Told you I was smart!

As much as it hurts me to say something positive about a record label, I am forced to give credit where credit is due. Universal Music actually did something smart today. A little overdue but smart.

Today Universal Group Distribution launched an online storefront, Groovetown Vinyl, specifically for vinyl and FLAC formats.

“In recent years, there’s been a revolution in sound quality, and consumers are clamoring for the richest experience from their audio collection,” stated UMGD SVP Marketing & Product Development Mitch Rotter.

Well, Mitch, you should have done this 2 years ago and then you would have looked uber-smart, but better late than never and at least it you’re thinking, unlike many of your peers at other labels.

It’s so typical for a record label to ignore things that are right in front of their eyes that it impresses me that a major woke up and did something proactive. In truth, vinyl is becoming a real market segment, of course a large part of that is used vinyl, but plenty of new product is moving. Furthermore the lossless FLAC format has been very popular on all of the bit torrent sites and has evolved over the years to be a preferred format of file sharers. Up until now it was nearly impossible for those audiophiles to legally obtain FLAC files.

So congratulations. Mitch. You did something intelligent. A true rarity in your business. You deserve a raise!

© 2011, Wayne Rosso. All rights reserved.

Major labels are anxiously waiting for the Google train bound for paradise to pull into the station

The record industry is putting all of their eggs in the Google basket, some labels believing that the search engine giant’s music service will deliver them from ruin, as well as the grips of Apple, and restore them back to health. They’re looking at the Google deal as a monster payday, with one label in particular thinking that the company’s future depends on it.

I’ve recently had some interesting conversations with execs in the know and the prevailing wisdom is that all of the other music services out there are not intimidated by what’s rumored to be on deck for Google.

It seems as though the service will be nothing more than a simple iTunes download clone with the added element of a locker service, a paid service of course. The price tag for the locker is supposedly around $30 a year.

The real news is that, according to informed sources, Google is nowhere near completing licenses with the majors. Furthermore the actual product isn’t fully baked either. I hear that the very earliest they could get a service launched is sometime this summer, but  my guess is that it will be much later in the year if this year at all. For some reason the majors unnecessarily drag out the licensing process anyway and in this case they’re going for supersized advances. So this is going to take a little while.

The fact is that Google really doesn’t care about music. Their music service is merely intended to make the Android platform a little more robust in order to compete with IOS4. To illustrate this point, the head of the Android initiative, Andy Rubin, is in charge of the music service too.

What’s even more interesting is that Michael Robertson’s MP3 Tunes is being sued by EMI for having a locker service, a suit that EMI is bound to lose. The argument is that MP3 Tunes is infringing copyright by allowing users to upload their music files to their private lockers. This is different from other music specific locker services in that MP3 Tunes does not scan a users hard drive and match the songs with copies hosted on the MP3 Tunes servers. That would require a license from the labels, but users upload their own media to dozens of existing services like MobileMe, Dropbox and even Windows 7 (you know, the commercials where soccer moms lovingly coo about “the cloud”?). Nobody’s suing them.

Now why do I bring up Michael Robertson? Because he’s the guy who basically invented the music locker concept almost a decade ago at MP3.com. In fact, he’s the guy who really put the mp3 format on the map—a format that is now the industry standard. He created a service called Beam-It that allowed users to pop a CD into their computers and seconds later have it available in their private mp3.com accounts for listening anywhere. The beauty of it was that the user would have to buy the CD in order to have it in their music locker. The industry, in their ultimate wisdom, looked upon this as an infringement of their copyrights rather than a tool to sell more CD’s. This, of course, was totally in character.

According to Robertson, “By attacking the Music Locker, EMI is attacking the right to personal ownership of digital property. I believe people should be able to listen to their music anywhere they want, and on any device that suits them — this is why we buy it…If you can’t store digital music you own in a personal online account, then your rights to all other digital property like movies, photos, e-books, medical records, etc. can be challenged”.

