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.

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….

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?

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.

Ars Technica discusses the UKs intention to follow the USA partially and extend copyright on the sound recording (see here). The article discusses the moral issue, the moral issue from the point of the consumer - the public and the concept of something entering the Public Domain. However, there is another moral issue. The issue of the artists. 

When I refer to the issue of the artists I am not backing the Cliff Richard position. They are the artists with reasonable record deals (of sorts) and so might initially benefit from the extension. However, I am focusing the light on all the musicians who were paid ‘buy-outs’ for featuring on records or signed awful deals. They were young and tied themselves into a deal which lasted the length of the copyright. The current 50 year rule gives them a second chance. 

For example they could remaster and print their own copies of the music. Sell it on the net or carry CDs around with them on the gig circuit. With the current demand for live music, there are many acts back on the road. Some are just playing pubs and clubs, but they are out there and they could sell 10/20 CDs a night. Its a potential income for them and a way of undoing a ‘wrong’.

50 years seems a fair amount of time for a record label/original copyright owner to make money from the recordings. Also, I think Cliff Richard just misses the point. If he let his audio recordings expire, then he could sell them direct via his website and gigs just like the wee bands doing the pubs and clubs. He would make a fortune.

Let the copyright die at 50 years. Its morally the right thing to do. Not just for consumers but very much for all the muscians and artists involved in the music originally.

Hot on the heels of my streaming versus downloads rant we have this:

Pret A Manger (or however you spell it) offers free Wifi!

Now, this is not new for our US readers, in that there are whole CITIES which have free WiFi (even though I believe one of Bush’s last acts as Da Presidente is to have said no federal help there as its bad for the market or something. But its ok to throw tons of money at badly run car companies). For those of us though, stuck on this wee Island its very cool. Most coffee houses charge, or at least embarrass you into asking for a pin or password, which means you have to order something.

Not here though. No. Here they have worked out that if people are encouraged to stay, then they might get the tummy rumbles, or thirsty. Where better to have lots of people all getting tumbles and thirsty than in a coffee shop/restaurant. Clever that. 

What does this mean? It means that if the market place works as it should (just as its proven to so well in the financial industry) then all the other coffee houses MIGHT follow suite. THEN, at that point, Ill be more pro streaming, as I can pop in somewhere, get a coffee and watch something from my PS3 at home streaming to my PSP in my pocket. 

As long as the signal works in the loo too, I’m sorted.

As predicted by many, streaming is slowly becoming the way to receive data. Here is a list (not exhaustive) of current random applications and services which use streaming:

You Tube: on computers, phones and other portable devices

Phones: 3G and Wifi allow streaming of video content and music. From ‘consumer phones’ to corporate Blackberry’s, they all allow content to be streamed.

BBC Iplayer: Perhaps not huge outside of the UK (as its a UK only service!), but one of the Nets greatest success stories. Backed by the tax paying public, the BBC have created a robust and high quality system which has been embraced by the public. 

Streaming though is now entering the world of the console and setup box. In recent months and weeks we have had Microsoft enter an agreement with Netflix to facilitate the streaming of its content through the Xbox360 platform, Playstation will soon have music videos being streamed through its media centre and Blockbuster have announced its stand alone streaming box which is similar to the Netflix stand alone products already out there.

In the UK Sky have also launched their version of the IPlayer and there is talk they might go into partnership with console companies to offer the streaming service directly through the console. 

Now most of these services are video first, with audio second. However there has been a steady growth of audio streaming websites (often with music videos) on the net. Some are subscription based and others free to the consumer but funded through advertising. Check our Deezer.com as an example. 

The point is this - downloading might be old hat already. How does this make you feel? Does it matter if the data is actually on your device if the technology allows you to access and recall it whenever you want, whereever you want? 

Now clearly there are limits to this technology. What happens if there is no Wifi or 3G signal? Well lets be honest, in Urban areas that scenario is becoming less common. However for us country dwellers (I live on the edge of town!), we do still struggle to get constant 3G, or even decent speed broadband (where I live we still only get 1.5mb a second!). Streaming You Tube in my household is a non starter at peak times of the day, so expecting high quality audio or video is just a dream! 

However, are people like me being left behind? Well some would say ‘no’ as downloading is still here, still viable. For how long though? Streaming is not piracy free, far from it - but it is a lot more secure than downloads. So won’t content owners push for streamed content as it keeps the content out of the actual hands of the consumer for longer? I.E. its passes through our systems, but unless we are technical, it never leaves a trace we can access. 

Personally I’m not a fan of this new reality. I like the option and welcome it as another way of accessing content (once my home broadband can use it!), but I want to be able to take my PSP on a plane and watch a movie. Something I can’t do unless I have downloaded it. Mind you they have now started allowing mobile phone calls on planes (you have to sell your wife though to fund it), so maybe we WILL be able to stream even when 30,000 feet in the air! 

Whats your opinion? Streaming versus downloads - what wins overall for you? 

Recently Nokia has announced its Comes With Music range of products. This is where you get one of their handsets and can then legally download an unlimited amount of music via their service for a year onto your newly acquired phone. 

Now when we say ‘unlimited’ that always means ‘within reason’ or that which could be ‘reasonably’ listened to by an individual in a year. 

The point is, this is slowly becoming a mainstream model. Sony Music is launching its own version (it has in scandinavia already) along with Sony Ericsson. I think we can expect that a similar deal will eventually work with the PS3/PSP platforms (at least for Sony content) and EMI recently went into a joint venture with Warner Music, not tied to a piece of hardware but allowing ‘unlimited’ downloads for a one off fee. 

Now in many respects these deals with labels add REAL value to music. The labels will get paid a slice off the hardware price or package fee (as with the EMI platform). The customer values music enough to want it and pro-actively download it, but they have lost the sense that they should pay individually for each track/album. Yet this way they are still paying for it, without feeling that they are - and then the money is distributed through to the labels and appropiate artists/songwriters etc etc. 

The flip side is that it could be perceived as the nail in the coffin of the traditional value system. The system which says:

‘That an artist or collection of artists and skilled individuals spent ‘x’ amount of time on this track/album. By purchasing it you are supporting them directly (and not the label - even though must of the money used to go to the label) and making sure they can continue to make music to the same high standard.’

Also it could be a way of blocking off the long tail. I.E. if an individual or band cannot get with a content aggregator.  They may also find that these new services only push material from major labels, as by associated with material with high cache levels adds value to the hardware and is a win, win; for the labels and tech companies. 

Does this squeeze out the individual, semi-pro? If they are left to ’sell’ their music, it would put them at a perceived disadvantage in the market place compared to the labels who have their ‘price hidden’ in the cost of the phone etc etc. 

Times are a-changing as they have been non-stop for the last 10 years. However, is something fundamental happening in front our eyes? As labels panic and seek to find an income (something which is kinda important for a business) are they undermining, further, the very product they wish to make money out of? Or, are they smelling the roses and leveraging the content the best way they can, today, making sure there is money to invest into the music of tomorrow.

Also does this mean that it will impossible to have a complete music collection in the future? Might we see a situation, as with movies and Blueray, that certain acts can only be listened to on certain playback devices? I’m not too sure thats ‘bad’ as its the norm for videogames and as I said, movies. However it would be a complete change for the consumer. 

Discuss……