Archive for: Music Stores

The Worm In the Apple – Terra Firma’s EMI Purchase looks Increasingly Sour

As you may have read here on our blog Terra Firma are suing their advisors/lenders Citibank for perpetrating a fraud against them – essentially Terra are saying that Citibank mislead them about the amount of competition there was for the record label’s purchase, the benefit to Citibank being more than £92 million in fees and lending them £2.5 billion that they claim they didn’t need to borrow. The plot thickens when you realise that EMI was in a huge amount of debt to Citibank, among others and that it was in danger of defaulting on the debt if it wasn’t rescued by a purchaser. The specific accusation is that a Mr. David Wormsley, a Citi employee who was advising Terra Firma told a rather significant pork-pie in an attempt to prevent Terra from dropping out of the bidding for EMI, precipitating a ‘busted auction’ – something that would have massively decreased EMI’s stock price, and thus the value of Citi’s asset, as well as EMI’s ability to repay any value that was still outstanding in their loan from Citi.

These accusations may be coming from a party that is desperately trying to shore up a huge investment in a failing company (look at EMI’s previous 10-K’s for an idea of their year on year losses), but they are pretty frightening for the big 4 labels – file sharing may finally be on the wane, with big torrent trackers like Mininova and The Pirate Bay being forced to go legit, but costs at labels are still outstripping income, and copyrights on some of their biggest selling artists are going to begin running out over the decades to come: the first Beatles song will come out of copyright in the EU in 2012 (unless there’s a change in the law).

Apple, eMusic and some other download stores are breaking ground in making online music profitable, but there are indications that even iTunes market share is dropping – innovation is happening with streaming services like Spotify entering the fray with big-label backing, but the true form of digital music in the decades to come is as yet undecided. I wonder if EMI will be there to see the changes happen.

Upload Tool Launched!

We’ve just launched our new upload tool, designed to make adding your music to our service quick and straightforward. You’ll need to sign in to your RouteNote account, and then you’ll find a link to download the new tool on the ‘Upload’ page. The program is available for all operating systems, and will install onto your desktop. From there you can add in all the music and image files, as well as the metadata (track, artist and album information) necessary to put an upload together. The program will then let you know about any errors in file format or album info before you send it to us, so you won’t need to wait for our admin dept. to get back to you with any issues, you can save the data entry process at any point before you send it, so that you can come back to a session later, without the risk of losing your progress, and uploads can be queued and sent while you’re not using the computer for other stuff online. Using the upload tool means that won’t lose your progress if the computer crashes during the upload, you can just restart the process once you’re up again. We’ve also streamlined the data entry process so that you don’t need to put the same information in multiple times for multiple tracks, releases are grouped by album, so the program knows which track is attached to which release.

We’ve put the tool together to make things easier and quicker for you while uploading, and to try and eliminate common errors from the upload process, and we hope that you think we’ve succeeded. Any feedback or comments on the tool once you’ve had a go at using it would be very welcome. You can comment on this post, or send email to support@routenote.com.

Investment and Innovation Imperative for the future of Digital Online

Interesting post over at MidemNet about why Deezer (a French streaming service) feel they are now coming in second place to Spotify: the author basically concludes that investment and innovation in the next wave of technology is essential if we’re going to move away from both the lugubrious bricks and mortar retail system of yesteryear, and the increasingly piratical, file sharing future that looms threateningly ahead of the online music industry.

UK Digital Music Market Trends

The UK has seen record levels of digital sales in 2009, with 10 trading weeks and the Christmas period still to come. 117 million singles have been sold so far, with 98.6% of these sales in digital formats.

Not only has the singles market more than doubled in the number of units sold sine ’02, but it’s almost entirely divested itself of the physical media. This growth is not reproduced in the album market (old figures here), which in 2008 saw a shallow (compared to predictions) decline of between 3.2% and 6% depending on who you listen to, despite 68% year on year growth in digital (read people shifting over to buy digital formats rather than physical).

