Recording Industry Making It Impossible For Any Legit Online Music Service To Survive Without Being Too Expensive

from the good-job dept

You just knew it would happen again. Every time the recording industry finally agrees to license a new music service to try to take the "sting" out of "piracy," it demands licensing terms that are ridiculous. From the execs at the labels' perspective, unless you pay an arm and a leg, you don't get to offer music. So, a few companies agree, and then realize it's impossible to make any money and shut down. In the meantime, the whole point of those legal licensed music services (to compete with "pirate" sites and services) is lost entirely. Wired is chronicling how all of the legal music sites are finding it impossible to survive and offer a free music service -- including MySpace music (which beyond not offering much of value in terms of user experience) "is struggling to keep up with its own payments to music copyright holders."

Of course, it's really no surprise that most of these sites have struggled. Beyond the ridiculously high licensing rates that the labels forced on them (often by negotiating through lawsuits), none of these sites put together a well thought-out business model. Instead, they all seemed to think that they could just slap ads on the site and that would be enough. But, of course, when you're listening to music, you're not looking at that website or paying attention to the ads -- and if the ads got too intrusive, they'd just go elsewhere. A real business model would have been setting up something more comprehensive, that gave listeners a real reason to buy associated with the music. Eventually we'll get there, but in the short-term, the graveyard of failed "licensed" music startups will grow, just as more and more "unauthorized" sites grow in popularity.

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And Here Come Another Round Of Yawn-Inducing Music Subscription Services

from the too-little-control dept

Well here we go again. There have been numerous attempts at music subscription services, and none have really done all that well. While some people do love their Rhapsody or Napster accounts -- neither has been a runaway success, and both struggle to get much attention these days. Yet, so many entrepreneurs believe it's a holy grail. So, here we go again. With plenty of people waiting for Spotify to enter the US market, the NY Times reports on two other new entrants; one from Mog -- who seems to have blasted press releases to everyone, with the general reaction being a big yawn and one from the founders of Kazaa and Skype, called Rdio. Neither sounds particularly compelling.

The problem with all of these subscription services is that they inherently need to have limits. You have to keep paying, you can't really share music with others, you may be able to take some of your music on the go, but it's usually a convoluted process. And that's a problem. Because people understand how mp3s work -- and that's without restrictions. Trying to get people to pay for a music experience with restrictions, that offers less than what they know can be done, is a recipe for failure. It's time to stop thinking of trying to "sell music" and start realizing how you can use music to sell something better.

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Why Did Apple Approve Spotify?

from the not-that-tough-to-figure-out dept

AdAge has a long article trying to puzzle out why Apple potentially "sacrificed iTunes" in approving Spotify's streaming music app. Oddly, while the article touches on a few of the reasons, I don't think it clearly highlights what seems like the most obvious reasons:

1. As we noted when the app was approved, Apple appears to be somewhat gunshy, following the FCC inquiry into why it "blocked" Google Voice on the iPhone (and, yes, Apple still insists it didn't actually block the app, but Google says otherwise). Given the scrutiny, Apple probably realized that it was in for some serious political trouble if it blocked an app like Spotify, which would have received a lot of press attention. Oddly, the AdAge article doesn't mention this at all.
2. Apple has always viewed iTunes as something of a loss leader to help it sell more iPods and iPhones. If someone else can help sell more of the devices, then more power to them. Though, the fear, of course, is that something like Spotify works on other devices too.
3. But this brings up the final reason: I would bet that the folks at Apple are pretty damn sure that they can outlast and out-innovate Spotify. Spotify hasn't shown much ability to make money, and while it has become a press darling as a music app, I wouldn't be surprised to find out that Apple's quietly been working on its own version of a Spotify-like offering built directly into iTunes. And, given Apple's standard operating procedure, if that's the case, there's a good chance that the Spotify-like iTunes will be even better than Spotify itself.

So, I don't think it's that confusing why Apple approved Spotify (and Rhapsody). I'd argue that the first reason was the biggest driver. Without the FCC investigation, it wouldn't have shocked me if Apple had denied the app if only to buy itself time. But, I would expect that sooner or later, Apple will come out with its own streaming version of iTunes with very strong integration into the iPhone, and suddenly Spotify won't look quite as interesting.

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Pirate Bay Appeal Lay Judge Employed By Spotify?

from the a-bit-of-bias dept

There have been all sorts of questions about unfair bias in the Swedish trial against The Pirate Bay and its founders, and the latest claim is that one of the "lay judges" on the appeal is employed by Spotify, currently a music industry darling trying to set up a licensed, authorized online music streaming system. Given that Spotify could reasonably see sites like The Pirate Bay as somewhat competitive, and that it counts major record labels among its ownership, it's hard to see how allowing an employee to be on the lay judge panel (sort of, but not really, the equivalent of a jury) is even close to fair.

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Apple Approves Spotify App... Spotify Should Thank Google

from the good-timing dept

Just before the whole mess -- including an FCC inquiry -- of why Apple rejected Google voice on the iPhone, we were among those who wondered if Apple would approve Spotify, the well-hyped (perhaps over-hyped) music app that in many ways competes directly with iTunes. Well, it looks like Apple has approved the software, though Spotify is still only available in certain European countries (though there are promises of a North American launch later this year). You really have to wonder, though, how much of the approval was due to the mess and attention that Apple received following the rejection of Google Voice. It seems likely that the company is now (finally) a bit more sensitive to this issue, and may have decided that it didn't need another PR headache... or to give any more fodder to the FCC. Spotify probably owes Google a nice bouquet of flowers.

