The Music Industry Loses A Big One

The "music industry" (also known as the major record labels and publishers) needs revenue. Everywhere they look the income pie is shrinking, and they're desperately trying to staunch the financial bleeding. One way they had hoped that would happen is to have the owners of the so-called "digital music lockers" pay them a license fee when a user uploads their music to the locker (also called "the cloud").

But neither Amazon nor Google went for that proposition, taking the bold step to wait and see what would happen in a test case of EMI (and 14 music publishers) versus MP3tunes.com. MP3tunes is the brainchild of Michael Robertson, the creator of the original thorn in the side of the music business - MP3.com, one of the companies that started the digital revolution in the first place. The site beat Amazon and Google into the music locker business, allowing the user to store all of their songs in their own virtual locker in the cloud so he/she could stream the music to any of their digital music devices at any time and not have to have all of their songs stored on that device.

In a lawsuit that has major industry ramifications, EMI wanted to get paid if any of their songs were loaded onto MP3tunes. What's more, they asked that MP3tunes effectively police their users to determine if any of the songs were stolen, then make them take them down.

In a ruling yesterday (August 23, 2011), Manhattan district judge William Pauley ruled that MP3tunes (and as a result, any other music locker) is not responsible for what their users upload, clearing the way for people to mix songs they have bought with those that have been offered for free on the internet without worry of having to pay a license fee.

The one stipulation in the ruling is that if a copyright holder finds that a user has uploaded pirated content, the locker company must take down those songs if they're notified.

OK, let's look at the winners and losers here.

The Winners
MP3tunes, Amazon, Google Music, any digital music locker - They don't have to pay a license fee to the labels, and they don't have to police their customers.

The user - They can store their music in the cloud without having to worry about being asked to pay a fee for music they can't prove they own.

The Losers
Music Publishers/Record Labels - They lost a potential major income stream.

Songwriters - Likewise.


Artists - They were bound to make something from that income stream, although probably a pittance of the total amount.

We all seem to leap for joy when the middle man takes a beating, but usually that also means that the creators are taking one too. Virtual music lockers threaten to become the next big thing in music and we'll see if that actually comes to pass by the end of the year or so, but that won't mean much for the real people that need the help - the ones that make the music.

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Google's Music Service Launch

On Tuesday Google did a beta launch of their new music service, called "Music Beta By Google." The service includes a free cloud music locker, a music player and integration with an updated Android music app.

The interesting thing is that Google, like Amazon (who recently launched their Amazon Cloud Player), went ahead with their soft launch without the permission of the major record labels. One of the reasons why Google might feel comfortable in doing so is that Music Beta doesn't include any sort of download store or streaming service that generates money, unlike what you'll likely to see from Apple soon. I'd say that the whole idea of the the record labels looking to be paid a second time for a purchase lockered in a cloud service like Music Beta can probably be put to rest now. Obviously both Google and Amazon feel legally comfortable with their position or they wouldn't have gone ahead with their services as they have.

Personally I don't see what the big deal is in terms of getting label permission to store songs. The only thing beyond cloud storage that a locker service offers at this point is a custom music player, although the labels feel that the ability to stream music that you've purchased on any device that you own to be somehow worth an additional payment. Good luck on that guys. It looks like that game is over.

One thing that's worth thinking about though - you still have to upload all of your music to whatever locker service you go with (meaning Google or Amazon, presumably not so with Apple's when it's launched), which can be a huge pain. Music Beta reportedly attempts to ease the pain by automatically determining what songs you listen to most and uploading them to the service first. The thing that label permission does is alleviate the need to upload, since the service will just look to see what songs you have on your drive, and allocate them for use in the cloud.

To sign up for a Music Beta invite, click here, then click on "Request an Invitation" in the upper right corner. Here's a video that explains the service.

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You should follow me on Twitter for daily news and updates on production and the music business.

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Apple's Cloud Music Strategy

While most music industry pundits have been predicting that music streaming would soon hit critical mass, it certainly isn't here yet even though it continues to grow. Those same pundits also declare that if Apple would change iTunes to a streaming instead of a download model tomorrow, the rest of the world would follow, which is no doubt true.

The Apple streaming anticipation has grown to a fever pitch, especially after last year's acquisition of Lala, but don't expect that to happen any time soon. Here's why.

1) Downloads are still a big business.

2) Streaming requires new license agreements with the record labels.

But aren't there rumors abounding about Apple in new license talks with the major labels? Yes, they're having those discussions, but not for the reason you think.

Indeed, Apple will soon be announcing a new cloud service (storage via the Internet instead of on board your device), perhaps as soon as the beginning of April, but the idea is that it offers a sort of "insurance" for the end user in case her songs are wiped out on her computer, iPhone or iPod. If all your songs live in Apple's cloud, you can access them from any device instead of storing them locally (although you can do that too, or both). Hard drive died? No problem, the songs are stored in the cloud.

