Crying In The Wilderness

I hope that somebody out there has noticed that I haven't blogged much this week. Yes, I have been busy but it is really ennui over the state of the music industry, brought on by a spate of bad news this week, that has given me blog freeze.

Wal-Mart and Borders are reducing floor space devoted to CD sales. Album sales, digital or physical, continue to tank. Nobody wants to buy Napster, even for the value of its cash on-hand. Bad news and it is just going to get worse. (Several hours after my original post I came across this bearish take on the music industry.)

Also this week, Music Think Tank posted a piece called Please Buy My Record: The Futility Of Flogging Music by Rhodri Marsden a long-time indie musician, concluding that trying to sell music just doesn't make sense any longer.

Perhaps I am the voice of one crying in the wilderness, so I'll say it like this: "Prepare ye the way of growth and profitability: Don't Sell the Music, Sell The Time Spent Listening to the Music. Make the arrows point up.”

Youth Cheap With Money Not With Time

Last week the Ypulse blog put up a post from Larry Weintraub, the CEO of Fanscape. In the post Weintraub recaps a panel he moderated on young people's music consumption at the Bandwidth Conference.

You should read the entire post, but here are some highlights:

• Youth Still Aren't Paying For Music...
• Concerts Are Cool, When They're Cheap
• But understand this, they love music. They consume more music than previous generations.
• The takeaway is that these young people have grown up in a generation where recorded music is traded, downloaded, and consumed with very little monetary exchange...

Young people today may not be exchanging much of their money for recorded music but they are giving their time.

Unlike an MP3, You Can't Pirate Time

Eliot Van Buskirk writes the Listening Post blog for Wired. Yesterday he put up a post, including a video clip, about an interview with Jon Simson the head of Soundexchange, the online music royalty organization.

Two things from the post that I want to comment on.

First, Simson says that Pandora should run audio ads in order to earn sufficient revenue to pay royalties. Of course I agree that audio ads are the way to go (although they won't command a CPM high enough in streaming music to pay current royalty rates).

Second, Van Buskirk ends the post with this thought: "Simson makes some decent points in the video, then shows that he has no grasp of the concept that infinitely-replicable digital goods differ from physical goods that must be manufactured."

We have all heard this "infinitely-replicable digital goods" argument before. It basically goes like this - because music is now digital and can be replicated at nearly zero cost it has nearly zero transactional value.

What I don't understand is why the proponents of this argument don't identify and advocate selling the one aspect of music that is not replicable and, any technological developments not withstanding, never will be.

What aspect of music is this? The time spent listening to music.

Android MP3 Player?

Last month I wrote a blog post calling for an open source MP3 player (How About An Open-Source MP3 Player?).

Now I read in this article from VentureBeat that: "Industry sources tell us that although Android will indeed start as a mobile OS, Google intends to expand it to be a sort of universal operating system that will span set-top boxes for televisions, mp3 players and other communication and media devices and services."

That would be a very good thing and would facilitate ad-supported recorded music applications for the portable audio player.

More On The Power of Audio

The findings below are from a just released study by the Radio Ad Effectiveness Lab.

With these features advertisements in ad-supported music can be even more effective than ads on radio.

Executive Summary

This report is a follow-up to the Radio Ad Lab’s report, Engagement, Emotions, andthe Power of Radio. After our original evaluation of 16 different real ad campaigns within actual programming, we previously concluded that:

On average, Radio ads have emotional impact on consumers that is equal to that of television ads.

This new analysis allowed us to dig more deeply into the individual ad results, and weexplored why some Radio ads seemed to have more impact than others. This wasn’t a controlled test of all possible creative variables, but we did observe some distinctions between the more engaging ads and those that were less effective:

• Strong beginnings make a difference. Every second in an ad is precious—and perhaps none more so than those at the beginning. An involving point of entry seems to distinguish some of the most successful Radio ads in our study.
• Word selection matters in Radio ads. In particular, words that are sensory laden, emotional, or empowering have a demonstrable impact on the emotional reactions of consumers.
• Words can be more powerful than pictures. The spoken word is powerful, andat least in some circumstances, saying something the right way can be even more emotionally potent than simply showing it on a TV screen.
• Radio ads need effective advertiser branding. Brand mentions alone aren’t enough, of course. But the best Radio ads do remember to mention the advertiser’s brand multiple times, and preferably in emotionally engaging ways.
• Time is valuable. Use it all well. The most impactful ads we examined not only started well, they sustained interest throughout. We do understand that not all commercial content is under creative control (e.g., legal boilerplate). But make the most of every possible second.

