Coolfer

Moving To Billboard

Wed, 25 Mar 2009 13:30:13 -0600

Remember when David Letterman was moving from NBC to CBS and he had all sorts of special guests in his final week? It was quite an event. Bruce Springsteen, who had not yet played Letterman, performed "Glory Days" his final show. At one point, Letterman quipped that he was just moving, not going away forever.

Well, After five and a half years, I'm taking my act to a different network, so to speak. Starting Monday the 23rd, I am the Senior Editorial Analyst at Billboard Magazine. What this means to Coolfer readers is you can read my daily posts at Billboard.biz. Same analysis, different URL. In addition, I will have longer pieces in the weekly print magazine and will write regular research papers on important issues and trends. I'm excited to join the Billboard team and for the opportunity to reach a wide audience.

Today I have a short, Coolfer-like post on Ticketmaster credit rating downgrade at Billboard.biz. Much more to come.

Thanks for reading, commenting and emailing all these years.

And, Bruce, let me know if you want to play my going away party.

Glenn

Gone Fishin'

Tue, 17 Mar 2009 06:51:35 -0600

Coolfer will be light (or void of) posts this week. I'm laptop-less in Austin for SXSW. On Thursday at 11am I will moderate a panel on blogs and whatever level of awesomeness they have attained in the music world. Other than that, I will be roaming around from party to party, showcase to showcase.

The Downsides of Streaming Services

Fri, 13 Mar 2009 13:33:07 -0600

Before the BusinessWeek.com article by Douglas MacMillan on consumers' use of streaming services as substitutes for purchasing, I was the only one (as far as I know) to point out this harmful downside to free, ad-supported services.

In December 2008, I wrote that streaming services are not a boon for record labels because of two key reasons. First, they are a poor way to monetize recorded music assets. Here's what I wrote in December:

Consider a song sold at iTunes. The label collects about 70 cents (ignoring publishing and distribution). A typical on-demand streaming payout would be, realistically, around half a cent per stream. That means the song must be streamed 140 times to generate the revenue of a single track purchase. A sale results in an immediate 70 cents while streaming spreads out that revenue over time (the time value of money dictates that money now is better than money later). The sale of an entire album results in revenue equivalent to 1,400 streams. The buyer would have to spend about 5,600 minutes -- over 93 hours -- listening to music on a playlist site to generate the same revenue generated from the purchase of a digital album.

Second, they allow purchasers to forgo purchases for free streams. To paraphrase Dr. Liebowitz of the University of Texas at Dallas, each minute spent listening to a low-revenue streaming service is a minute that is not spent listening to purchased music.

In addition, I wrote that labels' excitement for streaming services misses a key point. While these services may induce someone to switch from file-sharing to free, legal listening, they can also induce a person to switch from purchases to free, legal listening. That is what MacMillan found.

Researchers and industry consultants say online music sites are being used by a growing number of listeners as a substitute for purchasing music, rather than serving as a catalyst for more purchases. (San Francisco-based graphic designer Gitamba) Saila-Ngita's experience shows that the sites allow music fans to spend much less money than in the past. "Most of this is substitutional. People go to [the Web] instead of buying records," says Jay Rosenthal, senior vice-president and general counsel for the National Music Publishers' Assn., a Washington (D.C.)-based trade group that represents publishers of songwriters and composers.

While the article lacks much hard data and offers only scant anecdotal evidence, I think it's on the right path. Streams are substitutional, as Rosenthal stated. Plus, the article offered a bit of evidence of a streaming service's ability to upsell to MP3s. The upsell, if achieved, is the silver lining for streaming services like Pandora, MySpace Music and Imeem. In theory, listeners use the services to find music they like and this discovery leads to purchases. To the contrary, the growth of download sales indicates the incredible amount of music discovery taking place on the Internet is not leading to a net increase purchases. These people would have bought music in the absence of an Imeem or a Pandora. Per capita spending on music is dropping as online discovery continues to grow.

MacMillan has information on the number of webstreams and MP3s sold by Lala.com.

