Lessons From Taking TV To The Net

AdAge has a great article today about ABC's efforts to include ads in their online streams of network shows.

Several of the issues discussed in the article are especially relevant to ad-supported recorded music:

Consumers understand that the value proposition of "free content in exchange for exposure to advertising" applies even in new media

"ABC has made programs such as "Ugly Betty" and "Grey's Anatomy" available via video on demand, so long as the cable providers who offer the service disable a viewer's ability to fast-forward past any advertising. In a trial with Cox, ABC found 93% of people who had their fast-forwarding capabilities removed when watching ABC programs on-demand found having to watch ads an acceptable exchange for getting to see the programs free. "

It is best to establish advertising as the means of content support early in the life of the new medium

"The move has the potential to misfire, said Drew Corry, VP-director of Amphibian, a unit of Interpublic Group of Cos.' Initiative focued on digital media. "You kind of set the precedent with the viewer" when the player was first unveiled, he said. "It's probably a little bit difficult to go back now and start trying to add in inventory." Others also worry about consumer backlash. "I don't like to take toys away from people when we already gave them," said Jen Soch, VP-activation director-advanced TV at Publicis Groupe's MediaVest, referring to consumers' ability to fast-forward. "I don't love that they are disabling fast-forwarding," she added."

Younger consumers are more amenable to advertising than older consumers

"'It turns out that this generation has a voracious appetite for information, entertainment and media -- and they're more than happy to accept advertising to get it all for free,' said Anne Sweeney, co-chair, Disney Media Networks and president, Disney-ABC Television Group, at a March conference held by the American Association of Advertising Agencies. "

Big Mac Chant-Off

The other morning I was thinking that short jingle driven ads would be a really effective ad format for ad-supported recorded music.

Later that day I learned about McDonald's new Big Mac Chant-Off promotion.

This promotion works great on the Internet but it would also be great, and complementary, on MP3 players. I can imagine lots of creative and effective implementations.

Tuesday Tidbits

Amazon Lowers Album Prices - Amazon is the smartest and, therefore, the most successful retailer on the Internet. Reflective of this position they have started an innovative program of significantly discounting certain albums.

They know that the only way to sell music now is to lower prices.

Another Reason to Ignore Projections - PriceWaterhouseCoopers released its Entertainment and Media Outlook for 2008-2012 in which it predicts that worldwide spending on recorded music will decline 0.6% annually. What? Recorded music revenue dropped 8% in the last year alone.

Two kinds of studies you should always ignore: projections and consumers saying what they will do.

iTunes Reaches Sales Milestone - iTunes, the 800-pound gorilla of digital music, has sold 5 billion tracks since its inception. iTunes sales continue to grow but at a declining rate. The recorded music industry is now recognizing that digital sales will never replace lost CD sales.

Will Microsoft Miss The Next Big Thing? - Todd Bishop, the Seattle P&I Microsoft beat reporter, has a good interview with MS Chief Strategy Officer on his blog about MS's track record of being late to capitalize on the big trends in digital like Internet search advertising.

This is an appropriate question for ad-supported recorded music since MS is in the greatest position to capitalize on this "next big thing."

Another Music Start-Up For a Crowded and Tiny Niche - topspin media has launched to a lot of hype. According to the company "Our mission: To provide artists the tools they need to build successful businesses."

Almost to the day that topspin launched, Bruce at hypebot put up a list of 10 companies that are already doing the same thing.

Further evidence that there is no lack of money for music related start-ups; only creativity and the ability to understand markets are missing.

Ad-Supported Music IS NOT Internet Advertising

Important people in the music business continue to get ad-supported recorded music wrong.

Here is the latest example, which came out of the London Calling music conference last week:

Scott Cohen, co-founder and international VP of digital distributor The Orchard (NSDQ: ORCD), called ad-funded models more “meat than hype” noting that an 8 percent cut—which is what copyright holders get from digital sales of their music—of “not very much ad revenues” was not the greatest payment model. Cohen pointed out that figures thrown out for the total potential online ad spend for this year came in at $30 billion—“but that’s for everything, every single thing,” and not just for spending on a few online music sites. “This is not going to bring in $10 billion, it might bring in $10 million, but that’s a drop in the bucket,” Cohen said.

