This site is a blog for musicians and music industry people. It is a free educational resource and it is also the way I advertise my music consulting services. I am an entertainment professional with deep roots in the music industry. Throughout my music career I have been a major label A&R representative, a music supervisor, an artist manager, a reality show producer, a bass player and the head of a digital record label.
Posts Tagged ‘EMI Records’
Last week was marked by music catalog deals as Google added access to 5.5 musical works across 35 countries, and Universal prepared to sell off EMI assets. Also, L.A. Weekly’s annual “Music Issue” spotlighted innovative DIY artists and entrepreneurs.
Google Granted Access to Millions of Tracks
Google, Inc. signed a new licensing agreement with Armonia a Spanish/French/Italian collection of European publishers, artists and composers that will give the company’s customers the rights to listen to 5.5 million musical works in 35 countries from artists such as Lady Gaga and Rihanna. The new license will allow music fans in Europe to use Google Play and its other music-related features.
The deal’s terms are “in line with industry standards involving Google rivals like Amazon and Apple’s iTunes,” SACEM representative Catherine Kerr-Vignale reported to The Associated Press. Kerr-Vignale added that Amazon and Apple have European licensing agreements that vary by country, whereas Google has a uniform agreement that is the same in the 35 countries it will serve in Europe and also includes UK and American sections of Universal Music’s publishing library and Sony’s Latin arm.
Armonia is the pan-European organization for online licensing and comprises the Italian Society of Authors and Publishersm its French and Spanish sister organizations SACEM and SAGE and Universal Music Publishing International. New access to tracks by major artists will make it more competitive with other major digital music providers.
TechCrunch writer Darrel Etherington noted that because Google Play still features a great deal of content only available in the U.S., many outside the U.S. have had to use workarounds, like those detailed in a recent blog entry on the Geniusgeeks site.
Of course, this deal is also important to getting more royalties into creators’ hands and encouraging music fans to engage in legal online music consumption. Sami Valkonen, head of music licensing at Google said, “Licenses such as this are important in ensuring that artists and rights-holders are rewarded fairly for their creative endeavors, and digital service provides are able to bring innovative services to market for the benefit of European consumers … Armonia is a welcome development in the ongoing reform of pan-territorial licensing in Europe in helping simplify and speed up the music-licensing process, which is crucial in fostering ongoing rapid innovation by digital music service providers.”
Over Nine Industry Players Vying for EMI Assets
Major music industry companies and executives including Warner Music, Simon Fuller and Island Records founder Chris Blackwell expressed interest in buying pieces of EMI from Universal Music Group, as reported by an article on November 14 in the Financial Times. Universal has been forced into selling some EMI assets in order to satisfy the misgivings of regulators as part of the $1.9 billion deal it made to buy EMI’s recorded music division.
However, as auctions loomed, Billboard reported that John Rudolph, formerly the CEO of Bug Music as well as Lava Records founder Jason Flom will be partnering up to bid for pieces of the pie. Sources continued to report last week that UMG’s bankers were still getting signatures together for non-disclosure agreements and will likely not likely start to make deals until this coming week.
The European Commission agreement stipulates that EMI’s assets have to be sold to buyers with deep experience running and managing a music company. However, some have said that becoming a qualified buyer could be as simple as a company with money hiring a former label president to work with them.
Flom was a high-level A&R executive at Atlantic prior to founding Lava Records in the 1990s and has worked with Kid Rock, Tori Amos, Skid Row, Matchbox 20 and many others before moving onto Virgin in 2005 and eventually becoming the CEO of Capitol Records Group.
Rudolph left the large independent publisher Bug Music in 2011 when it was sold to BMG Rights Management for over $300 million. When he was CEO of Bug, he managed over 35 acquisitions, including the acquisition of the Windswept catalog and a deal with Kara DioGuardi’s Talenthouse company.
BMG Rights Management will likely also join Fuller, Flom, Rudolph, Blackwell and Warner in the EMI bidding process.
L.A. Weekly Spotlighting How to Make It in the Music Industry
L.A. Weekly’s 2012 Music Issue addresses how to make it in the music business, with a spotlight on notable DIY artists and groundbreaking executives who have learned how to make a living and find an audience in the modern industry climate.
The Issue points out that being a successful musician and music entrepreneur in 2012 means not only having deep talent, but also being willing to work hard and being able to employ innovating marketing techniques. L.A. Weekly highlighted indie artists including Stolen Babies, Jhene Aiko and Spaceships, label owner Leeor Brown and party promoter Perish Dignam as examples of those who are succeeding thanks to “passion and unique branding.”
As just one example, Philadelphia-born Perish Dignam is a party promoter who has traveled nationwide, studying industrial design, engineering and psychology. On his own since age 15, he developed a big social-media following before starting up his regular “Swoon” parties, which are much like steam-punk carnivals and feature women in bikinis with power tools, fire dancers, etc. Those music fans who show up with elaborate costumes and professional photographers are granted free admission. He funds the parties almost entirely on his own, then puts profits back into more parties to allow him total creative control. He designs all the sets, manages performances, hires staff and sells tickets.
And the EDM juggernauts the Flemming Brothers run a dance-party “enterprise,” Do Lab. Together, Jesse and Dede and Josh created the huge Do Lab movement in Southern California through multiple marketing techniques and will soon head to Egypt to tour. Youngest brother Dede said he believes the business works, because the brothers each accept responsibility for very specific aspects of creativity, development and business management. His brothers shape the vision and he takes care of the “logistics:” “We have these roles … so we can support each other.”
And as L.A. Weekly pointed out, the “DIY movement” is not a new phenomenon. Artists like Dr. Dre and others have been going their own way for decades. Dre’s album The Chronic was released 20 years ago. Before being picked up by Interscope, it was a self-funded project: “It took nontraditional sales tactics and the deep pockets of an incarcerated drug dealer to make it famous. Then as now, the do-it-yourself spirit was critical.”
This past week, recent major changes in the music climate were the main focus, as Universal Music Group (UMG)’s bid for EMI’s music division and a top music industry analyst questioned whether or not streaming music is already approaching its peak. Additionally, Musicmetric numbers showed that Australia has the highest instances of music piracy based on its population. And finally, Jimmy Osmond provided important tips for bands that want to sustain the over-50-year career that the Osmonds have enjoyed in the industry.
Universal’s Bid for EMI Approved
UMG’s acquisition of EMI Group Ltd.’s recorded music division for $1.9 billion was finally approved by regulators in the U.S. and abroad on Friday morning. This merger, which has been hotly contested by artists and professionals on all sides of the industry will put the label in charge of the entire Beatles catalog as well as the albums of artists like Coldplay and Katy Perry. This approval marks one of the final steps necessary to making the once four major record labels into three.
