Online music services took the spotlight this past week as Spotify launched its new integrative “Play Button” and the music industry finally struck a deal with streaming services regarding mechanical licensing royalties. Also, industry analysis showed that electronic dance music has become one of the most lucrative niches for independent promoters and artists.

Spotify’s “Play Button” Revealed

Spotify launched its new streaming music widget on April 10, and according to Billboard, it will another step towards globalization for the already-popular music service. Using the Play Button, users can stream music through the Spotify desktop app using a widget on a web page. This is expected to help spread the word about Spotify to those not already using the service and even guides them through the process of registration.

The Play Button is also the introduction of new partnerships that will make the process of integrating the tool simpler for both artists and music fans: FanBridge; Tumblr; FanRX and ShareMyPlaylists.com. These companies intend to start using the Button in their different platforms. Other editorial partners, including Pitchfork, Rolling Stone, NME, Popdust, Spin, The Huffington Post, The Guardian, Time Out and Mashable. have signed on to write about Spotify’s new offering.

Charlie Hellman, Spotify’s director of product development shared with Billboard.biz that this new Button is a response to the frustration users have reported surrounding sharing music via the Intenret:  “Streaming on the Web was scattered, disparate and unreliable.” The two biggest examples of this disconnect are embedded YouTube videos that will not play because the content owner has asked it to be removed or the uncertainty of which tab on a Web browser is streaming music. Hellman added that the people at Spotify felt that having one music player to “manage playback,” promote consistency and mitigate conflict  would offer a more streamlined listening experience.

While the Play Button is new, streaming widgets are not. They were used often early on in digital music, as many in the music tech industry felt that widgets would help those with web pages play DJs or connect directly to retailers. However, newly-envisioned widgets have turned into incredibly powerful marketing tools. Popular digital music companies like Topspin and ReverbNation provide widgets for artists that help stream music, collect email addresses for their mailing lists and direct traffic to their personal or label websites. And many widget-based storefronts have turned into Facebook apps that help artists enhance the ecommerce component of their websites.

Billboard also speculated that Spotify’s partnership with Tumblr could be huge. Those using Tumblr copy the URL or Spotify URI into a Tumblr audio page, add text and then put the post out there for the world. And Play Buttons can be directly shared by other Tumblr users on their own feeds.

However, Gray Blue, Director of Music Industry Relations at FanBridge – a fan growth and marketing site for artists – stressed that streaming music is not just about marketing for artists:  “This is seriously an answer to the most continually-asked question I’ve had [from artists] for the last year and a half:  How do I monetize Facebook streams?” FanBridge will now be offering the option for clients to add the Play Button within the FanBridge Facebook app and essentially stream royalties from their Facebook fan pages.

The biggest impact of the Play Button could be that it helps create a real network that will give Spotify a competitive edge:  The more often Spotify’s Play Button appears online, the more new listeners will sign up for the service and the more other people and online companies will post Play Buttons.

Groundbreaking Digital Royalties Deal Finally Reached

The music industry finally struck a historic deal with the Copyright Royalty Board (CRB) about mechanical royalties rates on April 11, said an article in The Hollywood Reporter, and the RIAA chairman called it “historic.” The agreement will set rates going forward for digital music, settles an ongoing argument about statutory license fees and will set new rules for many “cutting-edge business models” such as cyberlockers, streaming services and other subscription-based music services.

This agreement was announced by the Recording Industry Association of America (RIAA), the National Music Publishers Association (NMPA) and the Digital Media Association. These three entities will soon submit a 25-page agreement to the CRB that allows existing rates and terms for CDs and downloads to be carried over. Five new categories are also being proposed to be added to Section 115 of the U.S. Copyright Act, the section dealing with mechanical royalties. Proposed amendments include adding the following items to the system as items that will bring revenue for artists, songwriters, etc.: “mixed service bundles,” which include locker services, ringtones, etc. that are joined with music-unrelated products such as mobile phones, consumer electronics devices or Internet services; paid locker services; purchased content lockers; limited offerings,” which includes subscription-based services that provide only one or several genres of music or limited playlists; music bundles,” including CDs, ringtones, digital downloads.

Internet music streaming royalties have been a notoriously-debated topic since digital music took off, and if these items are added, those in the music industry believe rate negotiations will be much simpler than they have been in the past. Lee Knife, executive director of the Digital Media Association stated that the new landscape that could be created by changing copyright law could provide huge growth and earning opportunities for everyone:  “Today’s agreement paves the way for our members to continue developing exciting new business models that satisfy consumers, create greater revenue opportunities for music creators and effectively fight piracy, the music industry’s greatest threat.”

