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Digital Hope Is Not Enough
April 20, 2007
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"We have launched a number of significant digital initiatives -- most recently the introduction of DRM-free superior sound quality downloads across our entire digital repertoire - which reflect our optimism about the digital environment."
-- EMI Group chief executive Eric Nicoli.Well, America is saved from any more torment. Despite the best efforts of Howard Stern, votefortheworst.com, and all the others hoping to keep him on American Idol, Sanjaya was sent packing this week. You could almost hear Simon Cowell's sigh of relief as Ryan Seacrest read the results. Bye bye, Sanjaya. We won't miss you.
Now down to business.
The above quote from Mr. Nicoli certainly evidences his (and EMI's) optimism for future digital music sales. But the comment must be taken in the full context of what else EMI announced this week. And that news was anything but good.
EMI warned investors that a fifteen percent annual revenue drop is expected in its recorded music division. Even more troubling: sales trends include a year-over-year decline of nearly 13 percent in US-based sales of CDs, and a 20.5 percent decline during the calendar first quarter. Things are obviously not looking well at EMI, and I expect that other music companies will also announce sales and revenue declines as well in the not too distant future. Maybe not as bad as EMI's, but declining trends nonetheless.
Which brings us back to the news of dramatic increases in digital sales. EMI announced they did expect digital revenues to jump by twenty-eight percent, and that is good news. The problem is that all the increases in digital sales aren't going to generate the types of revenues the industry was once hoping might replace the billions that physical CD sales once did. Nope. It's just not going to happen. There's no rabbit coming out of this digital hat folks.
Any industry executive who has been watching music consumers' transition from CD buyers to downloading music onto their iPods for the past four years, should have seen the handwriting on the walls of cyberspace. It spelled out loud and clear "We want our music cheap, and we're not going to buy CDs anymore that only have one or two good songs."
Which is why, in fact, I started this very newsletter a little over four years ago. I wanted to communicate with as many industry professionals as I could about creating new roadmaps for future survival. I frequently warned of the coming problems, and many e-mailed me back during the newsletter's first year, telling me I was "overreacting" and creating negative scenarios. Au contraire. I just saw what was happening from a perspective outside the corporate walls of the big labels and wanted to bring it to the attention of all those who might listen.
This isn't an "I told you so." Far from it. This is another observation that I believe is plain to see: If the industry is resting its hopes of survival on digital sales continued growth in the coming years to satisfy necessary revenue generation, then the industry will simply cease to exist.
There's plenty of money to be made in digital sales, but the days of wine and roses, and billions in profits from CD sales (largely due to the fact that every label released back catalog of best-selling artists in the new format) are long gone, and it's unlikely the industry will ever see gargantuan profits like that again. Profits, yes. But never like in the past.
Mr. Nicoli and others should be optimistic about the future of the "digital environment." But, if they pin their hopes on that environment alone, they are making a big mistake. Music companies of the future will have to be diversified, vertically integrated with revenue-generating subdivisions, and multi-dimensional in their approach to the changing marketplace and changes in technology.
AND NOW THIS
This week IBM announced it has developed a chip that is capable of delivering an entire movie download in a second. (See story below.)
I was told such technology was coming five years ago by IBM and NEC and one of the developers told me that the same chips would eventually be capable of delivering entire music libraries at the same speed. I assume that will happen very soon, and if it does, it will present yet even more problems for the industry.
Trading songs online and downloading them is one thing, downloading THOUSANDS of songs in the blink of an eye is simply a very frightening thought.
Delivering The Digital Goods: iTunes vs. Peer-to-Peer
Apple boasts that more than one billion songs have been purchased from its iTunes music service. That sounds like a great number-until you consider that an estimated ten million users of Internet-based peer-to-peer (p2p) networks are logged on at any one time to swap music.
How does Apple, which sells music titles for 99 cents each, compete with free music downloads on peer-to-peer networks? Do the two approaches to distributing digital content complement each other? What can the music industry, which aggressively fights p2p downloaders, learn from Apple's experience?
Those kinds of questions attracted the research attention of Ramon Casadesus-Masanell, a professor at Harvard Business School, and Andres Hervas-Drane, a PhD candidate in Economics at the Universitat Autónoma de Barcelona and a Visiting Fellow at Harvard University. Their working paper, "Peer-to-Peer File Sharing and the Market for Digital Information Goods," is among the first efforts to study the interactions of two entirely new and radical business models operating in the same market.
