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posted March 04, 2009 05:54 PM     Click Here to See the Profile for HollywoodProducer   Click Here to Email HollywoodProducer     Edit/Delete Message
YouTube, Universal Music Discuss Alliance; Firms Would Build Online Hub for Music Videos That Could Charge Higher Prices for Ads
Google Inc.'s YouTube and Universal Music Group are discussing a partnership under which YouTube would build a new hub for music videos.

YouTube would also provide technology and advertising-sales support to help distribute Universal's video content to other Web sites, people familiar with the matter say.

Irish rockers U2 perform on the 'Late Show with David Letterman' this week to promote an album. The group is part of the stable of artists that Universal Music and YouTube hope to use to milk more money from online.

Financial details of the arrangement -- which is in negotiations and could still fall apart -- couldn't be learned. But the partnership would represent YouTube's stepped-up efforts to lure premium content in order to sell more, higher-priced ads.

Talks about the new effort, which has the working title "Vevo," have been under way since last year, according to people familiar with the matter, and are at an advanced stage.

A spokesman for YouTube declined to comment on any discussions with Universal. A spokesman for Universal declined to comment.

The plan aims to help both companies milk more money from music videos, which are some of the most popular on YouTube. The idea is to better showcase the videos on and off the Web site in a way that appeals to advertisers, people familiar with the matter say.

Whether YouTube is discussing a similar agreement with other music companies with whom it is in regular negotiations remains unclear.

The talks come as tensions between YouTube and the record labels have escalated in recent months, with both sides facing pressure to earn more revenue. In December, Warner Music Group Corp. removed its content from the site, after talks to renew a licensing agreement failed.

The new agreement would extend far beyond the existing licensing arrangements YouTube has struck with Universal Music, a unit of Vivendi SA, and other major record labels in recent years. Universal is the largest recorded-music company in the world, with artists including U2, 50 Cent and the Killers.

Under those deals, record companies allow their music videos and songs to appear on YouTube in exchange for a share of the advertising sold next to the videos. But the revenue hasn't added up. Google doesn't disclose YouTube's revenues but has acknowledged it has been harder to make money off the service than it expected. And the record labels -- worried about giving their content away for virtually nothing -- aren't satisfied with their share.

The major labels have long struggled with the challenge of making money from music videos. In the 1980s, they let Viacom Inc.'s MTV air their music videos very cheaply, or even for free, under the theory that the clips would drive album sales. MTV did help spur CD sales in the '80s and '90s, but the labels have come to view the decision as a tactical mistake.

So in recent years, the labels, led by Universal Chairman Doug Morris, demanded that sites like YouTube and Yahoo Inc. pay to use their videos. Vevo is supposed to generate enough ad revenue to support the minimum payments guaranteed under such agreements.

At an investor conference this week, Google Chief Executive Eric Schmidt discussed the need to come up with some new vehicle, akin to Apple Inc.'s iTunes, for online music videos.

"There's an ongoing battle, business discussion, whatever term you want to [use], about how do you compensate the music industry for the use of their music," he said. "And I don't know how that's going to resolve itself."

The talks come as other media companies seek new ways to make money off online music content. MySpace Music is a recently created joint venture among News Corp.'s social-networking giant and several record labels. The partners in MySpace Music share ad revenue from audio streams of music on the site. News Corp. also owns Dow Jones & Co., publisher of The Wall Street Journal.

Meanwhile, Google is showing more flexibility in other arrangements with content partners. To land some full-length versions of old television shows from CBS Corp., for example, it agreed last year to show pre-roll ads before the content.

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posted March 09, 2009 08:32 AM     Click Here to See the Profile for fred   Click Here to Email fred     Edit/Delete Message
That Tiny Sum? It’s Your Digital Download Royalties After Packaging and Breakage Costs
Published on March 9, 2009
by John Paczkowski

riaa_fatcatjpgA song purchased from iTunes or Amazon is no different from one bought from a brick and mortar retail outlet, despite the vast differences in the economies of distribution between the two. That, in a nutshell, was the jury verdict handed down in a case brought by rapper Eminem’s former production company FBT Productions against Universal Music Group. At issue here was whether the sale of digital music downloads falls under the “distribution” agreements that cover physical releases like CDs. FBT argued they do not, claiming that the label incurs none of the costs typically associated with them–things like CD jewel cases and inserts, breakage fees and in-store displays. Instead, the production company said that downloads should be covered by “licensing” agreements that don’t include such expenses. And the difference between the two is significant: Under distribution deals, artists typically take a 30 percent split of royalties earned. Under licensing deals, they take 50 percent.