Scott, you are comparing apples and oranges. Ad-supported music is not a subset of Internet advertising. Ad-supported recorded music opens a completely new, huge pool of time to advertising as the graphic below illustrates:

Done With Qtrax

Qtrax finally "launched" on Wednesday. I was able to register and download the player. I think I downloaded several Amy Winehouse tracks but I have not been able to get them to play. Even after installing Windows Media 11 I get a pop-up window directing me to a Microsoft page every time I try to play one of the tracks.

I understand that Qtrax is in beta and technical problems are expected. However, this company has demonstrated nothing but incompetence. From a doomed business model to botched launches to a beta player that doesn't work (for me).

This is my last post on Qtrax until I publish their obituary.

Still More On Why Teens Are Ideal Target

Yesterday I wrote (again) that teens and tweens should be the target demographic for companies launching ad-supported recorded music services.

I have also written (numerous times) that the cellphone is the ideal platform for ad-supported music.

This quote from a piece in the LA Times nicely marries these two beliefs:

It may all seem a little bothersome, but teens don't mind receiving messages about products on their phones, says Nic Covey, director of insights at research firm Nielsen Mobile. Nielsen said teens were nearly twice more likely than adults to trust and respond to advertising and pitches on mobile phones."

For them, responding to an ad that's relevant by sending a text or following a link on their phone is a logical brand engagement," Covey said. It's so natural that the student council at Notre Dame high school in Sherman Oaks decided to invite teens to their graduation via a prerecorded video sent over a mobile phone.

More On Why Teens Are Ideal Target Audience

A survey was just released on the digital music habits of young people in Britain. Here are some of the charts that I find interesting.

I believe these data support my assertion that ad-supported recorded music should start by targeting teens and tweens. Sites like SpiralFrog and We7 have target demographics that are way too broad.

Reach:

Frequency:

Can't pay for as much music as they want:

Because they are spending their money on other things that are intensively ADVERTISED:

Tuesday Tidbits

NYT Article on EMI and Guy Hands - Yesterday The New York Times published an article about the current state of EMI under Guy Hands. If it isn't crystal clear to you yet that Hands will fail miserably in running EMI it will after reading this article.

TBS Pause Ads - Have you seen the ads that TBS has been running on Family Guy and other shows that pause the action for a bottom of the screen promo of The Bill Engvall show?

AdAge has an article about these ads. I think they are creative and effective. I predict we will see more of these on television.

It will be more difficult creatively, but this type of thing could work with recorded music.

What's With All The Qs? - So Qtrax is supposed to launch tomorrow. Big deal. Now there is Qbox with: "Qplayer: The Social Network Music Player". Is Q the new i or e? By the way, Qbox offers a "concise" 600-word definition of Social Network Music.

mediadefender Defends Through Advertising

I got this story from mashable. mediadefender, the company that protects content by flooding P2P networks with bad files, is considering releasing tracks of music embedded with ads into the file-sharing networks.

Interesting idea but I can't imagine first-class advertisers wanting to participate. P2P users don't expect ads in music obtained from file-sharing networks and so will resent the advertiser. They will probably also try the networks again for an ad-free file.

Piracy is an enemy of ad-supported music and I am all for mediadefenders strategy of putting trojan horse content on the file-sharing networks.

I just don't think this approach works as an advertising or anti-piracy strategy.

MediaDefender Looking To Push Free Tracks With Ads Via P2P?

June 15, 2008 — 08:37 AM PDT — by Paul Glazowski —

MediaDefender, the ARTISTdirect-owned entity that’s been as friendly with big-name copyright owners as it has been a nuisance to the peer-to-peer world, has done many things that seem to many Web users to be unusual and unwarranted. Like, say, issuing automated denial-of-service attacks on BitTorrent tracker operators. One unsuspecting server of such data which was temporarily decommissioned, as many of you know, is Revision3, a San Francisco-based new-media company, which recently drew the technological ire of MediaDefender after it made an update to its whitelist.

Now, according to Ernesto of TorrentFreak.com, MediaDefender is experimenting with an initiative to distribute legitimate MP3s, complete with branding, over file-sharinghttp://en.wikipedia.org/wiki/file_sharing systems such as LimeWire. Yes, branding. Advertisers and record labelshttp://en.wikipedia.org/wiki/Record_label are purportedly working to bring marketing more fully into the offline playback process.

