HMV has had a great 2009, with the closure of two of its main rivals in the UK, Zavvi and Woolworths, its been able to posture itself as the only real mainstream music, film and game retailer on the UK High Street. Along with this new commercial reality they have been able to focus more on their games portfolio and grow on the back of the expansion of that market.

However, they know as well as anyone, that as we continue to move into a world of digital downloads their business model will slowly evaporate. Music, as we know, can now be downloaded or streamed directly into devices, whether it be Nokia ‘Comes with Music’ phones, the Iphone/Itouch family of devices or games consoles which are now starting to push full price product through their online distribution solutions.

Hence they have invested and purchased 50% of 7Digital a UK based online retailer and distribution solutions company. 7Digital is an online retailer which also has a music streaming service. It is yet to turn a profit and is operating in crowded market place alongside companies such as Spotify (streaming) and Itunes, Amazon and many others for downloads.

This deal with HMV is wider than just music though. HMV also owns Waterstones a leading book retailer which in recent years has been trying to find its way in the digital world, playing ‘catch up’ to Amazon. 7Digital’s technology and services will allow HMV to launch an online book store and leverage the audience 7Digital already claims to have along with the current consumer base HMV and Waterstones have access to.

Yet, why go to their store? What USP will it have? Itunes were the first and their software and hardware combo are superb. Additionally they now sell a wealth of other content through the Itunes store which again gets nicely organised into their software. Amazon and Wallmart sell everything you can think of online and their music stores are there to add value and perhaps pick up extra sales. They have been very successful. But why go to the HMV/7Digital store? Will they have exclusive content? Will there be some unique software that makes their experience high value and too good to miss for the educated content consumer?

Im doubtful, and I would imagine that to some degree the HMV management are yet to come up with the answers. Perhaps the aim is to provide back end services to other businesses that want to sell content and not focus on a direct to consumer relationship themselves. As one of the last large ‘content’ retailers on the high street it will be a fascinating 5 years to see how they manage to progress from being in the physical world of business to moving to an online proposition.

Perhaps their overall strategy is to hedge their bets and add value to HMV so that they become an attractive purchase for another company, perhaps a hardware manufacturer who needs to add a digital distribution element to their business model. This would be similar to when Nokia bought Loudeye a digital music service, which then evolved into the Nokia Comes with Music proposition. For example, if Sony bought HMV, they would overnight gain access to a music store, ebook store and physical stores, some of which could be shut down, and others transformed into their versions of the Apple Store equivalent.

The Beatles: Rock Band will be out on the 9/9/09 and its already been reviewed on multiple sites. They love it. Its the same old music, many of us already have, remixed and mastered as part of a game or game format many individuals already have and enjoy. What is interesting is that box sets of the same remixed and remastered recordings are being released along side the game.

Which will sell the more copies? Which will generate more revenue for the labels and publishers? This will be a huge milestone if the game does significantly better. It won’t be the start of a trend, far from it, but due to the historic nature of the content and act it will be a marker, a confirmation of all that we have learnt over the last 3-5 years.

Over the same time period new Ipod Touch products will be released. These may be nothing more than the same as the new (well not, so new now) Iphones, with faster CPU and graphics along with the cameras enclosed. However there has been speculation that along with a tablet type device (the jury is still out as to whether it will see the light of day) a new form of music purchase will be announced. A package of content, which includes videos, perhaps lyrics and who knows what else. Im still of the thinking that it might include some kind of Garage Band (the software for Macs) inspired tool for remixing tracks, as the actual individual instruments and vocals would be sent. Why pay for remixes when you can in effect get your audience to create them for you!

So will this be the month or even year where the music industry puts its hands in the air and recognises that whilst the music is important, what consumers want is interactivity but interaction with compelling content? Watch this space.

Once again I have left it too long to update the blog. Apologies! I hope though that those regular users of MusicResearch.com have been downloading our podcasts (music industry news) which have been more regular. In fact we are due to record very soon!