The problem is that the record labels wanted to get paid for a second download for the cloud privilege, so Apple had to enter into new licensing discussions as a result. Who wants to buy the same music twice?

Want another good reason why you'll see an Apple cloud service soon? We'll all soon be living in a tablet world, where iPads replace laptops so you won't have as much on-board storage. But you won't need that storage either, if everything lives in the cloud. Expect Apple to call it something other than "the cloud" though. Right now, the bets are on "personal locker."

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Help support this blog. Any purchases made through our Amazon links help support this website with no cost to you.

You should follow me on Twitter for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.

Apple's Cloud Music Service A Mirage?

Yesterday I wrote about the likelihood of Apple debuting a cloud-based service in the near future. Today comes word from Cnet that's might not be the kind of service that Apple has planned after all.

If your not familiar with the term "cloud," it means online storage. An iTunes cloud service would allow you to put all of your music online instead of keeping a copy on each device. That means that you can access it from your computer, your phone, or iPad, or anything else connected to the Internet.

But the problem is that a new service would require a new license for the songs from the major and indie labels, and Apple still hasn't even begun negotiations, which means that we won't see the envisioned cloud service anytime soon. Negotiations with one label takes months and months, let alone with all four majors. We'd be lucky to see it in a year.

So why is Apple building a huge new server farm (they call it the "Orchard") in North Carolina?

The speculation is that Apple isn't looking to launch a cloud music service at all. It's for video.

If this is the case, here's how I see it.

• 1) Apple is going after YouTube. Why else build a server farm for video?

• 2) Apple will launch a music subscription service earlier than anyone expected. If the cloud music service isn't an interim step to subscription, that means they're going right to subscription, right?

All this means it should make for a very interesting year of Apple watching.

P.S. It's been reported this morning that Apple has added cloud streaming to its MobileMe iDisk app. It has some limitations though, since it appears to be limited to Apple products, and doesn't support automatic uploads as you add songs to iTunes, playlists or album cover artwork. This shouldn't be considered a cloud music service, just an iDisk improvement, but it can be construed as Apple testing the waters before a full product introduction.

The plot twists and thickens yet again.

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Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.

Interesting July Music Stats

Digital music information and strategy company Music Alley puts together an interesting monthly report called NumberCrunch that includes some interesting statistics culled from information sources like NPD, Forrester and Neilsen/Soundscan. Here are a few points that I found interesting (my comments in italics).

• In the first half of 2010, digital album sales grew by 12.7% to 42.2 million units. If the album was supposed to be a dying format, why does it have a healthy growth of almost 13%?

• Digital albums now account for 27.4% of all US album sales. That means that the market for albums is still about 160 million, of which about 120 million are still CDs. The CD may be dying, but there's still plenty of sales life left in it according to these numbers.

• According to media analyst NPD, 7 to 8 million iTunes users in the US would be interested in paying at least $10 a month for cloud-based iTunes services to access their music libraries across multiple platforms. You can bet that Apple will be rolling this out by the end of the year or beginning of next, since they already have the infrastructure in place.

• 13 to 15 million iTunes users would be interested if the service was free. Doubtful that will happen though, unless the service can be monetized in some other way. 

• Analyst Russ Crupnick claims that the potential market for a paid subscription-based iTunes would be $1 billion in it's first year alone, which is about 2/3rds of what its present pay-per-download model. This is the 800 pound gorilla in the room. Almost everyone believes that if Apple pulls the subscription trigger, subscription will become accepted by the consumer almost overnight. But when will it happen? Probably not until well after their cloud service comes into being.

• Home computers accounted for 41.6% of digital music consumption in Q3 of 2009, followed by MP3 players at 32/5%, mobile phones by 12.1% and home streaming devices by 11.1%. That must mean that most people consume most of their music at work.

• Only 23% of people said they listened to music on both their computer and MP3 player, 9% on computer and mobile phone, and 5% on all four platforms. This could be a bad sign for a cloud-based service, as most people won't have any use for it.

• 63% of the people listening to music on their phones are 18 to 24 years old. Is this figure really any surprise to anyone?

I think the most interesting thing about these figures is that the conclusions have been holding steady for quite some time now. Let's see what next month brings.

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Follow me on Twitter for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.

Music In The Cloud - 3 Companies To Watch

The "cloud" is a synonym for off-sight computer storage accessed by the Internet. So many companies have huge server farms with excess storage capacity that they're making available in order for you, your band, or your company to store your data securely. You actually do this already with any company that hosts your website.

But storing your music "in the cloud" is something new altogether. What that means is that all the music that you own no longer needs to be stored locally and can be accessed at any time from the secure cloud storage via the Internet.