This is not a “creative cookbook,” but with the advanced techniques available to us in this study, we could actually observe moment-by-moment what happens when various approaches to Radio creative are played for a good cross-section of consumers.

We hope this exercise will serve as a useful reminder.

This study also suggests that it can be useful to fine-tune Radio ad creative so that it works in tandem with one of Radio’s greatest strengths—touching listeners at an emotional level.

Ads that do all these things are truly powerful. The strongest ads in ourstudy—the most emotionally engaging and the best recalled—did all of these things together.The quality of Radio ad creative matters. It pays to invest time creating good Radio ad content to begin with, and whenever possible, it can pay to test the content in advance to make sure that consumers really are reacting as intended.

Coke One-Ups We7

Free music from We7 and We8 - WeIRD!

Tuesday Tidbits

Network DVRs - Last week the Circuit Court of Appeals overturned a lower court decision and legalized Cablevision's use of DVRs located in the cable system rather than the viewer's home. AdAge reports that by lowering barriers to use, network DVRs will significantly increase use of this technology therby also increasing ad-skipping. I have to believe that any decrease in the effectiveness of TV advertising will be good for new-media advertising alternatives such as ad-supported music.


Napster Losses - According to Digital Music News, in the last quarter Napster: "witnessed drops across revenues, income, and subscribers, three critical metrics." Forrester analyst James McQuivey calls subscription services "modern-day record clubs" - an apt comparison of the service and revenue potential.

Google Chinese Ad-Supported Music Search - It has been all over the music news that Google has launched an ad-supported music search service in China. The Chinese - like every other breathing human being - don't like to pay for music. The potential for ad-supported music in China - especially on cellphones - boggles my mind.

Pay What You Want Download Site Aralie Launches - Why?


MySpace Music CEO Search Going Badly - The Deal reports that MySpace has been unable to find a CEO for their music service. Apparently industry insiders like Ian Rogers, Dave Goldberg, and Eric Garland turned down the job. I don't know why Murdoch would go after industry veterans to run this new service. The music industry needs new ideas. I don't think Hands can save EMI but I give him credit for turning to an industry outsider to run the record division.

UFC Presents MySpace v. imeem

Fortune published an excellent article about the upcoming competition between imeem and soon-to-be-launched MySpace music. I have reprinted the article below.

The piece contains some good information regarding CPM rates at the online ad-supported music services. The author points out the dilemma well known to those in the field - that these rates are quite low.

Ad-supported music will not escape the low ceiling of online display advertising CPMs until it moves from streaming to downloaded tracks.

Fortune

Making free music pay off

As MySpace prepares to launch its free music service, it faces an entrenched upstart playing the same tune.

By Devin Leonard, senior writer

Last Updated: August 8, 2008: 12:32 PM EDT

(Fortune) -- It's been the talk of the music industry for months. Perhaps as soon as September, MySpace, the huge social networking site with 120 million users, will unveil an ad-supported music service with free songs from three of the four major record labels: Universal, Sony (SNE) and Warner Music (WMG). MySpace CEO Chris DeWolfe has promised it will launch "a new chapter in the story of modern music."

There's only one problem with his grandiose prediction: Imeem, an ad-supported social network based in San Francisco, already allows its members to listen to the same songs - and many more - for free. Imeem, with 27 million users, has secured deals with all four big music companies, including EMI, MySpace's missing major. And it has no interest at all in being eclipsed by its larger, News Corp (NWS, Fortune 500).-owned rival. "We're number one in social music," says Imeem founder and CEO Dalton Caldwell. "We like that."

MySpace declined to make executives available for interviews.

The ad-supported music business is tough. The major labels control 86% of all album sales in the United States, according to Nielsen SoundScan. They generally want to be paid about a penny each time someone listens to one of their songs at a website like Imeem.

That would make it hard for Imeem to make much money. Social networks don't command premium ad rates, largely because advertisers worry about having their messages possibly appearing alongside user-generated cat videos and less savory fare.

People on Madison Avenue say Imeem is getting about $4 in ad revenue for every thousand page views. If the company is paying a penny to SonyBMG every time someone listens to a Bruce Springsteen song, it's in trouble. After all, users probably listen to at least one song when they visit someone else's page on Imeem. Your typical Springsteen fan probably listens to many more if he winds up on the page of another fan of the Boss.

