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The Librarian of
Congress's decision on Internet radio royalty rates
is due on Thursday, June 20th.
Hopefully that decision will be a reasonable one and we
can all get back to business!
So on Monday, June 24th, look for a special
"Back to Business" issue
of RAIN, featuring a review of products and services
now available to our industry.
If you're a vendor, make sure your firm
is included! E-mail us by clicking here. |
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WARNING!
World Cup spoiler in RAIN today!
If you're taping World Cup soccer matches to watch later
and are trying to avoid this morning's results, please be advised
that the "Site of the Day" box in today's issue will
spoil the England/Argentina game for you. Beware! |
Here's RAIN Reader
Feedback on yesterday's analysis of the USA Today series on the recording
industry (here)...
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"Emotion
is eclipsing critical business issues..."
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"These CDs must be profitable or labels would learn their lesson
and quit releasing them!"
On the contrary. In 1998, 88 releases out of over 33,000 represented
24% of the music industry's revenue. They don't  seem
to learn and continue to add layers of expense that raise the profitability
bar even more. This is probably the biggest problem for the music
industry and one that consolidation can't fix. That is, that they
are unable/unwilling to control their costs, and have not done/learned
anything to improve the chances of a release making a profit.
Put another way, they have no more clue as to what constitutes
a hit record than they did 40 years ago, but it costs them much more
to produce each attempt. The result is a bizarre twist on the old
"80/20 rule". In this case, less than 3 tenths of one percent of the
product released (by RIAA member companies) in 1998 accounted for
24 percent of their revenue...the "24/.3 rule."
"Further, they have invested billions in pursuit of killing
all forms of digital distribution -- from Internet radio to downloads.
Those expenditures don't address any of the above issues but they
drain resources. That money could have been shown as profit, directed
at making the music business more efficient, or both. Instead, much
of it has been spent on software based DRM solutions that no one but
music industry honchos and the DRM vendors believe will work.
I sympathize with and respect the music industry's desire to
stop piracy, but am perplexed by their tactics. Piracy, while potentially
a big problem, doesn't seem (as outlined in yesterday's RAIN
analysis) to be the driving force behind the current red ink that
plagues the music industry. Perhaps emotion is eclipsing critical
business issues.
One thing seems apparent, at least to me. As long as there
are easy piracy platforms, there is little risk in setting friendly
digital music services that address consumer hot buttons such as availability
of titles, transferability, ability to copy and use of the MP3 format.
Anyone who wants to get a file for free can and virtually every title
in print (and many others) can be had. That isn't true for those who
want to pay. They can buy the CD you say? Hmmm. As that song about
the Viet Nam war mused, "...waist deep in the big muddy and the big
fool says to push on."
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"Recorded
music is a bargain..."
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About your analysis of the USA Today article: The claim that
the average price of a CD has fallen 40% from 1983-1996 is
not a misquote.
As OM at K102/Ft. Lauderdale, we were one of the first stations
to play CDs on the air in 1983 (Using a Sony CD-101), and I remember
going down to Specs Music, where we had a trade account, and picking
up Michael Jackson's Thriller and the Steve Miller Band's Greatest
Hits. They were $20 each, and there was no discounting yet, as
the technology was brand new.
The fact that it's taken almost 20 years for the price to climb
back near the $20 mark is proof that recorded music is a bargain,
especially when you compare the price increases of movie tickets,
concert tickets, housing, autos, and pretty much anything else over
the same time span.
By the way, that 15 year-old CD containing 45 minutes of music
that you referred to sells for $12 or less at most record stores in
my area. There are many classic albums in the "nice price" rack for
$7.99 and $8.99, and the $18.99 new releases (which are almost always
discounted to $12.99-$14.99) generally contain at least 15 tracks,
and over an hour of music, enhancing the bargain aspect, in my opinion.
And this doesn't even take into account the durability and technical
superiority of CDs over albums and cassettes, which, in all fairness,
should probably be taken into
consideration when you're doing a "real dollars" comparison spanning
four decades.
