Sundtempest

Reporting, analysis, and opinions on the latest trends and developments in the music industry.

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LG and Omnifone launch unlimited music service for mobile phones

Omnifone, a UK-based company that provides applications to mobile phone manufacturers, recently announced a new point-of-connection music service called MusicStation Max as well as a partnership with LG Electronics, who will be rolling out the service in new phones in several months.

Described by Omnifone as the “world’s first pre-licensed unlimited mobile music phones”, any device integrating MusicStation Max (such as the upcoming LG MusicStation Max 3G handset) will allow customers to download and share unlimited amounts of music as part of a combined music, data, and voice plan. Playlists and downloaded music are backed up on a server so that users of MusicStation can “migrate their consumer experience” in the event of a lost phone or expired contract.

Though some news outlets have reported that MusicStation is free, this is not entirely true. While users of the service may download unlimited amounts of music, the telecom operators (such as LG, Vodafone, and others) offering the service as part of a combined plan may charge customers to access it.

Omnifone has stated that more than 1.6 million songs will be available thanks to a licensing agreement with Universal Music Group. Previous Omnifone music services have involved contracts with all four major record labels.

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Well, I can’t really say “I called it,” technically. But hey - this did come no more than two weeks after I posted my observations on the industry trend towards large-scale, point-of-connection models.

When reading the other media coverage of this story, I really found it frustrating that the word free was consistently used to describe MusicStation Max. Maybe I’m crazy, but as I wrote in my report, if it’s being bundled with other services and the rate for said services is increased, then it really isn’t free. Comcast cable presents things the same way, and it irks me just as much. They state that you can get “free” On Demand movies with your cable service. Sounds great, but their advertising and website neglect to mention that it won’t work unless you have a digital cable box, which of course costs another $8 or so per month (and you don’t need the box to actually receive standard cable service.)

Semantics aside, this is a pretty neat development. I was impressed by the remote backup feature and the fact that user playlists and music are transferable between providers that use MusicStation; cell phone companies aren’t exactly known for being nice to people switching or stopping their service, so not having to worry about your music collection being lost at the end of a contract is great.

Still, I am disappointed that no information is available on the financial arrangements Omnifone made with their music licensors, like Universal. Will royalties be paid on the basis of monitored song downloads? Of each phone sold with MusicStation enabled? Of each phone activated? How are artists going to get their share of the money (assuming they get one at all?) Hopefully, we’ll hear more details as time goes on.

NOTE: For those of you wondering why this story really matters, you may be surprised to know that the mobile sector of the music industry is inexplicably profitable, generating billions of dollars per year in revenue. It’s the only market where you can sell people cut down, poor quality songs for $3 a piece. It’s not even as if you can’t make your own ringtones easily for free, either! Imagine how happy Steve Jobs would be if he could triple or quadruple the prices on iTunes while re-encoding everything to 64kbps and only selling you 30 seconds of each song, which in turn can only be played on a single computer and can’t be transferred to a new computer (which you would probably need in about 6-12 months).

It’s a crazy business…

This entry was posted on Tuesday, February 12th, 2008 at 8:05 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Rhapsody acquires Yahoo music service subscribers

Internet portal and search giant Yahoo formally announced today that all customers of Music Unlimited, Yahoo’s subscription-based music service, will be transferred to Rhapsody Networks, one of the larger competitors in the world of digital music distribution.

Though Rhapsody is not the most widely digital music service (that distinction goes to iTunes) it still boasts 2.75 million subscribers worldwide. Yahoo Music Unlimited, in comparison, is only estimated to have about 400,000 paying users. These subscribers will be migrated to Rhapsody’s service in the next half year, and will keep their old subscription rate temporarily ($5.99-$8.99) - after some period of time, they must switch to Rhapsody’s fee structure ($12.99 and up) to keep their account.

As part of the deal, Rhapsody will be integrated into Yahoo’s heavily-trafficked music portal, which sees over 20 million visitors per month. Other terms of the deal have not yet been disclosed.

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At last, major online music retailers providers are merging! While I’m as much of a capitalist and proponent of start-up entrepreneurship as the next guy, I think the recent proliferation of (mostly unsuccessful) online stores and services delivering music has really gotten out of hand. Everyone wants to beat iTunes, and no one is even close to approaching Apple’s market share. Franky, I think the market is more than saturated, and all these new retailers are not making it easy for themselves in terms of how they run their business.

Take eMusic for example. $9.99 for 30 songs is a good deal, especially since they’re MP3 format. The library isn’t as big as what iTunes offers, though, and there’s no “rollover” - forget to download your 30 MP3s one month and you’ve basically wasted your money. Nonetheless, for avid music fans it’s pretty nice, and I ended up getting my dad a subscription for awhile. After using it for about half a year, he decided he would stop since he wasn’t really downloading enough music for it to be worthwhile.

