-based Virgin Digital will shut down next month. It never had a chance and was never on the radar. After a few years of download stores opening in numbers not seen since video arcades in the '80s and bagel shops in the '90s, it's high time the market thins out a bit and rids itself of the weakest players. Evolution is a natural and positive force in business. (PC World)

• Billboard.biz is currently streaming a video of an interview with SpiralFrog chairman Joe Mohen. He expects to have the other majors signed up "pretty quickly." When asked about the files' lack of compatibility with the iPod, Mohen spoke about a new generation of music-enabled, flash storage cell phones that will work with SpriralFrog. Another thing he mentioned was labels' fear that SpiralFrog would canniablize sales at places like iTunes. Mohen thinks he has convinced them that SpiralFrog that won't happen and the site will result in incremental revenue. I'm not sold on the business model, but the site is in its infancy and should improve over time. (Billboard.biz)

Posted by Glenn at 9:05 AM | Link
|Universal Music Group|

• Jean-Bernard Levy, chairman and CEO of Vivendi, the parent company of Universal Music Group, showed the same optimism that characterized the Goldman Sachs Communacopia speech by Warner Music Group chairmand and CEO, Edgar Bronfman, Jr. Levy said UMG is the only "healthy and stable" company in the music industry. He added that UMG has not yet decided whether it will it will make a permanent decision to sell music without DRM. The company is currently experimenting with DRM-free sales at some online stores. (Hollywood Reporter)

• WEA Corp, the distribution arm of Warner Music Group, inked a deal with Abandon Interactive Entertainment to market and distribute the video game "Freaky Creatures." The game -- and I'll quote here because this reads like stereo instructions -- is "one of the world's first player-customized, cross-platform, multi-player game universes for the tween demographic." (Press release)

• At the Popkomm festival in Germany, music industry execs discussed how the auto industry will become a valuable partner for the music industry as cars go online. "We will connect our cars with the Internet in the next three to four years," said a principal of a consulting group. "The iCar is not far away." (Billboard.biz)

• Music startup Slacker has inked deals with EMI, Warner Music Group and Universal Music Group. The well-funded company will eventually offer satellite radio and branded portable players. I tested the online radio a few times and, if this says anything about my level of interest, I have not returned since. (Digital Music News)

• Rapper Fat Joe's Terror Squad label has inked a deal with Caroline-distributed Imperial Entertainment. Terror Squad will soon release Fat Joe's eighth album, Elephant in the Room. Terror Squad and EMI-owned Caroline teamed up for his last album, Me Myself & I, which has sold 206,000 units since its release last November. (SoundSlam)

• A new survey from American Media Services finds that 63% of Americans listen to the radio every day, a figure that rises to 79% for adults between 25 and 34. Seventy two percent surveyed said they listen to as much or more radio than they did five years ago. Satellite subscribers held steady at 11%. "Many analysts seem to be enthralled with the technology of satellite radio, but the buying public isn't," said the AMS. (Radio Ink)

• In February, Universal Music Group will its Music Row offices in Nashville and heading downtown to a building adjacent to the Ryman Auditorium. The move is expected to save $200,000 a year. (Ashland City Times)

Posted by Glenn at 9:18 AM | Link
|Universal Music Group|

• The FCC has set September 20 as the date for a media ownership hearing in Chicago. It will be held at Operation Push National Headquarters on East 50th Street, from 4-11 p.m. This will be the fifth of six such town hall meetings. Here is my post on the hearing I attended last year in Nashville. (Radio Ink)

• Brit retailer HMV has experienced positive sales growth over the last 18 weeks. Total sales rose 12.2% over the period while same store sales grew 5.8%. Strong sales of DVDs and video games -- not music sales -- were behind the increase. (Billboard.biz)

• Ad-supported download site SpiralFrog has licensed the IODA catalog. That deal pushes SpiralFrog's catalog up about 1 million tracks to roughly 1.7 million (from 700,000). (Press release)

• Universal Music Group, which was preemptively sued by video site Veoh last month, has returned the favor by suing Veoh. The video site company, which counts Time Warner as an investor, has been blamed for "rampant infringement" and for following in the footsteps of "other recent mass infringers such as Napster." (Bloomberg)

