“As (Spotify) got bigger, the annoying adverts started to creep in and, with them, the gnawing sense that it was unfair to get so much use out of a service without paying. So a year ago, I went premium…
“But last week I reverted back ...
“For me, Spotify is a victim of the conundrum that almost all internet industries have yet to resolve — when you can get something so good for free, why pay?”
That is ironic because it is the same argument some onlookers use to suggest The Times’ own payment strategy “won’t work” (you’ll need to be a subscriber to read Ford’s piece).
Spotify’s raison d’être is making the listening experience so appealing and easy that people will want to pay for it rather than download illegally or elsewhere for free.
It’s having some success within that. Having racked up three million paying subscribers from an apparent 15 million active users for a conversion rate of 20 percent, it has built the world’s largest music subscription business.
That is at a price slightly more than The Times’ own monthly news package, which does not come with a free trial in the same way Spotify does.
By contrast, The Times website has slipped from around 20 million unique monthly users to 115,000 paying online subscribers - a 0.57 percent conversion.
This, however, is not a like-for-like comparison. Only a minority of The Times’ total, pre-paywall monthly uniques could ever have been considered “active” (ie. core, regular) readers, in the same way Spotify describes them. Current online subscribers as a percentage of this figure are likely far higher.
By the same token, were Spotify to express its subscriber count as a percentage of total users, it would shrink drastically. That is especially so since, lately, its first-time, free user base has been inflated by its Facebook promotion.
]]>U.S. users are apparently still enjoying desktop streaming with no such limits, if the absence of gripes in social media is anything to go by.
Reasons are not clear, but Spotify is a firm believer in using limited desktop free to drive premium subscriptions. It has been also been experimenting with 48-hour free trials and with free retention periods for cancelling subscribers, as it figures out the most attractive freemium levers to push.
It appears to be working. Speaking during an event at Universal Music Group in London on Thursday, Spotify chief content officer Ken Parks revealed Spotify has now hit three million paying subscribers. That’s up from 2.5 million in November, when Spotify said it had 10 million active users and a 15 percent premium conversion ratio. Now Spotify says it is converting 20 percent to paid; it did not update the active-users count, though mathematics suggests it is 15 million.
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This success, as was already known, is driven by ringfencing mobile for premium-only. “This is the one thing people are willing to pay for,” Parks said. “We don’t think there’s a big willingness for people to pay for streaming to the PC.”
Sitting alongside Parks, Universal’s global digital chief Francis Keeling said: “The one thing Spotify has taught us is the necessity to have a free trial period to get consumers to see how good these services are.” Spotify’s Parks added: “Users who are exposing their listening on Facebook are three times as likely to become paid subscribers.
“The vast majority of customers are paying 120 dollars, pounds or euros every year, which is around twice the amount the average user purchases on a download service every year.”
Where next? Free is not just a premium conversion tool; advertising to free users makes up a sizeable minority of Spotify’s revenue. But Parks said: “We’ve got at least a couple of different revenue streams. Those won’t be the only ones over time.” He told paidContent e-commerce may become Spotify’s third revenue plank.
Now that Spotify has an in-app platform for third-party services like gig ticket seller Songkick, Spotify could take a cut from transactions third parties process inside Spotify, Parks suggested, albeit only speculatively.
Separately, Parks made a pitch to the small number of artists and labels withholding their music from streaming services like his over payouts.
“Withholding a record from Spotify doesn’t mean that it’s not available for streaming,” he argued. “All of this stuff is available on YouTube (NSDQ: GOOG). You’re just pushing them to somewhere it’s not monetisable.
“There’s illogic behind withholding a record. What you really want to do is reward the people who are spending $120 a year, rather than punish them by not making the records available on the platform.”
Most Spotify refuseniks have been cottage-industry, artist-owned labels or artists themselves, citing low payouts from label royalties. But EMI’s Coldplay also withheld its latest album from streaming services for the time being.
Sitting alongside Parks, Universal’s global digital chief Francis Keeling, whose own label - the world’s largest - includes some artists holding out from Spotify, echoed Parks’ comments: “The only thing those artists are doing are alienating their fanbase.
“Our agreements with artists are on a case-by-case basis. Over time, we’re trying to convince our artists that streaming services are the right thing to do and these services should be supported.”
Refuseniks make up just a tiny fraction of Spotify’s total addressable label partner base. Spotify explains that it mostly pays labels, not artists.
]]>]]>
In a confidential document obtained under the Freedom of Information Act, lobbying groups for the major rights holders claimed Google and Microsoft‘s Bing are making it “much more difficult” for people to find legal music and films online.
The private document, obtained by the free speech campaigners Open Rights Group and shared with the Guardian, urges the government to introduce a voluntary body that would remove rogue websites from internet search results.
The proposals were made to the culture minister Ed Vaizey as part of a series of consultations on internet piracy between rights holders, search giants and the government in November last year. The nine-page document was submitted on behalf of the British Phonographic Industry (BPI), the UK body for the music majors, the Motion Picture Association (MPA), the Premier League, the Publishers Association and the Pact, the film and TV independent producers’ trade body.
Privately, rights holders said there is a “spirit of optimism” between the entertainment groups and search engines as they attempt to usher in more legal media sites, including Google’s own fledgling music service.
Google has in the past year stepped up efforts to remove copyright-infringing content, launching a fast-track removal requests form and filtering terms “associated with infringement”. However, the rights holders claim in the document that “as time goes on, the situation is getting worse rather than better”.
“Consumers rely on search engines to find and access entertainment content and they play a vital role in the UK digital economy,” the rights holders state.