And regarding your claim that the variety of formats was no
wider ten years ago than today, I'm aware of a Hot AC station that
has played a particular song at least 40 times a week for the past
14 months! To the best of my knowledge, nobody was beating records
to death like that ten years ago. This is a relatively new research-driven
phenomenon, and -- combined with the spotloads -- probably explains
the TSL decline, and the "blandness" complaints about radio, which
aren't just coming from "music heads" anymore, but from passive listeners
as well.
Thanks for an excellent newsletter!
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Dave Hoeffel, VP/Executive
Director
FMQB |
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"Make
the recording industry look like inflation-fighting heroes..."
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I suspect that may be a case of shaping statistics in the most
flattering light for one's cause (and failing to elaborate on details).
The figure of a 40 percent drop in the price of a CD may be the result
of a very high starting price
when CDs were new technology in 1983 and very few CD copies of each
album were released. Vinyl and cassettes were still dominant, and
cheaper to mass produce. Few listeners yet owned an expensive CD player.
I can't remember exactly, but $25 or more probably was a common
price for a CD in the early days. Therefore, the high baseline of
that statistic would make the recording industry look like inflation-fighting
heroes, when in fact, the dramatic drop at the start of the curve
was the natural result of the technology improving, becoming cheaper,
and expanding into a mass market.
Now that it's so cheap and easy that, except for legal restrictions
prohibiting it, I could burn music CDs on my own computer, well, I
think most of us have calculated that a reasonable supply-and-demand
price for the product shouldn't be as high as the recording industry
thinks it should.
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"There
IS no local market..."
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You're not entirely correct, there was
a day where an act was a hit in a local market but never made it nationally.
The record companies still made money on them, though. Can't be done
today since there is no local
market.
Interesting point you have: Why does an audio-only CD of the
1969 Doors "Strange Days" album cost as much or more than most DVDs
with more content (and, theoretically, more royalties to pay)?
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Virgin Radio UK "crackers"
for World Cup
With this morning's upset victory over Argentina in
World Cup football competition, Virgin
Radio UK -- along with its
listeners -- is going (in the words of one of the DJs) "completely
crackers."
The station, perenially at (or near) the top of rated
webcasts, is always fun to listen to, but especially so today.
We've been hearing lots of phoners and great production values
as the station (and the country) celebrates today's 1-nil
victory in "the beautiful game."
The DJs even did a "phone survey" of the
Virgin Radio offices to see who was still at their desk. As
might be expected, very few phones were answered.
(By the way, England's captain and Man Utd. star David
Beckham (Mr. Posh Spice) scored the game's only
goal on a penalty kick.)
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The U.S. Copyright Office has posted the official transcripts
of last month's Public Roundtable meeting on the Notice of
Recordkeeping. The transcripts for all three panels are here,
here,
and here.
Initial comment filings from various interested parties can
be found
here.
The three panels dealt with records that webcasters are required
to keep and report to copyright holders under the terms of their
DMCA licenses for the use of copyrighted music. The first panel
dealt with reporting for the use of royalty allocation, the second
with reporting for the use of monitoring
compliance to the DMCA sound performance complement, and the third
with how the reporting will affect small business.
US Register of Copyrights Marybeth Peters
(above) and Copyright Office general counsel David
Carson (left) moderated the all-day event. Representatives
of the recording industry, royalty collection agent SoundExchange,
webcasters, and artists participated.
RAIN coverage of the May 10th meeting is here.
The RAIN staff traveled to Washington, DC for the meeting,
and RAIN publisher Kurt Hanson
participated in the third panel.
From Salon.com: "John Andrews first heard about Netflix
when his class at Harvard Business School studied the company
in 2001. But it wasn't the business model that persuaded him to
sign up for the service, in which people register online and pay
$20 a month for a rotating crop of DVD rentals that arrive by mail.
He simply thought a Netflix
subscription would make his movie-watching activities more convenient
-- and he has yet to doubt his initial hunch...
"Andrews' enthusiasm seems to be contagious. In the
midst of a pronounced technology slump, Netflix has become the rarest
of all Silicon Valley breeds: a rising dot-com star. The Los Gatos
company has netted more than 600,000 subscribers since launching
in April 1998. On May 23 Netflix raised $80 million in one of the
most successful initial public offerings (IPOs) of 2002...