So what has happened in the music industry since I last posted? In some ways its been a rather retro three months, and the trend looks to continue. Some of the main stories that have made it big include:

The death of Michael Jackson. Clearly a sad and historic moment. Some would argue that we had seen the best of his work, and that all that lay ahead of him was an opportunity to relive that history with him in London. However I think its too early to make that call. It well known that he was working on new material with a range of interesting artists and producers. His record label have said that it WILL be released. Clearly he will have the last word on his career after all, and we shall see if it was just Michael Jackson doing an impersonation of Michael Jackson or whether he was treading new ground. I hope it was the latter.

Meanwhile ironically, but in many ways to be expected, sales of his music have rocketed since the announcement of his passing. Download stores and streaming services have seen his material dominate audience choice. I can speak from my own example, in that one of the first things I did when hearing the news was to go to Vid Zone on my PS3 and choose Thriller. A classic.

Another retro slice of news was one we have mentioned before on this site. Beatles Rockband. The game has now been shown off to the general public and pre-orders are already being taken. I expect demand for this game to be terrific if its not priced too high. The young will use it as a vehicle to explore classic music that they might have heard in passing but never actually owned whilst it will take music games to a wide demographic reaching out to older people who remember the Beatles first, second or third time around (in terms of re-releases of their albums!). It might also fuel an increase in CD sales of the new remastered recordings.

The game really does look terrific and the music has been remastered from the original tapes especially for this release by Sir George Martin’s son. It was pushed heavily by Microsoft at E3, the large games convention in May, but itll be cross platform and I would expect the Wii version to do extremely well.

Lastly, some pretty uptodate news. Well its more rumour than news. Apple is expected to bring out new IPOD Touch technology in September. However alongside the new Itouch and Ipod devices it is believed they will launch their ‘take’ on the tablet format of computer. The tablet has existed for sometime now, so what can Apple do to change things? Well from a technology front, it might have 3G or even 4G tech built in. It will be very thin and probably have multi touch tech on the front like an Iphone.

However it will clearly also have some key content tie ins. One of these is ‘Cocktail’ which some are describing as Apple’s attempt to redefine the album and make a ‘package’ of content valuable again to the consumer. Content to be included would be ongoing video footage, behind the scenes and other extras, which clearly might be experienced better on a larger screen device such as this tablet. However Im inclined to think that even if that content IS included, its not exactly ground breaking. Certainly not enough to make it a reason to buy the device.

Perhaps Apple have looked at the music game market and the clever music making device which uses LEDs made by Yamaha (the TENORI-ON) and thought that the way to go is to make music interactive to the masses. I can see the Apple Tablet having a type of simplified Garage Band built in (software on a regular Apple Mac), and when you download the ‘album’ you also get the seperate instrument and vocal tracks. This in turn would allow consumers to either listen to the studio mix or make their own.

Along with Apple’s recent move into the gaming world via the Iphone and Itouch, this in many ways, would be a nice fusion of their history of wanting to be seen as the facilitators of creative production (hence Imovie, Garage Band, Idvd etc on macs) and being seen as an alternative form of ‘fun’ via their appstore.

Now we just have to wait a few weeks to find out….

Sony have managed to slip some nifty new features into its latest Blue Ray players. These improvements allow the Blue Ray players to quickly convert video files for use onto a PSP or Sony Media Player. This is COULD be great news for PS3 owners as often this kind of software upgrade finds its way into PS3 firmware upgrades. This would mean users who use PlayTV could easily convert the files for use on the PSP without having to export to a PC or Mac first. 

The more hardware like the PS3 or computers in general can have conversion software built in the better for all of us. What would be great is if its implemented at a system level so that the moment the user tries to copy content from one machine to another, whether its video or audio, its automatically optomised for that hardware. This would take the ‘techie’ element away and result in making it user friendly to the vast majority of consumers out there.

For a while now I have been doing talks at various universities or even at the Dana centre (part of the London Science Museum), and the focus of the discussion often falls on the ‘quality’ of audio today.

In essence I find myself stating my case that the MP3 format might have helped the digital music player industry grow, but that it has held back the progress and sound quality of music for the majority of people.

