Neil Young addresses labels, piracy & more

Vevo CEO Rio Caraeff, made the first public statements regarding the video site’s profitability at the digital media conference this week, putting it plainly, “We are making money, yes,” with a reported $150 million in revenue last year. In terms of the future, Caraeff predicted that the joint-venture, which includes Sony Music, Universal Music and EMI, could be a billion dollar business in a “short period of time”… Meanwhile, Edgar Bronfman Jr. lauded Spotify as being artist-friendly and not detrimental to download sales, during his interview, and called Google Music an oxymoron, explaining that there’s no “beef” between Warner Music and Google, but they need to decide if they want to be a content platform… And Neil Young addressed a number of topics including audio quality, record labels, piracy and how he and the late Steve Jobs has discussed how to reconcile the current issues facing the digital music era by combining all three.

Edgar Bronfman Jr. speaks with AllThingsD's Peter Kafka

Speaking at the Dive Into Media conference yesterday in California, on what was his last day as Chairman of Warner Music Group, Edgar Bronfman Jr. didn’t mince any words when it came to the topic of Universal Music Group’s planned acquisition of the EMI recorded music division. “It does strike me as hubris particularly for Universal to think it’s going to be easy to buy EMI, and frankly to think they can buy EMI at all,” said Bronfman, also saying that the merger would create a “super-major” that would not only control the future of recorded music, but “the future of all digital media.” He also confirmed that Warner Music would indeed be fighting the deal, as was expected with the recent news of WMG’s hiring of an anti-trust lobbyist firm. Bronfman also denied that the failure to successfully acquire EMI was the impetus for his departure as chairman, and that his biggest regret looking back was his misjudgment in the mobile space, saying that the platform “took longer to mature than I thought at the time.”

Just about one year after Google had originally planned to unveil Google Music, a service that spent much of the last two years changing in concept and approach, and of course engaging in numerous negotiations with record labels, the (almost) fully-fledged music service was revealed yesterday. Three of the four (soon to be two of the three) major labels are onboard, with music available from Universal, Sony and EMI, while Warner Music is expected to be joining sometime soon. So how does it work? Basically it’s similar to how Google Music Beta worked, with a locker where users can upload up to 20,000 songs for free, regardless of where they originated, but now Google has its own digital music store tied to the Android market as well, where users can purchase music that automatically goes to their lockers. There’s also a tie-up with T-Mobile that allows customers of the carrier to download music and have it included with their monthly billing. And that “twist,” which was teased recently, is indeed a sharing feature. Users can share songs or albums with anyone on Google+, who can then listen to the song or album once in its entirety for free. Additionally there is an Artist Hub feature, a much more interesting twist for independent artists, who can create their own page within the Google Music marketplace, and sell directly to customers without a middleman and collect their 70% cut of each sale… Much of the discussion following the release of the new service has been approached in the Google Music vs. iTunes manner – Apple finally launched iTunes Match last week with less fanfare – but as some observers are astutely pointing out, it isn’t about an iTunes-killer for Google, at least not right now. There are differences – Apple has the ’scan and match’ feature which bypasses the lengthy upload process, but Google Music offers almost the same amount of cloud storage for free – Apple has almost a decade-long head start, but Google is putting links into YouTube music videos that go directly to the song in their music store. But what’s important to each user varies, and more importantly it has to do with what kind of device someone owns. Android-based smartphones hold over 50% of the market currently, and what Google really did, is fill the huge mobile music void on the platform… And when it comes to how all the new subscription music players fit in with the overall discourse, as Evolver.fm points out, they’re two different animals all together. The Spotify’s, MOG’s, Rdio’s, etc of the world put a plethora of music at your fingertips, but they don’t allow users to ‘own’ their music, which is still a problem for many people. However, they’re great discovery or sampling tools, because you don’t have to commit to buying something (or heading to the torrents) before being able to make it accessible across multiple devices. Will something new that is the best of both worlds come along? Time will tell.

Universal Music Group and Sony Music continue to dominate the music biz storylines this year with the unpredictable conclusion of the EMI auction, which saw the two industry leaders beating out the long-expected winning bidders in Warner Music and BMG Rights Management.  It might be too soon to call it the era of the ‘big three,’ with the regulatory process expected to last well into 2012 after Citigroup’s auction split EMI into two – the recorded music going to UMG while EMI Music Publishing is set to fall under the ownership of an investment consortium including Sony Music, the estate of Michael Jackson, music mogul David Geffen and others – but however you slice it, the trend of contraction continues. And for all the growth and ‘turning point’ talk, including from the CEO of UMG parent company Vivendi, in the wake of an increase in music sales over last year, the revenue from those sales is still in decline due to the lowering of prices, as pointed out in a Bloomberg article this week… So where do things go from here?

Independent music company coalition IMPALA began saber rattling prior to the announcement of the EMI auction winners, and were quick to make public their intentions to block the acquisitions by both groups following the announcements on Friday. Industry insiders however are questioning the association’s ability to ultimately triumph in stopping the completion of either deal. Universal Music is expected to dispose of a certain amount of assets, particularly in European territories where they would now hold a market share well over 50%, and their key argument for approval will be that the music industry is in a much different place even from just a few years ago, and that they like others are at the mercy of technology companies like Apple in this new digital age. How well that justification will fare remains to be seen, as there are seemingly plenty of holes. One could easily look to how long it took Spotify to launch in the U.S. due to the process of acquiring licenses from the four major label groups, and further, that they negotiated equity stakes in the service in order to allow a launch in America… It will also be interesting to see how well Google does with the launch of a new music store, expected to be this week, with only two major labels onboard, Universal and EMI (coincidence?)… And while iTunes Match is expected to succeed, it’s clear that Apple feels comfortable with their current position and power in the music space, as they continue to expand their sites in new areas of media and content domination… And as far as the EMI publishing spoils go, many see the creation of the investment entity, of which Sony only holds a minority stake, as making the approval process easier.

