Multiple reports have Spotify launching in the U.S. this week, with the most recent scuttlebutt claiming the release will be invite-only initially, with members allowed to distribute invites as well – a strategy that has been employed by other notable services such as Gmail. A splash-page that went up last week allows people in the U.S. to signup to receive an invite to use Spotify “soon,” and while there has been no official announcement about a Warner Music licensing deal, it is believed to be as good as done… More details as to what the startup is planning for the U.S. were summarized on AllThingsD from ad pitch materials obtained, which include a target figure of 50 million users in the first year, with an estimated 150 million Facebook users that “will start to see music on their feeds” exposing them to the new service. That is far from an official (or exclusive) deal between the two companies though, and details about how the service will actually integrate with Facebook are still sketchy at best. Meanwhile it appears that other similar services like Rdio and Rhapsody are looking to incorporate functionality with the social network as well. Spotify’s deck also mentions the massive amount of free publicity the startup has already received – now over two years of speculation and coverage about a U.S. version – and will continue to get when the launch is official. Even with all that, and presumably more up their sleeve, many are questioning the lofty first year objective. Using the service’s existing European numbers as the only available measurement, it is indeed difficult to conceive of the target user-base being reached so quickly… However, in addition to Facebook, significant publicity and even telecom carrier tie-ups being rumored, an important aspect being overlooked by many is the record labels themselves. Speaking with label folks familiar with the situation, the once reticent labels are now heavily getting behind the service. While the licensing agreements are the sticking point in just getting off the ground, it’s the additional marketing and promotional programs that can become a major factor in succeeding. There are other new music startups already operating that offer essentially the same major functionality as Spotify, but according to those in the know, there has not been another digital music service that the labels have lined-up behind this much since iTunes…
[UPDATE: The service officially launched the morning of Thursday, July 14, and the invites are for access to the 'free' ad-version only, the 'premium' and 'unlimited' subscription levels are now active.]
There have been many past reports of Spotify launching in the U.S. “soon,” but is it really happening this time? After recent news that the service signed on Universal Music Group, the company’s European general manager told an audience in London this week that the “remaining deals” (Warner Music Group) are being signed right now. While there still hasn’t been any official or unofficial reports that a WMG is in the bag, those comments as well as a confirmed new funding round of $100 million from DST, Kleiner Perkins and Accel, lead many to believe a launch is really happening, and soon. Whether or not the timing lends credence to previous rumors of the labels stalling Spotify in order to let Apple to get their new iTunes Match service out of the gate, the landscape is now slightly altered after Amazon, Google and Apple have all unleashed new services… President and CEO of the National Music Publishers Association, David Israelite, is urging members to create a more streamlined solution for digital music companies to license rights, so as to not miss out on new opportunities. That might come in the form of new agencies which act in the interest of all publishers for sync and mechanical rights – the process of tracking down various writers, composers and publishers that have interests in a tracks, has proved to be time consuming and frustrating to new music services seeking rights… Elsewhere, I.R.S. Records is being relaunched as a frontline label by EMI Music in partnership with Crush Management… After an initial pop for Pandora when shares first started trading earlier this week, the price settled back down, and continues to fall… And congrats to Jon Pikus, who has been named the Creative Director for Imagem Music in the U.S., Pikus comes to Imagem after previous A&R positions at MySpace Records, Columbia Records and Interscope…
BMG eyeing WMG's pubco
As Citigroup readies EMI for auction, as soon as this month according to reports, KKR-backed BMG Rights Management is already kicking the tires on Warner/Chappell Music according to the New York Post. While a number of suitors are expected to submit bids for all or part of EMI when the music group is taken to auction, if Len Blavatnik‘s Access Industries comes out on top again, most expect that regulatory obstacles would see Warner Music‘s pubco being sold, though some observers have Citi more likely to favor other interested parties due to fear of such regulatory scrutiny… A Digital Music News story this week revealed that digital music retailer eMusic has had little to no subscriber growth since 2007, even with the addition of catalogs from major labels. The service however, can point to an increase in revenue from its current subscribers, who are opting for higher-paying levels of membership. Also apparently on the horizon for eMusic is a cloud-based service – with CEO Adam Klein telling Billboard that they hope to launch it by the fourth quarter of this year… How many more companies will join those already in the cloud like Apple, Amazon and Google? Apparently Hewlett Packard is in the early stage of discussions with content owners, including major labels, for a service similar to iCloud, offering music, movies and TV shows… Meanwhile, MediaMemo reported today that Universal Music Group has signed on with Spotify in America, and while a deal with Warner Music Group is yet to be reached, sources have the two sides close to a deal as well… Elsewhere, Irving Azoff and Liberty Media boss John Malone are said to be considering taking Live Nation private, in an effort to restructure the company… And while News Corp.‘s prospect of completely unloading MySpace don’t look good, according to a new report, the frontrunner among those in talks for a strategic partnership that would leave News Corp. with partial ownership, is an investment group which includes Activision Chairman and CEO Bobby Kotick.