Read more about it by clicking here.
Net Radio Operators Lose Appeal Over Fees
In a potential blow to Internet radio services, a federal copyright panel on Monday largely upheld a contentious decision that would elevate royalty fees Webcasters must pay to record labels. The three judges on the U.S. Copyright Royalty Board said that after reviewing filings submitted by small commercial Webcasters, National Public Radio, and others, none of them had "made a sufficient showing of new evidence or clear error or manifest injustice that would warrant rehearing."
The board in its five-page order also declined to postpone the May 15 deadline when the new fees are scheduled to kick in.
Read more about it by clicking here.
Warner Wants Unprotected Albums Off Web Site
Warner Music Group last Thursday demanded that online retailer AnywhereCD remove its digital albums from the site, saying the start-up had violated their agreement by selling Warner's music without copy protection software.
But the fourth-largest music company appeared to make a concession to calls for music without copy restrictions, known as DRM, by saying it was acceptable for AnywhereCD to help fans rip CDs into the popular MP3 format. Copy protection has been a contentious issue in the music industry, with critics saying DRM restricts the growth of digital music, but supporters saying it helps curb piracy.
Read more about it by clicking here.
Are Songwriters Double-dipping?
When a performance isn't a performanceShould songwriters get paid for a public performance when you download a song? Thanks to a New York legal case, we'll soon find out. In the United States, three organizations license "public performance" rights for music on behalf of their music publisher and songwriter members: ASCAP, BMI and SESAC. Typical public performances include live performance in clubs and concert halls, radio, television, and streaming music on the Web. Until now, "downloading" music has not been considered to be a public performance.
But in late February, ASCAP filed papers in federal court in New York demanding the court rule that downloading music constitutes a "public performance" for which its songwriter and publisher members should be paid. AOL, Real Networks and Yahoo have responded that downloads are not public performances, and that ASCAP has no right to demand that they pay public performance royalties for downloads.
This article analyses the legal basis for ASCAP's claim, which is tenuous, and the strong economic forces that compelled them to try to add downloads to its income pool. Those reasons, surprisingly, may have more to do with the future of how people will watch TV programs and movies, rather than listen to music.
Read more about it by clicking here.
Imus Fallout: Music Execs Discuss Rap Lyrics
In the wake of Don Imus' firing for his on-air slur about the Rutgers women's basketball team, a high-powered group of music-industry executives met privately Wednesday to discuss sexist and misogynistic rap lyrics. During the furor that led to Imus' fall last week from his talk-radio perch, many of his critics carped as well about offensive language in rap music.
The meeting, called by hip-hop mogul Russell Simmons' Hip-Hop Summit Action Network, was held at the New York home of Lyor Cohen, chairman and chief executive of U.S. music at Warner Music Group. The summit, which lasted several hours, did not result in any specific initiative.
Organizers billed the gathering as a forum to "discuss issues challenging the industry in the wake of controversy surrounding hip-hop and the First Amendment." Afterward, they planned to hold a news conference at a Manhattan hotel to discuss "initiatives agreed upon at the meeting." But by early afternoon, the news conference was postponed, because the meeting was still going on.
Read more about it by clicking here.
AOL To Announce Five Web Programming Deals
Time Warner's AOL Internet division will announce on Tuesday production deals for five new Web programs as it tries to shore up its entertainment offerings and draw more advertising dollars. The deals include partnerships with reality television guru Mark Burnett, Dreamworks Animation, Big Brother producer Endemol, Madison Road Entertainment, Stone & Co. and Telepictures.
The collaborations will feature games based on the hit animated monster movie Shrek and trivia quizzes from Burnett's Gold Rush. A tie-in with popular talk show The Ellen DeGeneres Show will allow viewers to share their personal stories.
Read more about it by clicking here.
IPod Audio at Home, Cleaned and Delivered to Speakers Near You
Creative Labs' Xdock can stream audio wirelessly from an iPod to remote speakers and improve audio quality by cleaning up messy digital noise.
The $200 dock has standard and optical audio-out connections for playing music on powered external speakers. The dock uses two technologies to improve the audio: the X-Fi Crystalizer, which cleans up compressed audio, and the X-Fi CMSS-3D, which simulates surround sound. The dock plays video and pictures on any TV through an S-video connection.