The MP3 was launched at a point in history when memory capacity was limited. The MP3 format compresses the audio which results in the file taking up a lot less space. For example a CD quality file lasting around three and half minutes can be reduced from 38.5 Mb to around 3-10Mb depending on the amount of compression applied. 

Of course ‘compression’ cannot be done without a hit in the audio quality. The MP3 format in effect results in parts of the recording being removed. Normally its the part of the audio which is not crucial to the sound and ‘narrative’ of the music. This results in a range of frequencies being removed. Although not crucial to the listening experience these frequencies are noticeable, especially if played through a decent hifi rather than the standard Iphone headphones. Placed against a CD, a MP3 is clearly inferior for the majority of music genres. However, this reality has not stopped MP3 taking off and being the ‘format’ of choice for the majority of people. Apple have their own version called AAC, but this too is inferior to CD. 

Where as the visual would has not only avoided reducing quality (yes I know compression is used for digital broadcast - but it always has so compared to SD television its a win, win) but its actually gone HD and FULL HD mad. Maybe its because watching things is a primary activity, where as sound takes place whilst something else is taking place for the majority of people? However, I still believe that many people still listen to music just for the sake of listening to music, and hearing it in its full glory is something which most people would appreciate. Why else spend money on that expensive Bose Ipod dock if you don’t care about the sound quality?

Believe it or not audio HAS gone HD. We have 24 bit audio and it can be recorded and played back 192Khz (the frequency at which a sample is taken - the higher it is the more accurate the recording). Its just that, except for the production environment, these formats have failed to take off. Home cinema has helped a little as Blue Ray can support some of these formats, but for most people CD quality sound is still the best they have ever heard, and they live in a MP3 world for most of the time. 

The success of the MP3 format has been the main factor holding back progress. MP3 players were created to play back MP3s and hence new or even older alternative formats were locked out of the consumer offering. However the owner of MP3, Thomson, have now come up with MP3HD. This is excellent news!

What is great about MP3HD is that its backwards compatible with older players. So if you download a MP3HD file but your player can’t play HD files, it will still read it and just play a traditional MP3 version. However, when you upgrade your player then your files are already HD and you haven’t got a wasted download. Now these MP3HD files are not better than CD but are promising the same as CD sound, which is good. However, one assumes that the format could be extended to a FULL HD audio standard with the same backward compatible principles being applied.

The pressure to act is now with the actual download stores and hardware manufacturers to adopt this new standard. We want Amazon and co to offer MP3HD files for download and for hardware to support the files. Clearly download stores won’t jump at this despite the improved experience for customers. This is because of the extra bandwidth the stores will require to be able to send all this data to consumers. Additionally consumers will need fast broadband connections to recieve a file within a reasonable period of time. The latter of these concerns is not really relevant in most of the developed world with broadband fast enough to deliver this for most people.

The earlier concern, regarding the bandwidth download stores will have to use to deliver the files, is relevant. Indeed, this would most probably result in the files carrying a higher price. Though, this might stop the format establishing itself in the first place. Perhaps Thomson should lower any licensing fees required to use the format, at least to begin with, to help it take off?

Either way, its good to see that the quality of Audio is at last being made relevant at the consumer level and is not just an academic issue for the producers and professionals in the industry.

The demise of Spiralfrog has highlighted the reality of the ‘music for free’ model. This reality is simple: music is not free and costs to listen to and own. The record labels knew this and hence charged Spiralfrog a premium for granting access to their content. 

Unfortunately they did not have a strong enough business model and did not sell other services or generate enough income from advertising to be able to afford the music. This is interesting, as it demonstrates to consumers that the idea that there is no cost to music is phoney. Certianly Spiralfrog users now understand that there is a cost, because their service no longer exists.

However, one assumes that they will just migrate to another free music service such as Spotify. Spotify are clearly learning from the Spiralfrog story and has now announced that it will start to offer paid downloads via 7digital. 

Record labels want these new, legitimate services, to exist but then charge such high fees from them, they end up not allowing these services to bed in and grow. Hence, it is impertive that new music web ventures have a range of income sources from day one of launch. Especially in a market where advertising income on the net is down from anywhere from 2-20% depending on the sectors targetted. 