Spotify & Facebook Joining Forces?
Last week saw reports that Apple has signed licensing agreements with EMI Music and Sony Music for its imminent cloud-music service, leaving Universal Music Group the sole holdout, though word seems to be that a deal is on the cusp. While many of those watching are predicting an announcement of the new service at Apple’s annual WWDC event in June, the other remaining issue is having deals in place with the major music publishing companies, which right now they don’t appear to have. According to a report on CNET, despite Apple’s previous stepping out with increased iTunes song-sample lengths without the approval of publishers that created a contentious situation, there isn’t much keeping the two sides apart on a cloud-streaming agreement… Most are already hailing Apple as the fait-accompli winner of the cloud music ‘wars’, though Amazon made a big wave this week by offering Lady Gaga‘s new album Born This Way at a deeply discounted price, a move that the WSJ paints as an offensive on the iTunes digital music dominance, though Amazon is still a long way from making a dent in iTunes stranglehold. According to the article’s sources, Born This Way sold between 250,000 – 350,000 across both online marketplaces in its first day… Over the weekend news surfaced that Access Industries and Len Blavatnik‘s offer for Warner Music was not the highest, a group including Sony Corp., Guggenheim Partners and Ron Perelman offered 3% more at $8.50 a share, though the deal would have been contingent on Sony board and partner approval. How this will effect the multiple shareholder lawsuits Warner is currently facing is yet to be seen… Speaking at e-G8 in Paris this week, Sean Parker made comments, as MediaMemo notes, that may explain his interest in the recent bidding on Warner Music, and could also portend future involvement in bidding on recorded music companies, an excerpt: I think that there is a pretty dramatic change in the way music is monetized that is on the cusp of happening. Back catalogues of record labels are going to become extremely valuable…If you believe this transformation is occurring, if you believe the broken distribution systems are on the verge of being fixed, those recordings are dramatically undervalued… And speaking of labels for sale, Forbes has a profile of EMI group CEO Roger Faxon, framing him as the key in the label’s recent turnaround, including major digital breakthroughs with Beatles and Pink Floyd catalogs, though his future at the company may depend solely on who the new owners will be… And is Facebook Music launching soon and on the back of Spotify?
Apple reaches agreement with EMI for cloud-music service
The news of Apple inking a cloud-music deal with EMI Music was first reported late yesterday on CNET, and according to the industry sources the report is based on, the company is close to reaching similar agreements with both Sony Music and Universal Music Group – a deal with Warner Music was reported to have been reached last month. By now having licensing agreements with two of the four major label groups, the implications are numerous, but mainly it’s that Apple will likely once again be the driving force behind the latest shift in the digital music arena, and that Amazon and Google jumped too soon by releasing services without label deals in place… While lately the tech and music industries have been hot on the cloud-music future and closely watching developments unfold, it remains to be seen how much consumer demand there is, and on a large scale, what are people willing to pay. A new survey from Nielsen that targeted people with ‘connected devices’ (smartphones, iPads, etc), asked how much they would be willing to pay for a monthly subscription for various types of content (music, TV, movies, news, etc), and the average seems to come in right around $10/month. That falls in line with some current services that are available, and isn’t a bad number, but of course that is all in theory, and an important point to keep in mind is that an overwhelming majority of people still do not use smartphones or other high-priced ‘connected’ devices… Some attention has also turned to Apple’s patent-pending pre-buffering technology that is supposed to make its streaming experience better than other current services, though as Evolver.fm points out, Pandora and Spotify have been using similar technology for some time already… And in related news, which is receiving less excitment than the Apple-EMI deal, is that EMI Music has now also reached an agreement with digital music subscription service eMusic.