I canceled the account, only to find out a month or two later that it hadn’t been canceled. The provided login didn’t work, yet I was still being charged. The site offered no sort of customer service line to resolve this sort of thing, just a tedious automated menu system eventually telling me to email them. So I explained the situation in a polite email, sent it, and 5 minutes later received an automated response telling me to log on to the site to cancel my account, or email them. Very helpful, considering I just sent them an email asking to cancel my account, and I was unable to log into the site.

So, I sent them another email to the exact address specified, with all the information requested, and got another email within moments; the exact same email as the first automated response. Does this really sound appealing to anyone? Why does a top competitor in the digital music market have horrendous customer service?

Anecdotal examples aside, this particular sector of the music industry, while growing, is not really big enough to support the multitude of new businesses that seem to be cropping up every other week. Consolidation of the stronger ones should (hopefully) lead to more well-rounded, better-run offerings. In this case, Rhapsody is sure to see a boost in users not only from the Music Unlimited migration, but also from the exposure on Yahoo’s portal. I hope other companies - I’m looking at you, Qtrax and Spiralfrog - take note.

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This entry was posted on Monday, February 4th, 2008 at 7:55 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Qtrax off to a rocky start

Qtrax, initially a P2P network from the days of Napster, has run into some difficulties with the launch of its new digital music distribution service during the MIDEM conference in Cannes, France last weekend. Qtrax, which now deals exclusively in legal music, had promised a vast library of tens of millions of songs, thanks to “landmark deals” with the major labels. The key differentiating feature of the site is that said music is completely free to download (albeit not CD-quality, and protected with DRM), with an entirely ad-based revenue model covering the costs.

However, problems arose when all four major labels issued statements that they had not signed any deals with Qtrax. Universal, Warner, Sony BMG and EMI have all contradicted the claims of Qtrax that any sort of deals are in place for the distribution of the labels’ music. Allan Klepfisz, president of Qtrax, has acknowledged that the launch will need to be delayed as a result, but insists that the majors still support the service, despite the lack of formal agreements.

Additionally, Qtrax downloads are, as of now, incompatible with the Apple iPod. Though Allan has promised compatibility with the iPod without the help of Apple, technology analysts such as Rob Enderle are doubtful that compatibility will be achieved, as Apple’s FairPlay system of DRM is highly-guarded.

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Somehow, I am not really surprised that Qtrax has gotten a little ahead of itself. I heard about the site for the first time last week and was skeptical that any major label would sign on to an entirely ad-based revenue scheme that involved actual downloading, as opposed to just streaming. In fact, at the same time I heard about Qtrax, I also discovered SpiralFrog, another new site with the same premise - free downloads supported by ads. SpiralFrog has not officially launched yet either, but already, top management is jumping ship, possibly because they have only managed to gain support from a single major label, Universal. Hey, I’d feel uncomfortable too making all of my music entirely free and just crossing my fingers that advertisers will pay enough money to make up for it.

Even setting aside the issue of major label support, the problem here is that I don’t think people are really interested in being bombarded with ads so they can download mediocre-quality, DRM-protected music that won’t work with their iPod. Amazon already offers DRM-free downloads at dirt cheap prices, and iTunes certainly has had no problems making billions of sales. Last.fm’s recent announcement covers all the people who don’t feel like paying but just want to check out a few tracks here and there. Is there really a market for something like Qtrax?

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This entry was posted on Tuesday, January 29th, 2008 at 4:39 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Last.fm announces plan to “Free the Music”

Yesterday, the popular social music & streaming radio website Last.fm announced a new plan to make all music on their website free to stream on-demand, by any user. This encompasses all music available on Last.fm, including complete albums from all four of the major record labels, such as Sony BMG and Universal Music Group. This service, which is technically in a “public beta period”, is already available in the U.S., U.K., and Germany, with immediate plans to broaden coverage.

While Last.fm, as a large internet radio provider, already had license agreements with royalty collection agencies such as SoundExchange to compensate publishers and artists, this new service will add several new layers of monetization. Any artist or label is now able to create a payment arrangement with Last.fm, with a number of options to choose from upon registration. Even unsigned, independent musicians who upload their music can collect royalties directly for random streaming and on-demand plays of their music. Artists can also elect to not participate in the payment program, though their music will still be freely available.

The secondary layer of monetization comes from a premium subscription service which is also already in the public beta phase. This service will be required for users to stream specific tracks more than three times. Other tentative features for subscribers include removal of ads on the site, priority access during peak traffic periods, and the ability to turn a personal profile page into a “portable radio station” that can be accessed by anyone from any location. The subscription service will be offered for €2.50 per month ($3.65 in U.S. dollars.)

