hypebot

Established Artists Like Chili Peppers Face Harsh New Paradigm

"...Future-focused labels and acts are beginning to craft strategies that maximize touring, merchandising, and online receipts, while minimizing the importance of recorded sales. But groups like the Chili Peppers were born-and-bred in an earlier era, one that is characterized by defined album releases and bundled purchases. Now, that approach is facing more and more challenges.."

"...CD sales may be dying, but they still bring in billions of dollars annually. And forcing existing, major acts into an advanced digital strategy would only reduce existing revenues, and create more financial problems for labels. Moving forward, a newer breed of top artists will have to adopt radically different strategies to survive. But that thinking should be implemented at the beginning of careers, not in the middle of existing, successful ones."

- Paul Resnikoff of Digital Music News on the impact and implications of the new Chili Peppers' CD being leaked to P2P's just prior to release. 

More on the Chili Peppers leak and leader Flea's reaction here.

Nettwerk Mgt's McBride Encouraging His Acts To Go D.I.Y.

(CelebrityAccess MediaWire) -- Nettwerk Music Group CEO Terry McBride has advised his company’s clients to take note of the indies and the DIY-scene, telling the major stars they no longer need to sign with a record label.

McBride feels the benefits for today’s artists of keeping control over their musical output far outweighs those of being signed to a label. “We’re focused on setting up our artists as their own record label,” the Vancouver-based McBride told Billboard. “I’m advocating for artists we manage not to sign- or re-sign-with a label unless it’s a pressing-and-distribution deal to work back catalog with new projects.”

Nettwerk Management’s 42-act roster includes stars like Avril Lavigne and Dido, who are both signed to Sony BMG, as well as several lesser-known acts. The company also operates a label, Nettwerk Productions, and a publishing company.

McBride told the magazine that within three years, “probably 80%” of releases from his management clients will be through their own labels.

New Study Concludes Music Industry Has Itself To Blame For Declining Sales

The music industry has mostly itself to blame for declining revenues, a new study by research firm Mintel reports.  Major labels have been quick to blame consumers, but slow to listen to their needs according to the report. Retail music sales, at $12.5 billion in 2005, are predicted to fall to $10.5 billion by 2010.

"The growing distance between the music industry and its consumer is due to a number of factors," said Justin De Santis, analyst for Mintel. "These include lawsuits against individual consumers, payola, and, most recently, restrictive use of digital rights management."  De Santis believes that labels have a negative stigma to overcome, brought on by battles against illegal downloaders, radio "pay-for-play" scandals and homogeneous artist offerings on radio stations. The introduction of iTunes and similar sites has slowed the decay,  but not stopped it according to the Mintel study. Even though technology is starting to work for the industry rather than against it, labels still face the challenge of meeting the  demands of a diverse consumer marketplace.

In an effort to keep up with the digital marketplace, labels have marketed artists to sell single songs rather than complete albums. The Mintel reports concludes that this strategy has contributed to the lack of strong up-and-coming musical talent in the marketplace that exhibit "staying power".

The report continues that while illegal downloading has hurt the industry, big labels have relied on obsolete strategies for over a decade and have been late in exploiting emerging technologies. As a result, the bond between independent artists and their fans have become stronger. Although the music industry is just starting to use digital distribution to its advantage, overall sales will continue to decline unless companies learn to adapt more quickly to changing technologies.

According to De Santis, "The current renaissance of underground media has further driven the consumer away from the major labels and has contributed to the downturn in their sales."

Read some spirited debate from Hypebot readers on the future of the major labels here and join in.

MSN & Billboard Partner On Latin Music Site

MSN and Billboard will partner to produce Billboard.Latino.MSN.com a spanish-language music site that will feature reviews and stories produced by Billboard.  “This represents the beginning of our efforts to reach the growing Latin-American community,” said Scott McKenzie of Billboard. There are 41.3 million Latinos in the US making up 14% of the total population.

New Study Says Music Quality Doesn't Determine Popularity

Take heart music marketers. An extensive Columbia University study proves that when it comes to music, hype matters more that quality.  The study published in Science Magazine shows that when it comes to people’s perceptions of what is a good song; most of us just follow the crowd.

14,000 participants chose from 48 songs by unknown bands posted on the web. When info about how many others had downloaded a song was prominently displayed, participants suddenly claimed the more popular songs were better quality.

“It turns out that when you let people know what other people think, the popular things become more popular,” said Columbia sociology professor Duncan Watts told Red Herring magazine. “But at the same time, it becomes harder to predict what will be popular.”

