Digital music trends – Episode 44

This week: an interview with Christian Mix-Linzer, CEO of Berlin-based start-up Tracks and Fields and a couple of thoughts on last week’s debate at the British Music Experience entitled Tomorrow Never Knows. In the news: Apple to shut down Lala but the end-game is still unclear, Spotify adds social integration but has to roll out the update gradually due to high demand, We7 reveals that the advertising revenues are finally covering the cost of licensing fees and also introduces some social features, the BPI and IFPI reveal their numbers for 2009 which make for an interesting read and Hans Pandeya causes more havoc whilst the Pirate Bay re-iterates that it’s not up for sale.

Apple shuts down Lala – an iTunes streaming service imminent?

Macrumors last week was one of the first sites break the news that Apple is finally shutting down streaming site Lala on May the 31st.
Lala was acquired by Apple back in December 2009 for $17 million and only a short while after I interviewed the company’s CEO Geoff Ralston for the show – if you want to go back and listen to that interview it’s on Episode 24.
At the moment there are many speculations regarding the future of the service. On one side there are people maintaining that Apple will not launch a music streaming service from the cloud anytime soon, withCNET’s own Matt Rosoff maintaining that Apple’s idea of creating a music locker has already been shot down by the industry. Others believe that Apple will launch a streaming service as soon as June. Lala in fact is supposed to Shut on the 31st of May and Steve Jobs has agreed to open the D: All things Digital conference  the following day on the 1st of June. Given the rare public appearances of Jobs outside the of the tightly controlled environment of Apple’s own product presentations this has led to some speculation that he will indeed unveil the new service there and then. A third opinion is that Apple only acquired Lala for its engineers and never had any plans to roll out a music streaming service, but this would go against the fact that the Cupertino firm is investing over a Billion dollars in server farms and is without a doubt aiming to providing a better cloud services than the frankly inadequate Mobile Me.  In my opinion Apple would be mad not to try and create a subscription service, the a’ lacarte digital purchase is destined to decline in favor of services like Spotify and Rhapsody and I don’t think Apple is ready to hand over its digital distribution market share without putting up a fight. But I guess that if they are interested in creating this sort of service the music industry will have to make some tough decisions and evaluate the repercussions of the subscription model before committing to it. I should note thatLala customers who have bought tracks on the cloud will be given iTunes vouchers for the amount that they had originally spent – which is a meagre consolation to people that had built large collections on the site.

Spotify adds social integration and an iTunes-like interface for music management.

This week Spotify unveiled its new social side and started to compete seriously with iTunes. Spotify’s new software allows users to share their playlists on Facebook, lets people subscribe to those playlists with one click and lets you publish your profile on a host of social networks as well as your own personal website. It takes a stab at iTunes by finally incorporating the user’s local music library within the software.

Shortly after rolling out the update Spotify revealed that they were overwhelmed by the public’s interest and that they’d have to roll it out slowly in the next few days to avoid slowing down their servers. I personally wonder whether this move was actually a way to encourage people to upgrade to the monthly subscription – premium subscribers are apparently receiving the new software right away.  I think that this is a necessary and long-awaited move forSpotify and that above all I think that it may present some financial benefits for them. I hope the following makes sense but but think about it, even though many of us use Spotify for music discovery we also use it to repeatedly stream songs by bands we really love and know well. Chances are that we will have these songs on our computer either because we bought the CD or MP3 or because we followed less kosher avenues. If Spotify is able to access the music we have on our Hard Drive then we could incorporate the songs we ‘own’ in our playlists and that would allow Spotify to save the licensing money because they would be played locally and not streamed from their servers, a move that could potentially save them a fair amount of cash in the long run.

We7 Revelals that finally adverts are covering the amount of money they have to pay in licensing fees.

After Lala and Spotify this is the week of streaming services as We7 had an eventful week. Spencer Dalziel from the Inquirer has a really good write-up on the first and most important news which is that We7 has finally broken even, meaning that its advertising income is making up for all the royalties and other costs paid to record labels and publishers. This was highlighted by the company’s Chief Executive Officer Steve Purdham as a great milestone for the service – something that they have been working towards for the past three years. The CEO went on to detail in the announcement that it has taken a long time to get here because the service had to juggle with satisfying the needs of the consumers, of the advertisers and of the rights holders and that at last it seems to have found a happy balance. There was no shortage of sly digs at Spotify , We7 admitting that a song played one million times generates anywhere between 2.000 and 4.000 pounds, well above the figures allegedly paid out by the Swedish company to record labels and publishers. Also, he maintains that the company wants to remain completely open – no registration is required and the service is web-based –  and therefore it has greater mass-appeal than Spotify. in that respect it’s true – if you want to tell a mate to check out a great new album that is on Spotify they need to have an account as well, otherwise no cigar.  The second announcement of the week was in Spotify’s footsteps as We7 announced some new social features including an integration with Windows Live Messenger, one with Facebook and scrobbling with Last.Fm, although the announcement seemed a little rushed as a way to counteract the overwhelmingly positive coverage of Spotify’s update.