Palo Alto-based Lala, a startup launched in 2007, shows how the music industry is struggling to profit from this new approach to music. Lala gives people the option of either paying 99¢ to download one song or paying just 10¢ for a Web-hosted song that they can access from any Web-connected PC. Lala users can also stream any song in the catalog once for free, and keep up to 50 songs in their online collection.
So far, little money is changing hands. For every 1,000 songs streamed at Lala, users pay the 99¢ download fee for only 72 of them. They pay 10¢ for only 108 out of 1,000. The remaining 820 songs are played for free.

(I should note the article does not differentiate between song uploaded to Lala.com and streamed, for which labels do not receive payment, and streamed songs that are not in the user's permanent collection. If the track was already purchased and added to a person's Lala.com collection, there is not going to be a future ten-cent webstream purchase or $0.89 MP3 purchase.)

There is no doubt that music is moving toward access-based revenue models. Streaming is part of that shift. The shift may be inevitable. Giving consumers additional options may be the right thing to do. At the very least, streaming revenues are an acknowledgment that the boom years of the CD were far above the industry's historical norms and will not be revisisted. But the bottom line is labels need more revenue than less, and pushing consumers toward lower-revenue models may harm the record industry's chances for a soft landing.

Friday Business Links: Sony/ATV To Develop TV Series

Fri, 13 Mar 2009 09:56:43 -0600

• Sony/ATV Publishing is creating a television series called "American Storytellers." The series will turn the stories of country songs into one-hour dramas. (Billboard.biz)

• Bit torrent search engine Minivova generated €1,000,000 in revenue in 2007. Be careful of the wording in the article. It says Mininova "earned" €1,000,000, which implies revenue net of expenses. The €1,000,000 figure is actually top-line, gross revenue. Still, it's an important discovery. The Pirate Bay's ability to generate revenue -- which indicates the degree to which it is run like a proper business -- was a part of its recent trial. (Ars Technica)

• Country album sales are down 15.3% this year but its market share is down only half a point to 10.0%. (Music Row)

• A review of the recent upgrades to MySpace Music. Nothing great, in my opinion. (TechCrunch)

• Download the 39-minute In The City podcast of this week's first meeting of the Featured Artists Coalition. (Download MP3)

• Milwaukee's Atomic Records will soon close. "As the viability of record stores have dwindled over the years, I can’t help but feel that our importance to the community has dwindled also. We’ve received an enormous amount of love from people since we announced the closing but it’s been often accompanied by a hushed confession that music just doesn’t play as big of a role in their lives anymore." (Popmatters, via Daily Swarm)

• Arrington was right. Music is free. Download 1267 files, 6.15GB of music from bands performing at this year's SXSW. (Home of the (UNOFFICIAL) SXSW 2009 Torrent, via TorrentFreak)

Jack White's New Business Model

Thu, 12 Mar 2009 11:16:50 -0600

The Tennessean has an article on the launch party for the Third Man Records building in Nashville. The label was founded by Jack White (White Stripes, The Raconteurs). Its headquarters will house the record label and will have a record store, photo studio and performance stage. Said White:

If one of the bands working here says, 'Jack, there's a great band that played at the End on Friday night, you should check these guys out,' Saturday morning, they can come to Third Man Studios and we can cut a couple of songs. They can come back to the photo studio and we can take a photo of them. We can cut the acetate and run it down the block, and within three weeks, we can have a thousand copies of a 45 that they can sell at shows.

Thursday Business Links: U2 Sold Fewer Albums, Just As It Should Have

Thu, 12 Mar 2009 10:33:22 -0600

• U2's No Line On The Horizon entered at #1 on the album chart with sales of 484,000 units. Given the changes in the marketplace and the shift away from the album format over the last four and a quarter years since the band's last album, 484,000 units is about right on target. The 7.02 million units sold last week were down 8.6% versus that same week in 2008. Year to date, album sales are down 11.5%. (Billboard.biz)

• Chinese hackers have reverse engineered iTunes gift cards and are selling them at online auction sites. (Yahoo News)

• Nine more representatives have joined in support for The Local Radio Freedom Act, which opposes the Performance Rights Act. (mi2n.com)

• Through its CreateSpace disc-on-demand site, Amazon.com is offering hundreds of out-of-print and rare albums as ready-made CDRs. (Seattle Tech Report)