“At present, consumer searching for digital copies of copyright entertainment content are directed overwhelmingly to illegal sites and services.“The entertainment groups want Google to “continuously review key search words” and “effectively screen” mobile apps on Android smartphones in an effort to combat illicit sharing.
The document claims that 16 of the first 20 Google search results for chart singles link to “known legal sites”, according to searches by the BPI in September. In an attempt to persuade the government to clamp down on search engines, the groups claim that 41 percent of Google’s first-page results for bestselling books in April last year were “non-legal links” to websites.
“Much of the illegal activity in the digital economy is facilitated and encouraged by money-making rogue sites,” the document claimed.
“Intermediaries, unwittingly or by wilfully turning a blind eye (or in some cases, by encouraging such activity), play a key role in enabling content theft and often even profit from it. Only a comprehensive approach can address this issue.”
The entertainment bodies call for search engines to:
—Assign lower rankings to sites that “repeatedly” make available copyright-infringing material
—Prioritise sites that “obtain certification as a licensed site” for music and film downloading
—Stop indexing sites that are subject to court orders—Stop indexing “substantially infringing websites”
—Improve “notice and takedown” system
—Ensure that users are not directed to illicit filesharing sites through suggested search
—Ensure search engines do not advertise around unlawful sites or sell keywords associated with piracy or sell mobile apps “which facilitate infringement”
The chief executive of BPI, Geoff Taylor, said on Thursday: “The vast majority of consumers want search engines to direct them to legal sources of entertainment rather than the online black market.
“As search engines roll out high-quality content services, like Google Music, we want to build a constructive partnership that supports a legal online economy. We hope that Google and other search engines will respond positively.”
A spokeswoman for the Motion Picture Association added: “If you look for film or music via a search engine you usually find websites providing access to pirated films or music at the top of the list of results.
“This is confusing for consumers, damages the legal market and legitimises copyright theft. We are in dialogue with search engines, ISPs [internet service providers], advertising networks and payment processors about a code to deal with the escalating problem of online copyright theft which threatens the growth of the entire creative industries sector. This paper is a result of that dialogue and we appreciate government’s continuing efforts to help bring about a more responsible internet”.
Google declined to comment.
Peter Bradwell, campaigner for the Open Rights Group, said the proposal contained “some dangerous ideas”. He said: “It’s another plan to take on far too much power over what we’re allowed to look at and do online.”
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]]>On the eve of the big Midem music conference in Cannes, Rhapsody today says it is moving in to Europe by acquiring Napster International, the division service the UK and Germany. That is the latest piece of the jigsaw after the company in October announced Napster’s U.S. acquisition from Best Buy.
The company pioneered the unlimited music space in 2001 but, despite turning around customer decline following its spin-out from RealNetworks (NSDQ: RNWK) and Viacom (NYSE: VIA), its subscriber base has been overtaken four-year-old Spotify.
Last disclosed user counts were 750,000 versus 2.5 million. Napster brings an estimated 350,000 extra customers to Rhapsody. The combined figure of over a million, which Rhapsody itself disclosed on Thursday, is still shy of Spotify, but moving in to the big new territory of Europe - just as, vice versa, Spotify has embraced Rhapsody’s U.S. patch - could grow Rhapsody’s customer base further.
In Europe for the first time, Rhapsody will migrate Napster subscribers to its own platform in March, introducing its own web player, but the Napster brand and employees will remain in place in the UK and Germany.
Rdio, Mog, Spotify, Rhapsody, We7 and all manner of others are jostling for early dominance in a promising new paid content sector that has been ignited by mobile and by music labels seeking new growth after the slowdown of track sales.
Global music subscribers grew by 65 percent to 13.4 million in 2011, according to labels’ IFPI umbrella. But that is peanuts compared to what the sector could become as consumers switch from ownership to access. The opportunity is to create an iTunes beater.
Labels’ support has opened a window of opportunity for new entrants to race to own this new area. Here are the latest…
Beyond Oblivion, a fatally-named, New York-based unlimited music service invested in by News Corp and Allen & Co’s Stanley Shuman, has filed for bankruptcy, owing between $100 million and $500 million despite having not yet launched.
The company owes Sony (NYSE: SNE) Music Entertainment and Warner Music Group (NYSE: WMG) $50 million each, Reuters reports. News Corp.‘s digital chief Jon Miller is a board director.
Reasons for the collapse are not clear. News Corp had invested just $9.2 million for a 23 percent stake in April 2010.
Norway-based Aspiro, which provides its music service WiMP through ISP and white label partners mostly in Spotify’s backyard of Scandinavia, on Thursday announced its latest ISP partner, the Netherlands’ Ziggo. The deal guarantees Aspiro at least nine million Swedish krona ($1.3 million) over two years.
Aspiro is now active in Sweden, Norway, Denmark, Portugal and the Netherlands but wants to expand in to new territories and is in the process of rolling out to Ireland and Germany.
DAB and internet radio maker Pure on Thursday unveiled its own unlimited-access cloud music service, Pure Music, for £4.99 a month in the UK. Naturally, the service is available on some of Pure’s own radios, but also on web and on smartphones, where music subscription services are getting the majority of their paid custom.
Pure has the device capability to make an impact in music on radio, but customers may already be more excited about unlimited music on new-wave “radio” devices like Sonos and through AirPlay than conventional “radio”, even internet radio, per se.
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]]>Half of 7digital’s 2011 downloads came through smartphones and tablets, thanks to new carriage on gadgets from Samsung, RIM (NSDQ: RIMM), Sony (NYSE: SNE) Ericsson (NSDQ: ERIC), Philips and Toshiba. But the new feature is being added through a HTML5 upgrade to its website, which had been neglected for three years, CEO Ben Drury tells paidContent.
