Music Business and Trend Mongering

It just got a whole lot harder for online music retailers to compete with iTunes. Although I stop purchasing music from iTunes years ago to buy only DRM-free music (I settled on a monthly subscription with eMusic – which will still be my jam for more obscure left-of-the-dial music for the time being), the announcement by Apple on Tuesday that they are immediately dropping DRM (Digital Rights Management) from 8 million tracks changes things slightly.

Here’s what this announcement means to me:

A) Labels are continuing to relinquish more control over their product (which is a good thing).
B) It’s likely that iTunes market share will increase over and above their already commanding 70%+ of the legal online download market (which is not a good thing for competition).
C) Other players (like the leap year bug plagued Zune) will be able to play music from the Apple store (but only after it is converted from AAC to MP3, which iTunes can do, but is not ideal).

The truth is, aside from folks that are deep in the music business, how many consumers are really going to notice a difference? Do many casual music fans with an iPod know that iTunes had DRM files to start with?

Overall, the fact that Apple is removing DRM is definitely a step forward for the music industry. But I do tend to think that the real game changer for online music will be some sort of collective licensing model along the lines of what the EFF proposes. According to the IFPI, the ratio of unlicensed tracks downloaded to legal tracks sold is about 20 to 1. There are extreme opinions on both sides of the very complex collective licensing model discussion, but finding a way to monetize this traffic in a way that positively affects artists will have a much greater impact to the music industry than Apple’s DRM announcement. Baby steps!

It only takes a couple hours for a musician to get started with basic online marketing. Setting up an account with MySpace, Facebook, Twitter, uStream, Flickr, Reverbnation, OurStage, Fanbridge, and the dozens of other options is simple, and an excellent first step. But I tend to think that some bands lose sight of the fact that online marketing is not an end on to itself. The most effective online marketing campaigns support the physical marketing efforts as well.

Two examples from this week:

1) Don Bartlett, manager of Joe Pug (via the Lefsetz letter):

“We decided to put an offer up on Joe’s website and MySpace. We told any fan that if they knew anyone who might be interested in Joe’s music that they could send us an email and we send them as many copies of a two-song sampler CD as they wanted. Free. We even cover the postage. To keep costs down, we invested in a cd publishing system that burns and prints them robotically. Each CD has two songs, contact info, MySpace, and a reminder that the full cd was at iTunes. If someone lived near a place where a show was scheduled, we printed that show info on there as well. People requested as few as 2 and as many as 50. We sent all of them. Requests continued to pour in, and the more we sent out the faster the new requests came in. We’re at the point now where we get about 15 a day. Joe writes a thank you in each and every one. And almost instantly, sales took off. [Show] attendance jumped noticeably and MySpace/website action began a steady upward arc. More importantly, we built an incredible database of his most hardcore fans. And after receiving a mailbox full of cds for free, they are willing to do anything to help forward the cause. And it is the ultimate in target marketing…you have people who already like your music passing it on to their friends, whose tastes they presumably know.”

2) Rock/Jam band Umphrey’s McGee

The band is organizing an online pre-sale campaign that gives their fans a reason to encourage others to buy the record pre-sale. They’re announcing it on their Website, as well as using banner ads on their social networking properties. Here are the details from their site:

Much like an Umphrey’s show, no one is exactly sure what will happen with Mantis, the upcoming release from Umphrey’s McGee. The more fans that pre-order the release, the more bonus content we’ll unlock for everyone. We are leaving the amount of additional content and the makeup of some of that content entirely up to you. There are 8 total levels of material that could be unlocked containing over 45 unique & unreleased audio tracks, including behind-the-scenes perspectives, videos, and plenty of quirky surprises. Bonus Material Part I available EXCLUSIVELY to those who pre-order.

Great to see both of these bands nailing the online campaign to affect tangible change offline and facilitate a personal connection directly with their fans.

I’ve talked at length about the fact that it’s certainly easier (and cheaper!) than ever to sell your music online using CD Baby or TuneCore as a digital distributor. And while I think it makes all the sense in the world to get your music out to iTunes, AmazonMP3, and the other online retailers, it’s also important to sell directly to the fans that are visiting your own site or blog. Selling from your own site not only provides you with the opportunity for a higher percentage of income than selling through a third party site, but it also affords you the ability to creatively price your music, offer higher quality FLAC or lossless files, put songs up for a limited period of time, or engage in other subscription pricing models (like what Ari Hest is doing) that is not easily possible with third party online retailers.