• A review of the iTunes 8.1 new iTunes DJ function (formerly the Party Shuffle). "In the settings, when you click on 'Allow guests to request songs with Remote for iPhone or iPod touch,' it will enable all iPhones and iPod touches with the Remote app installed to find your iTunes Library. When those guests set your library of the source, they can then pick any song from your library to play next." (VentureBeat)

• Interesting: Rascall Flatts will stagger four pre-release songs in the month leading up to its new album. It has turned out that the a popular way to preview an upcoming album is to actually release a good portion of the album. (Music Row)

• An interview with MySpace Music president Courtney Holt. On the horizon: tools for DIY artists to add content to MySpace Music, more videos, more video-centric video programming, merchandise, ticketing ("We're going to be doing that in a big way in the near future," said Holt) and international launches. The company is shooting for the stars. Hopefully it can do at least one thing very well and move forward from there. (CNET)

• The State of New York has dropped its plans to tax iTunes downloads. The state legislature will use federal stimulus money to make up for what revenue would have been lost. (CNN.com)

WSJ on the Artist Involvement in Secondary Ticketing Market

Wed, 11 Mar 2009 14:53:53 -0600

At last, the curtain is being lifted on artists' involvement in the secondary ticketing market. The Wall Street Journal's Ethan Smith has an excellent article on Ticketmaster, secondary ticketing services and the extent to which some artists and managers are profiting from legal scalping.

A focal point of the article is TicketExchange, a secondary ticket marketplace owned by Ticketmaster. Here's what the piece has to say about TicketExchange and common practices employed by artists and promoters:

• Ticketmaster "routinely" offers to list hundreds of top tickets per concert on one of its two secondary sites (the other is TicketsNow) and divides the extra revenue with artists and promoters.
• "Virtually every major concert tour today" involves the setting aside by artists and promoters of some tickets for sale on the secondary market. The tickets appear to be priced and sold by fans and ticket brokers. The article gave an example of a ticket being priced at an auction-like $1,164.01.
• Ticketmaster's senior vice president for legal affairs admitted the company's "marketplace" sites only rarely list tickets being sold by fans and that the vast majority of tickets are sold in cooperation with artists and managers.
• But TicketExhange had been billing itself as a marketplace where fans sold to other fans. Wrote Smith: "After inquiries from The Wall Street Journal, the 'tickets posted by fans' message was removed from the TicketExchange Web site. Prices also fell, narrowing the gap between Ticketmaster and TicketExchange Marketplace."
• "Tickets that do not sell at the inflated platinum prices can also be moved between TicketExchange and Ticketmaster's lower-priced main inventory, without any signal to consumers that the ticket's status has been reduced."

Additional reading:

• "An Archived Senate Hearing, Surprising Proclamations" at Coolfer
• "Ticketmaster, Live Nation, and the 'secondary market'" at Hitsville
• "Scalping" at the Lefsetz Letter

Wednesday Business Links: Choruss, Mixwidget, Aussie 2008 Sales

Wed, 11 Mar 2009 08:56:23 -0600

• A profile on Jim Griffin and Choruss. "I think it's fair to say the business of music products has fallen and it just can't get up. … For any civilized society, it has to become very, very concerned when it becomes voluntary to pay for … the stuff of innovation, because those are the very things that drive civilized society, especially the one we live in." (eSchool News)

• Nokia plans to launch Comes With Music in Italy, Sweden, Mexico and other countries in the coming months. (PC World)

• Download Music Tanks report titled "Let’s Sell Recorded Music" that seeks solutions for record labels, ISPs and governments. (Music Tank)

• Mixwit's creators have just finished Mixwidget, an open-source mixtape project based on the late Mixwit mixtape. (Mixwidget)

• Some reality is setting in as ad-funded music models fail to deliver what content owners want. (New Media Age)

• Mixed results for recorded music in Australia in 2008. Total value dropped 8%, CDs dropped 12.2% by volume and 10.5% by value, digital tracks rose 33% by value and all digital rose 35.6% by value. (Billboard.biz)

• Auditude, which has deals with MTV Networks, MySpace, and Warner Brothers Entertainment, has raised a $10.5 second round of funding. The company's content identification technology identifies clients' videos and places ads over them. (VentureBeat)

Notes on the House Judiciary Committee's Hearing on Performance Rights Act

Tue, 10 Mar 2009 13:10:48 -0600

One of two outcomes will come from todays' three-and-a-half hour hearing on the Performance Rights Act: Either the committee will approve the Performance Rights Act or the National Association of Broadcasters and labels will reach their own agreement. It is very clear the committee members understand the promotional value of radio but think it is unfair that only radio stations get to decide the amount of that value. The issue of whether there should or should not be a performance right is all but decided. The issue to now be resolved is the value of the right and the timing of its introduction.