The U.S. Federal Trade Commission approved the deal with no exceptions, whereas in Europe, the EU will force Universal to sell a large number of EMI assets to keep the playing field fair for independent labels.
UMG officials were excited about their victory. Chairman and CEO of UMG Lucian Grainge told the Los Angeles Times, “[The merger] will allow us, I hope, to do our bit to return the industry to growth … It will enable us to continue to invest in more music, to create investment opportunities for the entire Universal group, it will give us the opportunity to work with entrepreneurs in different genres and it will give us a cushion through this crucial crossover period as we hurtle toward a primary digital business.”
UMG contributed to 29.9% of total album sales in the U.S. in 2011, which put it ahead of Sony Music Entertainment’s share of 29.3% and Warner Music Group’s 19.1% share. EMI held 9.6% of sales, whereas smaller independent labels had 12.1 percent.
Is Streaming Music at its Peak?
The surging popularity of streaming music services has given labels and artists hope that they can finally adjust to and profit from music’s shift to digital. But top music industry analyst Mark Mulligan, in his keynote speech at Future Music Forum in Barcelona on Thursday called this optimism into question, calling into question the actual growth potential of companies like Spotify, Rdio, Mog and Rhapsody.
According to Mulligan, while Spotify is a bright spot, everyone should learn lessons from past technological advances within the business: “There is a natural ceiling of adoption of the people who are willing to pay $9.99 a month for music they don’t own … If you look at growth from launch, Spotify is – at best – on par with where we should be. The likes of imeem were the future of the music industry once, too. The most Vodafone (UK) got to was about 600,000 customers. Spotify’s (UK) paying subscriber count is about 600,000, to 800,000 … This market should be much more dynamic than where we are now. It’s a niche proposition. The majority of mass-market consumers are still not interested in the pricepoint.”
As skeptical as Mulligan admitted he is, he acknowledged the efforts of digital pioneers like Rhapsody, and encouraged those that have enjoyed quick success to continue to work to improve their business models: “It took Rhapsody 11 years to get to one million users, it took Spotify nine quarters … Spotify has to work really hard to get to where it wants to be.”
He said Spotify especially needs to work on creating a mainstream model that will satisfy more than just the early adopters, who enjoyed unlimited access for free: “Spotify is having to acquire 1.9 million new customers a month in order to retain 400,000. It’s a huge, huge marketing problem. The average pay TV service would want to see churn rates in the low single-digit percent … They’re having to work so hard to keep where they are – like a duck: It may look serene under water, but underneath it’s legs are going like the clappers … What it shows us is that streaming clearly isn’t for everyone.”
However, subscription services are banking on new devices and mobile carriers that give them the chance to bundle services with products and get new customers. And these efforts were not possible when imeem was trying to gain its fotting and Vodafone was only offering a music subscription service to its own customers. Still, as competition increases and music services go after the same partners to create bundles, they may experience some barriers to growth.
Ultimately, Mulligan stated that downloads have not provided “hockey-stick” digital growth for the industry, and streaming, as with any other business model will have its own growth end point. He challenged music entrepreneurs to continue to improve the packaged music experience they are offering and find a way to incorporate exciting artwork, access to lyrics, chats with bands and other engagement opportunities and then monetize this format.
Australia Revealed to Have the Most Music Pirates
Information from bit torrent sites gathered by Musicmetric revealed that Australians download more illegal music, more frequently based on their population than any other country in the world, according to an article published on The Age. Conversely, Australian music fans also pay for downloads and purchase physical albums at a surprisingly high rate.
The Musicmetric survey showed that Australia placed sixth in the top 10 for music downloads in 2011, with 19 million. The most downloading country was the U.S., which downloaded music 96,681,133 times, twice the next-highest-downloading country, which downloaded 43 million units.
Of the 19 million downloads in Australia, which has a population of 23 million, the number of them obtained through illegal sites was higher than in any other country. And interestingly enough, the most popularly-illegally-downloaded artist was the local Adelaide-based hip-hop group the Hilltop Hoods. The manager of the group, Dylan Liddy, was skeptical of Musicmetric figures, but said that illegal downloads are unfortunately just something artists have to accept as the shift to digital continues to take place: “We are in the business of selling records so it would be great if we could monetise everything. But at the moment, the way that the music world has moved is getting illegal downloads and that’s very hard to police … It is what is. It’s great that the boys are popular.”
Still, Liddy said that while the Hilltop Hoods provide an example of the problems with illegal downloading, they also are still selling records in their home country, which is currently enjoying some of the best sales numbers of any country globally. The band’s latest album, Drinking From the Sun continues to be in the Top 40 on the Australian sales charts, seven weeks after its debut and has sold over 70,000 copies in all formats combined.
Many in Australia are taking Musicmetric results on downloading with a grain of salt, though the numbers are noteworthy when compared to those offered by the Australian Recording Industry Association (ARIA) for 2011. Both sets show that Australian music fans are comfortable with digital music. ARIA found that legal digital sales have continued to rise, and sales were up by 37 percent in 2011, with digital sales also taking up 37% of the market. ARIA also found that 25% of downloading was done via illegal sites.
Jimmy Osmond: “How to Survive in the Music Industry …”
Jimmy Osmond, the youngest member of the Osmonds recently spoke to the Daily Herald about how his family’s band has managed to find success in the music industry for 54 years – longer than any other group in history. He said that while recording and performing has become such a normal part of his life that he does not really even think about it anymore, he has learned a lot about maintaining success along the way, especially as part of a band and not a solo artist:
- Have fun. As Osmond has realized, there is no way anyone can spend a long time in showbiz unless he/she is having a great time along the way: “We’ve never stopped, for 54 years, re-creating ourselves … just because we love it.”
- “Know your strengths.” Band members need to be able to respect everyone’s roles and talents. According to Osmond, he sometimes thinks of himself and his siblings as fish in an aquarium: “Marie is our beautiful angelfish; Donny is the shark; Wayne, with his jokes, would be the clownfish, and so forth … I’m the little sucker fish, zipping around keeping the tank clean.”
- Embrace change. Keeping things fresh is what keeps bands interested in their music and the experience of creating art together … and also what holds fans’ attention: “Part of keeping it fresh for yourself and for people who follow you is change … We’ve had country hits, pop hits, rock and roll hits – we never wanted to be bored with us either.”
- A sense of humor is imperative. Osmond stressed that getting caught up in being successful can make the experience of being in a band and making music a chore. He said, “We don’t take ourselves seriously … We’re just doing what we do because we love it. We’ve never had those moments where we’re so narcissistic that we stop enjoying what we’re doing.”