The upgrade is not about a switch from ownership to unlimited access but, rather, about giving greater access to owned content. “7digital Player allows people to stream what they’ve purchased,” Drury says. “When you purchase a song from us, you really own it.” Previouly, 7digital’s web locker would let users re-download but not stream their songs directly.
HMV acquired half of 7digital for (appropriately) £7.7 million in 2009, when the company was loss-making. Now Drury says 7digital was in the black in 2011.
“We’ve moved a long way from that time,” he told me. “Since HMV bought their stake, our revenues have nearly tripled. We’re no Spotify, but financially we’re in a pretty good state relative to a lot of companies in digital music.”
Now 7digital is supporting the digital ambitions of a HMV which is seeing its core - retailing entertainment on plastic discs - diminish fast.
To compensate, HMV is selling more hardware like tablets and uses 7digital’s platform to power its own-brand digital music retail website. But it only avoided breaching bank covenants this month when record labels took HMV equity instead of money owed for supply.
“It was not a short-term fix - it was a substantive longer-term plan to support HMV,” Drury tells paidContent.
“There is obviously going to be the continued physical to digital transition over time. It’s shaping up to be a generational thing. It’s going to take a long time.”
For its part, 7digital, which maintains its core interest in selling music for ownership rather than renting access like Spotify, says it wants to to help HMV front up by “networking” rivals to iTunes Store and Amazon (NSDQ: AMZN) MP3…
A single 7digital account can be used on HMVDigital.com as well as 7digital’s roster of white label sites. “You will see those things coming closer together,” Drury says, referring to the HMV and 7digital sites.
]]>All this gives the IFPI some cause to be bullish. “At a time when other creative industries - in particular film, newspapers and book publishing - are only now rapidly shifting to online and mobile channels, the music industry’s level of digital penetration still dwarfs that of all other comparable sectors, except games,” its report says.
The group also cites “important progress” on piracy including France’s Hadopi law and similar measures tabled in South Korea, New Zealand and the U.S.. But, as usual, it does not let the year pass by without warning: “Widespread piracy is the biggest factor undermining the growth of the digital music business.”
Nielsen research for the IFPI says 28 percent of consumers globally use unauthorised music services each month, with Spain and Brazil seeing especially high and disruptive levels.
“The result of this activity is effectively a rigged music market,” the IFPI says. “Legal services, whatever their model, incur the business costs of being authorised and paying rights owners, as well as investments to develop secure payment methods and good quality services.
“This model is unsustainable when facing competition from infringing services that have greatly reduced costs and circumvent the normal rules of commercial business.”
The IFPI’s report did not break out total music industry revenue figures.
]]>» Apple Gets Hit With $1.9 Million Copyright Lawsuit By Chinese Writers
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» Brazilian and Chinese Internet Markets: Where Should You be Investing?
]]>But that absence is not indefinite.
]]>But that absence is not indefinite.
“Like all of Coldplay’s other titles, the new album will be on [Spotify] eventually,” the band’s manager David Holmes tells Businessweek.
The means that, for a small few individual acts with enough control over their own repertoire and the necessary inclination, streaming is now the unloved part of a windowed release strategy as seen elsewhere in the entertainment industries.
“I am very concerned,” Holmes added. “Spotify competes with download stores.” Coldplay wants to ensure that the people most likely to buy its music, as units for ownership, do so before giving everyone the opportunity to stream it for free with advertising support.
But many other acts, and certainly labels, have come to regard the opposite strategy as significant - they now hand exclusive first-week windows for new albums to services like Spotify precisely to drum up pre-sale excitement.
The UK music industry will debate the value of streaming on February 23, when a MusicTank panel hosts a discussion on the topic.
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]]>In the five weeks to December 31, HMV (LSE: HMV) Retail sales were 8.2 percent down on 2010’s equivalent period on a like-for-like basis.
“In the 144 stores refitted with an extended technology range of portable digital products, technology like for like sales were up 51 percent ..., an improvement in the previously reported average of 42 percent since the respective store refit dates,” the company told the City.
CEO Simon Fox: “The continuing actions to focus the business and to expand our technology offering are beginning to show through.
“We are seeing a combination of a slowing of the decline in music and film, and acceleration in the growth of technology. Undoubtedly trading conditions and the consumer environment remain challenging, but we remain confident in HMV’s future prospects.”
Fox did not quantify the supposed slowdown in the physical content sales crash, and the real issue is whether HMV has a growth strategy to emerge from it, since there certainly won’t be a reversal.
Stocking media gadgets like tablets and music players appears to be working, though puts HMV on a collision course with peers like Currys, countless other high street stores and e-tailers. HMV relaunched its digital content sales effort in 2011 but it has not yet gained tier-A consumer traction despite owning half of a jewel of UK digital media wholesaling, 7digital.
Remember, also, that HMV Retail’s figures include the benefit of growing gadget sales.
HMV still warns: “The economic environment and trading circumstances create material uncertainties which may cast doubt on the group’s ability to continue as a going concern in the future, and these uncertainties continue.”
Digital singles continue to boom, more than making up for lost physical sales. They are now 99.3 percent of all single sales. At this rate, CD singles sales, which clocked up 1.1 million units in 2011 (0.6 percent), may be entirely eliminated in 2012.
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Digital albums continue their more modest growth, which is not making up for physical decline. But LP album sales boomed by 43.7 percent and CDs are three quarters of the total.
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Singles have surpassed album sales thanks to digital downloads.
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In the last week of 2011, 5.7 million singles and one million albums were downloaded as gift recipients redeemed download vouchers online, the BPI said.
In total, music sales by volume increased by over three percent through 2011.