RIAA chairman Cary Sherman added, “This is a historic agreement that reflects our mission to make it easier for digital music services to launch cutting-edge business models and streamline the licensing process.”

Live Music Industry Reveling in Electronic Dance Music

Electronic dance music has become one of the most lucrative genres in the live music industry and is bringing huge opportunities (and big money) for independent promoters and DJs, according to Ben Sisario of The New York Times.

Electronic dance music (also called “EDM”) has been around for decades, but has only attracted large-scale-tour-worthy audiences in the past few years. In December, 2011, Swedish House Mafia was the first electronic DJ act ever to headline at Madison Square Garden. And this coming summer, DJs like Avicii and Kaskade will appear at some of the same arenas as artists like Coldplay and James Taylor.

Why has it exploded in popularity recently? Sisario cites that pop radio darlings like Lady Gaga, Rihana and Katy Perry’s incorporation of the sound into their songs have brought it to the masses … en masse. And while record sales have stayed low for dance music – David Guetta’s big album “Nothing But the Beat” was a top seller in the genre, but still only sold 300,000 copies – DJs were recognized at the Grammys this year, with Skrillex winning three awards and Guetta and Deadmau5 performing alongside the Foo Fighters and Chris Brown.

EDM festivals have brought the spirit of the rave, once questionably-legal and relegated to underground clubs and warehouses, to the mainstream. Their profit margins have even attracted the attention of Wall Street investors. In an industry that has started to put all its live music money on “aging headliners” like Bruce Springsteen, Madonna and the Rolling Stones, EDM has become appealing because it is full of fresh faces and attracts hordes of young fans. CEO of the world’s largest concert promoter, Live Nation Entertainment Michael Rapino said, “If you’re 15 to25 years old now, this is your rock ‘n’ roll.”

As an example, in late March, the Ultra Music Festival in Miami attracted 165,000 fans. And events featuring EDM artists like Deadmau5, Tiesto and Afrojack in Los Angeles, Las Vegas and Dallas have been reporting comparable attendance. The opportunities for these DJs to earn money has also been great as a result of the explosion of live event attendance, according to talent agents, with many of the bigger acts earning $1 million for a festival appearance and $10 million for a Las Vegas club residency.

Independent concert promoters are also winning, as many – such as Insomniac, Hard Events and Ultra – have found a niche for themselves in the EDM live music industry. Analysts feel that part of this opportunity has arisen because of the nature of EDM, which is designed to create a feeling of community, as it is essentially “high-energy waves of mechanized sound that, at its best, creates a communal experience for a sea of strangers.”

The success of artists and independent promoters is also attracting investors from within the music industry as well as those on the outside. Huge corporate promoters Live Nation and AEG Live have started to invest. And outsiders like media entrepreneur Robert R.X. Sillerman have started to notice the power of EDM. He was responsible for bringing together regional rock promoters in the 1990s to build Live Nation.

However, while there is great opportunity in the EDM arena, getting into the dance music festival business represents a risk, as figuring out the real value of promoting companies is challenging and there are risks inherent in putting together events for tens of thousands of people. For example, at the Electric Daisy Carnival in L.A. two years ago, a 15-year-old girl died of a drug overdose. And there have been other deaths at other festivals, as well as an incident where at the same event in Dallas, more than two dozen people were hospitalized for drug-, alcohol- and heat-related issues.

However, the latest resurgence of EDM is still huge for the genre. Since it has previously been “mostly associated with secret locations and drugs,” the amount of money suddenly flowing in (the biggest investors have been offering deals ranging from $20 million to $60 million to buy out bigger promoters) has been surprising. Joel Zimmerman, a William Morris agent who books a lot of top EDM acts said, “It feels like the dot-com era … There’s a little bit of a gold rush going on, with outsiders looking in.”

And many of the dance festivals have created strong brands, selling huge numbers of tickets just based on their names and the audio-visual excitement they offer. Still, a partnership between DJs and large-scale investors could prove challenging. Live music has turned into a risky and low-margin business for promoters, and ticket pricing is a balancing act. Pricing tickets too high or too low can drive a successful festival out of business. And many also wonder whether or not dance music will stay popular, or if it will fizzle out eventually as it did like electronica did in the 1990s.