The researchers say they beleive that their work disproves the theory first popularized in the best seller "The Tipping Point" that certain individuals are tastemakers and their opinions lead to hits.  “Everything is created equal; there’s nothing special about these people,” Mr. Watts said. Instead, the more people pay attention to others the more random popularity becomes.

"Research firm Gartner said in a report last November that consumer-to-consumer taste-sharing applications, such as user playlists, were having an increasing effect on music sales. The firm predicted 25 percent of online music store transactions would be driven by taste-sharing by 2010,"

writes Red Herring.

"Gartner suggested these recommendations would assist sales of what Wired editor Chris Anderson calls the long tail: niche content that isn’t often sold in physical retail stores but is easily made available in the unlimited stockrooms of digital marketplaces."

But the authors of this new study disagree. “Peer recommendation systems will have the effect of increasing unpredictability...They could also have the effect of concentrating attention on the superstars even more.”

Perhaps a new study that provides both tastemaker opinions and download numbers side by side is needed to determine which theory is correct.  But we suspect that everyine is right. Consumers are fickle. Music quality is impossible to measure.  And if we could figure out in advance what people would like then we'd be rich...or Clive Davis....or both.

HYPEBOT'S MUSIC INDUSTRY QUICKNEWS

UPDATED

- FRENCH COURTS SAY PERSONAL P2P OK - UK's The Register is reporting that "The French courts have ruled that using peer-to-peer networks (P2P), providing you are doing so for personal rather than commercial reasons, is legal. The decision comes just as the French Parliament meets to discuss whether internet users should pay a voluntary tax or surcharge of €5 a month to use P2P networks."  Influential online sources like Slashdot are hailing it as "A Legal Victory For P2P's"

- NAPSTER REPORTS MIXED FINANCIALS - Amid continuing rumors of downsizing and Google buy-out, yesterday's earnings call showed Napster with increasing revenues but accelerating net losses. Revenues were $23.5 million during the third quarter representing a 94% gain over the prior year. Subscribers rose by 66,000 in the quarter to 500,000. " But net losses widened to $17 million compared to $13.6 during the previous quarter.

MORE EARNINGS NUMBERS -

• Loudeye revealed preliminary numbers that show the company running out of cash with almost no bright spots on it's immediate future.

• Watch for earnings calls from XM and Sirius next week.

- THE NEW ARTISTIC MIDDLE-CLASS - Hypebot and others have written that while the digital revolution may be leading to lower sales for top tier artists its also opening up many more opportunities for niche and mid-level artists.  BusinessWeek's Jon Fine weighed in on the subject this week under the title "Rockers, Keep Your Day Job.  Worth reading.

- APA AGENCY GROWS - CelebrityAccess is reporting that booking agency APA has brought several new agents on board at its Los Angeles and Nashville offices as well as promoted from within. In Los Angeles, Dan Baron, Tyler Grasham and Mike Wilson join the Talent department, the latter two promoted to full agent status; Tim Scally joins the Comedy department; and Scott Simpson, Michael Pelmont, David Boxerbaum and Lindsay Howard have joined the Television/Literary department. In Nashville Galloway brings clients Cross Canadian Ragweed and Jake Shimabukuro, among others to the Nashville roster, which includes Rodney Crowell, Lee Roy Parnell, Sean Costello, Seth James and Maia Sharp. These moves come just a few weeks after APA re-launched its NYC office with four agents.

- TOURING TRADE GATHERS IN VEGAS - Trade magazine POLLSTAR's annual gathering of the touring industry tribe The Concert Industry Consortium starts Monday in Las Vegas and Hypebot will be there.

- SONGBIRD THE HOT NEW FREE MEDIA PLAYER -Songbird, a new free open source music player designed to unite music from various catalogs has launched and is rapidly gaining traction. Demand was so high for this Firefox based application that Hypebot had trouble accessing the site this morning.

- THE GRAMMY'S continued to disappoint with few if any of the sought after water-cooler moments.  U2 was the big winner. Perhaps AOL was smart to let "official online" status slip to Yahoo!Music.

Amazon Reportedly To Offer Downloads With CD Purchase

As anyone who markets music to adults knows, Amazon.com is an important source of sales.  But the online giant has lagged significantly behind others in the digital music and video space and Wall Street has of late been punishing them for it.  Amazon, however, may be about to make a move designed to end it's second tier status.