But growing volume does not equate to growing revenue. Last time revenue figures were released (by IFPI), the UK saw an 11 percent revenue dip in 2010 to £896 ($1387.76) million. Globally, the industry lost 8.4 percent of its revenue.
]]>“Of the 21 actions under this heading, 8 are completed, 5 are delayed, and 8 are on track,” according to the EC’s Digital Agenda for Europe Annual Progress Report 2011.
The project’s primary pillar is creating a “single digital market” to boost entertainment download and streaming services across borders, including by simplifying content licensing and harmonising online payments access.
Here are the upcoming key planks in Europe’s big digital content policy project in 2012…
In the UK, many of these points were already addressed by Professor Ian Hargreaves’ Review Of Intellectual Property And Growth, every recommendation of which the government has pledged to implement in order to simplify IP law for the digital and to make economic stimulus.
Recommended measures include creating a Digital Copyright Exchange, enabling automatic licensing of orphan works, decriminalising format-shifting and backing the EC’s cross-border licensing drive.
The Digital Copyright Exchange, a service from which online services can license content, will undergo creation in 2012.
According to a report in TorrentFreak, the Dutch Parliament on Friday said that it would not support a new plan introduced by the government’s justice department to make downloading movies and music illegal. This law, if passed, would apply to P2P sites like Pirate Bay, as well as the hundreds of others like it, but not necessarily streaming sites like Megavideo.
This appears to be only a preliminary motion from the Parliament: the original proposal is still making its way through legal channels will probably continue to be debated on both sides, and probably altered along the way.
At the moment, the issue in the Netherlands is hinging on the concept of “fair use.” Those who are opposed to restrictions on downloads believe that the media industry needs to focus instead on ways of delivering licensed content, rather than fighting those routes that are already in existence.
Private usage, they argue, is fair: selling that content on to others is not. In the words of Ernesto at TorrentFreak, the Parliament was concerned that such laws would “restrict the free flow of information, invade the privacy of citizens and invite copyright trolls.”
In countries like Germany and the U.S., private individuals have been subject to legal actions over unlicensed downloads; this is a route that those opposing the bill want to avoid. And given that some 30 percent Dutch people currently download media from the internet—it could indeed result in a legal nightmare if taken to its logical conclusion.
The Netherlands is not the only country in Europe looking at formally liberalizing the approach to illegal downloads: earlier in December the government in Switzerland issued a report that came to the same conclusion: the country currently has no legislation in place against illegal downloading, unlike France (with its three-strikes law) and Germany.
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]]>The report, penned by an unnamed “former CTO” as a guest post in Beta Beat in the New York Observer, describes Facebook’s approach to how it will place information into your new Timeline as a form of “payola,” the system once used by radio stations where they played music based on which labels paid them the most for the privilege.
The post was published partly in response to a page Facebook itself has created for users that provides explanation of how its advertising services work, titled “About Advertising in Facebook.” That page does not make any reference to how and if advertising will appear specifically in the new Timeline.
However, in the Beta Beat article, the implication is that Facebook will be using that Timeline as yet another ad vehicle, not just another way of presenting to you and others what it is that you do. It will work by using (and selling? that’s what Payola seems to imply) information about how you use Facebook, through an algorithm it calls “Graph Rank” (basic description of how it works here). That will include direct payments to the social network via Facebook Credits for games credits, watching premium videos and other content.
It’s unclear whether it will also include content from the comments you make in our own status updates: for example, does a recount of a recent trip to Monterey Aquarium trigger tags for fish, tourist attractions in a given region, or ecological charities?
Up to now, Facebook has made it pretty obvious—if not exactly easy to understand how—it makes a significant part of its revenue through marketing and advertising activities.
What seems to be the crux in this article is that Facebook hasn’t been making it very clear so far to its users that its newest innovation, the Timeline, will also be a part of this business model. Yet Facebook has actually been briefing brands to this effect. The ex-CTO writes:
“What most users don’t know is that the new features being introduced [in Timeline] are all centered around increasing the value of Facebook to advertisers, to the point where Facebook representatives have been selling the idea that Timeline is actually about re-conceptualizing users around their consumer preferences, or as they put it, ‘brands are now an essential part of people’s identities.’”
As Gigaom points out, should that really come as a huge surprise to users, given all the controversy that has already appeared around Facebook, its advertising services and privacy? That could be an insiders’ view, however. Do most of the 800 million users of the social network realise this? Do they care?
Update: Atlantic Wire has a response from Facebook: there is nothing new in this report. “Timeline doesn’t change anything for advertisers because we don’t share anyone’s personally identifiable information with advertisers,” a spokesperson told the blog. “Like with all products, we try to help advertisers understand how they work, but this is nothing new.” [original post continues below]
So far, the privacy controversies have resulted in settlements with regulators in the U.S. and elsewhere to make its practices more clear. And they could already be leading to lawsuits for the company.
We have contacted Facebook for a direct response to this story. It seems that at the least if these allegations continue to persist, we may either be seeing one more clarification in that “About Advertising on Facebook” page, or perhaps one more tweak to how that Timeline really ends up looking and behaving.
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]]>The answer to this question, for at least in the foreseeable future, is: not bloody likely.
]]>The answer to this question, for at least in the foreseeable future, is: not bloody likely.