This subscription model, in addition to existing advertising revenue, will fund the promised royalty payments to artists and labels. Though it is likely that exact figures will fluctuate, Last.fm has put forth a basic explanation of how money will be paid. There are two variables that determine what category a stream falls into: whether the listener is a free user or paying subscriber, and whether the song is streamed on-demand or part of the radio service.

* One free radio stream will yield a portion of 10% of Last.fm’s net revenue from the free radio service.
* One premium radio stream will yield either a portion of 10% of the net revenue from the premium radio service, OR $.0005 (one twentieth of one cent), whichever is greater.
* One free on-demand stream will yield a portion of 30% of Last.fm’s net revenue from the free on-demand service.
* One premium on-demand stream will yield either a portion of 30% of Last.fm’s net revenue from the premium on-demand service, OR $.0005, whichever is greater.

It is not explicitly stated how Last.fm will distribute the portions of their net revenue among all the artists and labels who could possibly be collecting royalties, though presumably it will correspond directly with the frequency that each artist’s music was played as compared with the total number of streams in any given service.

Additional details on the new subscription service, royalty tabulation and collection, and other information is available at various pages in the Last.fm FAQ.

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To be honest, as an avid music fan and an independent musician, up until yesterday I had paid little attention to serious usage of Last.fm. As a listener, I do still have the software installed on my computer, though I don’t often use it because - frankly - my Winamp playlist is a bit embarrassing. Besides that, the social music concept never quite caught on with me, for one reason or another. As an artist, I was frustrated with the fact that I have limited control over how my music is presented; though I have at least 40 tracks in the system that I have personally written, arranged, or participated in, it is spread over at least 15 separate “artists”, because the system apparently differentiates between “zircon (Andrew Aversa)”, “zircon”, and “Sixto Sounds, zircon”, for example.

However, this announcement has grabbed my attention and interest. Internet radio seems to be a source of frustration for many people in the music industry, as there are millions of interested listeners and perhaps tens of thousands of streaming stations, but very little actual revenue involved. Case in point; in 2006, SoundExchange, the only organization licensed in the U.S. to collect royalties for internet and satellite radio broadcasts on behalf of record labels, artists, and performers, scraped together a mere $20 million from the entirety of the internet and satellite radio industries. Certainly a paltry number compared to the multibillion dollar size of the U.S. music industry, or the nearly $800 million revenue of ASCAP, which collects on more traditional royalty-generating sources.

Certainly, if anyone were to change this, Last.fm would be a prime candidate given their massive user-base, and the accompanying prime-rate advertising income. Now that they’re promising (and delivering) staggering amounts of free music from every significant major source and countless independent and underground ones, I have no doubts that they will attract even more users than even before. I might not ever have been a dedicated fan of the site myself, but admittedly, they’ve got one of the most polished and least obtrusive interfaces in the business. No clunky Flash design, no pop-ups, no “shoot the monkey” ads, no “Jedi vs. Sith” applications, no software to download (unless you want to scrobble.) All things considered, I’d say Last.fm really is at the top of the internet radio game right now.

But in this particular niche of the industry, is being the best even going to be enough? Last summer, I had the opportunity of hearing a talk by Pandora founder Tim Westergren. Though he didn’t give any actual numbers, he explained that Pandora required a vast amount of investment to create and maintain, and that it was not truly profitable yet, especially considering all the royalties that they need to pay. Last.fm appears to be doing better at the moment, but now that anyone can “cash in”, will they be able to sustain a healthy profit? The subscription system is a nice idea, but historically, music subscription services have underperformed. iTunes has maintained massive dominance over the digital music market share, for example, against many subscription-based competitors like Napster, eMusic, and Rhapsody.

Though they have a better shot at it than anyone else, I’m not convinced that Last.fm’s new initiative will truly create a net radio revolution like many in the music industry have been hoping for. I also strongly doubt that it will have any meaningful impact on independent artists. My main “zircon” profile lists over 65,000 plays scrobbled. That’s not a small number, but assuming $.0005 per scrobble (and remember, scrobbles don’t equate to actual streaming plays on the last.fm site) that’s only $32.50 in royalties - a truly nominal amount. Even looking at a major artist, like The Prodigy, their 12 million scrobbles would only translate to about $6000, a negligible number for an established, touring act with Platinum and Gold records to their name.

All that being said, who knows? Maybe thanks to this, Last.fm will be as valuable as YouTube or Facebook a year from now, and listeners and artists alike will be happier than ever. Either way, I’m interested enough to start scrobbling again. And I should probably remove Jock Jams: Volume 4 from my playlist.

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This entry was posted on Thursday, January 24th, 2008 at 6:24 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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