- Have a dream. Sometimes bands can let ambition get the better of them and stop setting challenging goals. Osmond recently decided to book the biggest tour he and his brothers had ever done – so big, he wondered whether or not anyone would show up: “We played 51 dates and sold more than 100,000 tickets … We’re going to kick off another 50 dates in January.”
- Take a cue from Elvis. Though he has received a lot of advice along his journey as a musician, Osmond said that one of the best pieces came from Elvis Presley when they played together in Las Vegas: “He always emphasized, ‘No matter what, take time for your fans … As you go up the ladder, be kind to everybody, because you’re definitely going to see them on the way down.”
New developments this past week pointed towards potentially significant changes in the music industry landscape as Universal Music hit the final stages with European regulators examining its purchase of EMI’s recorded music division. And a new bill was introduced that could decrease the royalties streaming music services must pay to artists. Also, analysts explored how social media is really affecting the way people discover, listen to and share music online.
Will Universal Music Group Sell Big Assets?
Universal chairman Lucian Grainge offered up sizable slices of its assets to indie labels last week as it hit the final stages of negotiation with European regulators over its $1.9 billion purchase of EMI Music, according to The New York Times. The European Commission has been examining the fairness of the potential deal for months, and Universal now seems poised to sell as much as half of EMI in order to satisfy regulators, a move that could potentially change the landscape significantly for some members of the independent music community.
Grainge made an offer to independent labels and executives to buy approximately $300 million worth of European rights to EMI’s music. The Financial Times reported that a letter was released by Universal stating that the catalogs of Virgin, Mute, Chrysalis and other labels along with some of EMI’s huge catalogs of classical music and jazz were up for grabs.
The letter was particularly surprising, because indies have been very vocally opposed to the EMI-Universal merger. At last month’s U.S. Senate hearing, many independent musicians and executives, including Martin Mills of the Beggars Group (Adele) spoke firmly against a new Universal-EMI super label.
However, responses to Universal’s table “scraps” offering last week showed that as long as they can get something out of it, some indies are fine with the merger. Daniel Miller, founder of the small but once-prominent label Mute said that he felt the letter was giving him and other music entrepreneurs who had sold their businesses to EMI previously the opportunity to buy back what they had lost: “Universal is already the biggest music company in the world – that’s not going to change … There is an opportunity to strengthen the independent sector. In my personal view, it would be good for Mute, it would be good for our artists, and good for the whole independent distribution network.”
Well-respected head of the French label Naïve, as well as a member of the openly-critical Impala, an organization in Brussels that represents thousands of small labels, Patrick Zelnik agreed with Miller. He is teaming up with big-time mogul Richard Branson to try to bid on Virgin, which was started by Branson in 1972 and sold to EMI 20 years ago. Branson said Virgin is a “sleeping beauty” that “has been mismanaged in the last 10 years.”
Others in the industry have a less positive view of Grainge’s potential motives. They believe it might simply be a means for Universal to “divide and conquer.” They believe it is simply an effort to pit members of industry groups that are pro changing the old guard of the music industry against each other. Impala, for example, is now seeing its members taking different sides.
However, Universal has not done damage yet. While on Monday, a majority of the board members of Impala voted in favor of the EMI-Universal merger, the group is maintaining its anti-merger stance, because the vote was still short of the two-thirds needed to overturn the earlier vote. However, Merlin, a group that does licensing deals for thousands of indie labels, showed unanimous support.
Some major independent influencers are still standing steadily in opposition. Beggars Group’s Mills said he would never consider buying any of EMI and still feels regulators overseas and in the U.S. should stop the deal: “My position is that no remedies are great enough to cure the damage to the market of having a behemoth of this size … However, if it’s going to go through anyway, it’s better to have remedies than to have nothing.”
On July 19, three musicians representing the Featured Artists’ Coalition in London – Ed O’Brien of Radiohead, Nick Mason of Pink Floyd and ‘60s Brit-pop star Sandie Shaw – sent a letter to The Financial Times proposing that the copyrights for songs be offered to the artists in order to more fairly divide EMI assets: “To sell them to other corporations, whether large or small, is just a perpetuation of an old business model, which has seen recorded music business halve in value over 10 years … We do not need to repeat mistakes of the past.”
The Internet Radio Fairness Act of 2012 Sets Out to Change Streaming Royalties
New legislation proposed by Rep. Jason Chaffetz (R-Utah) could put streaming services like Pandora on the same royalty-payment standards as other digital radio companies, according to a piece on The Hill website. He is currently putting together a bill that is causing the music industry to fear for its revenue, which has already been a concern as more and more fans move exclusively online to consume their favorite music.
Currently, Internet radio services pay different royalty rates for streaming that are different from the streaming royalty rates paid by traditional cable and satellite radio stations. In 2009, a deal between record labels and Internet radio services signed a deal to set rates for music streamed online. That deal will be up for negotiation again in 2015.
Chaffetz was moved to create the bill because he feels royalty rules are unfair to Internet stations, who must pay higher rates to stream music than other digital services. His goal is to make the landscape the same for everyone: “It seems screwy that royalty rates change so dramatically based on the platform … When you’re listening to music in your house or in your car, you may be listening to it on your iPhone, you may be listening on the satellite radio or the FM radio … Does that mean the royalties should be so vastly different? It doesn’t seem to make sense to me. We need to play catch-up here.”
Pandora is showing support for the potential legislation, stating that Chaffetz is one of the leaders in trying to get the music industry back in line. Pandora Founder Tim Westergren said, “ The current royalty rate structure clearly favors some providers over others, and the discrimination against Internet radio must come to an end … Congress has an opportunity to enact legislation that will not only establish fair royalty rate-setting standards for Internet radio, but also drive more innovation in legal digital music distribution and treat artists as stakeholders.”
Music industry opponents of the bill feel that Pandora is simply going back on its 2009 agreement in an effort to get a better deal and will just mean lower income for artists. A source stated, “They’re making a lot more money [since the company went public last year], but they want a lower rate … If this bill actually passes, all it will do is take money out of the pockets of artists by letting them pay less.”
Still, Westergren argued that these conversations are all part of a normal process that was expected at the time the original deals were made: “At that time the [record industry’s] demand was that webcasters should not be prevented from lobbying Congress for changes in the statutory process for determining rates in future proceedings as long as they do not advocate changes in the rates for the period 2006-2015 … The proposed legislation does not affect those rates – only those going forward following the next [Copyright Royalty Board] proceeding.”
The Internet Radio Fairness Act of 2012 bill is still in draft form, but will propose to but online radio under the 801(b) standard of the Copyright Act – the same standard used by the Copyright Royalty Board when they set royalty rates for terrestrial, cable and satellite radio. It is also the same standard used for figuring out royalties that go to music publishers and songwriters.