Let’s start with the fact that MP3 itself is not all that it’s cracked up to be. It’s the lingua franca of ripped CDs and copyright infringement, but not of legitimate commercial music distribution. Apple (NSDQ: AAPL) supports MP3 with iTunes/iPod/iPhone, but not as its actual distribution format: Apple uses MPEG-4 AAC as its primary codec. AAC has better sound quality than MP3 at a given bit rate but doesn’t play seamlessly on some portables. Streaming services like Spotify and Rhapsody use different codecs altogether. The biggest MP3 retailer in the U.S. is Amazon (NSDQ: AMZN), with only 10 percent of the downloaded music market as of April 2011. It’s fair to say that none of the current growth in commercial digital music distribution is MP3-based, and it’s likely to stay that way. If you’re talking about paid content in music, you aren’t really talking about MP3s.
With that out of the way, let’s look at digital book content. It’s readable in plain ASCII text format, which is decades old and completely interoperable across devices. Yet there is no market for ASCII book content (in spite of attempts since the mid-90s), for various reasons but mainly because of its poor reproduction quality. And Adobe’s ubiquitous PDF is not well suited for today’s wide variety of digital devices because of its orientation towards printed pages and facsimiles thereof.
Right now, two e-book content formats vie for supremacy: Amazon’s proprietary markup format and EPUB, an open standard created by the International Digital Publishing Forum (IDPF), formerly known as the Open e-Book Forum. Both of these are straightforward markup languages with tags for paragraph, chapter heading, bold, italics, etc. It’s possible to translate from one to the other with minimal loss of fidelity, but they are different formats. And in most cases, they are both encrypted using different DRM schemes: Amazon uses its own, while most other e-books are marked up in EPUB and encrypted using Adobe’s DRM.
From the consumer’s perspective, the ideal would be a format that: preserves the look and feel of print typography; is readable (“reflowable”) on all types of devices; imposes no restrictions on copying or sharing; and is available from a variety of retailers. Well, it’s even more unlikely to exist (legally) for e-books than it does for music. EPUB was designed to be for e-books what MP3 is for music. But first of all, the MP3 codec pre-existed the digital music market by several years, while EPUB came out in 2007, the same year that Amazon launched the Kindle and several years after the first wave of e-readers hit the market. Secondly, EPUB does not have any serious technological advantages over other contemporaneous formats such as Amazon’s MOBI format, whereas MP3 had the advantage of compressing music files so that they could be sent to and from Internet sites over the then-prevalent dialup connections. In other words, there was no standard on which the e-book industry could build. Finally, recall that there isn’t really a significant commercial market for MP3s anyway.
Thus the legitimate e-book market will develop as any other technology market does: through competition. Competition results in one of two things: a dominant vendor with great customer acceptance, or vibrant competition with sub-optimal interoperability. Techies who have been around for a while know this to be true.
Many tech markets settle down to a long-term state of two or three players. In operating systems, there’s Windows and Mac OS (desktops and laptops); Android, iOS and BlackBerry OS (portables); and Linux and Windows (servers). The web browser market has the triumvirate of Microsoft (NSDQ: MSFT) (Internet Explorer), Google (NSDQ: GOOG) (Chrome), and Mozilla (Firefox). Other markets settle down to a single player whose dominance is tempered by a combination of legal constraints and consumer annoyance: currently Microsoft in office applications; Facebook in social networking; Intuit in personal finance software; and Apple in digital music.
Right now, the e-book industry is nearing a tipping point. Amazon has a marketshare of 58 percent (as of February 2011), while the Adobe/EPUB axis (Barnes & Noble (NYSE: BKS), Sony (NYSE: SNE), and others) claim a total of about 33 percent. (Apple’s iBooks is a distant third at 9 percent.) That’s not bad for Amazon, but it’s not like Apple’s digital music market share. Two things could happen: Amazon could pick up steam and move into Apple/music territory, or Barnes & Noble – or someone else – could gather momentum and reduce Amazon to perpetual-competitor status.
To evaluate what’s likely to happen in each of these scenarios, it’s important to look at how these services try to lock in consumers. The obvious feature that gets blamed for lock-in is DRM, but it’s not the only way. One of the reasons why Apple dropped DRM for music (though not the only one) is because it no longer needed DRM for lock-in; it could resort to more subtle means, such as the hassle of taking iTunes tracks and moving them to, say, your Android phone; or certain tricks Apple plays with its codecs to make them not play well with others.
If Amazon ends up with a more dominant market share, look for it to do similar things. Amazon is already experimenting with DRM-free distribution: Amazon’s Cloud Reader doesn’t use DRM, yet it also doesn’t offer copy-to-clipboard or print. Amazon will jettison DRM in most book market segments if and when it is sure that it no longer needs the technology to keep consumers on the farm. (Textbooks are likely to keep DRM indefinitely, at publishers’ insistence, given that students are not exactly willing buyers of textbooks.)
Yet even without DRM, an Amazon with 70 percent+ market share will be called a closed, proprietary monopolist. It may face antitrust inquiries in certain geographies, perhaps in Europe. Amazon will think of many ways to continue to lock consumers in, including continuing to use its proprietary markup language. Consumers and members of the techblogorati will complain about Amazon’s monopolistic behavior even as they praise its products’ design and gobble them up by the millions. Other e-book platform vendors will make their technologies as free, open, and interoperable as they can, but it will be too late – at least until the next major technological shift. In other words, this scenario will resemble Apple and the digital music market.
Now consider an Amazon with, say, 50 percent market share. The other e-book platform vendors will already have an infrastructure in place to interoperate among themselves while leaving Amazon out of the loop: EPUB plus Adobe’s DRM. They’ll keep DRM to help ensure that users stay on their collective farm and don’t wander over to Amazon-land, and they’ll offer interoperability among all Adobe-based reading devices (Nooks, Sony Readers, Kobo Readers, etc.) – not to mention apps for every major general-purpose platform. Amazon will also be likely to hang on to DRM so that it loses fewer customers to its competitors.