Of course, there are also two clashing cultures involved. Dance music promoters and managers tend to be distrusting of huge amounts of money and not familiar with the corporate way the mainstream live music industry is run. And many worry the festivals they have worked hard to make unique will lose their interactive spirit. Independent promoter Gary Richards of Hard Events said that the big investors he spoke with clearly did not understand the market. He added, “You just can’t franchise this like McDonald’s.”

Last week, the RIAA released the final official music sales numbers for 2011, highlighting the continued strength of CDs in the marketplace as well as revenue growth sparked by streaming services. Also, the California attorney general announced she will investigate the soundness of the pending EMI sale. And early digital innovator Thomas Dolby talked about why technology has created amazing opportunities for artists but has also put up road blocks for those trying to get their music heard.

Digital Music Dominated in 2011

The Recording Industry of America (RIAA) presented the final sales figures for 2011 on March 27, and the results showed what had been suspected since tentative numbers were released in December and January:  U.S. music sales grew by .2% (reaching $7 billion) from 2010, with digital revenue increasing 9.2% and physical sales dropping but still proving that CDs were still the format of choice industry wide for music fans. 

Digital music represented over 50% of sales in 2011, though CDs sold over 240 million units and raked in $3.1 billion, according to a report in the San Francisco Chronicle. Even vinyl’s presence grew significantly, selling $100 million in records, 30% more than in 2010.

Additionally, the positive impact of music streaming services like Spotify and Rhapsody shone through in the RIAA’s findings. An article in VentureBeat highlighted that these two services along with Rdio and others brought in 13.5 percent more revenue than in the previous year, with paying members increased 18 percent. 

2011 was certainly the year marked by artist and record label complaints that Spotify and subscription services were actually hurting rather than helping growth, as they speculated that people that used these services were less likely to feel compelled to purchase songs they could just listen to on demand. And many staged a protest of Spotify in November when over 200 indie labels took their songs away from streaming platforms.

However, the RIAA declared that its recently-released stats prove that streaming music could definitely be providing a boost:  “Access models like subscription services and Internet radio (represented by digital performance royalties) have continued to grow both in popularity as well as in their revenue contribution to the industry.” The organization added that digital music is not just a niche anymore, rather a set of viable business models that the music industry needs to continue to utilize in the future.

How Will the EMI Sale Impact the Music Landscape?

California attorney general Kamala Harris revealed to two unnamed sources this past week that she would be launching an official investigation of the split of the 114-year-old EMI Group between Universal Music and Sony/ATV Music Publishing, said a report published by BloombergBusinessweek. Universal – the world’s largest record label – is attempting to buy EMI’s recorded music arm for $1.9 billion, whereas Sony/ATV hopes to buy the publishing side for $2.2 billion, which would turn it into the biggest music publisher. The probe will analyze the potential impact the sale could have on the music industry and ensure it will not violate any antitrust laws.

Members of Harris’s office have already contacted customers as well as competitors of EMI, Universal and Sony/ATV about how the $4.1-billion deal might influence future pricing. And the state began to compile information late last month about the sale and its compliance (or lack of compliance) with antitrust  rules.

This sale is already under the U.S. Federal Trade Commission and European Union (EU)’s microscope. Many top executives of other labels as well as other industry experts have expressed their opposition to the EMI sale since it was announced last year, most notably Warner Music Group and CEO, turned board member Edgar Bronfman, Jr.    

Universal Music would get the rights to legendary EMI arists like the Beatles whereas Sony/ATV would get the copyrights to songs and mega songwriters including Beyonce and Jay-Z. Sony/ATV has already presented a series of compromises to EU regulators, and the European Commission has pushed its deadline for final rulings on the publishing side to April 19. Its review of Universal Music’s purchase has also been extended. The concern among critics and reviewers of the EMI sale is that, when split and merged, the two resulting companies will have a hold on too many songs and too much control over music prices.

Universal has also announced its plot to raise money to help fund the EMI acquisition, according to an unnamed inside source. The company will sell three music publishing catalogs in order to raise $200 million – classical, Christian and German schlager. And Vivendi – the Universal parent company – is also raising $668 million.

Thomas Dolby, on Technology and the Music Industry

Cutting-edge technologist and musician Thomas Dolby revealed his long journey in digital music and shared his thoughts about how technology is shaping artists’ careers in a keynote address at the Design West engineering conference in San Jose, California last week. And according to the EE Times, the takeaway for engineers and tech innovators was, “Shit happens.”