How Catalog Curating is Changing the Streaming Music Industry
Major disruptions in the industry have analysts looking at how fans consume their music, and how their behaviors will help or hinder the aspirations of streaming music services. A article posted last week by Fox News looked at how consumers are using social media and other online outlets to share music and how this behavior is giving them control over everything from what is available in online catalogs, to what is covered by music journalists.
In recent weeks, the online music company has experienced a sudden surge, greatly influenced by popular user playlists, curated streams and shared Spotify tracks on Facebook, which has discombobulated some traditional music magazines and critics. This month, Spin was also purchased by the Internet-media-focused company Buzzmedia, owner of blogs like Absolute Punk and Brooklyn Vegan, which could see it moving towards a more online-based existence.
Buzzmedia CEO Tyler Goldman feels recent events are not revolutionary, rather an indication that consumers are taking back control over deciding what they like and using social media as a powerful tool to help them get what they want, whether that be music or more information about their favorite acts: “People are looking for context and relevancy … and the digital media are figuring out how to deliver that more quickly to listeners as we move from MP3s and iPods to smartphones and streaming songs we no longer own. A critical part of that context is the social aspect of discovering new music.”
But some fear that this is simply translating as a lack of authority among once-respected music journalists and bloggers, leaving fans wondering who to trust, when all their friends are recommending different music based on what they are listening to in an endlessly-deep sea of musical choices available from Rdio, Spotify, Pandora, YouTube, satellite radio and terrestrial stations.
This ultimately has music fans turning to what is becoming their most trusted method for discovering new music: a friend who knows them personally and knows exactly what type of music they like.
Jake Sigal, founder and CEO of car-streaming services aggregator Livio Radio said that this form of curating is extremely powerful and is a lot of why streaming services like Spotify have exploded in popularity: “I think there’s a big value to curating.”
Pandora is known for using its “thumbs up” and “thumbs down” raking system to find new songs for listeners. But this process might become obsolete as curating by online DJs who create very specific playlists aimed at sub-sub-genres like trip hop or post-punk ‘80s genres deeply personalizes the music experience for listeners. The fact that these amateur DJs are long-obsessed with these ultra-niche genres and therefore highly-knowledgeable gives them heightened authority. Sites like 8Tracks offer only playlists created by fans. And Grooveshark uses a similar model, adding a feature that allows listeners to upload any music they have on hand, including vinyl.
Despite the popularity of crowdsourcing, amateur curators still cannot quite compete with brand names like Pandora. Still, musical tastes change so quickly that many of the traditional magazines like Pitchfork – once seen as the cutting edge of the indie scene – that have longer-than-internet-speed lead times on stories are now losing ground to individuals and smaller blogs and publications that can report on new music in real time.
Alan Light, a former editor-in-chief of Spin and co-aurhor of Gregg Allman’s memoir My Cross to Bear believes that fans and the industry are still trying to figure out the best form of music discovery, and the dust has not yet settled. Still, he feels it is music consumers’ job to decide what that mode will be and not the business: “I actually odn’t think that a 140-character record review is inherently less useful or creative than a 500-word review … The responsibility and challenge is the same; to try to help a reader think about a piece of music and better understand it, and that’s not easy to do at any length.”
Experts shed new light on two recorded music industry issues last week as Reuters presented some reasons why the EMI sale could weaken rather than strengthen Universal, and a professional study showed that music piracy may actually contribute to music sales. Also, the Bristol Institute of Modern Music (BIMM) revealed five tips aspiring artists and music business people can learn from Led Zeppelin’s manager Peter Grant.
Has the Label System Lost its Hold on the Industry?
Universal Music Group’s potential $1.9 billion takeover of the recorded division of EMI – which houses acts like The Beatles, Pink Floyd and Katy Perry – has been a hotly-contested topic of conversation since it was announced this past year. Concerns of a monopoly within the industry has caused Warner Music Group, consumer groups and independent musicians and companies to fight against what they see as a threat to future digital media.
However, according to an article in Reuters, regulators are likely looking at the other side of the coin as they decide whether the deal is viable. Major record labels might actually not be the Goliaths in this scenario, having been worn down over the years by big retailers and piracy that has driven the price of CDs and digital downloads and thus the profits of the recorded side of the industry down drastically.
Reuters interviewed eight antitrust experts about the EMI/Universal deal, and they were split about whether or not it would be approved. The music industry has changed so much in the past few years that many feel the 40-percent hold Universal would have on recorded music might not have as much of an impact as suspected, especially since the selling recorded music is no longer as profitable as it was a decade ago. Professor Daniel Sokol, who teaches antitrust issues at the University of Florida Levin College of Law said, “If [the U.S. Federal Trade Commission] block [the sale], it’s just because they don’t understand the market.”
Two other experts – who decided to remain anonymous – said that the decision might not even be influenced by the hard numbers; it ride instead on Warner Music Group’s success and persistence at arguing against the deal: “My sense is that the FTC could take a hard line depending on how good a job Warner does in generating complaints … It wouldn’t surprise me if it didn’t go through.”
Universal will go into discussions with the FTC in late May about potentially selling some assets to satisfy some regulators’ concerns. The label could also send a request to the FTC before early June to speed up approval of the deal so it can be finalized within 30 days.
The FTC is currently investigating the influence of Apple, Amazon and other retailers about its methods for pricing digital music and taking a look at the real impact of illegal downloads. The organization may agree with the idea that major retailers force music prices to be low, but Bert Foer, president of the American Antitrust Institute advocacy group said that piracy should not be considered relevant to the investigation: “It’s a passing issue and it will eventually get dealt with. It should not be the justification for allowing an anticompetitive merger to take place.
Consumer groups Public Knowledge and Consumer Federation of America have written letters to government entities asking them to look into the deal, fearing that the 40-percent hold Universal will gain could actually prevent innovation from occurring within the digital music space. Mark Cooper of Consumer Federation of America asserted, “If you control that much of the marquee content, they can determine the fate of new digital business models by withholding content.”
The Commission is also looking into allegations that have been made by various consumer groups about Universal’s resistance to license the biggest-selling items in its catalog to digital startups.
Universal’s Peter Lofrumento claimed consumer groups’ concerns about the sale’s negative impact on sales and music availability within the digital space are invalid: “The future of music also depends on providing consumers with as many legal alternatives to piracy as possible. We have licensed more digital music services than any other music company and will continue to do so to the benefit of our artists, consumers and the overall industry.”