In that case, there will be no complaints about monopolistic behavior and no antitrust inquiries, but there will be more DRM. Some pundits will praise the vibrancy of a competitive market in which vendors constantly try to outdo each other with features and low prices, especially since the entire market must (like music) compete with free and illegal e-books. But the punditry will also complain about consumer confusion and lack of interoperability. In other words, this scenario will resemble Apple and Google in the current smartphone market (where a recent study shows Google’s Android leading with 53 percent share).
But wait: what happens if Amazon loses the plot and ceases to own even a plurality of the market? One way this could happen is if Amazon flubs its expansion into the tablet market – which, judging by the initial mixed reactions to the Kindle Fire, is not out of the question. There is some question as to whether e-readers as a device class will survive the inevitable onslaught of cheap tablets from vendors looking to cut into the iPad’s market share. It could be that e-reader devices shrink into irrelevance as a device class and consumers will do their e-reading on tablets, phones, and other devices.
In that scenario, Amazon will continue to succeed as an e-book retailer, if for no other reason than its enormous overall online retail presence. But then just take whichever company becomes the new market leader and apply one of the two scenarios above to it. (For example, if Apple’s dominance in tablets continues, then Apple’s iBooks may dominate e-reading after all; and they know how to play that hand very well.)
The point is that in none of these scenarios do we get all three attributes: ease of use, interoperability, and choice – the way we do with print books. Technology markets like this do not exist. They are mirages. Just like the commercial market for MP3s.
Bill Rosenblatt (@copyrightandtec) is president of GiantSteps Media Technology Strategies, a consulting firm, author of the Copyright and Technology blog, and chair of the Copyright and Technology conferences. Email him at billr@giantstepsmts.com.
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]]>The rise shows that if Spotify is the music service that is getting all the attention at the moment, bringing lots of awareness of the streaming music model, it is also the case that its rising tide is also lifting other boats.
Rhapsody says that it is delivering on average more than 10 million tracks daily—meaning that it has a fairly high level of engagement from its paying users, with some 10 tracks listened to every day.
Rhapsody gives users the ability to stream unlimited amounts of music from its catalog of 13 million tracks for a flat fee of $9.99 per month. Unlike competitors like Spotify, it has not elected to run with a freemium model, although it does offer a free 14-day trial.
On the occasion of the million-subscriber milestone, I had a chat with Jon Irwin, Rhapsody’s president, about what the company has planned next:
On partnerships: Rhapsody claims to be available on more devices—more than 60—than any other music service; but so far the company has yet to sign a deal with a device maker to preload and have a special prime place on the device. That’s a key area for music companies to explore, since many OEMs do not have their own music services but still are keen to compete against the likes of Apple (NSDQ: AAPL) with combined device and content offerings. Irwin says that the company is currently speaking with device makers and may have something to announce “in 2012”.
Pursuing mobile users looks like a safe bet for the company: the number of subscribers already using the service via mobile is 40 percent, pointing to a clear audience looking for those kinds of services and willing to pay for them. The company already has partnerships with others in the mobile ecosystem: a deal with MetroPCS, for example, bundles the service together with the carrier’s prepaid data and unlimited text plans, as a way of encouraging users to take their higher-tier services. Verizon also bundles Rhapsody on to its LTE devices.
On Napster: At the end of November, Rhapsody completed the U.S. part of its acquisition of music streaming company Napster from Best Buy. Irwin says the next step will be to complete the acquisition of Napster’s European business and use it as a lever to finally move into international markets. Napster in particular has a strong position in Germany as well as the UK. It is unclear whether Rhapsody will rebrand Napster or whether the two products will initially co-exist together.
On competition/consolidation: Irwin is clear to try to point out how his service differs from the many others on offer, from Spotify and Rdio to Mog and most recently Rara. But ultimately these services are more alike than they are different, and consolidation is inevitable, he says.
“Our business is to take content that other people own, artists and composers, and distribute it on a patform to fans. We might do that directly or via a partner, but we take a very thin piece of that. The cost for labels and artists is the majority of what we receive,” he says. “We have to be efficient and at scale… It’s either go big or go home.”
On funding. Since breaking from Real Networks in April 2010, Irwin says Rhapsody has not had to raise any money from VCs to operate: one of the advantages of having a paid-only model is that the company has an incoming revenue stream every month and it operates its company accordingly. In contrast, he points out that those competitors that have raised more VC funds and are running through that cash quickly in the race to build up scale will have to at some point be able to show some kinds of returns. “The cost of giving way free music to try to get those free subscribers to toconvert starts to get expensive,” he said.
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]]>iTunes Match, for syncing library songs not bought through iTunes to multiple iOS devices, gets its first non-U.S. roll-out in Brazil, priced $24.99.
Other countries are Argentina, Bolivia, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Paraguay, Peru and Venezuela. iTunes’ App Store was already available in the region.
The store brings 20 million songs at $0.99, albums at $0.99 and more than a thousand movies. Yes, prices are in US dollars for now - customers must be able to pay in American currency. That will limit the potential of this roll-out in the short term.
The interesting thing about the Brazilian market is that a majority (60 percent) of digital sales there are from subscriptions, according to the IFPI. That is unlike most other places, where the dominant digital format is still individual downloads.
See these slides in which Brazil internet giant Terra’s co-founder says Latin America’s paid digital content prospects are booming because improving economic conditions are creating a larger middle class.
]]>Spun out as a standalone company by Omnifone—the cloud-based music company that powers services like Sony’s cloud-based music offering, as well as several carrier-led music services—rara.com is banking on a mass-market approach as the cheapest, easiest-to-use music streaming service in the market.
Designed as a service that “even your grandmother can use,” the interface is based around scrollable menus with album and track pictures as well as various channels designed around music genres and moods.