But the jury didn’t quite see things FBT’s way and instead bought Universal’s argument that the economics for digital downloads should be viewed as similar to those of the single. A nasty blow to FBT and other artists hoping to see their royalty rates adjusted to account for the new economies of distribution provided by digital music storefronts. Seems that much as technology has changed the relationship between musician’s and their fans, it’s done little to change the one between musicians and their labels.

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posted April 12, 2009 09:40 PM     Click Here to See the Profile for fred   Click Here to Email fred     Edit/Delete Message
YouTube, Uni Music Partner for Hulu-Type Music-Video Channel
Brokered by U2's Bono, the plan is to aggregate enough top-level content to attract advertising and sponsorship

Universal Music Group, the world's biggest music company, and Google’s YouTube, announced plans Thursday to launch a channel that they hope will become an ad-supported online destination for music videos.

Called Vevo, the channel will launch with content from UMG’s high-profile acts like Taylor Swift and Kanye West, though the plan is to eventually make deals with the other major labels. YouTube will host the videos, and UMG will provide the content, while both will split the advertising revenue.

The partnership was brokered by U2 rocker -- and UMG artist -- Bono, following a dinner in Paris with Universal Music Chairman and CEO Doug Morris, in which they discussed finding an economically viable way to feature music videos on the web.

Bono suggested that Morris meet with Google’s chief executive, Eric Schmidt -- and he also emailed Schmidt, suggesting he meet with Morris. The two finally got together in New York. "I came back here in California [thinking]: Why don't we think about a new approach?" Schmidt told the Los Angeles Times. "That then kicked off Doug's vision."

The result is an attempt to basically mirror the success of Hulu, a joint venture of News Corp and NBC Universal that features movies and TV episodes and draws some 34 million monthly viewers, except aggregating music videos – already a highly successful staple of YouTube, but one that has been able to successfully monetize itself. By becoming, in effect the online equivalent of early MTV, it would better attract advertisers and sponsors.

At the base of the partnership is a hope to find new revenue sources for the ailing music industry, with CD sales in free-fall.

"This is the next step in taking the video, which is more important than just an audio stream, to the next level of monetizing it," Morris told the Times.

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posted April 16, 2009 12:22 PM     Click Here to See the Profile for indiedan   Click Here to Email indiedan     Edit/Delete Message
British Spinster Becomes Instant Star

16 April 2009 2:35 AM, PDT

In what appeared to be the fastest-spreading viral video ever, a clip from Britain's Got Talent featuring the electrifying performance of Susan Boyle, a Scottish, middle-age spinster, has been viewed by more than 15 million people on YouTube in four days. (In the U.K. it has been viewed by more than 1 million people on the ITV website.) The list of record holders for YouTube videos is considered suspect since it includes commercial music videos whose viewing numbers have been boosted by fans using software that "refreshes" their YouTube feed every few seconds. (The actual champ is believed to be comic Judson Laipply's video, "Evolution of Dance," which has recorded more than 100 million views.) What is clear, however, is that the clip from a U.K. TV show has already been seen in the U.S. by more people than tune in to the average American TV show. And the numbers are escalating. One viewer who received an email with a link to the clip replied that she had received the same link from everyone she knows. Portions of the clip were carried on the nightly newscasts and cable news channels. British newspapers reported that she was an odds-on favorite to win the ITV talent contest and nearly certain to be cast in the West End productions of Les Miserables. (She performed "I Dreamed a Dream" from the musical on the show.) Producer Cameron Mackintosh issued a statement Wednesday saying, "Vocally it is one of the best versions of the song I've ever heard. Touching, thrilling and uplifting. I do hope she gets to sing it for the Queen."

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posted May 07, 2009 10:46 AM     Click Here to See the Profile for EmilySachs   Click Here to Email EmilySachs     Edit/Delete Message
Warner Music Group Walks Away From Digital Start-Ups Lala and Imeem, Loses $33 Million
Published on May 7, 2009
by Peter Kafka

victrolaIt’s par for the course for big music labels to boast about their digital music sales as their CD sales tank. And that’s just what Warner Music Group (WMG) did that this morning, pointing out that its digital revenue was up six percent this quarter.

Less boast-worthy: Warner has written off almost all its investments in lala and imeem, two digital music start-ups it once thought would help save it from the slump in CDs.

In 2008, Warner invested $20 million in and $15 million in Now the label is taking a $33 million charge on the two start-ups.

The company’s 10-Q, filed this morning, spells it out: It wrote off $16 million in imeem–its entire investment–and half of its investment in lala. It also threw away $4 million via a “receivable write-off” related to imeem–that is, the start-up owes Warner money the label doesn’t expect to see again.

This appears to explain why Warner wasn’t bothering to renegotiate its streaming rights deal with imeem earlier this year even though it owned an equity stake in the company: It looks like the label had already concluded the company wasn’t worth saving. UPDATE: A person familiar with the situation says Warner may yet hammer out a new agreement with imeem.