Of course, advertising and music have long been situated side by side. There have been radio and television deals secured, both in terms of commercials and singles playback. Live concerts also have their fair share of branding. And now on the Web we regularly see three-way partnerships made between companies like CBS (Last.fm) and marketers and media owners, some more successful than others. In fact, one such well-publicized experiment, dubbed Qtrax, a project that would offer free music downloadshttp://en.wikipedia.org/wiki/File_sharing to be supplemented and entirely subsidized by marketing, was shorted before it even had the chance to proceed with a debut.

That being said, this weekend we hear perhaps the first mention of a pilot championed by MediaDefender to grant downloads to the P2P class supported by advertisers. The only past word given about MediaDefender’s involvement in a large free-music giveaway of any sort was in the middle of 2007, when, as told by the New York Post, among others, telecom bigwig Sprint, Atlantic Recordshttp://en.wikipedia.org/wiki/Atlantic_Records , and MediaDefender joined to distribute a reported 16 million tracks from a single artist’s discography.

If MediaDefender is able to engage enough advertisers and record labels to distribute music of a popular variety, I would say it will manage to see a good bit of success, even if it can’t quite disguise itself as a supporter of such an effort. Though MediaDefender is more or less a household name among the technorati, it is presumably not a name which triggers a negative response from the average media consumer. If both music proprietors and advertisers are able to simply employ MediaDefender’s logistical aid in getting music out to the masses in an efficient, lucrative way, I would imagine this new program, if it indeed comes to be in an impactful way, will prove a success.

The question to be asked now is, if offered the option to download ad-supported music, knowing MediaDefender’s involvement, would you bite? Surely it depends on what exactly is being delivered. (Songs by an artist whose music you enjoy, versus one which you tend to ignore completely, for example.) Still, where would your judgement fall?

Songs For Soap

Advertising Age has launched a new blog called Songs For Soap. The site reports music business related stories with a particular focus on marketing efforts between consumer goods companies and artists.

Check it out and subscribe. Here is a recent post:

Come for Natasha Bedingfield, Stay for the Continental Breakfast

W Hotels, MasterCard and Sony BMG Form New Music Partnership

Posted by Mike Tunnicliffe on 06.11.08 @ 05:24 PM

According to a number of reports, Starwood Hotel division W Hotels Worldwide, along with MasterCard Worldwide and Sony BMG Music's Commercial Music Group, are launching W WonderLust Live, an exclusive concert platform featuring established and emerging artists. Guests and local consumers with MasterCard credit cards can book a "W WonderLust Live Package," which will include two tickets to the concert, an exclusive W Hotels/Sony BMG all-access VIP gift bag, drinks, a 3 p.m. checkout and a "Fabulous Suite."

The live performances -- hosted by A-list producer Bryan Michael Cox -- will also be broadcast on W's dedicated video channel, accessible only in W Hotels. Two concerts have taken place already; the inaugural one featuring Natasha Bedingfield, took place at W New York-Union Square on May 19. The second performance was held yesterday at W Los Angeles-Westwood with Irish singer-songwriter Paddy Casey.

Live Nation Studios -- the media company's live recording arm -- has signed on to record select performances and stream them at livenation.com. Some of the music will also be made available on a W Hotels CD, "WonderLust, The Worldwide Tour" produced by Sony BMG.

Previously, Starwood had a similar deal with the label to curate in-house mixes for all of its brands, and a compilation of electro-pop tunes picked for the W Hotels called "Warmth of Cool, Interlude" was released for retail.

MP3 Player TSL Eclipses Radio Among Teens

Read the following report and then tell me why radio companies are not working their butts off to get into ad-supported downloaded music:

Computers, iPods and MP3 Players Eclipse Radio Usage for the First Time

RESEARCH TRIANGLE PARK, N.C., June 5, 2008 – Coleman Insights has found that teenagers’ use of computers, iPods and MP3 players for music consumption has reached a tipping point in the last few months. After measuring usage of these new technologies by teenagers in dozens of client studies in recent years, Coleman Insights has for the first time detected greater use of them than of FM radio in a few specific instances.

In one study completed for a CHR-formatted radio station in a top 20 US market, 84% of 14- to 17-year-olds reported listening to music on a computer, iPod or MP3 player every day. The corresponding figure for listening to AM or FM radio was 78%. In a separate study, when asked the question, "Where is the first place you go to hear music?" 41% of 15- to 17-year-olds said iPods or other MP3 players, 27% said their computers and 22% said FM radio.