It will kick off with a catalog of 10 million tracks covering music from all the major music labels and several small ones, and launches in some 16 markets today, including the UK and U.S., and will be in 23 markets by the end of this week, including China, altogether covering some 900 million users.
Instead of offering free, ad-based options to draw users in and potentially upsell them to paid, ad-free services, rara.com is offering only ad-free options, with a $/£/€4.99 per month service letting users stream songs, and a $/£/€9.99 per month option letting users store tracks on their devices. Both services being with three-month trials for either 99 cents or 1.99 per month.
Considering how many streaming services are available on the market today, you could view launching with only paid offers is either a very bold move—or a foolhardy one. There could be revenue from day one, or it could mean that very few people sign up when the cost of entry is nothing for rara’s competitors.
From today, there is an app available in the Android Market, and the company will also be launching an app for iOS and Windows Phone “in the very near future,” according to Rob Lewis, the chairman of Omnifone and rara.com, at a presentation this morning in London. Rara.com is also available via web browsers.
And, not to overlook that a lot of the growth of iTunes has been down to Apple (NSDQ: AAPL) also selling hardware, rara.com has signed a deal to have its own real estate on devices: HP (NYSE: HPQ) will preloaded the service on all its devices from 2012. That could be a useful partnership, considering that HP is still the world’s biggest PC maker (even though it fears Apple will overtake it next year): another streaming company, 7 digital, told us last week that it’s preload partnerships with Samsung on its mobile devices has led to an enormous spike in the take up of its service.
One other notable detail: rara.com will be enlisting the help of big-name artists as “associate editors” to “curate” playlists and radio stations for the service. The first musician to work with the company will be Grammy award-winner Imogen Heap. Others will be announced in due course, the company said.
Although the most tech-savvy music lovers have dipped their toes into digital music in one form or another, the reality is that digital music is still a niche service, which either spells a big challenge for rara.com and its many competitors—or an opportunity. Some 94 percent of people still listen to CDs rather than digital music, according to a survey from Loudeye, which also noted that only 28 percent of those consumers surveyed have purchased digital music recently.
Unlike other streaming services that let users effectively “buy” tracks for lifetime use, for now rara.com will not be giving users that option. That is to say, if a user cancels his or her service with the company, their playlists and tracks will disappear.
Labels, artists. Rara.com is partnering with all the major music labels, and “a host of” smaller labels from day-one, but Lewis also acknowledged that there is still some way to go with more independents, especially in local markets. “We are licensing Chinese Canto Pop,” Lewis offered as an example. “Hopefully that will be there by January.”
Canto Pop is one thing; but another big omission are the various independent labels represented by Merlin.
That includes Rough Trade and Beggars Group and such artists as Adele, Arcade Fire and Grizzly Bear. As such, Adele is represented by only one song, from a compilation, while there are no tracks from the other two bands—or, it seems, the hundreds of other musicians represented by those labels. “Omnifone did not give Merlin time or opportunity to even make a deal,” said a spokesperson.
Also notable that for now rara.com is only working through labels: no deals to let unsigned artists self-publish on the service so far, so no YouTube-like viral sensations will be coming out of the service.
Artists will get paid per track played, rather than as a flat license fee: the more a track is played, the more he gets paid. No details on the actual revenue shares, except to note that they vary depending on the label and region where the track is getting played.
Social, API elements. Rara.com will let users share what they are listening to on sites like Facebook, but not actually listen via those sites themselves. It looks like there will be an API eventually, too, aiming to put the service into cars, for example.
]]>Google (NSDQ: GOOG) revealed the 10 billion milestone on 6 December, adding that the Market is currently generating 1 billion new downloads a month. That followed an announcement in November that more than 200m Android devices had been activated, with 550,000 more coming online every day.
The company has now published an infographic on its Android Developers blog digging into the Android Market data, including the claim that the most popular time to download apps from the store is 9pm on Sundays.
There is also a chart for the “Top 10 Most App-crazed countries” ranked by downloads per capita. South Korea tops the list, followed by Hong Kong, Taiwan, the US, Singapore, Sweden, Israel, Denmark, the Netherlands and Norway.
Entertainment is the second most popular app category in terms of downloads, taking a 12.2 percent share. It’s followed by Tools (11.17 percent) and Communication (6.45 percent), with Productivity, Personalisation, Music & Audio and Social all taking shares higher than 4 percent.
There are some quirky stats too: 1.87 million hours have been spent using the Android IMDb app in the last four months; 12 billion miles are navigated on Google Maps every year; nearly 1.8m Adele songs have been tagged using Shazam; and 4,054 years have been notched up in the Talking Tom app.
Google is bullish about the appeal of Android for app developers in 2012, with chairman Eric Schmidt telling the Le Web conference this week that he expects more companies to focus on Android alongside or even ahead of iOS next year, thanks in part to the new Ice Cream Sandwich (ICS) software update.
“Ultimately, application vendors are driven by volume, and volume is favored by the open approach Google is taking,” said Schmidt, according to CNET.
“There are so many manufacturers working so hard to distribute Android phones globally that whether you like ICS or not – and again I like it a great deal – you will want to develop for that platform, and perhaps even first.”
The counter-point to Schmidt’s argument about volume is that developers are also driven by revenues, especially when it comes to paid apps. Convincing developers to release their premium apps on Android alongside or ahead of iOS may require more case studies of these kinds of apps making good money on the Android Market.
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]]>“Global is quite big. We want to be the first ever truly global music service,” CEO Axel Dauchez said on stage at Le Web.
“There is a lot of fog around the U.S. market. Ten percent of music interest is in the U.S..