"Netflix also benefited, digital media experts argue,
from its uncanny ability to shift entertainment
consumer behavior toward a service and away from traditional
systems in which people buy or
rent a single piece of entertainment for a specific period of time.
Netflix, with its focus on flexibility,
comprehensiveness and ease of use, has essentially persuaded
consumers to accept a system of eternal borrowing. Call it faux
ownership. Netflix subscribers pay about $20 a month for the right
to hold on to DVDs for as long as they want; to watch movies over
and over again without paying extra fees. The only limitation is
that they can't hold on to more than their allotted number. To get
a new DVD, they have to send back an old one...
"If Netflix's convenience, portability and price attract
millions of people and make millions of dollars,
why can't the idea of faux ownership catch on in the world of digital
music?"
Read this entire story in Salon here.
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From a piece by Robert von Goeben in CNET News.com: "As
a venture capitalist who has done time in the music industry, I'm
surprised by the number of entrepreneurs who want to talk about
digital music.
A week doesn't go by that some smart entrepreneur doesn't call me
up to discuss an idea.
"These conversations got me thinking about the opportunities
for start-ups in the emerging digital music arena, and about why
all past efforts at revolutionizing the music industry have failed...
"The thing that makes major record labels so powerful
is their contractual control over music, and their ability to say
where, when and how a recording can be played and shared.
So where are the opportunities for entrepreneurship in the
music industry? The answer lies in controlling
the rights to recordings. It's only after startups get
into the game of signing artists that they will truly be able to
control the destiny
of downstream distribution.
"So my advice to the plethora of music startups focused
on distribution? Give it up."
"Distribution technology and services are just ways
of helping someone else sell their valuable assets, and are certainly
not a basis for entrepreneurship. It's the control
over the assets themselves, and not the pipes to deliver
them, that will drive shareholder value in new music companies."
Robert von Goeben is the founder and managing director of
Starter Fluid, a seed-stage venture capital fund in San Francisco.
He was the head of online and Internet activities at Geffen Records.
Read von Goeben's perspective piece here.
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From the Nokia press release: "Capital Radio plc, Nokia,
Rocking Frog, BT’s
mobile personalisation experts, and
source O2, mmO2’s incubator
for enabling wireless application partnerships, today announce the
forthcoming launch of CapitalM8
(pronounced 'Capital mate'), the first interactive radio service for
mobile phones working across all networks using SMS, WAP and GPRS
technology...
"The CapitalM8 service will be available to 95.8
Capital FM listeners on the single SMS short-code, 83133,
as well as via WAP, GPRS and the Web.
"CapitalM8 will launch mid June with the following features:
- Dedic8 – allows users to 'dedicate' a track to a friend,
who will be alerted to the dedication 15 minutes before the track
is played. Dedications can be accompanied with a text greeting from
the sender
- PlayM8 – allows users to find out the name of both the last
track and the track currently playing, along with the name of the
artist
- RingM8 – Users can select and download Capital’s top new
tracks as ringtones
directly from their mobile phone
"Nathalie Schwarz, Director of Strategy and Development
at Capital Radio said: 'The launch of CapitalM8 is another step in
Capital Radio’s strategy to distribute branded content across new
platforms such as mobile radio and Internet...the personalisation
technology creates the ability to profile listener preferences, which
will provide our advertisers with targeted advertising and marketing
opportunities.'"
Read this entire release here. |
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| June 13-15, 2002 |
R&R
Convention 2002: Beverly Hills, CA |
| July 8-9, 2002 |
PLUG.IN:
Jupiter Music Forum: New York, NY |
| July 25-28, 2002 |
The
Conclave 2002 Learning Conference: Minneapolis, MN |
| Sept. 12-14, 2002 |
NAB
Radio Show 2002: Seattle, WA |
| Oct. 1-4, 2002 |
Streaming
Media East: New York, NY |
| Oct. 30-Nov. 2,
2002 |
CMJ
Music Marathon 2002: New York, NY |
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