Asset write-downs–acknowledgements that the stuff you bought back in the boom is worth a lot less now–have been par for the course for big media companies following last fall’s crash. If anything, Warner is a little late to the game here–many of its peers took their lumps last quarter.

But it is unfortunate for imeem, which has just raised an emergency funding round–something in the single-digit millions, I’m told–and is still out trying to land more cash.

For the record, Warner said music sales were down 17.6 percent in the last quarter and that the company lost 45 cents a share on revenue of $668 million. Analysts had been looking for revenue of $730 million. Warner attributed a loss of 22 cents a share to the write-downs.

And as far as Warner’s digital revenue goes, that six percent increase is worrisome since it shows continued deceleration: A year ago, digital revenue had increased 48 percent over the previous year. And Warner’s digital total was up just one percent over the previous quarter.

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posted May 28, 2009 10:06 AM     Click Here to See the Profile for fred   Click Here to Email fred     Edit/Delete Message
Music Labels Cut Friendlier Deals With Start-Ups
The New York Times
| 28 May 2009 | 12:16 PM ET

With CD sales dropping fast, it is not hard to imagine how the major music labels could benefit from the growth of Web start-ups like Imeem. The company’s service lets people listen to songs, discover new artists and share their favorites with friends. And in return, Imeem owes the labels licensing fees for use of the music.

In Europe, Daniel Ek, left, and Martin Lorentzon founded the music service Spotify, which is free and plastered with ads.

But two months ago, Imeem’s founder, Dalton Caldwell, was ready to pull the plug. While 26 million people a month were using the service, Imeem owed millions of dollars to the music labels, and income from advertising was nowhere close to covering expenses. “It reached a point where it was not even clear it was worth doing any more,” Mr. Caldwell said.

Then the ground shifted. This month, Warner Music Group forgave Imeem’s debt, and both Warner and Universal Music agreed to relax the terms of their licensing deals with the site. That allowed Imeem to raise more money from investors and plan for a profitable future.

Imeem’s amnesty is one sign that a new accommodation is being forged between Web music start-ups and the companies on which they are almost wholly dependent, the major music labels. The recording industry is considering an all-digital future in which it needs popular Web services like Imeem, both as sources of revenue and as supplements to older channels of promotion like radio and MTV.

As a result, music labels are now striking more favorable terms with Web companies, and the start-ups have come to realize they cannot rely on Web ads to support themselves. For example, as part of its new plan, Imeem will try to push users into buying more T-shirts and concert tickets, and will soon add its own MP3 download store similar to iTunes, sharing revenue with the labels.

It is not yet clear whether any of this is enough to produce sustainable online businesses — or even to help mitigate the chronic pain of the music industry. But it is offering some hope.

“We are trying to figure out how to restructure partnerships and develop a healthier ecosystem where entrepreneurs can continue to innovate,” said Michael Nash, executive vice president for digital strategy at Warner Music. “Entrepreneurs are also realizing they need to spend as much energy on their business model as they do on technological innovation.”

The changes stem from an unavoidable and unpleasant reality facing the music business: the economics of offering music free on the Web do not work. Companies like Imeem, striving to create an alternative to Apple’s dominant iTunes Store, signed complex deals with the labels that required them to pay large upfront fees and then small royalties — typically a penny or less — each time a song was played online. Advertising recouped only a fraction of that considerable expense.

As a result, the online music landscape is littered with the wreckage of failed or troubled music start-ups. SpiralFrog, a free music download service supported by advertising, went out of business in March, citing financial difficulties. And music executives have roundly expressed disappointment with the money trickling in from MySpace Music, their joint venture with the News Corporation, which started last year and was talked about as a savior for the music business.

For many digital music entrepreneurs, there is new hope that music labels will now give them room to experiment and perhaps succeed. Last fall, Lala, a Silicon Valley start-up, introduced a distinctive service that lets people listen to a song once at no charge. Then it costs 10 cents to stream that song repeatedly on the Web and up to 99 cents to download it.

Lala executives credit the labels’ cooperation in the unusual licensing arrangement and say they are selling hundreds of thousands of songs a month.

In April, the mobile phone operator Vodafone introduced a music service in Spain that gives subscribers unlimited access to a broad catalog of songs on their phones for 16 euros ($22) a month. The songs can be played on the phone or transferred to a computer. The service was possible only because the major music labels altered the underlying economics of their licensing deals, said Rob Glaser, chief executive of RealNetworks, which is supplying the music service.

“That flexibility wasn’t there in 2008 anywhere in the U.S. and Europe,” he said.