Meanwhile the Itunes music download service will start to vary the pricing structure of songs within its library. Some would argue that the timing is awful, as the industry as a whole is still struggling and we are in a recession, but the idea of increasing the COST of downloading music is interesting. Perhaps Apple is seeing if the legitimate download market is now becoming a way of life for many users rather than something to ‘play with ‘ on the side of their traditional music consumption habits. Accordingly they are testing the market to see if they can squeeze value back into certain recordings.

One thing is for sure, good music costs money to find, nurture and produce. Perhaps the re-education of the public has started?

To bring those of you who have missed this news story uptodate:

YouTube have stopped allowing UK residents to see music videos from major labels. This is because they have not been able to agree the package paid to the PRS, which is the body that represents the songwriters in the industry (not the record labels). 

In many ways, what Youtube have done is ethical. Their previous deal expired and without agreement they shouldn’t make the content available. Additionally, without knowing what the final figure is they might be worried about exposing themselves to an unknown fee to be retrospectively applied to this period of time where no deal is in place.

However, its also quite possible that YouTube is simply posturing, and showing the PRS that songwriters represented by the ‘industry’ need YouTube far more than YouTube need them. In some ways YouTube would be right, whilst songwriters whos material is being used in ‘premium’ videos are being pulled, other ‘long tail’ artists, people who are probably not even members of the PRS, are still having their content made available.

The PRS is slowly changing the nature of its membership as its now offering free membership. They want as many people to join as possible as this would, in theory, allow them to leverage that user base when negotiating with the likes of YouTube far more succesfully. 

However, one has to wonder if eventually a cultural levy might have to be placed by government on organisations such as YouTube. A Corporate license fee as it were, which is collected centrally. It would then be left to organisations such as the PRS and PPL and labels directly to negotiate with the holders of that fund, what cut they should have. 

Something has to give, as the current situation is not great for songwriters. Music has a value, and even if times have changed and the end consumer no longer has to pay, we need those that leverage that value to appreciate this and commit to principles which enshrine fair payment. 

Some artists have asked for a share of the ad revenue derived from Youtube clips, and this is already on offer to those who own the videos (which is a separate form of ownership of the song). Thats not insane, but at present the technical infrastructure for that does not really exist on sites such as Youtube. On Itunes all music is placed with ISRC codes, which means you can trace the publisher/songwriter, copyright holders etc. With Youtube, at present, none of that data is transferred, so how can they pay directly to a songwriters? They cant. Thats why the PRS has to negotiate a lump sum type approach to YouTube and then work it out from there. However, Im sure a company the size of YouTube could put the infrastructure in!

However, this is not a one-off situation. Warners recently pulled their own content from YouTube over a similar issue. So what is the solution? It might simply be that YouTube is not the right platform for professional material. Its ideal for amateur works, or previews of commercial works. However, unless they launch a commercial channel section, a proper pay to view scenario, then content owners and those that represent content owners, will just have to steer clear of the website.

Mind you, YouTube have recently announced that they will soon allow people to download content, and charge for this privilege. Perhaps that might be the middle ground? The PRS and Warners would accept a lower payment for the streaming material, seeing it as a type of preview. Consequently a fairer form of payment is transferred when the content is downloaded by the user, just as it would be in the world of Itunes.

The PRS has a simple message which is that content is made and owned by people. Real People. Most of them earn less than £5000 a year (so they claim). Its not healthy for them to have it withheld from the consumers or to have it available but without real financial remuneration.

Perhaps the answer to these issues, is not to dance around numbers but to look at the actual system and platform on offer and work together to build something that offers value for all. The Youtube model was built without having to take these issues into account, and was essentially for amateur content. Now its been adopted by everyone, yet its own business model and delivery options are not compatible with the commercial production world’s needs and that, it would seem, is the core issue. We, the content creators love YouTube, but need it to work with it to  change how it offers content with a tiered range of options. 

Is anyone having this conversation?

Hey Mr DJ, as Madonna once said, wanna put a record on? Or something like that anyway. DJs have been with us for some time and its become quite an art form. Loads of music lovers who are already musicians or who never got to grip with traditional music production have embraced this art form as way of making their mark on the creative process. 