"The fact that kids are using alternatives to radio obviously isn’t news to anyone, but this is the first time in all our studies that we’ve seen the numbers support new technologies over radio," said Jon Coleman, president of Coleman Insights. "This shift, however, should convince radio stations that they have to determine how radio can fit into the lifestyles of younger listeners if they are not already attempting to do so."

Tuesday Tidbits

Wal-Mart Knows Low Prices - On the heels of the announcement that AC/DC will sell its new album exclusively at Wal-Mart, the New York Times has an article about the power Wal-Mart wields in the recorded music business. Wal-Mart achieved this power because it understands what it takes to sell product much better than the record labels do.

Says Gary Severson, Wal-Mart’s head of home entertainment: “I think that with any product, when the price goes up, the demand goes down. Sometimes it’s about the right artist with the right product at the right price.” It doesn't get much simpler than that.

Unfortunately for Wal-Mart, (but not the record labels) the right price is rapidly approaching zero.

Warner Wants a Piece of last.fm? - Warner has pulled its music from last.fm. Wired's Listening Post blog speculates that this might be a pressure move by Warner to get equity in last.fm. If so it is a good move. The labels should pursue equity in new music services. Not for profit but for some control in the future of the industry.

He Talks the Talk But Doesn't Walk - The following is taken entirely from David Card's blog: Why Microsoft ceo Steve Ballmer wants to dominate online advertising: "...I have to admit that I'm annoyed by the four 20 seconds [of ads], but not annoyed enough to pay a buck . . . I think at the end of the day most people say, "Heck, if I can get something that's pretty good that's ad-funded and the ads don't kill me, I'll take that over the thing I gotta pay for."

EMI's Latest High Profile Hire - Over at Silicon Alley Insider Peter Kafka has an appropriately skeptical post about the appointment by EMI of Cory Ondrejka as digital SVP. Ondrejka was one of the founders of Second Life and has "zero experience in the music business".

That doesn't bother me. What does bother me is that Ondrejka graduated from West Point where he majored in "Weapons and Systems Engineering". Yeah I am generalizing, but I don't believe that West Point Weapons and Systems Engineering grads have the irreverence necessary to make a difference in the music industry.

As we learned from the movie The School of Rock, Rock and Roll is about sticking it to the man. West Point Weapons and Systems Engineering grads devote their education to defending the man.

Mobile Music at Microsoft: More Unsolicited Advice

It was recently reported that Andy Lees, senior VP of Microsoft's Mobile Business Communication, said that Microsoft will focus on improving the music features on its Windows Mobile operating system for smartphones.

I suggest Microsoft do the same thing with music on mobile phones that I have suggested they do with the Zune: Differentiate Microsoft by focusing the platform on free ad-supported music.

Cellphones are the ideal platform for ad-supported music.

As Arbitron found, people prefer getting free ad-supported music on their cellphone to paying for it through subscription or OTA downloads.

Mobile music is not yet dominated by Apple. Microsoft should be bold and seize this market through free ad-supported music.

U2 Manager's Ad Induced Vertigo

Paul McGuinness is the manager for U2. Earlier this year he got some action in the blogoshpere for advocating that ISPs should be required to police illegal downloading. I agreed with his argument. However, he and I must now part ways.

John Timmer writes this for Ars Technica about McGuinness's keynote earlier in the week at Music Matters 2008 in Hong Kong:

But even as he wants to see more payment for artists, McGuiness rejected one model that has worked on the Internet—ad-supported content—because he feels it is beneath musicians. He's quoted as saying he does not want to see "artists reduced to the status of employees working for glorified ad agencies." A note from this ad-supported writer: get over yourself.

It was the music industry's steadfast refusal to engage the public's interest in downloaded music that left listeners with few legal options for years, ultimately producing a public that has grown comfortable with music sharing. If McGuiness' views typify the level of analysis involved in those piloting the music industry into the future, then musicians should be very worried.

Write on John!

Pandora Is Too Afraid Of Advertising To Succeed

Pandora has released a beta desktop application. As you can see from the graphic above the desktop player is nearly identical to the Internet player. This has fueled much crticisim on the blogosphere.