Read more about it by clicking here.
IBM Develops Super-fast Chip To Send Data
SAN FRANCISCO, March 26 (Reuters) - IBM on Monday said it has developed a tiny chip capable of transmitting an entire high-definition movie in a single second, a breakthrough that could make computers faster and more energy efficient.
The chip was made using existing production methods and works by converting electrical signals to laser light, allowing it to transmit 160 gigabits of data per second, enough to handle telephone traffic for all of New York City.
"We have worked out a way to ship almost inconceivable quantities of data at extremely low power," said Bernie Meyerson, chief technologist for International Business Machines Corp.
Read more about it by clicking here.
THIS WEEK'S 'WHO CARES?' NEWS ITEMS
ITEM #1: The TV Guide Channel dropped Joan and Melissa Rivers this week as its red-carpet hostesses and replaced them with Lisa Rinna, who is due to make her debut at the Emmy Awards on September 16. Two questions: A) Does anybody really care about the TV Guide Channel? B) Who is Lisa Rinna?
DIVORCE COURT OF THE EXTREMELY WEALTHY
Michael Jordan, Neil Diamond and Steven Spielberg topped Forbes magazine's list of the 10 most costly celebrity divorce settlements of all time. Jordan's estranged wife, Juanita Vanoy, in line to collect more than $150 million when the couple's divorce is finalized, while Diamond paid an estimated $150 million to his second wife, Marcia Murphey.
REMEMBERING AHMET
Eric Clapton, Phil Collins, Stevie Nicks and Kid Rock were among the artists scheduled to perform Tuesday at the memorial service for Atlantic Records founder Ahmet Ertegun. Mick Jagger speaking at the service, while Bette Midler served as host of the event.
TOO MUCH TOO SOON?
Lily Allen cancelled most of her U.S. tour dates in May and June, writing on her MySpace page that she's been "getting really drunk" recently, and has become "so nervous about doing bad shows."
CONGRATS TO
Carrie Underwood whose "Before He Cheats" video took home a leading three honors, including Video of the Year, at the 2007 CMT Music Awards, for which fans vote for the winners online. Other winners Monday night included videos from Kenny Chesney, Rascal Flatts, Sugarland and 17-year-old Taylor Swift.
SINGING SPIDERMAN?
A musical adaptation of Spider-Man coming to Broadway in July, with U2's Bono and The Edge supervising the songbook, according to Playbill.
REBUILDING
It may have gone down, down, down in a burning ring of fire, but former Bee Gee Barry Gibb is about to raise it again. Gibb has announced plans to build a new home near the Nashville site where Johnny and June Carter Cash's home burned down last week and preserve the original foundation, in honor of the late musicians.
KNIGHT TO BE HONORED
Gladys Knight will receive the 16th annual Ella Award from the Society of Singers at a ceremony on Sept. 10. The Society of Singers benefits the health and welfare of professional singers worldwide and awards scholarships to students pursuing an education in the vocal arts. For more info on this great organization, go to their website at www.singers.org . (And if you know the President, Jerry Sharell, drop him an e-mail!)
FROM THE BETTER LATE THAN NEVER DEPT.
Florida governor Charlie Crist stated he is seriously considering pardoning Jim Morrison's 1970 indecent exposure and profanity convictions stemming from a 1969 concert in Miami. The Doors frontman was appealing the convictions at the time of his death in 1971, when he was only 27.
IS THIS SHOW REALLY NECESSARY?
The Puerto Rican boy band Menudo, which gave singer Ricky Martin his start, is coming back as part of an American Idol-style reality show.
GETTING A STAR ON HOLLYWOOD BOULEVARD USED TO BE SOMETHING SPECIAL...BUT NOW THIS
Erik Estrada received the 2,336th star on the Hollywood Walk of Fame Thursday, honoring an acting career ranging from his role in CHiPs in the '70s and '80s (a show we never need to watch in reruns) to his more recent reality show appearances in The Surreal Life, Armed & Famous (which was cancelled after only a few episodes) and Discovery Health Body Challenge.
2006 Industry Conferences
Date Name Location MUSEXPO 2007 April 27 - May 2 Los Angeles, CA DIGITAL NARM May 1-2 Chicago, IL
Quotes of the week
"My girlfriends and I always say, 'Wouldn't it be great to have a one-night stand?' But then you end up with somebody and you're with them for two years, four years, six years...that's exactly what I need right now. The problem is I'm too hot."