So getting back to Google, the point is that unfortunately their music service will not be breaking any new ground. ITunes was a game changer six years ago. Spotify is a game changer that could actually finally be the big breakthrough for subscription services, something the industry has spent the last decade praying for. Instead they’re now counting on Google to be their savior. it looks like the labels will continue to tread water, if they’re lucky, that is.

© 2011, Wayne Rosso. All rights reserved.

"It would be in your best interest to accept our generous offer"

The guys at Torrentfreak do a terrific job of covering the torrent and p2p scene. I’m always amazed at the stories they break and the excellent writing. And if I understand it correctly, they do it in their spare time when not at their day jobs.

Last weekend they broke another story that I found particularly interesting. Torrentfreak’s Ernesto reported on DigiRights Solutions (DRS) a German company that published a powerpoint sales and marketing presentation to push its anti-piracy services.

After initially running through some pretty mundane stats about how much online piracy is costing copyright owners, the DRS presentation goes through their process of finding and pursuing users who illegally download songs and movies. They explain that after they find the alleged downloader, they send out an email demanding a payment of 450 euro ($650) per file. DRS keeps 80% of whatever they collect thus leaving 20%, or 90 euro ($130) per download, for copyright holders.

Then suddenly the presentation turns into a pitch comparing the profitability of legal and illegal downloads. Ernesto goes on to report :

“A legal online purchase of a song brings about €0.60 into the pockets of the copyright holders compared to the €90 per alleged file-sharer that pays up. So, the copyright holders get 150 times more from pursuing filesharers than from selling actual music, the company claims.

However, not everyone who receives a letter will pay up, but DRS says that an impressive 25% of all recipients do without asking questions. This figure is much higher than most people assumed previously.

DRS states that it’s realistic to track and pursue about 5,000 filesharers per month per title. Considering that 25% of those people pay the €90, then the copyright holders would have to make about 150,000 online sales. Which is equal to the number of sales that are required for a Gold record award in Germany.”

Needless to say, this is absolutely bizarre and outrageous. Rarely are such blatant attempts made to turn piracy into a profit center, especially when the labels do not have to share this type of revenue with the creators.

Evidently DRS is currently successfully operating in the UK and Germany at the moment, but are clearly looking toward other territories. The fact that the UK government, or any government in fact, would allow such legalized extortion is beyond the pale. I understand that European governments are moving quickly to quash illegal downloading and that’s fine. But to allow and condone the organized extortion of its citizens by a private for profit company heralds new lows in the war against piracy.

This brings to mind the famous confrontation between Joseph Welch and Senator Joe McCarthy at the Army-McCarthy Senate Hearings in 1954 when Welch effectively put an end to McCarthy’s reign of terror when he said “Have you no sense of decency, sir, at long last? Have you left no sense of decency?”

© 2009 – 2010, Wayne Rosso. All rights reserved.

Hey Guys, Don't Take Their Check!

Yes, I’m back. Apologies for the long hiatus, but I was busy with some knucklehead who had the world convinced that he was going to buy the Pirate Bay. Oy vey. What a story.

I’ll get into all of the details in the coming months. It’s one of the weirdest chapters of my extremely unconventional life.

But in the meantime, check out my column in The Music Void about the latest legal woes of my hero, the Baghdad Bob of digital music, the one, the only Allen Klepshitz of Qtrax. Read about it here.

© 2009 – 2010, Wayne Rosso. All rights reserved.

But the interesting ray of light was buried in the story.

“We’re not going to have $14 billion in iTunes and Amazon sales no matter what we do,” says NPD Group VP/senior industry analyst of entertainment Russ Crupnick. “There’s still tens of millions of people who haven’t tried the digital music model. Half of them have digital music players. Some of them use. We’re not making the case for them to buy as many CDs as they used to and not making the case for them to buy anything from digital. Variable pricing is irrelevant.”

This is where other new digital business models could come into play, such as Nokia’s Comes With Music model and the kind of collective licensing being pioneered by Choruss, both of which would bundle the cost of music into other services or products. Both rely less on a revenue-per-unit model and more on revenue-per-user. Or “pricing the consumer versus pricing the content,” as one label digital executive puts it. “We think the real story around price as it relates to the audience for digital music is with respect to the new business models that are user-based as opposed to wholesale price-based.”