Dolby – best known for the ‘80s song “She Blinded Me With Science” (which he performed as part of the speech) – stated that technology has presented some incredible opportunities for artists, but has also brought about many problems for those trying to get their music heard:  “You used to have to spend millions just to get out in front of fans … When I started out at 17 … [you] had to get a cassette tape to an A&R man, then get the radio stations to play it, and all these other things had to fall in place.” But now “the music industry will be like day trading with a music manager behind a screen.” However, artists can build a very targeted fan base using social networking tools capable of finding “qualified listeners with a laser focus.”

In his speech, he explained that as one of the first electronic music artists in the 1980s, his path was difficult:  “Electronic instruments were quite bulky, they didn’t stay in tune and they were quite expensive.” One of his first synthesizers was the “size of a refrigerator” and double the cost of his first home in London.

However, he pushed on, branched out and diversified, securing a one-year grant from Paul Allen’s Interval Research group in the early days of the Internet in order to research the possibilities of deeper integration between music and technology. The results of his exploration brought about the formation of Headspace, a company that created the Beatnik audio engine described by Dolby as “a SoundBlaster card in software.”

In 1994, Dolby began to work with Netscape founders Jim Clark and Marc Andreessen, whom he eventually persuaded to include audio in their browser, though they still put up resistance. Their questions about his methods pushed him to create new audio code through Headspace that eventually got the attention of Sun Microsystems, who began to use it in Java technology. And this led to a request from Nokia to use his code to introduce some of the first polyphonic ringtones for mobile devices:  “By 2005, most phone makers licensed Beatnik and ringtones were a billion-dollar business” – one that was still music focused but did not require the support of big record companies.  

Dolby then created Rich Media Format, which allowed song samples to be embedded into ringtones, which unfortunately led Dolby back to world of major labels, which he had hoped to escape when he initially started to explore musical concepts rooted in emerging technology:  “We inadvertently brought the large recording companies into the game … They would sit down with the carriers and do deals that cut out all the cottage ringtone publishers. Within a few years the window for polyphonic ringtones ended because the wireless networks were good enough to handle the whole song.” So, in 2008, Dolby retired from technology and decided to begin his music career anew.

Dolby is currently on tour promoting his first album in 20 years, traveling with a trailer “that looks like it was designed by Jules Verne and H.G. Wells.” He has also designed a Web-based mystery game called “The Floating City,” which will become a place for 11,000 of his fans to put together clues and will be sold alongside his latest album. His trailer is also a portable studio that records 30-second video clips from fans that are added to the time capsule for The Floating City game.

This past week, comments from label heads and other industry executives in the wake of the Grammy®s seemed to indicate streaming services are a necessary evil for artists’ success. And MySpace’s new Internet radio player rejuvenated interest in the social networking site. Also, analysts noted that Kodak’s recent demise may provide a glimpse into the future for the music industry if it fails to embrace new technologies.

Could the Industry’s Resistance to Digital Streaming Be Futile?

Artists’ and labels’ boycott of music streaming services like Spotify – which recently reached 3 million subscribers – and Rdio could actually be detrimental to their continued success going forward. As a result, many label executives are starting to change their tune about the importance of participating in this relatively new digital music venue, according to an article published in the Financial Times.

Adele – who won six Grammy® awards last week and has sold 17 million copies of her album 21 worldwide – was particularly under scrutiny as one of the small number of very well-known artists refusing to put music up on streaming services because they fear their presence on “free” sites might detract from digital and physical album sales. And Spotify’s criticism of those that refuse to adapt to the changing music landscape seems to be rubbing off on some music company chiefs.

Until recently, Warner Music Group (WMG) was one of Spotify’s more vocal opponents. But Spotify’s rise to the top as a global music subscription service, even chief executive Steve Cooper has admitted it may be time to embrace it as a necessity for artists:  “Streaming services are coming on strong.” Even though they still comprise under 10% of total digital revenue for the music business, he admitted that their explosive growth rate indicates “you will eventually see those lines cross.”

Spotify’s chief content officer Ken Parks stated that the negative attitudes of Adele, The Beatles and others who have refused to adapt to the new streaming models are in the minority, but have just made headlines because they are high-profile artists:  “The vast majority of artists and their labels are behind this model.” And Universal Music Group (UMG)’s digital president agreed last month that those who have said Internet music streaming is “cannibalizing” the industry have no real basis for their argument and are just resistant because of a fear of change. His comments were a reaction to official reports that stated digital music revenues had increased in 2011, breathing new life into the industry after almost a decade of floundering.