This is encouraging news for the music industry in the UK – despite the panic that filesharing and online piracy keeps sending through the motley ranks of the big execs, there’s not that big a downturn in sales. Music piracy is a massive phenomenon; according to the IFPI, 95% of music downloads are illegal, but is it really hurting the industry if sales are staying firm in the face of this explosion in Piracy. The BPI’s Chief Exec Geoff Taylor stated “That singles have hit these heights while there are still more than a billion illegal downloads every year in the UK is testimony to the quality of releases this year and the vibrancy of the UK download market.  Consumers are responding to the value and innovation offered by the legal services and these new figures show how the market could explode if Government acts to tackle illegal peer-to-peer filesharing.” His implication is clearly that all the pirates out there would be forced to buy their music instead of getting it free  – but I think this is something of a false premise: just because people like getting something for free, doesn’t mean they would be prepared to pay for it. I’ve been introduced to a lot of bands by people burning me CD’s or sending me tracks over the net, even way back when my teenage girlfriends used to make me mix tapes it was the same sort of piracy, but the upshot of that was that I’ve discovered more bands, been to more gigs and bought more CD’s, vinyl and downloads than I ever would have if I’d not been so freely able to share music. I strongly feel that bands should profit from people’s enjoyment and sharing of the great music they make, but it should be directly related to the cost of time effort and money involved in getting that particular piece of music to that particular person.

I would pay more for an LP than for a download because I’m getting more. Not just intangible 1′s and 0′s but a real lump of plastic and paper and design as well as the music. MP3 stores cost money to run, tech guys, ISP’s, designers and even marketing people (sadly) have to be paid, but those costs aren’t there with file sharing networks, or at least they’re not paid for by the guys in the music industry. If the site makes money, that should be shared equitably with the artists whose work they exploit, but artists should take into account that they’re not just losing download sales, they’re also gaining fans through these channels, fans that will buy tickets and albums and merchandise and write about you on their blogs and tell their friends about you, if you’re good enough, and you give them a reason to buy. *deep breath* Sorry. Rant over.

What will always be true is that supply must follow demand; if people want new ways of getting music cheaply online, the traditional market and online music stores must adapt to provide them, or fail in the competition with less legitimate routes of supply.

Death of the CD?

Paul Resnikoff of  Digital Music News today posted this article on his blog, making the radical suggestion that the majors should seriously consider ditching CD’s as a major sales format, and concentrating on digital, thereby divesting themselves of the whole distribution network necessary to sell them. If they just stopped pressing CD’s all the shops, warehouses, trucks, box packers and smiling counter staff would suddenly become obsolete, bad for the truck drivers, and bad for the record companies in the short term, as they’d lose that income stream – but would such a ruthless move be good for the majors in the long run?

Looking at the storage formats that have waxed and waned over the history of recorded music, the eventual demise of compact discs seems inevitable; from wax cylinders to minidiscs, everything is replaced by a more convenient alternative. Even though this shift from physical to digital is a big one for the human mind to wrap itself around “But where is my actual music? My computer looks just the same as before” This will hold true of the CD just as it did of the horse-drawn carriage; people will stand around scratching their heads for a while and bemoaning the loss of work for farriers and the fall in the price of oats, but eventually we’ll all get used to having our music stored in a cufflink, or beamed into our brains from our mobile phone or whatever else is in store for us, and the CD will become what vinyl is now – a charming reminder of a less convenient, more physical age. Those companies that accept the decline of physical media and look towards maximising the advantages of digital music distribution (minescule distribution costs, instant worldwide availability, no cumbersome physical infrastructure etc. etc.) will be the ones that dominate the new era, and those that keep clinging to the old technology, will lose out in the future, no matter how strongly entrenched the current hardware seems.

Digital Music Store Focus – Recordstore.co.uk

London based company Digital Stores Limited has been building online shops for various high profile clients for the best part of a decade (they were incorporated in ’97), and have put up their own record shop, selling both digital and physical releases. Their catalogue seems to include material from all of the majors – indeed, I had to think quite hard before I caught their search function out (they don’t have any Zetan Spore, a trance band from down here in Cornwall). Album prices range between £4.95 (indie mp3 album download) to £12.49 (mainstream CD order).