Even though broadcasters effectively demonstrated the potential impacts the royalties could have, the committee was more concerned of an absence of the right and the uniqueness of this instance in which creators do not have the right to negotiate the value of their work. On occasion the constitutionality of the matter was brought to light. In addition, committee members expressed their desire to protect small and rural broadcasters from financial ruin.

Highlights: Corgan vs. Lundren (1:54). Newbury vs. Bainwol on YouTube (2:01). Nadler's discussion of competing studies with Newbury and Liebowitz (2:02). (Those time estimates are assuming I came in ten minutes late. I'm not sure at which exact point I entered the webcast).

Prepared Statements

Bill Corgan of Smashing Pumpkins (about 40:00 in the webcast) gave a wistful testimony that underlined the importance of radio in his musical upbringing. He called it a "longtime inequity" and "outmoded" law. An "issue of fundamental fairness." Performers deserve to be paid especially since they may not share in other revenue streams. "Who has been taxed more than the artist themselves?" Over the course the hearing, Corgan proved to be an excellent witness. Artists were very well represented.

Paul Almeida of the AFL-CIO also framed this as an issue of fairness and pointed to the advantage terrestrial radio has over Internet radio stations.

Lawrence Patrick of Patrick Communications, a media brokerage firm that owns some small-market radio stations. Started by talking about radio's current financial hardships (some have a 30-50% decline in revenue). New fees would do "significant, long-term damage" to stations. They will reduce staffs and hurt owners while enriching record labels. Threat to emergency services and local coverage. Stations do not have the option of raising their ad rates (which he says are "dropping sharply").

Dr. Stanley Liebowitz of University of Texas at Dallas. Talks about his two studies of whether radio play helps music sales. Neither found evidence that sales are increased by radio play but evidence that sales have been harmed by radio. Explains this means total sales and not sales of individual artists (who obviously benefit from radio play). Time spent listening to radio is time not spent listening to purchased sound recordings. In the absence of radio, a person can listen to nothing or pre-recorded music.

Steve Newbury of Commonwealth Broadcasting, chairman of the radio board of NAB. Takes issue with the pro-artist argument when record labels get 50% of the royalties. "The record labels walk away with more money from this bill than do featured artists." He blames artists' financial difficulties on unfair record contracts, cited Toni Braxton as an example. "Free radio play is the best friend of artists and record labels." Local radio stations would be forced to cut services, switch to a talk format or file for bankruptcy. Composers would be hurt because the bill provides a financial incentive not to play music. New artists would be hurt, and music diversity would be at risk. Radio listeners would be hurt because stations may disappear, especially in rural communities. "Significant unintended consequences."

Mitch Bainwol, CEO of the RIAA. Speaking as a member of the musicFIRST coalition. Five key points. First, broadcasters currently pay nothing to performers but collect billions in revenue. Second, the U.S. is unique in that it does not pay the royalty, and other platforms other than terrestrial pay the royalty. Third, more than half of songs played on radio are oldies. Promotional value is not as great as it used to be. Fourth, the bill focuses on big, corporate radio. Eighty percent of stations in the U.S. are accommodated. Fifth, the issue is not about transferring money to record labels.

Items from Q&A

Bainwol added that the country won't be in a down economy forever. There ought to be a right. The next question is what should the rate be? A percent of revenue? It would be a "modest payment" for cost of goods sold.

Rep. Howard Berman pointed out that radio hosts are paid, that stations pay for the right to broadcast sporting events. He said there is the issue of the right and the issue of the structure. When radio stations have lost $5 billion, payments go down as well. The system will adapt. A GAO study is fine, but should not be what determines if there is a right to this royalty. Asked Newbury if he would support accommodations for small broadcasters. Newbury responded that stations provide promotional value and he has "grave concerns" that damage will be done before an independent third party study is done. Berman suggested to start the study as stations and labels begin negotiations.