• Some CD Baby stats posted by president Derek Sivers: 194,385 albums in stock; 170,379 (or 87%) have sold at least one copy; 129,014 digital albums offered; 123,168 (or 95%) of those digital albums have sold one or more units. Here's my favorite: 12% of CD Baby artists account for 90% of its sales. (CD Baby, via Digital Audio Insider)

• Jeff Leeds on how MTV is trying to remake its Music Video Awards as it's in a four-year ratings slump. "In shaking up its showcase event, the channel is not only aiming to reverse declines in the awards show's viewership, but also to generate buzz about several new efforts to connect with tech-savvy young viewers drawn to upstart brands like YouTube. ... MTV's own correspondents, as well as fans at the awards show, will snap candid camera-phone moments and post them on a new area of MTV's Web site called "You R Here." The most compelling photos or video recordings from Las Vegas may be presented during the channel's news segments." (International Herald Tribune)

• Eighteen Grateful Dead tracks will be available for download via the video game Harmonix video game Rock Band. Harmonix is a division of MTV Games. (The Escapist)

• Former FCC chaiman Mark Fowler supports a Sirius-XM merger. "If the two satellite radio companies, each only several years old, need to combine to be more effective competitors in an audio entertainment marketplace teeming with technological change and innovation, the government should not stand in the way." (Radio Ink)

Posted by Glenn at 9:25 AM | Link
|Brick-And-Mortor Retail||Online Stores/Services||Satellite Radio||Universal Music Group|

• Album sales dropped 5% last week and were 19% lower than the same week last year. For the year, album sales are 14% lower than last year. High School Musical 2 topped the chart for the third straight week even though it dropped 43% to 210,000 units. Casting Crowns' Altar & The Door was the top debut with 129,000 scans. Sales of digital tracks dropped 7% last week and were 31% higher than the same week last year. Digital tracks are up 47% this year.

• New owner Universal Music Group has decided to close Sanctuary's UK recorded music division. Said Universal, "In consultation with senior management of the Sanctuary Group, it has been decided that its Sanctuary Records UK division will no longer continue as a stand alone, front-line record label." (BBC News)

• Groove Mobile received $6 million in funding from ORIX Venture Finance to aid its expansion. (Press release)

• Target has landed another exclusive: “Live From SNL! Music Performances From Saturday Night Live," a collection of musical performances from the last four seasons of the show. The CD will retail for $13.98 and have recordings of Maroon 5, Kelly Clarkson, Foo Fighters and others. (Billboard.biz)

• Congress will hold hearings on media stereotypes and the degradation of women. Rep. Bobby Rush, the chairman of the House Subcommittee on Commerce, Trade and Consumer Protection, will hold the hearing on September 25. On the witness list so far are Universal Music Group's Doug Morris, Warner Music Group's Edgar Bronfman, Philippe Dauman of Viacom and rapper Master P. The event is currently titled "From Imus to Industry: The Business of Stereotypes and Degradation." (Variety)

• He's back. Garth Brooks' "More Than A Memory" became the first song to ever debut at the top of the country singles chart. (Music Row)

• Reuters wonders about the 2007 album total. How much of this year's 14% deficit can the back-loaded release schedule make up? Eyes are on Tuesday releases by 50 Cent and Kanye West. (Reuters)

Posted by Glenn at 10:13 AM | Link
|Mobile Music||Universal Music Group|

Vivendi released its earnings for the first half of 2007 (read PDF of earnings release). Earnings before interest and income taxes (EBITA) and €2,596 million compared to €2,348 million for the first half of 2006, representing an increase of 10.6% (11.9% at constant currency). Wall Street has mixed feelings, though. While revenue and EBITDA were both up, earnings attributable to equity holders dropped almost 49% (due mainly to a 2006 gain from Vivendi's tax dispute settlement).

Universal Music Group EBITA was €220 million ($301.3 million), down €75 million. (It should be noted that UMG's first half 2006 earnings included €50 million recovery of expense related to a legal dispute with TVT.) At €163 million, EBITA in the second quarter was a 7.6% improvement over last year. Digital sales increased about 50%.