Where do you sign up, right? Well, that’s the catch. The process of setting up an e-commerce store on your site is not necessarily the most straightforward thing to do. Andrew Dubber, whom I first heard about when he published his free e-book 20 Things You Music Know About Music Online, has a great post on his blog outlining his research on selling music online. He outlines several options from straight up outsourcing it (easiest option of course, but also most expensive), to open-source e-commerce platforms and plug-ins (the most interesting being this free WordPress plug in).

Check out Dubber’s complete post here.

Following hot on the heels of No Depression’s announcement that they were closing up shop, Harp Magazine, another one of my favorites, announced this AM that they too were ceasing publication.

From my old contact there, Jake Flack:

=====

I am very sorry to tell you that, effective March 20, 2008, I will no longer be the Associate Publisher of Harp. Because of the declining revenues and increasing costs related to print publishing, Harp is discontinuing publishing as of that date. The March/April issue (with Dave Grohl on the cover) will be the last issue printed and distributed. The company is shutting down operations and will not be publishing the May issue.

It’s been my distinct pleasure to work with all of you. For the past five years I’ve been very fortunate to work with so many wonderful people who are dedicated to putting out and promoting great music. I’ve always felt that Harp provided a first class platform for giving independent music a voice that otherwise might not have been heard. We were able to do that because our advertisers shared that vision.

I apologize for the mass email but time dictates this rather impersonal notice. Best of luck to everyone and thank you so much for everything!

Jake

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It’s always a drag to see another positive entity in the music business go down, but I suppose I am not incredibly surprised. When I think of the parties and folks at SXSW that made an impression on me, much of it was online focused: Ioda’s party on 6th and Red River, Imeem’s event, the Ourstage folks, and so on. Similar to mid-level indie labels, I think mid-level music print mags are in for a tough haul, in particular those that are not making a serious push for online business. Online businesses with marketing dollars prefer to spend it on online advertising: certainly keyword buys, but also newsletter affiliation, banner ads, and contextual marketing. With online marketing, you can pinpoint exactly how successful a particular campaign is, and more importantly, online marketing folks know that it is easier to attract someone that is already online than it is to to attract someone that is offline. To survive these days, Harp and others need to monetize their online efforts by creating an online community, that A) folks want to be part of, and B) advertisers see value in.

Those that are not evolving are going to be left behind…

Ten months after Warner Music head Edgar Bronfman said that Apple’s Steve Jobs suggestion that dropping DRM copy protection from digital music was “completely without logic or merit,” Bronfman reversed direction last Thursday by licensing its catalog, DRM free, to the Amazon MP3 music store. Warner joins EMI and Universal in offering higher quality (256 kbps), DRM free mp3s through Amazon’s online store, leaving Sony as the odd man out in the major label circle.

On the surface it would appear that the majors are simply responding to consumer demand and giving music fans what they want. But the fact is, the majors hate the digital monopoly that Steve Jobs has with iPod/iTunes. They understand that the only way to increase their margins on digital music and regain some of the control that Apple has taken from them is to reach the billions of iPods floating around. Their endgame is almost certainly to get customers in the habit of purchasing mp3 files from a place other than iTunes (which currently accounts for 70% of all digital music sold).

DRM (digital rights management) is technology that copyright holders place on a digital file to restrict its usage. It’s a flawed, user-unfriendly tactic, and it will go away. But while it exists, I will continue to do my online music buying with DRM-free retailers emusic and Amazon.

Radiohead Rocking The Online Marketing Campaign (And You Could Too!)

Following up on the DJ set that Thom Yorke did on Thursday evening, radiohead.tv hosted a second straight night of live performances, videos and cover songs in what is appearing to be some sort of Webcast series. Excellent stuff – a homemade video for the new 15 Steps song using images from the Brad Pitt film Se7en (with Thom’s head playing the role of Gweneth Paltrow), a great Smiths cover, and a red hot live version of Bodysnatchers, the second song from the “In Rainbows” record.

Radiohead is, of course, in a unique position as one of the biggest bands in the world, and they are going to be getting a ton of publicity no matter what they do. But what’s interesting to me is how fun this all is, and the fact that any band can pull off essentially the same thing. The Se7en clip looks like it took someone about 25 minutes to make using iMovie!