Napster, a pioneer in peer-to-peer music sharing that became a paid music service owned by the retailer Best Buy, reduced its subscription rate to $5 from $12.95 a month last week as a result of new deals with the labels, according to Chris Gorog, Napster’s chief executive.

Also last week, Pandora, the rapidly growing Web radio service, said it would increase the number of audio commercials on its free service and offer an ad-free version, Pandora One, for $36 a year. The founder, Tim Westergren, said he expected the company to reach profitability next year.

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“There was a generation of Web companies that signed up for deals that didn’t make sense, and unfortunately they set a precedent,” Mr. Westergren said. “Now that those deals turned out to be unsustainable, it made the labels realize that there was actually not hidden money they were missing out on. I think labels have a much better understanding of the economics of the business.”

Another music start-up seeking to take advantage of the new environment, one that seems to be collecting ardent fans and skeptics in equal numbers, is Spotify, based in Stockholm.

The service, which requires iTunes-like software that people download to their PCs, offers millions of free songs, supported by copious advertising and opportunities to buy merchandise, downloads and tickets. (A premium version, without ads, costs around $15 a month.)

Spotify plans to enter the American market later this year, and its founder, Daniel Ek, says that the music labels have given the start-up flexibility because they are attracted to a service that, with its unlimited free music, could convert illegal downloaders into monetizable consumers of music. “This is what has been lacking for 10 years. The only way to beat piracy is by actually creating a legal service that is just as good,” Mr. Ek said.

Spotify will not discuss the details of its arrangements with the European divisions of the music companies, and many music entrepreneurs and observers question whether Spotify — and other digital music start-ups, for that matter — can build enduring businesses.

“Until we start seeing these guys living on their revenues, as opposed to their investment, we are not going to know how effective their business models are,” said Mike McGuire, an analyst at the research firm Gartner.
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ILike, a Seattle company that bills itself as a music discovery engine for users of social networks, has actually turned away from offering free music online in recent months, and is instead focusing on helping bands forge connections with fans and developing tools like applications for the iPhone. Ali Partovi, iLike’s chief executive, is not sure labels and start-ups have found complete harmony yet.

“There is an ongoing tension between what consumers want and what music labels want,” Mr. Partovi said. “It’s hard to know what model will satisfy both, and what will work over the long run.”

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posted August 20, 2009 08:51 AM     Click Here to See the Profile for fred   Click Here to Email fred     Edit/Delete Message

Death By Discovery: The Interminable Churn Of Music Startups

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The more I think about it, the more I see the music start-ups space as a dog that won’t ever bark..err…sing. The MySpace-iLike deal—and the price that iLike got—is a perfect example of what will continue to shape all of the online and mobile music startups. As I see it, there are endemic structural and cultural reasons for it. The first part, something that has borne out over the last few years, is obvious: that margins in music downloads are horrible for anyone without iTunes scale (and even that’s not growing rapidly), and that music labels are the choke point for most of the startups in the download space. Then, the other part about ad-supported music startups that we all instinctively know: too little ad money sloshing around for too many startups and the economics of ad rev share don’t work out well. Plus, there are too many interested parties trying to leech off money at every stage of the value chain for this to ever scale.

Then, the platform dependence problem: as the iLike price shows, any startup that wants to achieve scale will be at the mercy of platforms like MySpace, Facebook or any other social media service that it piggybacks on.

But my contention is that once all music becomes digital, whether through downloads, on-demand or streaming, then there are only so many ways in which startups can differentiate themselves.

There are only so many ways you can enhance an always-on, playable-anywhere experience. One could argue that music discovery and recommendation still has a lot going for it as a sector, but it is completely overblown, especially when that has to compete with all the other information/media/services that overload users with push media. I think user communities will coalesce around artists, and not central services, which also weakens the argument for discovery/recommendation/community startups.

Besides, users are not loyal, that we have seen time and again: first it was, then iLike, then Imeem, then Pandora, then Slacker, then Spotify, and it goes on and on. For me as a user, it doesn’t matter if I hear a song on one or any other of the services. Last night I discovered, and now I am on to that. If I have fun discovering new artists, I have fun discovering new ways to discover new artists and songs as well. And that is what consumer behavior is going to be: if you think music and artist discovery is the holy grail for differentiation, then be ready for new-music-service discovery as a fact of life as well.

P.S.: As a slight aside, my favorite music discovery service is, surprise surprise, YouTube (but that’s another post).

Rafat Ali

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posted August 25, 2009 10:21 AM     Click Here to See the Profile for fred   Click Here to Email fred     Edit/Delete Message
Great online music list from TechCrunch...

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posted September 29, 2009 09:56 AM     Click Here to See the Profile for HollywoodProducer   Click Here to Email HollywoodProducer     Edit/Delete Message
YouTube and Warner Music reach a deal...

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