heute:pop:blog.  

This is a re-post of a contribution I recently wrote for the Bandzoogle blog. Bandzoogle is a great platform to build sophisticated websites for bands. While writing the below I realized how confusing streaming services music be for DIY musicians and how hard it can be to get their music onto those services.

Music streaming services are a great way for fans to access, consume and discover music on the Internet. They also offer bands and labels great ways to get discovered, build a fan-base, and, for some, there is even some money to be made. Unfortunately there are many misunderstandings about the different services on the Internet and this post will (hopefully) clear up some of the questions that Bandzoogle members, and other DIY musicians and indie labels might have.

So, what exactly are “streaming services”?

The “ownership” of music has become less relevant over the last years. Many people (myself included) don’t feel they need to own any CDs, vinyl records and mp3s if most music is available on the Internet to listen to. Ownership results in maintenance and responsibilities: we have to clean records and make sure they don’t get damaged. We have to back up our mp3 collection and make sure we keep the format up to date (who knows if mp3 as a format will still be relevant in five years ?).

A great alternative to the above is using a music streaming service to access music. The files are stored “in the cloud” and we only access them through the Internet as opposed to owning them. Typically, you will not pay every time you listen to a track but you will pay a subscription fee, or there will be advertising that you will be exposed to in order to listen to the music for free.

What is important to understand (and this is where it gets tricky) is that there are basically two types of services: “radio” and “on-demand” streaming. (more…)

One of my first tasks when I moved to Canada was to get an overview of digital music services in this country. I also wanted to figure out which of the big international services have launched in Canada and how well they are performing. Disappointingly I realized that other than a few players such as 7digital, Slacker and of course iTunes there aren’t many local digital music companies for a country that strongly supports its music industry: grants are a common way for indie labels to stay afloat and radio stations have to play a certain amount of Canadian artists.

Just like there is no lack of music fans in Canada there is no shortage of talented programmers and entrepreneurs – other digital businesses (e.g. games, advertising, movies) seem to be quite healthy. Companies like Pandora, Spotify, MOG and Rhapsody however have never launched their service in Canada and others like Last.fm only have a limited service in the second largest country in the world. Also, looking at the new players that have seen some hype recently (such as mFlow, Thumbplay and rdio) have not announced any plans for a Canadian launch.

After speaking to a range of people about the lack of access to legal digital music in Canada there seem to be different explanations:

1. Licensing difficulties (1) – it is complex and expensive to license content from record labels for Canada

I find that hard to believe. When licensing reordings from labels or aggregators you will often strike multi-territory deals so there is not a lot of additional work needed when including Canada as a territory as part of a launch (for example) in the US. However, depending on the label, you might not be able to license content for all of North America under one deal but you have to go through two offices. There might be one department dealing with the US and one with the Rest of World.

Nevertheless, when launching an international music service it shouldn’t be too hard to include Canada as a territory from a label licensing point of view.

2. Licensing difficulties (2) – getting publishing rights is a nightmare

Yes it is. But it is everywhere. At least in Canada there is only one collection society dealing with the rights of the music composers whereby in the US you have to go to a bunch. In Europe you will (normally) still have to deal with a different organization in each country which is slowly changing so pan-European licensing should be easily possible at some point.

3. Canadian copyright law is in limbo

Whereby this is true it shouldn’t stop anyone from launching a music service in Canada. Without wanting to go in too much detail this is the deal: many people say that the Canadian copyright  law is outdated and needs modernisation. This was suppose to happen for years but whenever there is a new government the proposed changes are being put ‘on hold’ (read: ‘thrown away’).

The international music community is actually quite upset about the lack of movement in Canadian copyright law calling it a “major source of the world’s [music] piracy problem” (IFPI). Ouch.

Again, this should not stop anyone to launch a digital music company in Canada since the changes in copyright law are unlikely to affect consumer facing music delivery services.

4. Canada is too small to make an investment like starting a music service worth-while

This is probably the excuse I hear most often: It seems that companies feel their investment will not be returned because the music market in Canada is too small. And starting a music service is a rather big investment with the largest cost being music licensing.

I think this is a fair argument but doesn’t explain why services are being launched in the smaller countries in Europe (just one example here). So starting up a service in an English speaking country that has a similar music taste to its big neighbour shouldn’t be so hard then, right? After all, Canada is the seventh biggest music market in the world (2005).

‘Big neighbour’ are two very important words here. It’s a psychological issue that the US (population: 309m) is so big and suddenly makes Canada (population 34m)seem so small. Living here now for a few months I can see that Canada has a complex about being the ‘small neighbour’ and everything has to be compared with the US. And of course everyone has to agree that when it comes to starting any business, given the choice, one would have to go to the US as the market is simply larger.

But this is not what it’s about: Canada needs digital music companies that have already proven success in other big territories to launch locally or alternatively a new breed of Canadian companies that can move music fans away from unlicensed music usage.