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Will Apple Allow Spotify On The iPhone?

from the one-to-watch dept

Having used Spotify a bit, I can definitely see how some people think it could potentially replace iTunes completely. It basically acts like an iTunes that has access to millions of songs at no additional cost (and, yes, it's all licensed and legal). The songs are streamed, but you almost never notice it. It really does feel just like iTunes, while also having "Pandora-like" features for creating specialized stations or sharing others' playlists. Unfortunately, it's only available in the UK for now, though the rumor is it will be available in the US before the end of the year. However, where things could get really impressive is with Spotify's mobile app. For a few months, there's been a YouTube video of Spotify Mobile on Android:

The demo highlights the fact that you can sync any playlist for "offline" play, solving the biggest question about weak mobile signals on the go, or how you use it on a plane or somewhere without wireless access. With offline syncing, it's basically everything that an iPod can do -- with access to 6 million songs without having to pay for each individual song. But, of course, Android is still a limited platform. The big fish these days is the iPhone App Store, and Spotify has now submitted an iPhone app for approval, which raises all sorts of questions. With Apple's history of rather arbitrary rejections -- including ones for things Apple has deemed "competitive" -- will it block Spotify as a rather direct competitor to iTunes? That would be very unfortunate, and again demonstrate the risk of a closed platform.

That said, the initial reviews of the iPhone app seem quite strong. Eliot Van Buskirk at Wired loves the syncing feature, and warns that "you'd have to pry it out of my cold, dead iPhone before I'll delete it from my phone." Meanwhile Music Ally points out that Spotify has uploaded a video of the iPhone app as well: It really does look pretty slick. So now the ball's in Apple's court. I have no idea if Spotify can survive as a business (and I suspect that the royalty rates the music industry wants will make that difficult), but it is great to see more innovation in the space. Now we get to see how Apple feels about that sort of innovation.

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Is Streaming Really Replacing Downloading?

from the perhaps-in-some-cases... dept

Lots of attention is being paid today to an article in the Guardian about a new study claiming that illegal file sharing has collapsed in the UK and is being replaced by streaming music found on YouTube and through services like Spotify. The premise of the article is that now that kids have alternatives, they're willing to dump unauthorized file sharing and get by with streaming. While I don't doubt that it may be true in some cases, I'd take these findings with a pretty large grain of salt for a variety of reasons:

• It's not based on actual usage data, but on survey data.
• As more and more attention is being paid to people getting sued and fined for online file sharing activities, people are certainly going to be less willing to admit on a survey that they participate.
• This is especially true in the UK, where there's been a tremendous amount of attention on the recent Digital Britain report, which claims, as a goal, to reduce illegal online file sharing activities.

That said, it wouldn't surprise me at all to find out that some users have modified their behavior due to the ease of use from online streaming platforms. When I was in the UK, I got to play around with Spotify, and I could see how many people might start using that as a replacement for file sharing much of the time (and demos of Spotify's mobile app that include syncing features when there's no internet connection make it look quite compelling for even offline music playing).

However, even if we take what the article says as proof, it seems quite likely that the industry will muck this up too. Already, we've seen that Spotify is running into licensing problems, and the company is nowhere near being able to turn a profit. And, of course, the industry is pushing for increasingly unsustainable webcasting rates. That's why YouTube and PRS still haven't come to an agreement over all that streaming music in the UK, and even as PRS has tried to lower its rates to make a deal, some of the record labels are actually demanding the rates be pushed back up.

This is how the legacy industry kills anything even remotely positive. The second that the industry sees anything that's working, it suddenly smothers it by demanding to get a bigger and bigger cut. We've seen it for years. As soon as iTunes started to be successful, the labels pushed to get a bigger and bigger cut from any sale (and to push the prices of each song higher). More recently, with the massive success of video games like Guitar Hero and Rock Band helping to promote music (and making musicians a ton of money), the labels have been demanding a bigger cut as well.

Rather than understanding how to create and foster a healthy music ecosystem, it seems that some of the major label bosses have learned how to do one thing only: squeeze each tiny baby lemon as hard as possible until it's dry, never giving it a chance to actually grow. And then they wonder how come each new revenue stream doesn't make as much money as their old way of doing business.

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Recording Industry Apparently Unable To Avoid Screwing Up A Good Thing

from the nice-work,-guys dept

Back at MidemNet, the most amount of "buzz" I heard for any particular new music service was for Spotify. Time and time again, I heard from a variety of people -- both from the recording industry and from the tech side -- that Spotify was a company that had truly figured out how to make a great music service. Of course, there was some bad news too. Due to licensing issues, it wasn't available in the US. I spoke with some of the folks from Spotify (who were at the event) and they said they were focused on getting more rights so they could open the product up further -- but it looks like the recording industry is pushing them in the opposite direction, yet again. The company has announced that, rather than adding more music to its service, some licensing issues mean they'll be removing music from the product. Once again, the recording industry seems to be missing the point. Every time it freaks out about some new useful service, and demands increased limitations (or, more usually, more money), it kills off whatever potential that service had, and puts yet another bullet in its already-Swiss-cheesed feet.

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