LimeWire's founder could face $1billion in damages
The trial to determine damages owed by Lime Wire founder Mark Gorton to the top record labels represented by the RIAA (a separate settlement with the National Music Publisher’s Association was previously reached back in March of this year), began this week in New York. The maximum statutory damages that could be awarded is more than $1billion, from a $150,000 fine for each of the 9,715 albums released through the P2P network. Notable claims made by both sides as reported on CNET and Bloomberg, included the RIAA’s claim that Lime Wire alone holds significant blame for the 52% decline in music sales during the years 2000 to 2010, as part of the overall accusation that Gorton’s service financially devastated the record labels. Meanwhile the attorneys representing Gorton called into question the notion of financial devastation for the labels, citing revenue from the likes of Internet radio, royalties from video games, and ad dollars from YouTube – even calling attention to high-level executive salaries and compensation still in the 7-figure range and higher. They also produced past notes and referenced comments from prominent music group CEO’s such as Doug Morris and Edgar Bronfman Jr., which seem to indicate the labels are aware that piracy is a consumer problem more than anything, likewise adding that recent history shows any time a file-sharing service has gone offline, the public just shifts to the next best option…. Elsewhere, Spotify has released a new and improved app that has many seeing it as an aggressive move on Apple‘s iTunes store and a clear indication that the start up’s aims remain high (and possibly that a U.S. launch is even closer). The new version allows users to directly sync music on iPods, and in a further affront, the service has also introduced the selling of downloads, coming in the form of bundles enabling users to purchase playlists. Said CEO Daniel Ek, “From today, Spotify really is the only music player you’ll ever need”…
Destined to be combined?
The final round in the Warner Music auction closed yesterday, with two primary bidders said to be vying for the company, one being Len Blavatnik’s Access Industries and the other, a coalition of brothers Tom and Alec Gores, whose respective company’s are Platinum Equity and Gores Group – both suitors reportedly tendered bids around $3billion for the entirety of WMG. Attention has begun to drift to the looming sale of EMI by owner Citigroup, and the belief de-jour is that whomever ends up nabbing Warner Music, will also be aggressive in securing EMI as well. The result would likely be a cut and paste job between the various components of the two music groups. In another twist, The Telegraph reported yesterday that KKR-backed BMG Rights Management and Universal Music Group may be teaming up in an attempt to acquire either or both EMI and Warners, having put together a plan to carve up catalogues in an effort to avoid regulatory hurdles… Elsewhere, according to FMQB, Q Prime is expanding its promotion team, with an emphasis on bolstering the undertakings of its premier management operation, with a roster including Cage the Elephant, The Black Keys, Silversun Pickups, Snow Patrol, Muse and many others. Q Prime’s Mom + Pop Records, who has releases from Sleigh Bells, Metric, Freelance Whales among others, should also benefit from the increased staff. The additions include Trina Schaefer (formerly of Island Def Jam), Erin Gellert (formerly of Epic Records), Devin Rosevear, Chris Frank (formerly of Universal Motown) and Michael Fang (formerly of Red)… Meanwhile, the news of a nearly 25 million additional user accounts being compromised in the recent PlayStation Network breach (77 million were initially reported) smacks of the Sony BMG rootkit blunder (and ensuing lawsuits), and it can’t be good news for Sony Corp. CEO Howard Stringer, whose term has recently begun to be put in question more frequently… And for an interesting read about some of what labels are said to be demanding from cloud music, or locker, services (efforts from Amazon, Apple, Google and Spotify being the most widely discussed), check out the guest post from MP3.com and MP3Tunes founder Michael Robertson on TechCrunch.