A nice addition to their retail arsenal is a signed exclusive section, where they list special artist-signed editions of new releases (as I write Biffy Clyro, Athlete, Idlewild and Maps are among the artists listed in this section). Prices don’t seem inflated from regular retail cost, so this seems like a great way of picking up something a bit more special for a fan who’ll appreciate having an artifact rather than just a download. Other than this little bonus, I can’t see much to distinguish Recordstore.co.uk from the competition – prices are reasonably similar, the range is pretty comprehensive, but you could get the same service from Amazon. On the other hand, I support them on the same principle that makes me buy food from the farmers market rather than ASDA, the smaller retailers care more, and I think small businesses are a good thing for keeping a marketplace varied, vibrant and full of innovation. Much as we are a smaller enterprise but provide an alternative digital music distribution solution to the bigger players like the Orchard.

Digital Music Store Focus – Napster 2.0 <

Napster originated as a peer-to-peer music service in 1999, one of the first that gained widespread popularity. Unlike modern bit-torrent services it provided a connection between users through a central server, and this direct involvement in the file-sharing process rendered it vulnerable to a slew of lawsuits brought by (to name but a few) Metallica, Dr. Dre, Madonna, A&M records and Bertelsmann Gruppe.

These lawsuits culminated in Napster’s bankruptcy, and its purchase at the bankruptcy auction by Roxio (of CD burning fame) – who have converted it into a subscription streaming service. Users can pay GBP£5 a month for unlimited streams from Napster’s 8 million strong catalogue, plus 5 tracks to download and keep as MP3s. There’s also the option to buy download tracks on an a-la-carte basis once you’re subscribed. In addition to this, Napster also provides a free streaming site, with limited functionality, and access to three quarters of its catalogue. Users can’t make playlists from this site, and it’s a lot slower and harder to use than the subscription platform.

The subscription service is cheaper than Spotify Premium or eMusic, its closest competitors in terms of service, and the fact that all of Napster’s members are subscribers makes it’s income much more reliable than the advertising based model that still makes up the bulk of Spotify’s trading, (the Economist reported that only 40,000 of the 6 million users who had downloaded the free platform have subscribed to the premium service) and thus better able to provide a steady income to it’s contributing artists, were it not for the odd addition of it’s free streaming service to the mix. Napster’s operations seem a little confused, different elements pulling in different directions from one another; a steady income from the subscription service, with a clunky ad supported option detracting from it; a limited MP3 download service clashing with both and yet failing to make it easy for users to take music away from their PC’s. If they could centralise all of these elements into a neat platform and make it easy to use, they’d have a model that looked a bit like Spotify’s, but it’s yet to be seen whether that can be turned into a profitable business in the long term.

Digital Music Store Focus – iTunes

No prizes for recognizing that logo, this is the biggest music store on the web. The store isn’t available using a normal web browser, only by installing Apple’s proprietory iTunes software, relentlessly updated to include more efficient ways of getting you to buy more content of different types, for every single one of your lovely Apple products.

Combined with the iPod, Apple’s online music store must be one of the biggest success stories on the net. They were surprisingly late on the scene; MP3’s were invented way back in 1991, eMusic’s first incarnation was born in 1998 , and the iTunes store didn’t go live until April 2003 (a year and a half after the iPod launched). Five years later, in April of ’08, iTunes overtook Wal-Mart to become the biggest music retailer in the USA, and was reported by Reuters as selling over 70% of all digital music worldwide. The IFPI calculated the global digital market as worth USD$3783.8 billion in 2008 – conflating these figures means the iTunes store turned over $2648.66 billion on music alone: by their own report, they sold 2 billion songs worldwide between January 15^th 2008 and January 6^th 2009 – OK, so the IFPI comparison gives them more than a dollar a track per sale, which isn’t the case, but the figures aren’t entirely disparate.