Posted by Glenn at 1:11 PM | Link
|Earnings Releases||Universal Music Group|

• LiveNation and Ticketmaster will not renew their relationship when the current contract expires at the end of the year. That will open the door for LiveNation to beef up its own ticketing operation (which recent acquisitions should allow it to do). Sources say the 14-15 million LiveNation event tickets purchased annually give Ticketmaster around $100 million in service fee revenues. (Billboard.biz)

• SoundExchange is allowing small webcasters -- defined as those with annual revenues of $1.25 million or less -- to pay 10-12% of revenue instead of the per-performance royalties set earlier this year. The deal includes a usage cap to "ensure that this subsidy is used only by webcasters of a certain size who are forming or strengthening their businesses." (Radio Ink)

• It's goes without saying, but at least somebody included it in an article. From Bloomberg News on Wal-Mart MP3 downloads from WMG and UMG: "Kevin Swint, Wal-Mart's manager of digital media, said the company is in talks with Sony BMG Music Entertainment and Warner Music Group Corp. as well as other record companies to offer their products in the same unprotected format." (Bloomberg)

• The second annual, five-day Next Big Nashville music festival, a showcase of Nashville's rich music scene, will run September 5-9. Local bands The Pink Spiders, De Novo Dahl, Ghostfinger, Wax Fang, Jeremy Lister, The Features and Freedy Johnston (he recently moved to town) are among the 130-plus bands that will play at ten venues. A five-day wristband will cost only $30. (Next Big Nashville)

• Little Big Town will give away its new single, "I'm With The Band," as a free download tomorrow at the band's website. The freebie will start at midnight E.T. and last 24 hours. (Country Weekly)

• Can you tell something about an artist's longevity from last.fm plays per listener? I would think so, and after compiling a long list of numbers, David of Digital Audio Insider thinks plays/listener, though a crude metric, shows quite a bit about long-term potential. "The Last.fm numbers don't look good for the long-term prospects of the Bravery and the Walkmen. Of all the acts in this analysis with Last.fm audiences of more than 100,000 listeners, these were the only two with less than 20 plays per listener. My suspicion is that bands that receive a fair amount of mp3 blog attention might have their ratios pulled down because there are a large number of Last.fm listeners who have only heard a single track or two via a music blog." (Digital Audio Insider)

• BusinessWeek's Ronald Grover writes about Universal Music Group's International Music Feed, a reaction to MTV's lack of video play. The potential is there, he writes, but the viewers aren't. "According to IMF, it gets an anemic 47,474 unique visitors a month to its Web site. And while it has 17 music channels on the online TV site Joost, and two channels on British cell-phone company Vodafone (VOD), it has just about no U.S. TV presence. ... It ain't MTV, that's for sure. But give Universal credit for trying." (BusinessWeek.com, via paidContent)

• The Rhapsody America joint venture is a case of one company having the brains and one company have the brawn. Will it bring mobile music into the mainstream? (Big Red Horseshoe)

Posted by Glenn at 10:46 AM | Link
|Rhapsody||SoundExchange||Ticketing||Universal Music Group|

• Universal Music Group will buy V2 Records from Morgan Stanley for $14 million (though reported price tags vary). The V2 roster includes Brit legend Paul Weller, the Stereophonics, Elbow and Bloc Party. The deal does not include V2 North America, which was sold to Sheridan Square for $15 million last year. The label merged with Artemis and had been demoted to a catalog-only label. (Reuters)

• The New York Post has an article on the collaboration between Epic Records and Koch Records. "Lacking a dedicated staff to market the songs specifically to hip-hop/ R&B radio stations and music video outlets like BET, Epic hired New York-based Koch, home to rappers including Jim Jones, UNK and DJ Khaled, to do it for them." (New York Post)

• Sanctuary Group chairman Robert Ayling, as well as James Wallace, Tina Sharp and John Preston, are no longer on the company's board of directors. (Billboard.biz)

• EMI has a deal with Arvato Mobile that will allow Arvato-powered carriers (T-Mobile, Swisscom, Mobilkom) to offer EMI videos to mobile phones or PCs. Content such as videotones, wallpapers and full-track downloads are also part of the deal. (Mobile Entertainment)

• A profile of new industry site The Daily Swarm. "We all saw that there was a ton of music-business information scattered around the Web, but there wasn't really one place that was bringing it all together." Side note: Coolfer will turn four years old this month. Thanks for reading. (Chicago Sun-Times)

• According to the BPI, UK music sales in France and Germany hit a four-year high last year. UK artists represented 23 of the top 100 albums in Germany. (BBC News)