[UPDATE - Bloomberg first reported yesterday that a last minute joint-offer for Warners was submitted by Sony/ATV Music Publishing and Ronald Perelman and Guggenheim Partners LLC. A winning bidder is expected to be announced on Friday.]
Parker Joins Bid for WMG
The latest news coming out of the Warner Music Group sale, is that Napster co-founder, and current Facebook and Spotify investor, Sean Parker is part of a consortium that is planning to make a bid for WMG, a group led by Ron Burkle and Doug Teitelbaum, according to AllThingsD. Burkle’s interest in making a play for the company was recently revealed along with a handful of other leading suitors. Parker’s moves are always of interest to tech and music industry circles, due to his association with such high-profile and influential start ups. Warner is one of two remaining major label groups yet to sign on with Spotify in the U.S. – Universal Music Group being the other… The New York Times profiled Big Machine Records founder Scott Borchetta in a piece over the weekend. Borchetta goes into his early career in Nashville working with his father’s promotion company and various Music City record labels, before starting Big Machine in 2005… On the heels of the recent acquisition of music subscription service Thumbplay by Clear Channel, who is eyeing the online radio space currently dominated by Pandora, the company has announced the departure of its head of digital Evan Harrison… And Superglued, a highly-anticipted location-based Foursquare-like mobile app for concerts, will be unveiled tomorrow during the last day of SXSW Interactive.
Beyond believable funding
Today Vivendi announced that Lucian Grainge will now be taking the title of Chairman along with CEO of Universal Music Group, this comes ahead of the original timeline for assumption of the title, a result of Doug Morris exiting his contract early to head to Sony Music this summer. Grainge will report to Vivendi CEO Jean-Bernard Levy, and will also take a seat on the board of gaming company Activision Blizzard… Warner Music Group is reportedly narrowing the field of offers it has received, for both the entire company as well as just the publishing unit Warner/Chappell Music - conflicting rumors have current WMG investors wanting to sell the entire lot, while most believe CEO Edgar Bronfman Jr. is still eying EMI and has no intention of exiting the recorded music space…Elsewhere, Spotify revealed that its music service now boasts 1million paying customers, which represents roughly 15 percent of its overall active user base. A good sign for a U.S. launch soon?… File-sharing service LimeWire, which was recently shutdown by court order, has settled legal action brought by music publishers for an undisclosed sum. Action brought against the company by the record labels has yet to be resolved… And a News Corp-backed digital music start up called Beyond Oblivion made waves this week with a reported $77million in new funding. The company’s model has a twist in that it is a device-based cloud music service, which will pay content holders a royalty every time a song is played on a device, regardless of where the song originated.
Morris takes his talents to Sony
The big news this morning from within the big four music groups (soon to be three?), is the confirmation that outgoing Universal Music Group CEO Doug Morris will indeed take over the reigns as new chief executive at Sony Music on July 1st, as Rolf Schmidt-Holz departs at the end of this month. Sony Corp. chairman Howard Stringer will fill the role in the meantime. Morris held the role of CEO at UMG since 1995, before announcing a successor in Lucian Grainge at the beginning of last year. On the other side of the coin, RCA/Jive label chief Barry Weiss will also leave the building this week, as he takes a top spot in Grainge’s East Coast Universal label operation… Bloomberg reported this week that Warner Music Group, which recently put itself on the block with help from Goldman Sachs, has received ten offers so far including bids on its publishing division Warner/Chappell Music by Sony/ATV Music and KKR-backed BMG Rights Management, while Russian billionaire Len Blavatnik is seeking to acquire most of the company. UMG did not submit an offer, reportedly due to anti-trust concerns – though they may be interested in acquiring parts of the recorded music business… In what could be seen as a preemptive move as Spotify appears to be gearing up for a U.S. launch (including reportedly making hires), Rhapsody is offering a 60 day free trial for its streaming service… Ringtone company Thumbplay, who transitioned into the music subscription arena earlier than most current players, has been bought by Clear Channel. It appears that the new owners of the service intend to transition the service into online radio, utilizing the Thumbplay technology and talent and integrating it into Clear Channel’s current free iheartradio service… Elsewhere, Live Nation California prexy Rick Mueller is reportedly leaving and heading to rival AEG… MTV and Sony/ATV’s Extreme Music are launching Hype Production Music as the result of a new licensing partnership that will focus on emerging and independent artists… And despite continued turmoil in the digital music landscape, investors are once again starting to dump big cash in the chaotic space.