Copying the UI of the Internet player to the desktop player is a smart way to maintain brand integrity. However, the desktop player also copies the large size of the Internet player.

Here is how Tim Conrad, Pandora CTO, explains the size of the desktop player:

One big caveat: it's important to understand that at Pandora we have big licensing and streaming bills to pay and from the beginning we've been working hard to figure out that piece of the puzzle. That means that advertising is an integral part of the Pandora experience and in an effort to keep the advertising as unobtrusive as possible we've focused on graphical ads rather than audio ads. The one downside to that is that we need lots of pixels to run the ads, so one thing you'll find with the desktop app is it's not some tiny little widget. As nice as that would be, it would make it basically impossible for us to cover our costs with advertising. So, at least for now, the main window of Pandora Desktop (which you can minimize) looks pretty much exactly like the Pandora.com home page.

This paragraph is riddled with internal contradictions. Here they are in a nutshell: We need advertising revenue to be in business. We don't want ads to be obtrusive but we do want a big part of your screen to show ads. You can minimize the player to get rid of the ads.

Some advice to Pandora: First, graphical ads don't work for ad-supported music, only audio ads do. However, you are afraid of audio ads. This may conflict with your hipster music sensibilities but if Pandora relies on advertising for revenue it is in the advertising business, not the music business.

You are clearly way too conflicted about advertising to be in the advertising business. Scale back your ambitions for Pandora and make it a niche fee-based service

Deperate Measures: EMI Licenses Qtrax and Spiralfrog

Yesterday it was revealed that EMI had reached licensing agreements with both Qtrax and Spiralfrog.

I am glad that these services are adding to their catalog of majors. However, these deals have nothing to do with the success of the services because they aren't successful (or launched) and won't be successful.

Behind these deals is growing concern at the Guy Hands led EMI and Terra Firma. The financial markets have essentially concluded that the loans Citigroup made to Terra Firma are worthless. This has Hands really worried because Terra Firma needs the support of big banks like Citigroup for future deals. Hands needs PR to dress up ugly EMI.

Still this is the beginning of a positive trend for the ad-supported music industry. Ultimately, the only thing that will drive the recording industry to make reasonable deals is desperation in the face of disappearing sales, which is very late but starting to settle in.

Tuesday Tidbits

More Ridiculous Business Models from LaLa - LaLa.com likes business models. The stupider the better. Some they have tried and shed: facilitating CD swapping for a fee, on-demand ad-supported streaming, and a music locker service. Now they have unveiled unlimited streams at 10-cents per song.

Perhaps the only people more wrong about the music business than LaLa management are the company's investors. One unsuprisingly clueless investor of note is Warner Music Group, which according to hypebot, put $20 million into the company.

The only thing that LaLa.com got right is their name.

Peter Gabriel Launches Another Internet Music Business - Apparently Peter Gabriel is more interested in starting businesses than he is in seeing his businesses succeed (he is a founder of We7). Gabriel is behind the just launched The Filter. I think The Filter is a meta-recommendation site.

I don't know. Watch this intro by Peter Gabriel and see if you can figure it out. He makes The Filter sound as necessary and compelling as paying 10 cents for a stream you can easily get free and (legally).

Short Ads

Those of you who use immem have surely noticed that they have started inserting audio ads between playlist tracks. Bravo immem! Audio ads are the only format that works with audio content.

This morning I heard two ads on imeem; one for the Zune and one for T-Mobile. The Zune ad was about three seconds and the T-Mobile ad about 10 seconds.

With these short ads I believe imeem is using the right approach to audio advertising.

A few weeks ago Steve Smith, author of The Mobile Insider column on MediaPost, wrote an article about the value of short, frequent ads (video and audio) in new media.

Steve followed up that piece with a column that contained this quote:

Randy Haldeman is the CMO of Apptera, the voice ad company behind many of the free-411 services. When the company runs focus groups to test all kinds of audio ad inserts on these free calls, “you can see the people’s faces cringe at anything over 12 seconds,” he says. And the ads that are not related to the user or to the voice-activated query in the directory assistance call get an even worse response. “When they put down the phone on untargeted ads, they ask us ‘What the hell was that?’”

I believe that long ads can work in the medium of ad-supported recorded music. However, I think we are learning, from these other media, that short, frequent audio ads will be the primary format of ad-supported recorded music advertising.