-- Heather Mills telling Ryan Seacrest about the pitfalls of being irresistibly single. Uh, no offense, Heather, but "too hot" by whose standards?"This is just an Internet-Rogaine accident gone terribly, terribly wrong."
-- Bruce Willis, after David Letterman accused him of looking like "that Sanjaya guy" when he appeared on The Late Show in a faux-hawk wig."Not since the episode of Saved by the Bell, where Tiffani-Amber Thiessen disguised herself as a boy in order to join the school's basketball team, have I seen such an impressive mustache."
-- Jimmy Kimmel, referring to American Idol's Sanjaya Malakar's new dusting of facial hair"I've always been on a diet, ever since I was in the sixth grade. It's an ongoing battle and it's a nightmare."
-- Gwen Stefani to Harper's Bazaar."It's so weird that I went to rehab. I always said I would die before I went to rehab."
-- Lindsay Lohan to Allure magazine. Write your own punchline to this one."I have fame on the level of a Marilyn Monroe or an Elvis, but part of the reason I didn't go the way they did was because of my beliefs. People make judgments about it [Scientology], but often they don't know what they're talking about. I would advise anyone who wants to know about it to read up on it. We were having a problem in Germany [where some critics called Scientology a money-making entity rather than a religion]. I talked to [former president Bill] Clinton, who talked to Chancellor Kohl, and things have improved since then."
-- A quite delusional John Travolta. (Source: www.thesuperficial.com.) Uh, some of us have read up on it, John. And a church founded by a man who was a science-fiction writer and believed many of our problems are caused by the spirits of space aliens that are stuck to our bodies is definitely good comedy material. Thank god for that great "South Park" episode!"I think it's disrespectful to the whole team, I think, to do that. And audiences aren't stupid. It'd be a big flop without me, Tobey, or Sam. That would really not be the smartest move."
-- Kirsten Dunst to EW.com. on rumors that director Sam Raimi may opt to helm "The Hobbit" rather than stick with the Spiderman franchise. Sorry, Kirsten, if you really think another Spiderman movie would really a flop without you, you need a serious dose of reality, because you aren't a box-office draw. Name another movie you were in that did big box office? Ooops. There are none."I think I'm a fair person but it would be very difficult to forget what I read."
-- A prospective juror for the Phil Spector murder trial. Obviously, she didn't make the cut. Spector is charged with the murder of Lana Clarkson.
The B-Side - 'Blips'
THE ONION (www.theonion.com) STORY OF THE WEEK:
'This American Life' Completes Documentation Of Liberal, Upper-Middle-Class Existence
CHICAGO-Producers of the long-running Chicago Public Radio program This American Life announced Monday that they have completed their comprehensive 12-year survey of life as a modern upper-middle-class American.
In what cultural anthropologists are calling a "colossal achievement" in the study of white-collar professionals, the popular radio show has successfully isolated all 7,442 known characteristics of college graduates who earn between $62,500 and $125,000 per year and feel strongly that something should be done about global warming.
Read the rest and laugh here: http://tinyurl.com/2rgz67.
Site of the Week
Tubes
If you're Internet-savvy-and if you're reading this, why wouldn't you be?-you probably already have your own snapshots, videos, or music circulating through one Web site or another. TubesNow.com is a great tool to help you keep your media organized and centralized. This free new software (now in its beta version) lets you store media and files in a central location using an easy-to-use drag-and-drop interface, and it has simple file-sharing and collaboration options. Is it the perfect answer to your file-storage needs?
Read the full review on PCMag.com to find out: http://tinyurl.com/2uua9r.
The Blogs
Check out a great (that I contribute commentary to) blog by Jerry Del Colliano, the Director Executive Programs, Clinical Professor Music Industry & Recording Arts, at the Thornton School of Music,University of Southern California, by clicking here: http://www.insidemusicmedia.blogspot.com.
Box Office
Check The Daily & Weekly Box Office (and more film info) at: www.boxofficemojo.com.
TinyURL
Check out www.tinyurl.com where you can make a smaller URL that will work for any webpage you wish to link to or reference. (As you can see, I'm using it in my news stories above!)
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