MySpace Music starts out in an even weaker position. Ad agency people say it charges about $1 less per thousand page views than Imeem. But Donnie Williams, director of digital strategy at marketing firm Horizon Media, says that MySpace is improving its ad-targeting abilities. "That means they'll be able to sell more ads," he says. "And it makes it harder for the Imeems of the world to maintain their rates." MySpace, it should be noted, also plans to make money by operating a music download store and a music subscription service.

Imeem executives decline to reveal their company's ad prices. Nor are they interested in shedding much light on the financial terms of their deals with record labels - except to say they are "ad revenue-sharing" arrangements rather than the standard penny-a-song contracts.

Caldwell says Imeem has yet to turn a profit. But he argues that his company is in a strong position because it is smaller and more innovative than MySpace.

Well, that's what every technology industry underdog says, isn't it? But in this case, there's some truth to it. Imeem employs a bunch of geeks who worked on the original incarnation of Napster. They have developed technology enabling its users to export their Imeem music and video playlists as widgets to other social networks like Facebook and, yes, MySpace, too.

Gene Munster, senior research analyst at Piper Jaffrey, says the widgets are part of the reason Imeem isn't about to be blown away by its bigger competitor. "MySpace is limited to people who use MySpace, whereas these widgets can be used on any platform. So they have access to a broader audience. We are also starting to see ads within those widgets."

That must set some people's teeth on edge at MySpace. Wouldn't you be a little miffed if your competitor was selling ads on your own website?

As you might expect, MySpace is watching its rival closely. Erin Pennington, national senior vice president of digital marketing firm Moxie Interactive, has run ads for Puma and Verizon (VZ, Fortune 500) on Imeem. She also patronizes MySpace. She gets a lot of Imeem queries when she visits MySpace's offices. "I definitely think MySpace has been paying attention to what they are doing," she says. "They are trying to learn from Imeem's success."

Here's something to think about. What if MySpace decides Imeem is too much of a distraction? Could it persuade its music company partners to dump the smaller social network? After all, MySpace Music will be a joint venture with SonyBMG, Universal and Warner Music. The music guys have a lot at stake here.

But as usual, their loyalties are divided. Warner Music is also an investor in Imeem along with Sequoia Capital and Morgenthaler Ventures. Warner sounds happy about the way things are going at Imeem. In May, Warner Music CEO Edgar Bronfman Jr. told investor he had "a lot of faith" in the company: "Our original investment is worth a great deal more than [what] we paid for our original investment."

Perhaps Imeem is getting better ad rates than people assume on Madison Avenue. Caldwell should enjoy it while it lasts. Starting in September, he'll find out what Imeem is truly worth.

Lazy Sunday Every Day It Seems

I have been lazy in posting since returning from the Minnesota wilderness. I will get back up to speed next week - I hope.

In the meantime read this post by Erick Schonfeld on the Ajax Blog about the UMG backed Total Music plan.

trueAnthem Gets A Lot Right

I learned about a new ad-supported recorded music company called trueAnthem from this story. I really like what this company is doing.

Like most ad-supported music start-ups trueAnthem is launching with a catalog of indie musicians. There are, however, a few features that, together, seperate trueAnthem from the others.

First, the company distributes its downloadable tracks through freely available widgets. The idea is that people will post widgets for songs they like on their social network pages and their friends can do the same or just download the track. This viral strategy is not unique, nor is it a complete distribution strategy, but it works well for a digital music start-up.

Second, the sign-up is the simplest and fastest I have encountered on a free music download site. This detail is evidence of craftsmanship.

Third, and most important to me, is that each track is preceded by a short, live-read ad from the artist introducing the song and its sponsor. trueAnthem gets two things very right here - audio ads are the proper format for ad-supported music and live-reads are a great implementation of this format.

trueAnthem joins leaders We7, imeem and Pandora in using audio ads to fund ad-supported music. I think we are finally beginning to see some critical mass toward the use of this format.

The problem that trueAnthem and We7 still face is the audio whiplash of an ad fixed into the music file and played every time with the track. The next step is to dynamically insert ads into downloaded music just as they are inserted into streaming music. Ad-supported downloaded music will not succeed without dynamic insertion.

Nonetheless, kudos to trueAnthem