Rep Smith addressed a GAO study and pointed out that most take a year to complete. Asked Bainwol about an outside study, he said he prefers to dual-track this (study concurrent with negotiations). Bainwol wants the study to be done in the context that a right is established.

Would they support an amendment to the bill that artists get all royalty payments. Bainwol said no. There is a 50/50 split because it is a good thing to invest, and record labels get a return on their investment. Giving all money to artists would dry up investment in new artists. Newbury did not answer the question because he doesn't support the right in the first place, but "taking the record companies out" of the equation is more in line with what broadcasters want.

Rep. Smith asked Corgan about declines in recorded music sales and how the bill will help. Rise of Internet culture and free downloading. Labels dug in their heels to try to reverse it, but it didn't help. It's a complicated issue, 50 different people could give 50 different answers. Later, Corgin complained that artists have no leverage in this issue.

Rep. Watt asked if stations would have an incentive to switch to a talk format. Talk hosts have to be paid. Even at minimum wage, that would be more than the station would pay for performance royalties (in the case of a small station). Patrick said a station in many parts of the country can get a talk radio show for free. Newbury gave the example of ESPN programming, which is provided at no cost to the station. Rush Limbaugh, however, is paid in exchange for the exclusive right in that market.

Debate over the rights of the label to take half. Corgan said he negotiated away some rights in good faith. He has no problem with record labels getting half the royalties.

Rep. Lundgren brought up the constitutional aspect of the ownership right. Less creativity today? Corgan talked about the "erosion of the revenue base" that has brought in conservative approach. He feels music has been hijacked by corporate interests and you see fewer leading-edge artists. There are fewer stars per generation. Today is different in terms of sheer numbers. There are more artists then ever but fewer stars. There is something going on that is creating fewer stars. Lundren came back to ask about the incentive to play unknown artists versus established artists if there is a performance royalty. Corgan said it's an issue of making the proper capital investment to develop artists, and that's not happening. Labels don't have the revenue to make the capital investment. Stars drive the business, Corgan said. Stars are not just the most popular, they enact a change in music and increase creativity.

Rep. Nadler asked how much value obviates the need for a performance royalty and if the same principal would hold in other industries. He asked about an NAB-sponsored study and added that Liebowitz's study was independent. Newbury did a very poor job explaining his issues with Liebowitz's studies. Liebowitz entered the discussion to talk about his methodology and talked about the NAB study. NAB did not allow data of the study to be shared because its license with Arbitron did not allow for it, something Liebowitz downplayed and said is the wrong to conduct a study without allowing for outside analysis. Nadler asked Newbury if he would ask Arbitron for permission to share the data. If the NAB wants anybody to trust the study, Nadler said, it should do what it can to get Aribtron to share that data. Later, Liebowitz said he did not want to unilaterally share his data with the NAB but would give his data to the committee.

Rep. Waters asked Bainwol why record companies should get 50% and if they already charge them for production, promotional and other costs. (My RealPlayer conked out at this point. It's a shame, I think this was a good part of the hearing. I came back to hearing Rep. Waters encourage the two sides to bring to the House a solution and underscored the importance of keeping small broadcasters in business.)

Later, Rep. King brought up the question of whether or not stations should be able to accept payments from labels if they are required to pay artists and labels for performances. No broadcaster was about to say it wants to circumvent anti-payola laws and policies, but it is food for thought.

Corgan talked about mechanical rights and labels' use of them as a negotiating tool. He wants labels to pay out 50% and not use performance royalties in negotiations, that he finds it annoying that labels negotiate with mechanicals. He said artists and labels agree on the 50/50 split and that critics who say the bill is unfair to artists are incorrect. Labels and artists are united on this. Corgan later said the band renegotiated with its old label (EMI) and has a 50/50 split on its old songs, but most bands get more like 20% royalty on sales.

Rep. Weiner believe the issue of the right has been determined as the committee has given little to no objection to that issue. He brought up the possibility that some artists would pass on their right to be remunerated in return for the promotion.