Proponents of Spotify and other services  are not denying that the pay-out per track is less for artists than what they can earn on iTunes and digital music stores. However, the growth of the space has already been so significant that experts are foreseeing much bigger payouts as time goes on and the number of listens rises. And increased label and artist support will only help this growth, as it has already helped transform several subscription music streaming sites into global businesses. Rhapsody, the first subscription music service recently acquired Napster from Best Buy and finally launched in the UK and Germany. And after finally gaining support beyond its home country of France, Deezer has launched in countries across Europe and Latin America in the past few months.

Rhapsody president Jon Irwin said he believes the industry is starting to embrace streaming because technology – particularly mobile technology – has improved so quickly and business models are finally starting to clarify:  “In the last couple of years, technology moved to the point where smartphones and networks make the product experience so powerful … Two and a half years ago, there was no mobile access.” Because so many services are now offering the same prices and content, Irwin and others believe packaging and presentation are going to be key to increasing a particular service’s popularity.

And artists are going to need to reach out to fans by being stream-able if they want to keep them engaged. Independent music analyst Mark Mulligan forecasts that there could be an agreement reached between holdouts like Adele and streaming services if they implement “windowing, where albums’ releases are staggered across different services.” Former streaming holdout Coldplay tested this out by releasing Mylo Xyloto physically and on iTunes in October, then making it available through Spotify, Rdio and Rhapsody in early February. According to Mulligan, “The relationship between streaming and the download could be the same as radio and the CD. Radio cannibalizes sales as well … But artists get many multiples higher on Spotify per play than they get on the radio.”

Parks reminded critics that iTunes was also initially opposed by huge artists, including Radiohead, when it arrived on the scene in 2003:  “We are obviously pursuing a model that changes the way the industry and artists have done business for over 50 years … That kind of thing can be difficult to do.”

The MySpace Music Player:  Bringing Back Internet Radio

Nearly-forgotten social networking site MySpace managed to rope in over one million new registered users thanks to its new music player, according to a press release issued last week and reported by Billboard.biz. The service debuted on December 19 and brought the site beyond 25 million registered users.

The new music service provides access to a catalog of 42 million songs and has a recommendation engine that can be integrated with Facebook. While MySpace credits its acquisition of new users to the music player, many analysts claimed the fact that the site finally integrated with Facebook probably provided just as much help. App usage numbers reported by AppData.com showed that from early January to early February, usage of MySpace’s Facebook app rose from 900,000 monthly users, to 1.6 million monthly users.

MySpace’s move to Internet radio puts it in competition with other sites like Spotify and Rdio, which could provide it with a big challenge as both are more experienced in the streaming space. However, the fact that MySpace is a social network, an entertainment site and a music service bundled into one and not just purely a play-on-demand site will likely give it an advantage.

Aside from Internet streaming services, the site will also be competing within the Internet radio space, going head-to-head with Pandora, Clear Channel’s iHeartRadio and Hype Machine. Internet radio could be a good avenue for MySpace to take because it has lower barriers to entry than other models, and because radio is still the most easy-to-use, universal medium for music fans; they still spend more time listening to radio than to on-demand music.

The Fall of Kodak:  A Lesson for the Music Industry

Kodak’s recent bankruptcy should be seen a lesson for the music industry, according to a recent Billboard piece that points to a Knowledge @Wharton article. It provides a glimpse into the consequences of not adapting to technological change and provides some insight into what might happen if the music business fails to evolve, embrace digital technology and abandon some of its outdated business models.

131-year-old company Kodak filed for Chapter 11 bankruptcy protection on January 19 after a  steady demise that began full force in the late ’90s. Last month, it reported almost $6.8 billion in deficits. But how does such a long-standing company fall? It has tried to respond to changes within the industry by expanding into the world of digital picture frames, digital cameras, video cameras and printers and building an online picture-printing business. However, it still has had to close manufacturing plants, processing labs and has laid off tens of thousands of employees since 2003. And despite attempting to stay up with new technologies, it was resistant to truly changing its focus to meeting the new needs of its customers by developing entirely new products, instead focusing on trying to find new uses and improvements for its existing products.

As stated by the Knowledge @Wharton piece, these issues should sound familiar to those within the music business. Music companies have just experienced a decade of layoffs and a completely changed retail environment, thanks to the rise of digital music. And they are being asked to abandon age-old business models in order to satisfy music fans and continue to give artists and others a viable way to make a living.