“In 2012, you have 160 million smartphones in the U.S. and 900 million elsewhere. Definitely, the market is not in the U.S.. The U.S. is low-growth, high-margin, high competition.
“When you’re looking at pay-TV, for instance, spending proportionate to cost of living is much higher (elsewhere) than in the U.S.”
There is no further detail on how Deezer has secured so many global music rights, but UK MD Mark Foster told paidContent in October it expanded first to the UK from France because most music rights are brokered with labels in London.
This is a market with four opportunities…
The subscription music segment makes its money by requiring payment for mobile access. Having already grown through partnerships with Orange in France and the UK and with Belgacom in Belgium, Deezer says 10 of the 85 roll-outs it will do by January will also have a telco component.
Now that services like Deezer and Spotify look set to make a dent in western piracy, labels are turning their attention to remaining piracy problem areas, like Spain and China. If the services can crack there, they will forever be in labels’ thrall. Annual Deezer revenue has tripled to €50 ($66.88/£42.87) million, Dauchez said.
Deezer’s roll-out is large-scale, but it is not alone - several others in digital music and entertainment are all going global right now. The race is finally on to become a global brand leader…
Others are farther behind…
Spotify, in particular, looks like it developing significant brand traction, so Deezer is pushing its globalisation button quick and hard. It thinks the key is surfacing relevant local music through editorially-led discovery.
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]]>The Windows Phone app, which will officially come out next year, will see 7digital offer its 17 million-plus music store via the Windows Phone Marketplace app storefront. It will work on the full range of smartphones running the latest version of the OS (7.5 “Mango”), including the new range of Nokia (NYSE: NOK) Lumia devices, and allows users to browse, sample, buy and download their music directly to their devices.
With Microsoft (NSDQ: MSFT) and Nokia already offering their own music services, it will be interesting to see whether 7digital can gain much traction on those devices. On other platforms like Android (which recently also launched an optimized tablet version) and BlackBerry, 7digital had more clean sailing, in that there were no obvious incumbent music services that would steal its wind.
But Ben Drury, the CEO of 7digital, tells me that part of the idea of launching on Windows Phone is not just to pick up new users on those devices, but to offer existing users a route to continuing to use the service when and if they make the switch to a new platform, such as a Windows Phone device.
Services with that kind of device flexibility in mind are a refreshing thing to hear in the context of all the ecosystem “lock-in” that Samsung and Apple (NSDQ: AAPL) are fighting over in courtrooms from Australia to Washington.
Indeed, while Apple has honed iTunes as a service very specific to its own devices, 7digital has taken a significantly different approach, with not only apps for multiple platforms, but the promotion of its API to as wide a range of third parties as possible. The list not only includes stereo makers like the UK-based Pure, operators like T-Mobile and mobile giant Samsung, which offers a 7digital-powered music service on bada feature phones as well as its smartphone and tablet lines. At the moment, the Samsung and T-Mobile partnerships are bringing in the most business and traffic to the service.
Given deals like Samsung’s, it’s no surprise to hear that devices like mobile phones have become a significant part of 7digital’s business. Drury, during a presentation earlier this evening in London, noted that mobile devices account for 44 percent of all music sales for the company, compared to only one percent of all sales a year ago. (Music bought via PCs account for the remainder in both cases.)
With the Windows Phone app coming out in the early part of next year, that will mean that 7digital is available on all the major smartphone and tablet platforms in a native format—all except Apple’s iOS, that is.
It’s not for lack of trying: 7digital is currently trying to get an App Store app approved, after having it rejected for unexplained reasons.
7digital has been using a workaround, however…
iOS users can access the service via their browsers. The main issue there is that they have to keep their music in their cloud-based lockers rather than having an option to download it; Apple’s terms do not allow for music downloads to its devices through services other than iTunes, and although Apple did not spell out to 7digital why it had rejected its first app for the App Store, one 7digital engineer I spoke to today told me he thought the download element may have been part of the reason.
The other, of course, could be the obvious direct competition that 7digital poses to iTunes.
Perhaps predictably for a competitor, Drury said he thought that iTunes had reached its peak of penetration. In the UK, iTunes currently accounts for 80 percent of all downloads of albums, and 85 percent of all single tracks, but Drury believes that proportion will inevitably start to go down with the adoption of new devices for consuming music—for example, phones built on the all-popular Android platform—at the expense of buying standalone music players like the iPod, which had effectively cornered the market for digital music, via iTunes, before other devices and other stores could get a look in.
Fast foward to today, and amidst the many other places outside of iTunes to listen to and buy digital music—they include streaming sites like Pandora, Spotify and Deezer, as well as Sony’s Music Unlimited, and even the recently launched Google Music—7digital hopes to be one of the contenders.
To be sure, 7digital is growing—three million registered users, adding 100,000 in the month of November, and averaging a rate of about 30 percent active users—but it’s still more than a stones throw from the numbers being generated by iTunes, which saw its 16th billionth song downloaded in October 2011 and this summer reported 225 million iTunes accounts with credit card numbers on file.
That’s where the company, which is 50 percent owned by UK music and digital entertainment retailer HMV, hopes that the U.S. will come in handy. 7digital has been operating in the country since 2009, when it started to acquire song rights in the country; now it will be looking to beef up that presence even more, promoting Vickie Nauman into the position of president of 7digital North America.
Among her responsibilities will be expanding that list of partnerships and marketing as well as overseeing label relations. With plans for extending services beyond music and further into e-books, video and other digital media, will be interesting to see, as 7digital digs deeper into the U.S. market, if we start to see new elements popular with the local crowd—such as streaming or even an iTunes-Match style service—find their way into the main product, too.
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