• An interview with Guy Fletcher, head of music publisher MCS. "The internet is fast becoming a major platform for delivery of music in many different contexts. However, the advent of internet social networks, peer-to-peer file sharing, free downloading, etc. have created communication systems whose operators are generally unwilling to enter into licensing agreements with collection societies making it difficult, if not impossible for them to keep track of the online use of our copyrights." (The Telegraph)

• EMI's Blue Note Records is going to change its website to incorporate social networking and direct-to-consumer downloads. (The Register)

• Apple now offers iTunes widgets. (My iTunes, via Digital Music News)

Posted by Glenn at 9:12 AM | Link
|EMI||Mobile Music||Universal Music Group||iTunes|

A partner in a new Universal Music Group initiative is gBox, which you might not have heard of before last week. The AP has a profile of the Cupertino-based startup. gBox was mentioned in the UMG press release that announced its upcoming experiment of offering DRM-free downloads. The experiment will run from August 2007 to January 2008.

People who follow a Googe AdWord text link from the results of a search for a UMG artist will be taken to gBox. Once there, they'll have the option of a DRM'd or DRM-free download for $0.99. (No information is given on album prices.)

"Under the program, gBox will get referrals through ads that Universal will buy through search leader Google Inc., gBox Chief Executive Tammy Artim said Friday.

Google will get standard advertising fees rather than a cut of sales under the arrangement. The ads, which would appear when Google users search for specific terms such as the name of an artist, will direct users to gBox.

The arrangement with Universal and gBox is separate from Google's music search service, which directs users to online music stores when they search for specific albums or artists. The company says it does not get paid for such referrals, and it does not restrict links to a single retailer.

Google, which has said it has no plans to create a music store of its own, described the new arrangement as strictly an advertising relationship.

Songs at gBox cost 99 cents each. For the Universal songs that are part of the test, gBox will offer an MP3 version free of copy-protection technology known as digital-rights management. A DRM-enabled version will be available at the same price."

gBox is currently optimized only for Internet Explorer 6.0. If you're able to, go check out the site. There's not much there -- there are only two Coldplay songs, for example, and both are available in WMA format -- but it's worth it to browse around a bit. The available file formats was the first thing I looked into after I registered. Here's what that page says:

"iPod®/iTunes® gBox supports Apple’s AAC/Fairplay format for iPod/iTunes. Download music for your iPod in Apple’s AAC/FairPlay format and load it into your iTunes library like any other imported music file. Just synch with your iPod and you’re done. It’s that easy.

PlaysForSure Windows Media®
Download your music in the Windows Media WMA format for your MP3 player and other devices. WMA is compatible with any PlaysForSure device.

Computer Crashed?
Lost all your gBox music files with no backup? Don’t worry! Just redeliver a backup copy from your gBox account.

Multiple Downloads in Multiple Formats
Do you have multiple devices? Perhaps an iPod and a MP3 player?
gBox lets you download protected music in your choice of iPod/iTunes or WMA formats. It’s that simple. The total number of allowable downloads may vary based on record label restrictions for different songs."

Posted by Glenn at 10:47 AM | Link
|Online Stores/Services||Universal Music Group|

The Internets is all abuzz over Universal Music Group's decision to drop DRM from select retailers for a trial period of time. Below are some of the comments.

Some are of the opinion that DRM is disappearing because it is inherantly bad for consumers. In this specific case, DRM inhibits market growth (not because it's bad for consumers, but because it has been very good for Apple). I believe UMG is testing DRM-free not to hurt iTunes as much as to enable iTunes' competitors. The goal here is to open up the download market. Competition is good for consumers. A more competitive download landscape will be good for consumers and labels alike. A world beyond iTunes awaits, and UMG wants to get there. Maybe dropping DRM will achieve that goal. We'll have to wait and see.

From an unnamed source at Billboard.biz: "We want to have a robust digital marketplace where there’s healthy competition. We don’t have that now. Apple has a stranglehold on the whole thing, so much so that all the other online retailers are badly disadvantaged because you can’t buy music from their stores and play it on the iPod. We want to open up the market and create a more level playing field. We want to give other retailers a chance to compete."

Farhad Manjoo at Salon: "Nobody should be locked in to one store because of what device they use to play their songs. With EMI and now Universal coming around to this view, perhaps we might soon live in a such a sensible world."