LA Times Gets TSL

Sounds a lot like the LA Times is endorsing selling the TSL to recorded music...


From the Los Angeles Times
Editorial
Let music lead the way

Playlist services could be an enormous boon to record labels, if they could figure out how to use them in their business.December 26, 2008It's been a roller-coaster month for Project Playlist, a popular local start-up that lets users create playlists of songs scattered around the Internet.

Last week, the company's service was booted from MySpace, cutting it off from much of its clientele. On Monday, it announced its first deal with a major record company, Sony BMG. And on Tuesday, its playlist-building application was expelled from Facebook. This one-step-forward, two-steps-back routine shows how hard it continues to be for the music industry and entrepreneurs to adapt to a world in which recordings proliferate online, beyond the copyright owners' control.

Project Playlist is one of a growing number of online services that enable people to find, arrange and play the songs available (legally or otherwise) on the Net. Because they don't store songs themselves, several of these services have argued that they don't need to obtain licenses from or pay royalties to the labels. Naturally, the major record companies disagree. Two popular playlisting sites with no visible means of support — Muxtape and Mixwit -- folded rather than fight or strike deals. Project Playlist, which sells advertising and has raised more than $20 million from venture capital firms, was sued by Universal Music Group, Warner Music Group and EMI Music in April. Sony BMG held its fire, and eventually agreed to grant a license. Playlist services could be an enormous boon to the labels.

The vast quantity of music online creates a need for aggregators that can introduce new songs and artists, assemble individual tracks into hours of programming, and organize the chaotic mass of music into something coherent. That's the niche that companies such as Project Playlist fill. The problem for labels and artists, though, is that their business has long relied on selling music rather than generating money from what people do while they're listening to it. And services like Project Playlist are designed to sell advertisements, not songs -- which would be a fool's errand, given how easy it is for consumers to find free music online.Record companies are trying harder than before to profit from music that's free; witness efforts such as iMeem, MySpace Music and Nokia’s Comes With Music. But they're not making nearly enough money from such ventures to compensate for the steep slide in CD sales.

More to the point, they haven't yet made it easy for innovators such as Project Playlist to build new businesses that automatically generate income for copyright holders. That's what the major television networks have achieved in the past year by making their programs available online with built-in advertising. Entrepreneurs who want to construct businesses based on TV shows from CBS, NBC and Fox can do so easily online, and the viewers they attract generate more dollars for the networks. The record companies too need to join entrepreneurs in the marketplace, not the courtroom.

Alternative Revenue Does Not Capture TSL Value

Read this report on music purchasing and downloading from the NPD group.

The annual declines in CD purchasing continue at really mind boggling rates. CD sales will be completely gone in a few years.

The CD used to be a proxy for TSL to recorded music since it was, for all intents and purposes, the only way to access recorded music.

The health of the music industry depends on monetizing TSL to recorded music. Despite the quote from Crupnick in the NPD report, alternative revenue sources will provide only enough nourishment to maintain the industry as a sickly skeletion of its former self.

The digital file is now becoming the proxy for TSL. The industry must extract the TSL value inherent in every downloaded digital file and ad-support is the only way to do that.

The NPD Group: Decline in U.S. CD Sales Drives Down Overall Music Demand by 2 Percent in Third Quarter of 2008

Paid downloading gains traction and music-related games are evolving into an important source for music discovery

PORT WASHINGTON, N.Y., December 18, 2008 – According to The NPD Group, the leader in market research for the entertainment industry, year-over-year consumer demand for music among Internet users in the U.S. fell 2 percent in the third quarter (Q3) of 2008. This overall decline in music acquisition includes purchased CDs, purchased digital music downloads, files obtained on peer-to-peer (P2P) file sharing Web sites, and borrowing music files to rip to a computer or burn to a CD.

The proportion of U.S. Internet users, age 13 and older, purchasing a CD in the prior month fell from 25 percent in Q3 2007 to 22 percent this year. NPD estimates that the volume of CDs purchased declined by 19 percent in Q3 compared to last year. The most dramatic declines in CD sales volume were among teens (down 34 percent) and among adults age 26 to 35 (down 36 percent). CD purchases by adults age 36 and older showed a more moderate decline of 10 percent.

Paid digital downloads experienced growth in the number of buyers, and the volume of tracks sold in Q3. Fifteen percent of Internet users purchased music from online music stores, such as iTunes and AmazonMP3, which is an increase of 2 percentage points over last year and equates to approximately 2.8 million additional music-download customers. Legal music download volumes increased by 29 percent in Q3 with positive numbers seen for all age groups except the 50-and-older segment, which represents a small portion of buyers.

“The continued growth in the customer base for paid digital downloads is positive, particularly for teens, but it’s counteracted by deepening softness in CD trends,” said Russ Crupnick, entertainment industry analyst for NPD. “Alternative distribution deals in mobile and social networking are important ways for the music industry to fill the gap left by the decline in traditional revenue streams.”