While there are similarities between Kodak’s problems and the problems of the music industry, there are also differences. Kodak’s products were supplanted by new products, whereas “legacy music companies” will retain the rights to the product fans want, which is the most popular music. However, the music industry will still have to change from within or the companies that refuse to evolve will be overtaken by new companies that will be formed in order to fulfill the needs of the modern music consumer.

Many experts point to the fact that evolution is actually happening. Physical distribution (which is the pat of the business that is arguably the most changed) has been completely transformed, prices have dropped and different packaging has helped keep CD sales strong as the digital market grows. Many record companies are diversifying to accommodate the shift to digital and latching onto sponsorships and other opportunities. However, experts still wonder, when looking at what happened to Kodak (who did try to change) what will give the music industry a better outcome than Kodak. The answer could be in leadership:  “… Entrenched leadership often finds it difficult to break old patterns that once spelled success. Kodak’s history shows that innovation alone isn’t enough; companies must also have a clear business strategy that can adapt to changing times. Without one, disruptive innovations can sink a company’s fortunes – even when the innovations are its own.”

Last week, new theories surfaced about the real impetus for the Megaupload shutdown as further details about the recent arrests emerged. And two Mötley Crüe members weighed in about the oddities of the modern music business and what artists can do to succeed. Also, Grammy® winner Ne-Yo joined Motown as an A&R executive with hopes of reshaping its artist roster and making music a more unifying force.

Megaupload’s Fall May Not Have Been about Piracy

The dramatic shut-down of Megaupload and arrest of its founder Kim “Dotcom” last week may not have entirely been about piracy, according reports in a variety of publications, including TechCrunch and Time magazine. The move by the U.S. Justice Department could have been part of a plan initiated by the music industry to protect itself from the ramifications of Megaupload’s soon-to-be-released, disruptive music store and DIY artist distribution service.

Plans for the “Megabox” service were first released by TorrentFreak in December. While the service was still in beta, listed partners included 7digital, Gracenote, Rovi and Amazon. And Megaupload had launched a marketing battle against major music industry groups, including the RIAA and the MPAA, who showed Kim Dotcom in an anti-piracy film. The site had also sued Universal Music Group for blocking its YouTube campaign featuring a variety of major recording artists singing its praises.

But many sources speculate it was actually the impending launch of Megabox that added the most fuel to the fire, as Dotcom himself had described the service as a major iTunes competitor. Megabox had plans to offer free premium movies via its “Megamovie” site, which, along with its many music streaming and services to artists would have moved it from being a mere digital locker site to being a major transformative device for digital content.

Megabox had outlined a model that would allow unsigned artists and any other unattached content creators to sell their works through the site and pocket 90% of their earnings. Artists would have also had the option to completely give away songs and still be paid for them through a “Megakey” service. According to its founder, Megabox had potentially discovered way to get around the labels, RIAA and the entire music business.

And due to Megaupload’s gigantic size, popularity and support by some potentially influential musicians, it may have been able to succeed where other services have not yet been able to legally. According to a report by Time, the rapper (and superstar Alicia Keys’ husband) Swizz Beatz was officially listed on the Megaupload website as its CEO just prior to its shutdown. While he hasn’t been implicated in the lawsuit, and experts speculate this title was just a vanity title that emerged as part of the celebrity YouTube campaign, his presence further supported the site’s reach.

Before it closed last week, Megaupload was the 13^th most visited site on the Internet and made up 4% of all global Internet traffic. It had 180 million registered users, 50 million daily visitors and was already a service many artists trusted to distribute their digital content. Megabox was set to monetize all this and pass on a majority of its earnings directly to artists. Kim Dotcom and a handful of other executives have been charged with racketeering, money laundering and multiple counts of piracy.

Vince Neil and Mick Mars:  Where is the “Weird” Music Industry Headed?

Mötley Crüe singer Vince Neil and guitarist Mick Mars each discussed the current music industry climate this past week and talked about how artists can find success.

According to Neil, the music industry is vastly changed since his band first found fame in the ‘80s, and the many places artists now have to focus in order to be seen presents major challenges:  “… There are so many different outlets for music now. Thirty years ago, you had MTV; everybody watched MTV and everybody saw your video. There was one place to go; now there [are] thousands of places to go … it’s just harder to get everybody to look at you at the same time.”