The FTC has not publicly discussed Sony’s purchase of EMI’s publishing arm, but this transaction will likely not be under scrutiny in the U.S.
BitTorrent Sharing: A Promotional Tool?
A new study conducted by a Robert Hammond, a researcher from North Carolina State University revealed that BitTorrent music downloads could actually have a positive effect on album sales. Though major record labels continue to fight against illegal downloading, this paper reveals that this practice could actually be leading to more digital and physical sales.
For the past decade, a variety of researchers have been tracking the impact of piracy on the revenues of the recorded music industry. But until Hammond’s study, no one has had a large enough sample of download statistics from a BitTorrent tracker to get an accurate picture of the phenomenon.
Hammond published his results in a paper entitled, “Profit Leak? Pre-Release File Sharing and the Music Industry.” He collected download statistics of new albums released on the largest private BitTorrent music tracker between May 2010 and January 2011 and then compared them against sales numbers to create a model that would predict the correlation between sales and piracy on an ongoing basis: “I isolate the causal effect of file sharing of an album on its sales by exploiting exogenous variation in how widely available the album was prior to its official release date. The findings suggest that file sharing of an album benefits its sales. I don’t find any evidence of a negative effect in any specification, using any instrument.”
His sample included 1,095 albums from 1,075 artists. And his research zeroed in on albums that leaked on BitTorrent sites prior to their official release dates. Record labels have been the most focused the most on attacking pre-release piracy, and this type of illegal sharing has been at the center of anti-piracy criminal proceedings in both the U.S. and the UK.
However, this paper shows that attacking music piracy sites might actually have a detrimental effect on the industry. Hammond’s research points to the idea that piracy could be a promotional tool for artists and labels that mimics radio play and media campaigns. Still, piracy’s positive effect is modest: Hammond’s paper found that when an album leaks a month prior to its release, the result is only about 59.6 additional album sales.
Hammond’s study was also different from other researchers’ because it focused on album releases and not individual songs: “I focus on how file sharing of an individual album helps or hurts that album’s sales. The question of interest here is whether an individual artist should expect her sales to decline given wider pre-release availability of the album in file-sharing networks. I find that the answer is no.”
Hammond also found that popular artists profit more from piracy than new or emerging artists, who experience no negative or positive effects from pre-release piracy. This information contradicts other research, which Hammond said is because the data he had used is more complex and accurate than data that has been used in previous studies.
Five Lessons for Artists
The British music industry school Bristol Institute of Modern Music (BIMM) recently announced its three-year music management course and a £16,000 ($25,593) scholarship in honor of Led Zeppelin’s late manager Peter Grant, who was also responsible for artists like Chuck Berry and Little Richard. Grant was known for his no-nonsense ability to cut deals with record companies and tour promoters that brought musicians bigger profits and changed the landscape of the music industry.
Grant continues to be remembered as one of the best-known, ruthless, but most successful band managers in history. In an article published last week in Bloomberg Businessweek, Cliff Jones, former frontman of the Britpop band Gay Dad who now runs music business at BIMM said, “We often talk about turning points in rock music – Elvis, the Beatles and the like – but the music business itself had similar sorts of turning points, similar awakenings, and in this area, Peter Grant was a stuperstar of management.”
This article, “Five Lessons From Music’s Most Feared Manager, Led Zeppelin’s Peter Grant” presented a list of five lessons aspiring musicians and music business people can take away from the knowledge and professionalism Grant learned during the course of his career.
1. “Music comes first.” Even when he was negotiating incredibly profitable record and tour deals, it was clear Grant loved his bands and their music. In 1974, he even took the helm of Led Zeppelin’s Swan Song Records to give the band and other bands signed to the label more creative control. He also regularly dismissed opportunities for short-term publicity in favor of campaigns that would have more lasting impact and ensure artists would be around for many years.
2. “What’s good for other bands isn’t necessarily good for yours.” Led Zeppelin was known for not pushing singles because of their belief in the power of the full album and for not performing on TV because, as Grant said, “You just cannot capture the magic of Zeppelin … on a 25-inch screen at home.” While he admitted that TV had worked for other artists like Elvis, he felt Zeppelin’s harder-edged sound was more conducive to live shows. Grant’s firm stance on this led to the band selling huge numbers of concert tickets.
3. “No file sharing.” Grant was firmly against bootlegging and piracy, and regularly visited record stores to collect illegal copies of Zeppelin records and destroy them.
4. “Go the extra mile.” Grant often toured with his bands and set the precedent for other managers. He carefully guarded expenses and made sure his musicians made money. In fact, in 1979, Grant did not believe them when Knebworth festival promoters stated only 100,000 tickets had been sold. So, he hired a helicopter to take aerial photos in hopes of getting an accurate count of the attendees. The crowd was double what had been reported, and Led Zeppelin profited.
5. “Punch people in the face.” Peter Grant was known for physically assaulting those that wronged his artists. He once beat up a promoter that tried to gyp Little Richard and broke a Led Zeppelin bootlegger’s arm. However, BIMM’s Jonessaid, “This is a very exaggerated part of his life … He had a reputation for strong-arming people but it usually wasn’t much more than that.” Jones added that perhaps #5 could be scratched from the list: “We won’t be teaching all of the business ethics that he used.”
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.
Major music industry changes and progress were highlighted last week as France reported on the impact of its radical internet anti-piracy policies over the past few years, and the RIAA contested claims by experts about positive industry growth. Also, analysts said they expect protests against the EMI split to hold up the final approval of regulatory agencies at least one year.
Has France Cured Piracy?
France’s controversial experiment to end digital piracy has already brought about major results, according to reports released in The New York Times. Two years ago, France approved new laws that would harshly penalize copyright violators, even cutting some off from the Internet, and the first offenders went to court last week to face the music.
Studies have shown that the French “three-strikes law” – which, like SOPA and PIPA has been welcomed by the struggling entertainment industry and despised by those that see initiatives of this type as a form of censorship – is administered by an agency in France called Hadopi and is already having a positive effect. Piracy has dropped sharply in France, the country’s digital sales are thriving and music industry revenues have started to stabilize.
According to president of Universal Music France Pascal Nègre, “I think more and more French people understand that artists should get paid for their work … I think everybody has a friend who has received an email [warning them about the penalties for piracy]. This creates a buzz. There is an educational effect.”
Despite marked progress, many within France still oppose the law, and its advocates are concerned it will come under fire if a new president is elected. Current President Nicolas Sarkozy was responsible for implementation of the “three-strikes law.” But his opponents are starting to piggyback on the movement in the U.S. that recently brought down two U.S. congressional bills and protest against an international copyright treaty.