The number of Internet users sharing music on peer-to-peer (P2P) sites held steady at 14 percent in Q3 2008; however the volume of music shared via P2P sites rose by 23 percent, as P2P users reported downloading more files. Teens purchased 34 percent more paid digital downloads compared with year-ago, however growth in P2P file downloading was acute among 13- to 17-year-olds -- up 46 percent. NPD noted that the practice of sharing files for the purpose of burning to a CD fell 25 percent among teens, which suggests an increased preference for having the files in a digital-only format.

“The industry has managed to constrain the number of people who are file sharing, but the expanded use of services such as Bit Torrent enable entrenched P2P users to download a growing number of files,” said Crupnick.

Video gaming also appears to have positive effects for the music industry. Twenty-two percent of music buyers (CDs, digital or mobile) overall – and 35 percent of consumers under the age of 35 -- reported playing a music-based video game, such as Rock Band or Guitar Hero, in the prior three months. Many of these music gamers reported that the gaming experience had a positive outcome, such as creating music discovery or triggering a digital-music or CD purchase.

"Year-to-date through November, the music and dance genre was the best-selling genre in video games, representing 16 percent of total software sales for the year,” according to Anita Frazier, NPD’s video games analyst.

“Even though gaming competes with music for the consumer’s entertainment wallet share, music-related games are evolving into an important source for music discovery that can have positive revenue implications for the recording industry,” Crupnick said.

Music Start-Ups Going Nowhere

Interesting list of 200 music "start ups" in 2008 compiled by Music Ally.

Few if any could become significant businesses.

Evidence of the profound lack of business creativity in a creative business.

Measuring the Audience for a Track

New recorded music business models will require a new audience measurement metric. The approach described in the MediaPost article below isn't it.

Measuring TSL is (also a lot simpler).

Networked Insights' Music Chart Challenges Traditional

Gavin O'Malley, Nov 19, 2008 08:00 AM

Last month, Networked Insights released a study challenging the Nielsen Co.'s ratings system by measuring what content is being discussed and shared online. Today, the social media research startup is releasing the second part of its study to take on Nielsen-owned Billboard Magazine and its weekly "Hot 100 chart."

While traditional music charts like Billboard determine song rankings, based on sales and radio airplay, Networked Insights' report attempts to offer a new take on music audience measurement by analyzing the millions of interactions occurring online everyday around the most popular songs.

When measuring "the social"--Networked Insights' term for engagement--seven of the songs on its top 10 must list did not appear in Billboard's top 10 songs.

"This indicates a large discrepancy between song purchase and airplay and audience interactions online," said Dan Neely, founder and CEO of Wisconsin-based Networked Insights.

In addition, while both lists consist mostly of pop and hip-hop/R&B songs, Networked Insights' chart showed a different genre with two songs in the "alternative" category: Secondhand Serenade's "Fall For You" at No. 5; and Coldplay's "Viva La Vida" at No. 7.

What is the point? The study points out that Secondhand Serenade's lyrics are popular among social network users as they lend themselves well to posting as comments and on "friends' pages."

In anther finding, American Idol winner David Archuleta's "Crush" is ranked third on Networked Insights' list because of the strong interactive component of the show transferring to online interactions.

"Our research proves that across many industries, marketers need to fully understand their online audiences and not just rely on traditional forms of measurement," said Neely. "The way people interact with music now goes far beyond just buying it or listening to it on the radio."

Today, according to Neely, online measurement generally involves listening to the 15% of people who post content online. While this section of the audience is important, the other 85%--which Networked Insights claims to uncover--is interacting in other ways like reading, rating, sharing, linking and inviting.

To gather data for this Measuring the Social report, Networked Insights tapped more than 17,000 social media and social networking sites, which included 3.5 million conversations per day and over 120 million unique users.

The Networked Insights top 10 chart was compared to Billboard's Hot 100 list for the week of Oct. 28 through Nov. 4.

Lots of TSL to TSELL to TEENS

From a recent study by the Consumer Electronics Association:

When asked how they spend their day, nearly half of teen's activities were driven by technology. Four of their five top activities were technology driven, with listening to music as the most popular activity among teens. Purchasing (58 percent), borrowing (56 percent) or receiving a CD (52 percent) as a gift are still the primary sources teens get music, with online stores (51 percent) being a secondary source. Purchasing music through online stores has increase 10 percent since 2006 and teens are accessing music
through online sources like YouTube (47 percent). As teens increase their online time, there is expected growth in online consumption of music.

Did I hear somebody say "Don't Sell the Music, Sell the Time Spent Listening to the Music"?

Free Music

On his personal Music Industry Blog, Jupiter analyst Mark Mulligan has a post entitled 2008: The Year of Free Music.

Mark writes:

2008 was the year in which the music industry accepted the fact that the only way to fight free is with free. That the only way to engage young digital consumers that have grown up with file sharing is to offer them something genuinely comparable in experience and price (i.e. free). Back in 2005 I wrote in a Jupiter report that if the industry didn’t start offering these young consumers free music they would become a demographic time bomb for future music revenues. Now finally we’re seeing these strategies starting to happen.

I disagree.

In 2008 the music industry granted licenses to ad-supported music streaming and downloading services under usurious conditions that guarantee failure. The industry throws scraps to free while it continues its rain dance to the music selling gods.

When the epitaph of recorded music sales is written, 2008 will be nothing more than the year that the delusions of 2007 continued.