Tuesday Business Links: House Hears Testimony on Performance Rights Act

Tue, 10 Mar 2009 09:24:27 -0600

• Now streaming: House Judiciary Committee's hearing on the Performance Rights Act. (House Judiciary Committee)

• The NAB's statement before today's hearing. (Radio Ink)

• Chuck D is Sellaband's spokesperson as the company launches in the U.S. (Music Ally)

• Pitchfork has a new design and now has the pitchfork.com domain (used to have only pitchforkmedia.com). On my relatively small monitor the current above-the-fold advertisement takes up about half the screen. (Pitchfork)

• According to BigChampagne data, more than 445,000 people illegally downloaded the new U2 album using BitTorrent between February 18th and March 3rd. (Music Ally)

• Songwriter D. Vincent Williams, a former Warner/Chappell staff writer, has launched Black Ink Music Publishing in Nashville. (Music Row)

• Nokia has scheduled a music-related news release for tomorrow. (Nokia Blog, Gizmodo)

Music Drops 21% in Q4 and 24% in 2008 at Trans World

Tue, 10 Mar 2009 09:08:27 -0600

Trans World, operator of f.y.e. and other entertainment chains, reported dismal earnings in Q4 2008 (read earnings release and earnings call transcript). Total Q4 sales were down 24% to $344.7 million while comp store sales were down 14%. For fiscal 2008, sales were down 21% to $988.0 million while comp store sales were down 11%. (Comp store numbers are much better due to the high number of stores that were closed during the year.) Q4's net loss was $9.4 million and fiscal 2008's net loss was $69.0 million (which includes a $15.1 million impairment of long-lived assets).

Q4 comp store music sales dropped 24%. Fiscal 2008 comp store music sales fell 20% and represented 35% of total revenue (down from 39% the previous year). Music was only 31% of revenue in Q4.

In the earnings call, president and COO Jim Litwak outlined a four-pronged strategy to create "a sustainable model that is less impacted by the technological advances upon new physical product." One aspect of that strategy is improving market shares in CD and DVDs, two categories that "outperformed the industry" in Q4 but are extremely impacted by consumers' transition to digital. Those comments have been made in the past and reiterated the company's desire to be the market leader in the fading CD and DVD businesses -- to be the best in the worse, so to speak. Competition could be sparse, and there should be good opportunities as labels pour margin-enhancing promotional dollars into the few chains that still show support for the CD format.

The downside is that Trans World is doubling down in troubled segments. It did not specify which new business lines it plans to add to bolster growth. Further, it has downgraded the role online and digital kiosks will play in its turnaround.

Master Plan? Don't Bet On It

Mon, 09 Mar 2009 12:53:43 -0600

Do the major labels have a master plan that will guide them to a soft landing in the post-CD era? If you believe the claims of an unnamed music executive told by Michael Arrington in a post at TechCrunch, everything is going as planned. The lawsuits, the stubborn licensing deals, he wrote, are all part of "a master plan."

By 2013 (maybe as early as 2011) it’ll make sense for the labels to finally reorganize their business models around the reality created by the Internet and person to person file sharing services. No longer will the labels be tied to revenue limited to sales of master recordings - by then most or all artists will be under 360 music contracts that give the labels a cut of virtually every revenue stream artists can tap into - fan sites, concerts, merchandise, endorsement deals, and everything else.
But until then, he says, the spreadsheets and financial models dictate that suing customers and partners just makes too much sense. Venture capitalists have directed hundreds of millions of dollars, via their litigation-mired startups, into the label coffers. To some extent those payments will continue, although the big payment days are likely over. Apple still sends a lot of money to the labels for paid downloads, and sites like MySpace Music, Imeem, Rhapsody and Last.fm pay big streaming dollars. Until CD sales really stagnate, all those revenue streams bring in more money than facing reality.

Any chance labels -- along with publishers, performing rights organizations, managers, artists and every other party of interest -- will have a system in place to monetize P2P -- on a large scale -- within two years? I say no. Given the music industry's glacial rate of change, and given the fact that not as much as an embryonic plan is yet actionable, I would say three or four years is optimistic and five or more years is more realistic. (iTunes Music Store turns six years old in a few months. Look what short distance beyond paid downloads the record industry has moved in the last six years.)

Any reason labels should wait two to four years to start reorganizing? Absolutely not.

The basic premise of Arrington's post is hilarious. I'm sorry, but I cannot believe there is a master plan, as if label executives are simply sitting back and waiting for the proper time to unleash the business models and organizational structures that will save their jobs and industry. I have seen the same sense of certainty when executives have in the past spoke in support of DRM, DRM-based subscription models, consumer lawsuits, CD copy protection technologies, and the various next-generation CDs and audio DVDs.