Photo: EliB

I went to the UK launch of Chris Anderson‘s new book ‘FREE‘ last night which unsurprisingly was a very busy event since he is a bit of a digital media pop star. With being a celebrity come the critics that have to proof that your ideas are in fact rubbish and that try to find examples where “The Long Tail” does not work and where “FREE” destroyed jobs.

I’m not one of those guys. However I had to think of something when Chris was talking about some of his ideas last night. They gave out free copies of the book (an abridged version, not the full one) so I can even quote him now. He is writing:

“What the Internet does is combine all three, compounding the price declines with a triple play of technology: processors, bandwidth, and storage. As a result, the net annual deflation rate of the online World is nearly 50 percent, which is to say that whatever it costs YouTube to stream a video today will cost half as much in a year.”

Although I agree that the above applies to any technology costs this does not work for any licensing expenses. The licensing fees for content is already the biggest expense for many services that stream or otherwise deliver content to consumers. Although there is certain evidence that the cost of content is going down (the PRS has recently lowered they per stream royalty for music streaming services) I don’t believe that this trend will keep on going at a rate of 50% per year.

Nevertheless, Chris Anderson’s book ‘FREE’ looks like another must read for anyone who is interested in how technology changes moder day economics.

Those who listen to my show on a regular basis (and understand German) will see that Gerd Leonhard and myself share many ideas about the future of recorded music. He put together a brief overview on his thoughts in the YouTube video below.

It’s a great summary and there is a lot in those 10 mins – might be worth watching twice.

EDIT: as just pointed out by Chris, there is of course a second part to the above:

Hopefully I wasn’t talking too much about the potential future of ad supported music services this week. These are tricky time for anyone working in music, may it be music owners or services that want to bring music to the fans.

You can listen to my latest show here.

1. Jimi Hendrix ‘All Along The Watchtower’
2. Archive ‘Bullets’
3. Fredo Viola ‘The Turn (A Pagan Lament)
4. The Decemberists ‘The Rake’s Song’
5. Bonnie ‘Prince’ Billy ‘Afraid Ain’t Me’
6. Suicide ‘Ghost Rider’
7. Architecture In Helsinki ‘Hold Music’ (Max Tundra Mix)
8. Cazals ‘Somebody, Somewhere (Moulinex Remix)
9. MSTRKRFT ‘Fist Of God’
10. Passion Pit ‘I’ve Got Your Number’
11. The Wee Rogue ‘Into The Mist’

If you can get your hand on the latest copy of Billboard (10th January it says on the cover) make sure you read the Opinion piece on page 4. In addition to giving a good pitch, Lala.com‘s Bill Nguyen wrote a short and well formulated article on listening to music online and business behind it. My favourite quote:

“The web is home to more new music each year than was released in many previous decades. Critics say the music is mostly junk – but the same could have been said for the Web before Google made the knowledge there accessible.”

I couldn’t agree more.

Don’t get me wrong: I’m always happy when I hear that new music services go live (or, like in this case, re-launch). I am fully supportive of of companies trying something new and different and it’s great that there are people out there taking risks. My cynical side however was looking at all the blog posts carefully when I was reading about lala’s new business model. And not just because this must be the fourth time that they have come up with a new one.

So you can pay 10 cents to ‘buy’ access to a track an unlimited amount of time however if you own the track already on your computer (and you let lala scan your library) you can listen to that track for free an unlimited amount of times. You can also buy full track downloads for 90 cents. Sounds all pretty complicated and I agree with what Bob Lefsetz was posting yesterday:

[...] With x number of people new to Google this year, what are the odds consumers are going to understand Lala’s business model?  Shit, I can’t understand their business model.  I rent the music online, but only online, I can use my own stuff online…what about the rarities, do those get uploaded too?  And, is it so complicated that I ultimately want to use this service? [...]

TechCrunch has got a different opinion and I get their point of view:

[...] Conversely, Lala wants you to listen to as much music as possible in the hopes that you’ll keep clicking that addictive 10 cent “web song” button, and is forgoing advertising entirely. The result is very refreshing. [...]

What I find refreshing is that those new ideas are coming out of a company that is party owned with Warner Music. There was never any doubt that there are very smart people working at Warner and it looks like we can now see some of that. It was always obvious that the big content owners should have been much more pro-active when it comes to new ways of monetizing their content. They missed out on that for years and are suffering because of that.

I can’t test out lala myself (as it’s only available in the US) but it sounds like it’s not very user friendly but makes sense in the end. Lets hope people out there are going to have the patience to figure all that out. And if not they can always come up with a new model.

A big thanks to David Porter who put the current issues the online radio industry is facing in very simple words in this blog post. In fact, based on this I will explain the problems to the listeners of my radio show in Hamburg tomorrow morning, which is really not a tech (and most certainly not a streaming licensing) savvy crowd.

More on this soon…