According to an article in Newsweek, Amazon may soon unveil a service where customers who buy a CD will also receive a digital copy that they can transfer to a portable player. "It's the most well-thought-out, consumer-conscious strategy I've seen yet for digital music," one insider told Newsweek. "Several other music execs confirm that Amazon is hoping to launch later this year, before its busy Christmas season...'They realize that a very significant percentage of their sales are in physical media products that will almost certainly migrate to digital,' says Citigroup analyst Mark Mahaney."

Great idea, but if everyone knows about it how long will it be before others adopt the strategy?  With Apple controlling 80% of the download market and Google rumored to enter the the competition, can this possibly be enough to give Amazon a significant share of the digital marketplace?

Amazon does have a reported 55 million customers who already trust the company and have input the credit and delivery info.  Perhaps Amazon plus the new wave of improving portable mp3 players will finally be enough to nudge more late adopters into the digital camp.

New Analysis Predicts Shakeout In Online Music Delivery

A new white paper by industry analysts Point-Topic takes a close look at the outlook for online music services in 2006 and the picture is not entirely pretty:

"2005 was a big year for the online delivery of music. By October 2005, Apple’s iTunes service had sold 600 million tracks worldwide, and Apple had shipped over 30 million iPod music players by the end of the year...the IFPI estimated that downloads accounted for around 6% of total music sales in the first half of 2005."

"...But whilst iPods and MP3 players may be generating significant revenue, it is less clear how profitable many of the online music services are."

"Music publishers and copyright holders (usually record companies) take the great majority proportion of the $0.99 that iTunes charges...That does not leave much for the providers of music sites. Apple will only say that its site operated at ‘above break even’ for the first quarter of its 2006 ...Coming from the overwhelming market leader in most territories, this statement shows that online music is not an easy place to make money."

"Although music sites do not have the overheads of a physical music retailer, there are significant running costs..."

"...with these low margins, what does 2006 hold for the online music industry?...online music is a service that people want and will pay for, so the overall outlook is very positive. Even so, some consolidation of sites seems likely, reducing the current high number of online music providers. Other possibilities might include a change in pricing structure, away from ‘one price fits all’..."

See last months CD and download sales figures here and click here to read more of Point-Topic's analysis.

Google Reportedly In Acquisition Talks With Napster

The New York Post is reporting that Google is aggressively seeking a strategic alliance with or even the outright purchase of Napster. Rumors have been rampant in recent days both about Google's desire to get into digital music and troubles within Napster who let go of 10 % of its workforce last week.

Napster could be an interesting play for Google who have already entered the video download marketplace, but lag behind in music. One has to wonder , however, why the net giant needs Napster and it's comparatively small half million subscribers to leap into a real position in digital downloads. The Post suggests  that it is a sign that Google "sees subscription services, rather than the individual download model that Apple's iTunes is built on, as the future of digital music".  Perhaps the might Google sees something that others have not seen in recent earnings reports that seem to indicate continued consumer resistance to music subscriptions. 

For Napster, a Google alliance or acquisition would provide a significant boost for a company struggling to find it's place in a competitive and shifting marketplace.  The Google name alone is consumer magic; much like Napster's name once was.

Industry observers had speculated about a more aggressive or creative move into music by Google including perhaps variable pricing, iTunes style ease of use, and more open access for independent music than other services like Napster currently provides. But perhaps Google has something much grander in mind...Could a Google/Napster hybrid provide free ad supported subscriptions? Or dare we dream about even free downloads like the Napster of yore...only legal?  It's had to imagine what Google is thinking, but they've surprised us before.

Read the full New York Post story here.  Free registration may be required.

Hypebot's Digital Music QuickNews: Yahoo Grabs Grammys & Google May Open Music Store

• Trumping rival AOL, Yahoo Music will provide the official Grammy web presence with previews, exclusives and behind the scenes action.  But that won't stop Billboard and others from trying to grab a piece of the Grammy action.
• There is increasing chatter that Google is planning to open a music download store.  Web watchers hope that any site would offer the same democratic access and variable pricing that Google's video store does.  If so it would offer stiff competition to iTunes and others.  Read more about the rumors at SearchEngineWatch.
• According to Digital Music News, "Satellite radio provider WorldSpace, which covers several global regions outside of the US, recently posted a subscriber count of 115,000....a 50 percent jump over third quarter totals. The company credited heavy uptake in India for the recent growth surge."
• Rumors persist that Microsoft may manufacture it's own portable player to compete more effectively with Apple's iPod.  Read Hypebot's full coverage here.
• And reportedly other managers and acts may soon be joining Nettwork Management's McBride To Fight RIAA Lawsuits/  Read that story here.