I sure would like to know who the unidentified label exec is who spoke out of school, because it finally points to a hint of intelligence. Could it be that labels are finally catching on to the concept of monetizing traffic? Are they finally moving away from the unit sales mind set of the past?  Rumor is that the labels are restructuring their deal with imeem to reflect a per user rate instead of a per stream royalty rate. I hope for imeem’s sake that its true. But what’s to keep major label greed from being unrealistic in their pricing in a “per user” model? Nothing. If labels are finally moving in this direction, they deserve credit. Better late than never. After all they’ve already led to the loss of tens of millions of dollars that investors sank into a multitude of music services that failed due to the labels’ outrageous demands and shifting strategies, making it nearly impossible for a start up to get legitimate funding. And based on history they have always manage to get greedy and fuck things up. Nobody ever loses a job for saying “no”. If label execs don’t start saying “yes” they’re going to lose their jobs anyway because there won’t be any music companies around to work for.

© 2009, Wayne Rosso. All rights reserved.

A friend in London was telling me a crazy story. Everyone knows that EMI has been cutting staff like they were lepers over the last couple of years. During this “reorganization” period they apparently had decided to fire most of the digital media people with the intention of outsourcing it instead.

They’ve apparently now done a complete about face and are actually trying to rehire many of the same people they fired over the last year with the intention of bringing the digital media stuff back inside.

I don’t know about you, but my head is spinning so much that I think I’m going to throw up.

© 2009, Wayne Rosso. All rights reserved.

The study was commissioned by Wiggin, one of the top media and technology law firms in the country. Firm partner Alexander Ross told the BBC “A letter would not be enough. It does take an ultimate sanction.” (By the way, Alexander is not only a great guy but brilliant too.)

The survey also revealed that ISP’s would rake in bigger profits if they switched from flat rates to a metered plan. A sort of pay as you go model.  Heavy consumers of video and online games would pay a premium to maintain their access to these sorts of content, according to Ross.”The suggestion is that if ISPs develop content services of their own and tier their access there are ready and willing customers for it.”

Consumers apparently are getting more and more comfortable with watching on demand TV on a PC.  The survey shows that use of the BBC iPlayer and similar UK TV web services has exploded in the last year. However the leap from laptop to family room TV set is still a bridge too far for many consumers, saying that it is still to difficult to make the PC to TV set connection. But once TV manufacturers and  device makers simplify the process and actually begin to build wi-fi connectivity into sets, the demand for services will skyrocket.

“The distinction between the sit back experience of scheduled broadcasting and the sit forward experience of on demand access is becoming ever more blurred, and consumers are driving the convergence,” said Mr Ross.

So will this convergence actually ignite more illegal downloading of movies and other video content? Could it become so second nature that the masses just won’t know the difference between what’s legal and what isn’t? The flip side of the coin is that ISP’s certainly don’t want to go around disconnecting their customers. Next week the British government is releasing a final version of the Carter Report, which will tackle the issue of web piracy and possible “technical solutions” to the problem that could involve slowing down connection speeds for habitual offenders.

In light of the Wiggin report, it will be very interesting to see what the government comes up with. The odds are better than 2 to 1 that it will be something goofy.

© 2009, Wayne Rosso. All rights reserved.

Spoiled Rich Kid Edgar Bronfman, Jr.

A few short weeks ago, Goldman Sachs analyst Ingrid Chung gave Warner Music some big love. She upgraded her rating of Warner stock, giving it a 14.6% bump in one day, sending shares from an April 13 opening of $3.08 to a close at $3.53. Chung saved some extra big hugs for Junior, saying that Warner Music’s management, led by Edgar Bronfman, has shown “continued superior execution,” resulting in nine consecutive quarters of U.S. album market share gains.

“We believe that Warner Music Group has had the opportunity to buy its own bonds at a significant discount to par in the open market over the last six months,” said  Chung in the client note.