In the past two years, Hadopi has sent 822,000 email warnings to suspected offenders, followed by 68,000 second warnings through registered mail. Now, 165 cases are in the third stage, and offenders are facing potential fines of almost $2,000 apiece as well as loss of their Internet connections for one month. And the secretary general of Hadopi, Éric Walter claimed that the low number of three-time violators provides proof that this education-based policy works: “Our work is to explain to people why piracy is a bad thing and why they should stop … When the people understand that, they stop. Of course, some people don’t want to understand. Then we have to transfer their dossiers to the justice system.”
A recently-released Hadopi report showed file sharing had dropped significantly in France during the past two years. And another study commissioned by Wellesley College and Carnegie Mellon university showed that France’s policies could actually be responsible for the rise in legal downloads from the Apple iTunes store. iTunes sales were significantly stronger in France than in any other European country from the spring of 2009 to mid 2011. The study further made its case by noting that musical genres considered to have very high piracy rates, like hip hop, rose far beyond those of low-piracy genres like Christian and classical. Researchers concluded that Hadopi brought about an additional €13.8 million a year worth of iTunes music sales in France: “We suggest that with regard to mitigation of sales displacement by piracy, a national anti-piracy policy combined with educational efforts is much more effective in the longer term than a small number of high-profile lawsuits.”
And even those not in agreement with Hadopi’s policies admit that the law has reshaped the way people behave online. Jérémie Zimmermann, co-founder of La Quadrature du Net, a proponent of an open Internet, said he feels the law has increased the use of virtual private network software and other anonymity tools: “Apparently some of its intimidation is having a psychological effect … The political costs of creating an institution like this are tremendous.”
And some analysts have said that because hackers can log into others’ accounts, instances of false accusations could be a major problem. Renaud Veeckman, co-founder of SOS Hadopi, which provides legal support to those that have received anti-piracy warnings said, “It’s like when someone steals your bank card number … Are you responsible, or are you the victim?” SOS Hadopi has already worked with five people in the third stage, and all five have been cleared before their cases hit court.
The first cases against suspected pirates may go to court in France before the first round of the presidential election, slated for April 22, and many question whether or not this was planned because the other candidates are against the law. Sarkozy stated last week that if re-elected, he would actually try to give Hadopi more power, giving it the authority to go after unauthorized streaming and other new technologies. Walter insists politics are not to blame for pushing the cases to court as soon as possible: “I’m proud to work on one of the only initiatives in the world to say, ‘O.K., we have just been speaking for 10 years, we need to try something … The point was not to know if it was a good idea or a bad idea; the point was to try something and then to say, ‘What have we learned? What do we know now?”’
The Music Industry is Collapsing, According to the RIAA
This past week, the RIAA continued to insist that the music industry is not going through a growth spurt, despite official reports published in Forbes and other reputable business publications that claim the contrary. Reacting to the “Sky is Rising” report presented by technology and music industry expert Mike Masnick at the midem music conference in late January, Joshua P. Friedlander, the Vice President of Strategic Data Analysis at the RIAA called for “a little less spin” on official numbers in a piece published on the organization’s blog last week.
While Friedlander stated he and everyone else wants to have a positive outlook about the future of the music industry, what Masnick said about the “bright spots” of the changing industry is based on misleading, incomplete information: “Who doesn’t love an optimistic view about the future of the music business? We’re as bullish about it as anyone and will never pass up a chance to tout the unprecedented variety of legal music choices today’s fans enjoy. The one problem? The study is highly misleading and doesn’t present an accurate or complete view of what has been really occurring in the United States in recent years … Instead of looking at actual sales data that is widely available, the paper looks at a global sales metric that includes a much wider range of industries outside of music. Moreover, we see real world examples that consistently show the importance of the ‘traditional’ metrics for working artists.”
And Masnick retaliated against the criticism in the TechDirt blog, stating the RIAA is only disputing facts because its own outdated business model is collapsing: “People should read the full report for themselves, where they’ll see that we looked at a variety of different data sources to see what the data said, and noted the various caveats with each of them. Oh, and that ‘global sales metric’ that the RIAA complains about? That’s directly from the IFPI – the sister organization of the RIAA, who basically represents the RIAA’s views around the world. If the RIAA does not like the IFPI’s own numbers, perhaps it should have a talk within its own organization.” Masnick added, “… The real story of the report is that the market is thriving for artists and consumers, but is much more challenging for big, lumbering legacy players. That would basically be the RIAA’s membership.”
And Masnick also pointed out that another part of the reason the RIAA is not fully understanding the full shape of progress within the industry is because many of the numbers are based on fact that technology has opened up new opportunities for artists that, in the old system, were not available and thus were not tracked as part of the “old system.” The modern music industry has created an entirely new environment, and legacy companies are resisting the new look of growth: “The real problem here is that the RIAA ignores the zeros. In the past, under the old system, if you weren’t some hugely successful label musician, you generally weren’t a musician at all. You made zero and you dropped out of the market entirely. So you didn’t count. But thanks to the new opportunities, many more people can make music, release music and make money from music. But that means a lot more competition. So, sure, if you don’t compete with that wider base of competition, perhaps you’re going to make less. But that’s not a sign indicating a decline in health of the overall market. It’s exactly the opposite.”
And as Masnick concluded, many of artists and labels he talked to at Midem were very excited about the opportunities that are opening up for them to make a living doing what they love, and “It’s just too bad the RIAA is looking backwards, rather than forward.”
You can also read more about the “Sky is Rising” report here.
EMI Split Opposition Likely to Hold Up Final Merger Approval
Despite the official dissolution of EMI brought about by its sale to two separate labels, the music industry is still expected to fight over what many perceive as unjust corporate consolidation, according to an article in The New York Times. And this battle could go on for at least the next year.
There have been some major changes regarding major labels beyond just the split of EMI in the past year: Warner Music Group (WMG) was sold to Access Industries – a conglomerate run by Russian billionaire – in May, 2011. And of course, in November, Citigroup split EMI, sending half of its operations to Sony and the other half to Universal Music Group (UMG).
The EMI sale seems to be a done deal. But, it still has to be approved by regulatory agencies in the U.S., Europe and around the world. The Federal Trade Commission has been investigating the mergers for the past few months, and UMG just filed its merger application with the European commission on February 17. Sony will soon follow suit.
The controversy in the industry has of course been that if the sales go through, the number of major labels will go down from four to three and also give UMG and Sony some significant advantages over WMG in the marketplace. As a result, WMG and many independent labels continue to lobby to block the deals, which also have consumer groups worried that the deals might have a negative impact on competition and innovation within the music space.