The impact a DJ can have on a venue, due to the DJs taste in music and feel for the room is crucial to a venue or club’s success. Additionally once taken to a new level, completely new pieces of music can be born from the clever use of turntables and DJ equipment, from delays, samplers and the like.

Activision it seems loves DJing too. So much in fact, thats its next big music game, following Guitar Hero, will be DJ Hero! For me it makes total sense, more so than Guitar Hero. Over the last few years DJs have already been ‘mixing’ MP3s connected to controllers which didn’t actually have a record on them. You can even get a piece of hardware which takes the motions from a traditional set of decks and uses them to control MP3s.

Hence, there is no reason why the game can’t do everything these existing systems allow for the professionals. Except It will do more as its a game. It will be competitive, allow for Net play in some way and perhaps use the video and microphone elements of the consoles. However, what it will also mean from the perspective of the content owners, is that its a new download store. Thats right, if you have already bought music on Itunes, or Guitar Hero I bet youll need to buy it again in the new DJ format (mind you if you could use your OWN MP3s or Guitar Hero tracks that would be awesome). What would be available? Music videos I would imagine - it could actually reboot the market for music videos. In fact you could have a video mashup section too, which only worked with images.

Lastly, it would offer a much lower difficulty access level for wanna be DJs, and bring more people into music on a creative level, which cant be a bad thing. The new Nintendo DSi is already seeing this trend and embedding it into its design. The DS lite despite being a huge success, can’t play music (what can’t nowadays?!), so with the DSi upgrade Nintendo have implemented this missing feature. However, is it just another IPOD? No, Nintendo have also taken the DJ route. Its more of a creative tool than a ‘dumb’ player. Music can be slowed down, sped up and even have its pitch changed. Like Activision, Nintendo can see that people want to be able to do things with content, whether it be their own, or someone elses. 

So, it would seem we are now ALL going to become the DJ.

Wanna put a record on?

As demonstrated here, it seems that the UK will not get tough with those who download music (mainly) and film (secondly, with games following on from that) illegally. Other countries, lead by France, will be (or have) legislated on this issue.

However, despite France’s very aggressive laws, it will be interesting to find out how many people France will be pursuing through the courts on this issue. They are adopting a three strikes and you are out (disconnected from the net) system, which is what the BPI in the UK would like to see.

I wouldn’t be surprised if at some point a human rights organisation took a test case to the European Court for Human Rights to fight for our basic human right to have access to the democracy of all technologies; the internet. So we may find that this new law never really gets into ‘gear’ anyway. After all, when someone commits a driving offense, you can take away their right to drive, but not to access roads. I know thats not the strongest legal analogy/comparison, but you get the indicative point I’m trying to make. Hence, if the UK is not going to legislate, and if France’s efforts will be undermined via the courts, how do we move forward? How do we stop piracy?

Well, as discussed on our podcast (music industry news), the main two methods which are immediately available to us is education and changes in business models. However, our approach to education should not just explain that its ‘wrong’ (which is often counter productive and patronising). Instead, it should be a form of education that explains who is involved in making content so that consumers or non-consumers can start to relate to those who are losing out.

The second method is to bypass it altogether. FInd new income streams, whether they be ‘real world’ (such as tours etc) or changing the link between the person, or persons paying for the music and the actual consumer of the music. For example companies which are setup to offer free music (streamed or downloaded) but which is paid for by banner ads etc.

However, surely the future is about tagging all audio with metadata, and then making sure that data is read by all major OS platforms. Windows, Mac OSX, Linux, NXE, Sony XMB etc etc. Just as with the game consoles and mobile phones, its becoming normal for users to have to input credit card details into their machines so that content can be bought and accessed all the time. Well, if we had a working, fully supported metadata system, then as a piece of music or film was played, money would automatically be taken and delivered to one’s local collection society (to be shared amongst the named creators and IP owners). Does this mean we would be paying for everything we listen to or experience?