Chung also highlighted the recent introduction of variable pricing for digital songs at Apple Inc’s (AAPL.O) iTunes Store and other retailers as a positive for the future.

“We believe that variable pricing could drive higher volume and higher average revenue per track, although margins may remain at the same levels,” the she said.

Well the WMG share have continued to rally off of Chung’s religious conversion. Until today.

Junior today announced that he has written off $33 million in bad investrments in Imeem and Lala. Lala was a loser play from the beginning and the Bain Capital putz who bought into that shit hole at first should be a new entry in Dickipedia. And Imeem is even more interesting. Not only did Junior write off his $15 million investment in Imeem, but then cried that he was owed another $4 mil from the company that is virtually uncollectible. Now this is after Junior refused to renogiate the Warner streaming deal with Imeem which would have helped the company get a little traction. Sheer genius. Record labels are historically shit business partners. And it looks like a Warner investment is the kiss of death.

And let’s talk about Ingrid’s prognostications regarding the huge revenue bumps that WMG would get from the new iTunes variable pricing. Well, since launch, iTunes sales have steadily declined. You might say “So what? Maybe there ‘s a little less volume but that’s offset by the increased margins. Big deal.” It appears as though the revenues have indeed gone up—up to an overall increase of $14,000 a week. And that’s for all sales, not just Warner’s. So this must net out to Warner an extra $6-$8 K a month?

So this all must really piss off Junior, who has sworn off investments in digital properties (and let’s not forget last year’s $30 million write off of Junior’s investment in a concert production company Bulldog Entertainment). But what really sticks out to me is how much Junior overestimates the value of his content in today’s market.

If you’ll recall a few months ago Warner made a big deal out of yanking its deal with YouTube claiming that they just weren’t making enough money. That makes sense. If you don’t make what you want, just make nothing at all! And of course YouTube could give a shit. They sure don’t need Warner Music. Now the irony comes in. Even though WMG pulled its content, users continue to upload it for everyone to watch. That is until Junior’s genius lawyers start sending YouTube DMCA takedown notices, which of course will actually COST Warner money. So by turning down YouTube’s dough, Junior not only loses that income but goes out of pocket.

And, of course, there’s last week’s brilliant move of sending copyright guru Larry Lessig a DMCA takedown notice over one of lessig’s presentations posted on YouTube. thus giving the fair use doctrine the perverbial finger.

So what does this all mean? Did Ingrid Chung get some great tickets for the Madonna tour? Or a date with Josh Groban? Or has she simply been sniffing glue? Can Junior be as big a dickhead as he’s painted in Steve Knopper’s book “Appetite For Self-Destruction”? So who should really be running Warner Music? Junior or Ingrid Chung?

© 2009, Wayne Rosso. All rights reserved.

Wuss Rockers Coldplay

Wimp soft rockers Coldplay are trying to get hip by giving away their new CD.  Fans who attend one of their upcoming North American tour dates will get a free copy of their new live album  The CD, called “LeftRightLeftRightLeft,” will also be available as a free download through the band’s website www.coldplay.com

This isn’t the first time for this type of giveaway. Prince gave away copies of his album ”Planet Earth” to readers of a Brit newspaper. But Coldplay, lame band that it is, seems to be catching on to the realities of the new music business and are sure to piss off their label. EMI, by putting a huge dent in their billing. So you have to give Coldplay credit where credit is due. But these knuckleheads at EMI can’t catch a break. They’re even leading in the Wayne’s World poll of which major record label will be the first to go down in flames with 55% of the vote. This is the highest percentage of anything that EMI has had since 1964 when the Beatles held all five slots in the Top Five US singles.

This all underscores the fact that physical product is becoming more and more utterly useless. CD’s are nothing more than coasters. At least Coldplay recognizes this and seem to understand that recorded music is just another marketing tool to build their brand and help sell tickets, merchandise, etc

So the next question will be if bands will now kill the golden goose by raising concert ticket prices to replace lost revenue from recorded music. Of course they will!!! Stay tuned.

© 2009, Wayne Rosso. All rights reserved.