Helen Smith, executive chairwoman of Impala, a collective of small music companies said, “Turning music into a two-horse race is not good for artists, not good for consumers and certainly not good for the development of the online market.” Other critics have agreed with her, adding that an imbalance within the industry where UMG would control 40% of the global market for recordings and Sony 32% of music publishing would have an extremely negative impact. In some European countries, UMG would control as much as 50% of the market.
Edgar M. Bronfman Jr., former CEO for Warner and current board member said that the UMG-EMI marriage would be a destructive “supermajor,” and that Warner has already hired law firms in Washington to fight the deal.
The Federal Trade Commission’s investigation of the merger is already in its “second request stage,” which is expected to last through the summer of 2012. Experts believe that UMG will have a harder time gaining approval because it will be more powerful than Sony once the merger is finalized. (Sony only owns half of its current music publishing, Sony/ATV, with Michael Jackson’s estate owning the other half, and thus will only get a 38-percent stake in EMI’s publishing arm.)
What will Universal’s argument be? It will likely say that a larger company will have better control over prices and will be able to keep them down to discourage piracy. However, it may have to fight against its reputation for doing the opposite. When the company took over BMG Music Publishing, the European Commission actually noted that big labels had managed to impose higher licensing rates for recording rights than smaller, independent labels.
Music executives and analysts agree that the review process will likely result in a negotiation process. Universal might have to sell chunks of its holdings, particularly overseas. The company has already agreed to sell $680 million in “noncore assets” to help with the purchase.
Smaller labels have additional concerns about Universal using its power to gain more control over online music services, giving them the ability to dictate terms to technology companies, including Apple, and inhibit development within the space.
This past week in the music industry, technology reigned as TuneCore launched a new service to help artists collect on missing royalties and EMI partnered with Echo Nest to build a space for music app developers to hone their craft. Also, studies showed the music industry could be directly helpful to the U.S. economic recovery process.
TuneCore Songwriter Publishing Administration Service Launches
The online distribution service TuneCore announced the arrival of its new service that helps songwriters collect on unpaid royalties on November 2, according to the Wall Street Journal. TuneCore is used by thousands of signed and unsigned bands and helps them get their songs and albums into major online stores. Now, the platform has enhanced the support it offers to artists trying to capture their royalties painlessly with the Songwriter Publishing Administration service, designed to get at the millions of dollars of revenue that has been uncollected by artists, referred to as the “black box.”
TuneCore has been discussing missed royalties issues for many months in the site blog and has long promised to start to roll out services that will help address the major problems in this area. This latest release marks the company’s first solution of this type for songwriters. The tool offers a deep roster of features that will help songwriters register their songs, track copyrights and pursue legal action to get unclaimed royalties.
This service for songwriters costs a one-time $49.99 setup fee plus 10% of the money that TuneCore is able to recover for each artist.
This past week, Nine Inch Nails frontman (and recent Academy Award winner) Trent Reznor provided his endorsement of TuneCore’s new offering. He has been using TuneCore for over six years for all his releases, citing it as an “interesting and efficient solution” to get his music out “everywhere and circumvent the existing machine in place:” “When they reached out to tell me about their new big idea – adding transparency and straightforwardness to the murky waters of publishing administration (which to me is a world as boring and convoluted as it sounds) I was very interested. If they could pull off what they did with distribution on the publishing administration side of things, this could be a pretty big deal – it could be another important tool that further empowers the musician/songwriter directly.”
(You can also read a past interview I did with TuneCore founder and CEO Jeff Price, who talked to me about some of the finer points of digital distribution.)
EMI Builds a “Music App Developer Sandbox” with Echo Nest
EMI and Massachusetts-based tech company Echo Nest announced on Thursday that they will be launching a site that will give music app developers an online platform, music-analysis tools and a place to play with and build new app ideas based on EMI content and properties. Developers that work through this “digital sandbox” will not get guaranteed licensing for the apps they create – EMI has to approve all apps that get built and use its artists’ songs, videos and other content. But, this tool is promising to greatly decrease the barrier to entry into the app space for tech entrepreneurs.
The idea for the website came about because of the high failure rate of companies building products around artists’ work in the music space. Online companies like Liquid Audio, CenterSpan, Echo Networks, Music Buddha, etc. have all died quickly, often because major labels make them go through such a lengthy process to get content or use content in new ways. This drives up costs for these tech startups, delays launches and makes raising capital very difficult.
Bertrand Bodson, EMI’s head of digital marketing said that the company has already secured deals with a handful of artists that have recording and songwriting deals through EMI, such as Gorillaz and the Pet Shop Boys. These artists will collaborate directly with app developers. EMI is also making content available to app developers from some of its older pop acts, including Culture Club and Simple Minds. Echo Nest will be managing the platform and making music-related software features such as song identification, playlist creation and remixing available to tech-preneurs.
This sandbox also has preset licensing terms: It is a 60-40 split, with developers getting the smaller amount. This split is competitive with deals that major labels have been offering online music retailers and subscription music services. EMI will be charged with clearing the rights to tracks that developers use and will provide some marketing services to promote the music apps that make the cut.
One of the major goals of the project is to help music developers gain entry into the growing mobile market. Only about 4.2% of the apps available in the Apple App Store relate to music. Echo Nest already controls over 200 music apps. So far, the company has signed up EMI and Universal Music Group’s Island Def Jam, a label that is not yet ready to use the sandbox.
The Music Industry Could Be Vital to Economic Recovery
The results of recent studies revealed that the music industry could play a big part in economic recovery in the coming years. An article published on the Bloomberg Businessweek website revealed that a report released on November 2 in Washington by the International Intellectual Property Alliance – a collection of organizations whose members include Apple Inc. and Paramount Pictures – showed that the publishing, software, film, music and TV industries pumped $930 billion dollars into the U.S. economy in 2010, which represents over 6% of the total gross domestic product. As a result, industry experts are highlighting the importance of pushing ahead with new anti-piracy legislation.
During the past few weeks, entertainment and software industry groups have been asking Congress to keep the sector healthy by approving recent legislation that would shut down websites that sell illegal copies of movies, music and computer programs and games. An attorney representing the organization, Steven Metalitz stated, “The analyses released … demonstrate the vibrancy of copyright and creativity as an engine for growth. To preserve and enhance that vibrancy, we must ensure strong legal protection for U.S. creativity, innovation and ingenuity, both here and in the markets of our trading partners, in both the physical and online world.”
Recently, U.S. Texas Representative Lamar Smith introduced the bill H.R. 3261 that would allow the U.S. Attorney General to pursue court orders that would block foreign websites that steal and sell U.S. products. It would also increase the criminal penalties for selling counterfeit medication and military goods.