Interesting BPI and IFPI numbers

Both the BPI and the IFPI last week revealed their latest figures for music sales in 2009 which make for quite an interesting read. The BPI reported that in 2009 for the first time in years there was a moderate rise in revenues by 1.4%. Digital contributed significantly to this performance since the year-on-year digital revenues more than doubled and shot up to 154 million pounds, which is becoming a respectable figure if you consider that the total revenue was 928 Millions. naturally though the Physical market is still the lion’s share of the business, and theBPI stressed how the majority of online downloads are still illegal. Companies like Spotify, We7 and the newly introduced MFlow are likely to start to contribute more significantly to revenues in 2010 but the BPI warns anyone thinking that the CD is dying that this is all but true – even with the demise of chains like Woolsworth and Zavvi that accounted for 17% of the physical market sales have not dropped by a significant amount and the success of the pop-up stores set up byHMV last Christmas showed that customers are still wanting to buy CDs.

The IFPI’s figures unfortunately did not reflect the situation in the UK. Its figures show that music sales globally slid by 7%, although the situation varies widely from country to country. Thankfully the digital music sales globally were up by 9.2% – which is probably not as high a growth as would be expected – but in many areas the growth was of over 40% in favour of digital sales. The report was keen to underline that countries with lax piracy laws were most affected by the decline in sales, with Canada and Spain on the front line, whilst the introduction of anti-piracy laws has improved the situation in South Korea and Sweden. Although the report seems to point its finger entirely on the piracy phenomenon when it comes to finding a cause for this steep decline, Zero Paid points out that this decline in revenues is also given by the sharp digital growth in countries like the USA and Japan , where over 40% of music transactions are now digital. This means that more and more consumers are buying one track from an album rather than the entire product which clearly reduces what were 20 dollar transactions to 99 cents.

Pirate bay not being bought?

The saga of Hans Pandeya is never-ending, once again he claimed that he will buy the pirate bay by the summer and circulated a press release to that effect. This would be done through a company called Business Marketing Services. Again the Pirate bay reiterated that it’s not even in talks with MrPandeya in a concise blog post.
Frankly given Pandeya’s supposedly shaky financial situation and the fact that his announcements in the past have produced only thick empty smoke I can’t even understand why anyone is reporting on this other than because Pirate Bay stories generate traffic and because this saga now reads like a mildly entertaining soap, but I guess that right now I’m falling into this trap myself so I’d better stop talking about it!

Tomorrow Never Knows.

The debate was well-stocked with with high calibre speakers including Geoff Taylor from the BPI, Paul Brindley from Music Ally, Jeremy Silvers from the Featured Artist Coalition, Peter Sunde Komisoppi from the Pirate Bay and Will Page from PRS for Music.

The debate’s aim was to address the future of the music industry but by and large it failed to address that subject comprehensively and much of the conversation – understandably given the presence of PeterSunde from the Pirate Bay – ended up revolving around Piracy –  although Paul Williams from Music Week who was acting as Chair did his best to keep the conversation fluid and on track.
The debate ended up being somehow monopolized by the polar opposites that were Geoff Taylor from the BPI and Peter Sunde Kolmisoppi from the Pirate Bay neither of whom was in my opinion entirely in touch with reality. Peter Sunde didn’t understand for a second the struggle of an artist who sees his work used and shared without permission on P2P networks – he simply said once it’s digital it will be shared and copied and there’s no way to stop that. On the other side you had Geoff Taylor who kept pinning the decline in sales entirely on piracy whilst we know that is not the cast saying things like: The many digital revenues are starting to add up to something but because of people like the pirate bay they are a fraction of where they should be and that the anti piracy measures are great for consumers and music fans as otherwise investment in new acts is going to dry up and it will be the pirate bay’s fault.

Thankfully the panel also offered some more balanced opinions like those of Paul Brindley from music ally, who pointed out that the music industry has been struggling for years as to where to intervene on piracy in the value chain. They tried suing the users and that back-lashed horrendously, they tried closing down the sites responsible but the nature of the Internet made that a useless pursuit, they are now putting pressure on theISPs to send letters out with the latest legislation but cutting people off the Internet could be going a step too far as the Internet is becoming a basic human right just like water. Also Will Page fromPRS talked about the value chain and about how measures need to put in place that allow for the growth of legal digital companies to outpace that of illegal ones.

I suggest that you go and read the very well written article by Jeremy Silvers on the Music Void where he debates the piracy issue as a reflection on Thursday’s debate in a very sensible way.

Leave a Reply

Your email address will not be published. Required fields are marked *