This premise simply does not reflect the uncertainty with which everybody within the industry currently operates. Nor does it reflect labels' missteps, gaffes and wrong guesses throughout this decade. Show me an executive who knows exactly where the record industry is headed and I'll show you someone whose inflexibility and arrogance will end up hurting his/her company.

The truth is there is currently no plan on the near horizon that will make up for lost revenues if so much as Wal-Mart gets out of the CD business. That's the one correct part of the post. There is nothing to replace lost CD revenues. But there is a difference between having the end in sight and knowing what to do when the end comes.

For the next two to four years, labels will pray the CD does not entirely collapse, will witness continued (yet slowing) growth of paid downloads, will be thankful that people pay $3 for a ringtone, and will hope companies find the right combination of hardware and software to create successful music services. If they're smart, they will allow for a wider range of products and services to exist in hopes a handful will connect with music lovers.

And labels might want to put far more resources into figuring out just how to harness the power of person-to-person distribution without losing their shirts. It would take an effort not seen since the Apollo moon missions to get there within two years.

More on Scalping, Service Fees

Mon, 09 Mar 2009 10:54:17 -0600

Nice to see Bob Lefsetz touch upon some topics I have written about a few times lately: the practice of setting aside a block of tickets for artists and managers, which parties get to share in ticket service fees. Ticketmaster Entertainment CEO Irving Azoff went on the record about these practice in his testimony before the Senate Judiciary hearing a few weeks ago. Unfortunately, the Senators didn't pose follow-up questions that would have put a spotlight on artists and promoters.

From Bob's post:

The public is ignorant. The public thinks if a show goes on sale, they’re entitled to pay face rate and sit in the front row. The public doesn’t know the ticket fees are kicked back from Ticketmaster to the promoter, the act, the building…
Then again, some people aren’t ignorant. They don’t even deal with the original on sale. They go straight to the secondary market.They know what’s available, the price is clear and they make a reasonable decision, not influenced by the heat of the moment. ...

But, the game should be defined. How many of the overall tickets being sold are available through Ticketmaster? Are any good seats ever put on sale?

Forget the Springsteen hysteria. That’s not the real issue here. The point is, in a country where you can look up what someone gave to a politician on the Internet, where you can research seemingly each and every fact about individuals and companies online, why can’t there be a map showing what tickets are actually available? Furthermore, why can’t there be an accounting of where the "missing" tickets have gone?

If the Ticketmaster-Live Nation merger is struck down, it won't be because of the Springsteen incident in which customers were sent to TicketsNow, Ticketmaster's secondary ticketing (read: scalping) site. But it's clear that people want a "fair" disbursement of tickets at face value and Ticketmaster is seen as acting in an "unfair" manner when it diverts tickets away from the primary market. (I put those words in quote because what is fair and unfair is very subjective. What I think is fair is not what Senator Chuck Schumer thinks is fair is not what Mr. and Mrs. Kenny Chesney Fan thinks is fair.) It's also clear that artists and promoters have a hand in what tickets are and are not sold at face value. Ticketmaster is taking all the heat. It's time for others to take some heat as well.

Monday Business Links: Eminem Producers Get Old Royalty Rate

Mon, 09 Mar 2009 10:10:15 -0600

• Eminem's producers lost their lawsuit against Universal Music Group that sought a higher royalty rate for digital sales. (Los Angeles Times)

• The Australian recorded music market fell 8% to $234.4 million in 2008. Digital increased 14% to $14.4 million. (Billboard.biz)

• Live Nation wants to make upgrades to the Masonic Center in San Francisco. Neighbors are not on board. (SF Examiner)

• Muziic allows users to stream the audio from YouTube videos. The service is, according to the web site, "free and legal." That won't stop legal action, I'm sure. What are the odds Google will want to pay content owners for streams that did not garner ad impressions? (Muziic, via CNET)

Who Is Country Fan?

Fri, 06 Mar 2009 15:44:01 -0600

Both the Tennsessean and Music Row have articles today on a CMA consumer survey that sought to find out more about country fans. Both are recommended reading.