Here’s a breakdown (drawn from Apples published stats) of how music sales have accelerated for Apple over the last 6 and a bit years:

To save you the horror of another of my poorly structured Excel ’03 graphs – here’s one lifted from the very informative Wikipedia page that unfortunately only covers the trend up to 6billion tracks. (If anyone can recommend a better program for graphing, please tell me in the comments!)

The success of their online proposition has been underpinned by the massive success of the iPod – over 218 million units have now been sold, meaning that the average iPod owner would only need to have bought 40 tracks from the iTunes store to account for all sales. That’s less than 4 albums worth each, and I think I probably have a few hundred albums in my collection.

iPod Sales by Quarter

Unless you’re a pretty hardcore nerd, you’ll be forced to manage your iPod through iTunes, and that shop is just so conveniently placed within the same piece of software that it’s easy to see how those track sales figures come about. Even accounting for a decent percentage of hardware failures, obsolescences and droppings into a pint of beer for those iPods out there (yes, I have had all of these happen), the iTunes captive audience (don’t forget all those iMac and Macbook users) is still 150 million strong and buying hard.

Track prices are relatively high, with occasional offers and a regular set of free sample downloads from artists promoting themselves. Apple users don’t seem to mind this, and it translates into pretty good profitability for artists selling through iTunes, 65% of the revenue from each sale is piped on down to the provider of the tracks sold, and there’s no variability in per track income as with the ad-supported streaming services. RouteNote can get your music on itunes without you having to pay anything up front.

Digital Music Store Focus – Insound

Insound is a minor player with a lot of heart involved in its operation. They essentially act as a blog and record label, picking up and supporting new acts that are to their taste, promoting them and selling their music through the site. They’re a smaller retailer that survives by taking an active interest in the bands they sell, keeping their margins high (read higher prices to the consumer – MP3 downloads $9.99-$10.49) and selling other trendy stuff, badges, bags, books etc. If you can convince them that you’re worth selling they’ll really make an effort to put you out in front of their indie audience, with promotional tools like free MP3 downloads and custom merch to drag people in to buy your music. RouteNote doesn’t currently do digital distribution to Insound – your best bet would be to approach them directly.

***EDIT***

Just to respond to that comment: a totally unfair comparison of someone who happened to be on Insound’s MP3 download front page when I looked, The Castanets, shows their album ‘Texas Rose…’ as being $1.50 cheaper on Amazon ($8.99) than on Insound ($10.49). Please feel free to refute me with your own research. I think Insound might deserve the extra money for taking an active interest in the bands they promote, and I hope they pass on more $ to their artists, but as a straight comparison, Amazon is cheaper (admittedly this is only one example).

Digital Music Store Focus – iMesh

iMesh is a peer-to-peer platform that has survived the legal harrow of the recording industry. The RIAA brought a copyright infringement case against them, which they settled out of court, and after which they changed their business model to be based on subscriptions within North America. Those of us lucky enough to live in Europe can still use the file sharing service without paying a $29.99 annual fee, and even the hapless Americans can use the iMesh ‘to go’ service, paying for tracks individually.

The music they offer up through their search is based on results from youtube, which streams quite smoothly in a little window on their GUI (the program window), and on the hard drives of the various iMesh users logged on at a given time (you all know how peer to peer works, right?). They have agreements with the RIAA (and thus the labels and artists listed with them) to pay royalties on streams and downloads, but they also have a vast amount of content that has not had copyright claimed. This doesn’t mean that copyright doesn’t exist in those tracks, just that the people the tracks belong to haven’t objected to their being used on iMesh’s service, which doesn’t seem particularly equitable if they don’t know its happening. RouteNote doesn’t currently do digital distribution to iMesh, but if you’re a user, you can put your own tracks in your iMesh folder to be shared. You won’t recieve any revenue thereby unless you’re registered with one of their partner mechanical copyright agencies like the RIAA or MCPS though.