He also said that there is not much that is “secret” in today’s business. Social media has given fans the opportunity to get closer to their favorite artists:  “I think with all the social media everybody pretty much knows everything. What you’re doing and where you’ve been and where you’re going.”

And Mick Mars stated that today’s bands are going to have to come up with new methods for delivering music to their fans, because the music industry is “getting weird:” “I think the future will have to see bands put together really cool packages that will be worth it for people to go see.”

Mötley Crüe begins a Las Vegas residency in February. Though Mars admitted he would rather be touring than staying put, he admitted he feels  hopeful that the residency will inspire other artists to start their own residencies and open up the industry to new ideas:  “I know it is a cool thing we are doing, and that we are probably going to make this possible for other bands to do the same thing. I don’t know if we are planning on doing more of this type of thing or not. We are going to have to check it out and see.”

Ne-Yo Named Senior VP of A&R at Motown

As recently-appointed A&R executive at Motown, 32-year old, award-winning artist Ne-Yo hopes to help the industry and music fans revert back to a united front, according to a report by Fox News. The Grammy® winner’s new title was announced by Universal Music on January 25. He has multiple hits as a solo artist and has written huge songs for Rihanna, Beyonce and others.

While Motown has its roots in black music, this type of music originated as art that could appeal to everyone and unite fans. And Ne-Yo said that he hopes to return to this idea in a music industry that he believes is becoming increasingly segregated:  “I want to get back to a place where everybody’s listening to the same thing no matter what race, color, creed you are …Now there’s music that’s specifically for black people and there’s music that’s specifically for white people, and I feel like the essence of … music is lost when you do that.”

In his new A&R role, he hopes to bring artists to the label that are deeply talented but also willing to work. He wants to focus on those who are driven to be working musicians, not just “one-hit wonders:”  “I definitely plan on making sure the people I bring to the industry are going to be an asset to the industry as opposed to a liability … It’s more than ‘She looks good in  a short skirt’ or ‘He looks good with his shirt off’ – it’s about somebody that has talent.”

Ne-Yo is set to release his fifth album in summer, 2012 and will be moving over to the Motown Records label himself from Island Def Jam, also a subsidiary of Universal Music.

Those of you who have been reading this blog for a long time may remember my 2010 interview with Tom Silverman that wound up being picked up by several larger periodicals.  Tom is the founder of TommyBoy records and one of the principal executives at the New Music Seminar.  He asked me to re-post one of his latest blog posts about where the music business is just over two years later.  I personally feel it’s premature to call the upward swings in some areas of the business a “resurrection” but I have enormous respect for what Tom built at TommyBoy and the work he continues to do with the New Music Seminar.  If nothing else, the statistics he presents below are very interesting.  The article below is unedited and written and compiled by Tom himself.

THE MUSIC BUSINESS RESURRECTION

Tom Silverman

As I sat and planned the program for the June 2012 New Music Seminar, it occurred to me that we are approaching the first anniversary of the music business resurrection.  After ten years of decline, the music business hit bottom in the second week of February 2010 and began to rise the week of February 14^th.  There have been many reports of the music business comeback and many have tried to figure out what was responsible for this upturn.   Some have credited Adele, others the shuttering of Limewire, still others the Walmart $5 dump bins.

Let’s look at the good news.

In 2003, there were virtually no single sales as the labels stopped manufacturing them to drive buyers to higher priced albums to get the song they wanted.  In 2004, iTunes changed all that and for the first time music lovers could buy not only the radio single, but also every track on the album separately for only 99 cents. Digital singles exploded, soon surpassing total album sales, physical and digital combined.

In 2010, digital single sales increased only 1.1% leading people to believe that tracks had peaked and might begin to decline.  2011 proved them wrong as singles grew 8.5%. Although this seems like a small number, due to the huge denominator, this represents growth of over 100 million singles in 2011.

Most of the 1.27 billion tracks that sold in 2011 were at the higher $1.29 price point showing the inelasticity of demand for digital singles even in the face of free illegal downloads and a half a year of Spotify plus Rhapsody, Mog and Rdio offering streaming competition. It is important to note that this growth did not come from current hits like Adele, Katy Perry or LMFAO but across the board especially from catalog.

More good news came from digital album sales where the growth rate increased from 13.3% in 2010 to 19.5% in 2011.

In unit sales, digital albums took the biggest jump since 2007 and the second biggest jump ever.