Some of the other big questions being asked by observers this week include, what is the fate of EMI Group CEO Roger Faxon? A role within Universal Music on the recording side seems unlikely, and while EMI’s pubco is expected to remain its own entity with Sony/ATV in a management and administration role, will there be room for Faxon to reunite with his former EMI publishing co-CEO Marty Bandier, and more importantly would he take a reduced-role? How does this play for current Sony Pub players Jody Gerson and Danny Strick? Will Warner Music be first in line to snatch up EMI recorded assets in European territories from Universal, particularly in light of their recognized weakness abroad and the shake-up among its international management structure announced by Lyor Cohen just last week? Will Edgar Bronfman Jr. now exit WMG completely as expected? Contrary to public comments from BMG Rights Management CEO Hartwig Masuch today that the EMI publishing purchase was not “necessary” for the company, those in the know believe that it was indeed a crucial acquisition for the KKR and Bertelsmann backed venture, and having failed to secure it, are wondering if KKR will now get out? Insiders share that the Germans are considering buying out KKR’s stake. And having purchased most of the mid-level music publishing business over the last couple years, including Bug Music during the EMI auction, will BMG now shift focus to unifying its management structure and operation?

Plenty more action to come…

Doug Morris' "new Jimmy"

In a New York Times feature on Doug Morris yesterday, included among the expected platitudes from the new CEO of Sony Music, like describing his plan for the company as simply “to help create the pre-eminent record company in the world,” was the clever and first official disclosure of a new label deal with producer Dr. Luke, which will see the expansion of his current imprint with Sony, Kemosabe Records. The news, which we exclusively revealed back over the summer (with the New York Post picking up the item shortly after), comes with similar overtones as we initially reported, which is Morris is attempting to recreate his successful investment and development of Interscope Records with Jimmy Iovine at Universal Music Group. The new deal, which has been in negotiation for many months, will put the label on equivalent footing as Epic, Columbia and RCA, and also includes exclusivity at Sony for Dr. Luke’s producer services for five years – a component that smacks of Sony’s soon-to-lapse agreement with Rick Rubin, whose production work outside of their label system has been noted by many as part of the arrangements overall failure.  Also central to the Kemosabe deal is the purchase of a significant stake in Dr. Luke’s publishing by Sony/ATV, a move that will give the pubco an interest in what has been Luke’s highly-successful songwriting operation, which includes a stable of of up-and-coming pop composers with numerous chart-topping credits. Observers are drawing similarities to previous high-dollar publishing investments in hitmakers at their pinnacle, like Kara Dioguardi’s Arthouse Entertainment deal… Meanwhile, Citigroup’s auction of EMI is dragging on longer than the bank would like, with plenty of spin and speculation surrounding the action for the recorded music division. Last week saw the twist of Warner Music Group owner Len Blavatnik, pulling his bid from the table after Citi wanted him to increase the offer, though many see it simply as a negotiating tactic from the Access Industries owner. In turn, Universal Music Group, who previously was thought to be out of the running, is being touted as potentially back in, with the New York Post reporting the two sides are scheduled to meet today, though UMG’s last offer fell below Blavatnik’s. On the EMI Music Publishing side, the deal is still seen as BMG Rights Management’s for the taking…  Elsewhere, in related news, David Bowie is reportedly on the verge of leaving EMI, which would end a 15-year relationship that gave the label rights to a large part of his catalog of classic albums. Discussions are said to be taking place with both Universal and Sony… And South African hip-hop enigma Die Antwoord are leaving Interscope Records, seemingly as abruptly as they were signed to the label in early 2010. The group, who has a publishing deal with Sony/ATV, will soon be releasing their second album via their own new label ZEF RECORDZ.

swimming upstream

An article on Rollingstone.com has been getting passed around this week, as magazine contributor and author of music biz treatise, Appetite for Self-Destruction, Steve Knopper, took a stab at outlining the “new economy” of music sales. Streaming-music services in particular are a hot topic recently among artists, record labels, music-tech start ups and those who observe and comment on all of their goings-on. Among the choice quotes from the piece includes one from Jeff Price, founder of TuneCore, who commented on the confusing nature of streaming royalty rates, saying “It is beyond complicated. It took me literally three months to understand this thing,” while MOG founder David Hyman chimed in on the record labels distribution of streaming royalties to artists, “Once they get that wad of money, how do they distribute it internally? I have no idea”… The biography of Steve Jobs and its contents has been another widely discussed subject recently, with various story lines that cross into the music industry sector as well, including the Jobs experiences dealing with major labels. A New York Post item today points to Apple’s iTunes negotiation with former Sony Music boss Andy Lack, as particularly difficult, with Lack asking for royalties on each iPod sold, and Jobs criticizing him for not understanding his own business. Meanwhile, other more obvious iTunes related revelations are made, such as the reason that The Beatles only recently appeared in the digital marketplace was due to ongoing and unresolved contractual issues between the group and EMI… Elsewhere, Twitter has made its first specialized music hiring, in former Disney Music Group marketing manager Tatiana Simonian… AOL SVP of business development Jared Grusd is reportedly heading to Spotify… In a surprising move, Coldplay has opted to not make their new album Mylo Xyloto (pronounced “@&*%^$”) available on streaming services like Spotify, Rdio, MOG, Rhapsody and others, in what could be seen as a stance similar to holdout artists whose material still isn’t available on iTunes and other digital retailers… And more clues about Google’s upcoming launch of a music store comes this week with evidence of an expanded Android mobile landing page for the new Google Music service.