Check out Thom’s DJ set from Nov 8th here:

Bodysnatchers clip from last night’s Webcast is here:

Se7en/15 Steps video:

Smiths Headmaster Ritual live cover:

Surely as a response to Amazon’s more competitive pricing structure for DRM-free music, iTunes has announced that they will drop the price of their iTunes Plus songs (256kbps, DRM-free) from $1.29 to $.99. iTunes Plus includes songs from EMI as well as a number of larger independent labels. Amazon’s mp3 store, which launched on September 25th, offers DRM-free songs for between $.89 and $.99. The battle is likely to continue as it’s clear that the majors, and in particular Universal, are not pleased with Apple’s dominance of the online music world (70% of all digital music sales are currently through iTunes).

I got this email first thing today:

THANK YOU FOR ORDERING ‘IN RAINBOWS’.

THE LINK BELOW IS YOUR UNIQUE DOWNLOAD ACTIVATION CODE.

PLEASE CLICK ON THE LINK OR CUT AND PASTE INTO YOUR BROWSER TO OBTAIN YOUR DOWNLOAD.
IF YOUR LINK APPEARS AS TWO SEPARATE LINES, PLEASE CUT AND PASTE THEM CAREFULLY INTO YOUR BROWSER.

THE ALBUM WILL COME AS A 48.4MB ZIP FILE CONTAINING 10 X 160KBPS DRM FREE MP3s.

IF YOU HAVE ANY QUESTIONS OR PROBLEMS DOWNLOADING YOUR FILE, PLEASE CONTACT OUR DOWNLOAD CUSTOMER SERVICE TEAM: downloadinrainbows@waste.uk.com

WE HOPE YOU ENJOY ‘IN RAINBOWS’.

—

Well, I do enjoy ‘IN RAINBOWS.’ Very much. And from what I can tell, there’s a whole lot of other folks that are enjoying this record today too. Nicci and I went down to Cambridge 1 for dinner (a hip pizza place in Harvard Square), and they were playing the record to a room full of folks there too.

Over and above anything else, this coordinated experiment shows that it’s still possible to build a huge buzz around a new record (not easy). Radiohead has succeeded in having many people hear their record for the first time, at the same time. If the new music business model involves using a discounted (or free) digital product to corral these folks into creating a word of mouth groundswell that can support a tour, merch, licensing opportunities, ringtones, etc, then it looks like they may have nailed it. They also have 6 other records (now available digitally for the first time on Amazon). Long tail anyone?

First, what the heck is Richard Wagner doing as the #1 artist on Amazon’s new MP3 store?

All signs indicate that the Amazon store will give iTunes a run for it’s money as the most popular online music store. First, all the music is DRM free (thanks in part to a feud between Universal and iTunes), and high quality. The site is incredible easy to use, searching for new music is intuitive, and my Wagner download (“Apostles Mean for Small Choir & Orchestra”, I had to hear what the big deal was!) took no time to appear in my iTunes interface. Songs are also variably priced as opposed to the flat $.99 or album only method that iTunes offers.

Yow!

Radiohead (who fulfilled their Capital Records contract with their last release, and are presently “unsigned”) have apparently set up a Web page where one could purchase their new record in digital form at whatever price one wants to pay for it. A physical release is also available, for 40GBP

Check it out:

http://www.inrainbows.com/Store/index.html

A couple of interesting things to consider:

1) The proper physical release streets in December with tons of bonus material:

From www.inrainbows.com:

[start]

This consists of the new album, in rainbows, on cd
And on 2 x 12 inch heavyweight vinyl records.
A second, enhanced cd contains more new songs, along with digital photographs and artwork.
The discbox also includes artwork and lyric booklets.
All are encased in a hardback book and slipcase.

[end]

The package sounds amazing, but thanks to the weak USD, I’d be paying more than $80 for it.

2) The digital release (with less music) is available two months prior to the physical release.

I love the idea from a band in Radiohead’s position. They make the bulk of their income on stadium shows and merch, and they have the name recognition and reputation to pull off a 40GBP package (which has a much higher margin for them as they do not need to split any proceeds with a label). It takes the Stars experiment of breaking street date with their digital release a step further by dropping the financial component.