However, some tech experts and lawmakers are against this bill, because they believe it may be too ambitious. The Computer & Communications Industry Association – which represents companies like Google and Facebook – are pushing for more objective discussion about copyright bills in Congress before anything is passed. The organization’s CEO, Ed Black said, “Too often we hear about the cost of piracy without also considering the cost to legitimate sectors of the U.S. economy of poorly targeted copyright enforcement measures like the pending Protect IP Act and its even worse companion, H.R. 3261 … Congress needs to consider the overall economic picture both to the entertainment industry as well as the tech industry and other sectors.”
Last week, legal and copyright issues came to the forefront of music business news as antitrust regulators discussed the potential results of a merger between EMI and one of the other three major record labels, the National Music Publishers’ Association settled its long-standing lawsuit with YouTube and the music industry expressed concern about how music-locker services might affect the marketplace.
Officials Relaxed about EMI Merger Ramifications
Antitrust regulators are not raising many red flags when it comes to the potential EMI Group merger with either Universal Music Group, Sony Music Entertainment or Warner Music Group, according to an article published in the Los Angeles Times last weekend. And this surprises some executives and others in the music community, given the merger would mean the number of major labels in existence would be down to just three, from the six that existed in the late 1990s.
Why is no one worried? According to experts, it’s because major labels don’t have the power they once had because of the revolutionary changes technology and other factors have brought to the music industry. Digital channels especially have loosened record companies’ hold on the marketplace, and online retailers, including iTunes and Amazon.com have helped artists become less dependent on labels to peddle their music to fans. Similarly, social media and other online resources have brought much less expensive marketing tools directly to musicians, making relationships with labels and attachment to the labels’ large marketing teams less necessary.
Mark Lemley, an antitrust law professor at Stanford Law School adds, “… Things have changed. There are new sources of competition in the digital environment, and the dominance of the four majors has been reduced.”
However, while certain truths about the modern music landscape do decrease some fears about the potential EMI absorption within U.S.-based legal circles, regulators in Europe – where there are different standards – are watching the situation very closely. According to Michael Cohen, an antitrust litigator with Paul, Hastings, Janofsky & Walker in Washington, D.C., two factors are of the most concern to officials: market power; the ability to collide. Officials will need to know the answer to some important questions: Will the merged firm be able to dictate prices that EMI and whichever firm takes it on don’t independently have the power to dictate right now? Will the environment caused by the merger make it easier for the companies that remain to get together to collude?
This isn’t the first time major music companies have been questioned about pricing issues. In 2002, labels paid $67.7 million to settle lawsuits filed by a few states’ attorneys general. The charge was that the labels were inflating CD prices by coercing retailers into agreeing to minimum prices. And in 2003, the FTC ruled that Vivendi Universal and Warner had broken antitrust laws when they prohibited discounting of the Three Tenors’ records.
Now, digital music services, including iTunes and Amazon often discount music in order to compete. As an example, Amazon recently decided to sell Lady Gaga’s album Born This Way for just 99 cents. Pricing is a common area of focus when it comes to music companies. However, another concern of regulators in the Digital Age is curbing technological innovation. Many others worry that if major music companies are given too much power in their industry, they might prevent the efforts of innovative start-up companies.
Citigroup, Inc. took over EMI after Terra Firma Capital Partners was unable to pay off a $5.4-billion loan in February. And the first round of bids on the company is expected to come around in the fall. EMI currently holds 10% of the recorded music business and 20% of the publishing business worldwide. Included among EMI’s charges are mega-stars like Katy Perry, Pink Floyd and Willie Nelson.
National Music Publishers’ Association Settles YouTube Copyright Suit
The National Music Publishers’ Association (NMPA) finally resolved its copyright infringement lawsuit with YouTube, according to Billboard.biz. While details are not yet available, the resolution is good news for music publishers, who have been waiting for news since the suit was first filed in 2007; now they have license agreements with YouTube and will get royalties from YouTube for musical works that appear in videos on the site.
The Harry Fox Agency (HFA) will be in charge of setting up the licensing agreement, which will include synch rights for music in user-generated videos. However, even publishers not with HFA will be able to benefit from the agreement. Royalty payments will be determined by global advertising revenue earned by those videos that use the music.
While the appeal is still pending, the NMPA and music publishers including Edward B. Marks Music Company, Freddy Bienstock Music Company and The Rodgers & Hammerstein Organization have already filed notices to dismiss their appeal. More information can be found about the resolution on the NMPA website.
The Music Industry Braces for the Impact of Music-Locker Services
In May, LimeWire agreed to pay $105 million to settle a copyright infringement suit filed against them by the major labels. And Wired magazine called this event “the end of an era,” so reports an article published on Law.com last week. And this “era” was the 10-year period when the recording industry fought to stop unlicensed music swapping online through P2P networks.
However, now the music industry faces a new challenge: As global music sales continue to decrease, new cloud-based music-locker services like those begun by Amazon, Apple and Google have cropped up making many industry professionals and some artists concerned about copyright issues yet again.
Cloud-based music services are a direct response to the increased use of mobile devices, including smartphones and the recently-released iPad. They allow users to upload their digital music files to remote web servers and access them anytime, anywhere. But according to some, the cloud-based model technically involves copying copyrighted content, and new licenses need to be administered. Many in the music industry also point out that there could be a lot of loopholes in music-locker systems that might give fans more ways to swap files illegally. As Steven Marks, general counsel of the Recording Industry of America (RIAA) points out, “For some services, the term ‘cyber-locker’ is a misnomer because the content is not locked.”
Experts on the other side of the equation disagree that cloud services could potentially violate existing licensing agreements and think the recording industry is focusing too heavily on the finer points of the law and not enough on establishing realistic business strategies that work in the current environment. Corynne McSherry, the Electronic Frontier Foundation’s intellectual property director says, “You don’t need a license for simply providing storage for people to upload their music … They want to wring every possible cent out of every reproduction of music. That’s listening to your lawyers and not your business people.”
Amazon was the first of the major companies to get into cloud-based music storage, revealing the $20-per-20-gig Cloud Drive service in March, despite opposition from the industry. Google also started its Google Music Beta in May without obtaining any additional licensing deals. Apple announced its iCloud service in June after making deals with the four major record labels to give them 70 percent of iCloud revenue. Apple approached licensing differently from its competitors because it set up its service differently: With Cloud Drive and Google Music Beta, users must upload files manually, whereas iCloud scans the songs on a user’s computer and grants that user access to identical copies in the central Apple database for all songs it recognized.
Major music labels have not commented on whether they will sue Amazon and Google over their lack of licenses. However, an anonymous source from one of the labels stated that he thought that Amazon and potentially Google would probably eventually cut licensing deals simply to compete with Apple.