It doesn’t have to. Some sites would offer ‘free to listen/download’ experiences as they would have purchased a global license (paid for via advertising for example) and the consumer would not be charged from downloading on that site. However, should the consumer wish to pass the file onto the web, then anyone downloading it would activate the metadata contained within it (as it would ‘know’ it wasn’t a direct download from a licensed site) thereby causing the OS to charge the users credit card/mobile phone bill.

What happens if someone wants to transfer content from one machine to another? As long as the OS could recognise it was a machine to machine connection (similar to HDMI being ‘aware’) then it would allow it at no cost.

This might sound very complicated, but I doubt its more complicated than the current ‘lack of system’. Also its designed to make the rules clear, and provide an income for everyone. What stands in its way?

1. Hardware/software companies continuing to support their own files and formats to help boost a certain type of platform.
2. Collection agencies not working together. Something which is not getting better. Europe has a plethora of them, which in 2009 is looking very outdated. If the whole of the USA has only a handful, how come Europe has agencies for everyone country, with some countries having more than one?!!?
3. Civil Rights campaigns, complaining people are being charged to access information on the web. Someone will need to tell them that content owners, and creators have rights, copyrights, which need to be respected too. No one ever protested about having to buy a book or even pay a small fee to borrow it from some libraries (via a joining charge or local/national tax). 
4. We now have millions users with ‘old’ hardware and software already out there, which would not be compatible with this proposed system (without a software update - not possible on all devices). The longer we wait to create the system, the harder it will be to implement it without disenfranchising large members of the audience. Trying to service both audiences, would be similar to the effect of having DRM in files whilst still selling non-protected audio CDs.

If a system of metadata is not going to work, or cannot be implemented then all is not doom and gloom. However, what it means is that we will have to rely on education and alternative business models (alternative from just digitzing the traditional record label model, still pursued by many) exclusively. Not a disaster at all, but it will mean that the debate on the rights and wrongs of piracy and more importantly, the monitory value of music will never end.

For sometime we have been used to music and advertising working together. In many ways, its never been subtle, from the famous Pepsi style ads, to HIp Hop acts wearing branded goods such as Nike and Reebok.

However, its never become a point of standard practise. Mainly because not all acts or all songs reach a large enough or relevant enough audience. Additionally, what with the economy being so tough at present, advertisers demand stats and feedback to deomstrate the bang they get for their buck.

A few years back, Sting’s video for Desert Rose was doubled up as the advert for a Jaguar. It was still subtle enough (in contrast to a pepsi ad) to fit around the narrative of the video but had enough shots of the car so that it could be used in a shortened form for tv and cinema adverts.

With everyone, reaching out and grasping new income models will the idea of advertiser driven content raise its head? We are already seeing how much of the tv industry is supplementing its income due to a market that has gone through huge amounts of fragmentation, and due to advert slots themselves being less effective partially attributed to the tivo style technologies that now exist. 

Shows are either being commissioned by sponsors or prexisting shows are being touted to possible sponsors who may like the concept and see a fit with their product or message.

Why not the same with music? I’m not only suggesting this for individual tracks or artists. Why not apply this approach to the great untapped ‘brand’ of the label itself? Labels have never understood brand. Even though they take great pride in their LABEL, apart from the DefJams or specialist jazz labels of this world, the ‘label’ has rarely stood for anything in the minds of the consumer. Consumers, for the large part, did not buy this or that album because it was on Universal or EMI. They followed the act.

However, if the labels can actually come up with identities (you could call them labels!) which have a very strong focus, and start to sell them as ‘channels’ being targeted at specific target groups- why then they might find that they have a platform which advertisers will want to embrace. This would help create targeted income on Utube Channels, physical product, tv slots. One can even see opportunities with regard to how their music is ‘presented’ on platforms such as Itunes, Amazon or the new mobile ‘unlimited’ music services.

Of course this could have a cynical affect on the music. However, it shouldn’t. After all, record labels have always pushed music that was appealing to an audience. Without doing that, it would not sell and hence not be supported by the label. All we are doing here is doing it in a more coordinated way and making sure the record company’s own label really means something.

We have already seen how music shows on tv are being snapped up by sponsors and ad agencies the world over. Now is the time to take that trend and make it apply to music in general and not just American idol and its copycat shows.