16.8 million more digital albums sold in 2011 than in 2010. 2011 was the first year that the increase in digital album sales exceeded the fall in CD sales. This is a significant benchmark that few seem to have noticed.

Good old CDs had quite an amazing year. In the face of the Borders chain closing and many other stores folding and CD SKUs shrinking within existing stores, we saw the smallest percentage shrinkage in CD sales since 2001.

Physical CD sales on the internet were actually up 17.7% in 2011 indicating an increasing desire for CDs at least online. With CD sales still running almost 69% of all album sales seven years into the iTunes era, it is clear that people still want physical CDs. If it were easier for record buyers to find the CDs they want in stores, there is no doubt that CD sales would be selling in far greater quantity.

More good news in the 60 year old 33 rpm vinyl LP album format where we saw a huge 37% increase in vinyl sales last year. The total sales are still under 4 million units (compared to 1.27 billion singles).

After hearing stories of the death of music acquisition from the “cloud camp,” music buying seems alive and well in all its forms.  Nielsen SoundScan counted 1.6 billion music transactions for the first time ever in 2011.

If the good news in music sales is not enough of an indication of the returning health of the music business, add to that the new revenue centers of music streaming.  In digital broadcasting where SoundExchange collects and distributes to artists and labels statutory fees, the industry has seen an enormous growth in new revenues.

In 2011, $95 million more dollars were collected by SoundExchange than in 2010 and conservative projections for 2012 show growth into the mid $400 billion mark. In 2011, SoundExchange collected almost the same amount from digital broadcasters as the traditional performing rights societies collected from all of the AM and FM radio stations for the songwriters and music publishers.

Other licensed streaming services with subscription models like Spotify, Mog, Rhapsody, Rdio and other subscription services added even more new revenue to the music business.

Although this graph tracks worldwide subscriber growth, Spotify’s U.S. launch in July shows great promise for significant new music revenues from the “access” model that appears to enhance rather than cannibalize music acquisition based on early results. This is comforting to a music industry that is always worried about a new format cannibalizing an older one.

The music business has clearly hit bottom and the resurrection is here.  After a decade of the “music web” expanding its reach, becoming easier, faster and more social, new music discovery channels are showing their impact in more music sales and more paid music access. To be fair, all the news was not positive in 2010.  The continued shrinkage of CD shelf space, the decline in mobile phone ringtone/ringback revenues and the failure of Beyond Oblivion, a promising idea tying connected devices to “feels like free” music access, were lowlights in an otherwise stellar year for the business of music.  The powerful launch of iHeartRadio, the long-awaited U.S.

launch and explosive growth of Spotify, the public offering of Pandora and their achievement of 120 million registered users, Sirius/XM reaching 21.9 million subscribers. Mog, Rhapsody, Rdio, Cricket/Muve all grew their music subscriber base, all not only driving more revenue to the business, but more engagement and discovery of music and spending especially in the over-30 demographic that had historically spends far less money on music than younger demographics.

YouTube and Vevo are beginning to generate significant revenues to the music business and also driving discovery and sales as well.  Mac Miller and Tyler the Creator were just two of the breakthrough YouTube driven hits proving YouTube’s ability to drive exposure as well as sales.

Smartphones reached 50% of all mobile phones in the U.S. and the recent CES Convention showed hundreds of new connected devices, and the rollout of connected automobiles all of which will drive more music access.

The 50’s saw the transition from 78’s to 33 rpm albums and 45 rpm singles that fueled a 30-growth period for music.  The cassette made music portable and stimulated additional growth.  The CD increased the perceived value of an album by 80% and ignited the biggest growth era in the history of the music business. A decade of adjustment is over and it is now clear that we are on the brink of the next big growth era of the music business.

On June 17-19, the New Music Seminar will explore the exciting future of the music business with the SoundExchange Digital Broadcasting Summit and the BMI Creative Conclave. The creative community and their label partners will meet the digital broadcasters, music bloggers, music technologists and all of the new music exposure and monetization players. Clear Channel CEO, Bob Pittman and Sean Parker will share their vision for the future as keynotes, as every sector of the evolving new music business convenes to discuss their perspectives for the exciting new future for the music business.

For most of us in the music business, this is probably the first time in a decade where we are feeling a new sense of optimism. Although unauthorized on-line music usage and distribution has not gone away, it is now time that the music industry begins to focus on expansion and positivity rather than fear and protectionism. Welcome to the resurrection. Have a nice day.