So why is that useful? Right now, if you have 20 gigs worth of music stored on your laptop, you can only copy some of it to your phone and iPad, and if you have a desktop computer, that same 20 gig also has to be stored there, taking up twice the storage space. Wouldn't it be easier if you had all your music stored somewhere else that you could access at any time with any device connected to the Internet? That's the idea of music in the cloud.

While it's only a matter of time until iTunes and Amazon jumps into this area of the business, there a 3 companies that are already there. The following is from a 6/28/10 article in the Technology section of the New York Times by Brad Smith that describes what available in the cloud right now.

mSpot. A mobile media company based in Palo Alto, Calif., mSpot is rolling out a so-called “music locker” service on Monday. Users of the service can upload their music collections to the Web and stream their songs to any PC, Macintosh and soon, a variety of mobile devices (starting with Android; an iPhone app is on the way.) The first two gigabytes of storage (around 1600 songs) are free, and there’s a variety of fees for extra storage.

It seems to me that mSpot is taking a legal risk here: it has not secured special cloud music licenses from music labels and publishers. Darren Tsui, mSpot’s chief executive, says the company does not have to, since consumers have a “fair use” right to make a  copy of their media collection, and mSpot is storing separate copies of everyone’s songs in their own individual online locker. Still, Mp3Tunes.com, a similar service founded by music pioneer Michael Robertson, was sued by EMI back in 2007 and that litigation is still going on.

eMusic. The 12-year-old Internet music store has one of the most complex propositions in the digital music scene. Its 400,000 subscribers pay a set monthly fee, starting at $11.99, entitling them to download a certain number of songs per month at an average price that amounts to around half what songs cost on iTunes. The service is known for offering unencrypted music files from mostly indie record labels. In the last year, Sony Music, then Warner Music, agreed to license selections from their catalog to the service.

Though eMusic is not showing much subscriber growth, it says it is breaking even, and its private equity owners, Dimensional Associates, seem to have high hopes for the company. A deal between eMusic and the largest music label, Universal Music, for Universal’s back catalog, is “imminent,” said a person briefed on eMusic’s plans, who asked for anonymity because the discussions are confidential. This person said that the labels are increasingly giving eMusic the latest songs, not just back catalog. The person added that eMusic is also working on a cloud music service to let users access their music collections from any computer or mobile device. It could be introduced early next year.

Thumbplay Music: This New York-based company is more widely known for selling ringtones and video games on mobile phones. Earlier this year, it introduced a mobile music service for BlackBerrys and Android phones; earlier this month, it added an iPhone application to the mix. The service costs $9.99 a month and entitles subscribers to unlimited access to over 9 million songs from all the major and independent music labels.

Evan Schwartz, Thumbplay’s chief executive, calls this “the first cloud-based music service to be live across all mobile platforms.” Mr. Schwartz, who incidentally recently hired Pablo Calamera, former Apple MobileMe chief, as Thumbplay’s chief technology officer, concedes that Apple is the competitor to watch in the digital music market.  “The thing about Apple, though,” he said, “they will launch a cloud music service that only works on their hardware. That leaves wide open the other tens of millions of smartphones that are sold everywhere.”

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Follow me on Twitter for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.

Apple's new iTunes Play

One of my predictions about the music industry for 2010 was that subscription music would almost hit critical mass, with Apple's iTunes finally pushing it over the edge when they introduce their own subscription service in 2011. This prediction was based on the premise that Apple's purchase of Lala provided the needed infrastructure to create a subscription service that made it easier than building one from the ground up.

While this seems a reasonable supposition, industry pundits are predicting that Apple has something else in mind for the Lala backbone, and they'll spring it on us at the upcoming "big event" scheduled for January 27th.

The thought is now that Apple will do a sort of hybrid service, moving all of a consumer's purchases to the "cloud" (computer storage accessed via the Internet) instead of having a song downloaded on to your personal computing device (be it a computer or a phone or an iPod). In effect, you get the streaming function of a subscription service but it will still be only of all the songs you purchased. So in effect, you won't be downloading songs any more, you'll be uploading them! You can still have them on your desktop if you want, but you probably won't.

Indeed, the main benefit to the consumer is that you save all that room on your drive, especially if you have a large collection, and you no longer have to worry about high-quality versions of the songs eating up your hard drive. But the real benefit belongs to Apple. They still get to charge you 99 cents (or more) to purchase a song, instead of collecting a flat fee per month for access to unlimited songs. And they don't have to renegotiate any of the licenses with the record labels. The consumer gets a taste of what subscription music would be like, but at no cost benefit.

This doesn't sound like much of a deal at all, especially when the Spotify music subscription service is about to launch in the States soon. I still believe that this move is still a precursor to Apple eventually going subscription, but it's just a ploy to keep the status quo a little longer than had they gone directly to subscription.

Because once the consumer gets a taste of music subscription, there will be no turning back.