BMG RM's Hartwig Masuch; Who will they take first?
It’s being reported the Warner Music Group is preparing to receive offers this week from a list of up to 20 bidders, the latest entry on the list of suitors is Russian businessman Len Blavatnik, who already owns a minority stake in Warner/Chappell Music. The KKR-backed BMG Rights Management venture is expected to be among bidders for WMG’s publishing division, having apparently tapped multiple banks to advise and provide financing. Though the move could also be to prepare bidding for the Citigroup-owned EMI Music, the other major music group currently on the block. Or maybe it’s both… EMI group CEO Roger Faxon continues his media tour, with a piece this week in The Guardian where he explains the pitfalls of splitting up the company’s recording and publishing divisions. Meanwhile, former owner Guy Hands expresses disappointment over losing EMI, his highest profile investment, to Citigroup… Details coming out over the weekend have Spotify getting a large amount of new financing in the range of $100million from Digital Sky Technologies (also backers of Facebook, Groupon and others), which would give the company a new valuation of around $1billion. If it seems like all that new money will just end up going to the labels in the U.S. in order to get off the ground (Spotify now has both Sony Music And EMI onboard), MediaMemo‘s Peter Kafka says think again… And how would the new Apple content subscription service fees hinder music services like Spotify? A cryptic email from Steve Jobs this week has many questioning if Apple is changing its tune on fees applying to music services.
#1 source of label revenue in Sweden & Norway
Contrasting speculation continues around Spotify and when the start up will launch in the U.S. as well as whether or not the income it could create would even mean anything significant for artists or labels. Recent reports have anonymous label executives calling the revenue they create “Microscopic,” “Laughable,” And “Pathetic”, while others proclaim the service is now the “second largest source of revenue in Europe for labels”. For what that’s worth. And questions continue to be raised over how the service pays artists, particularly indie acts… Only an actual launch in the U.S. would tell the full story. Where do things sit with such a launch? Sony Music has signed on, and EMI is supposedly “close” – but they have been for weeks, and there’s larger entanglements there with the state of limbo the label is in under the temporary ownership of Citigroup. Warner Music Group CEO Edgar Bronfman Jr. has changed his tune slightly, stating on yesterday’s WMG earnings call “We do see Spotify, and services like Spotify, as ever-more meaningful for our results.” Meanwhile Universal Music Group remains the big prize for the start up getting off the ground in the states. If a letter sent to the current few U.S. users of the service and a job opening in an unnamed U.S. location, are any indication, Spotify will soon be landing here. Or maybe not. As aptly put by @evolverfm “Spotify in the U.S. is the new Beatles on iTunes.”
Who will get out of the gate first?
In another 2011 industry horse race, contradictory reports and speculation continue to surface about the launch of digital streaming music services from high profile companies like Google, Spotify and Apple. Sony Music recently inked a deal with Spotify, becoming the first U.S. label to do so. And that was quickly followed by rumors of a U.S. deal with EMI being closed in on, however the effects on such a deal by the label takeover this week by Citigroup are yet to be known, but it’s likely not good for the European start up. Even if an agreement was reached, would it be valid when new ownership takes over? Regardless of an EMI deal, or even Warner Music Group, the biggest target for Spotify to get the service off the ground in America is still Universal Music Group, who boasts the largest market share and a significant stable of current hit artists. What will it take to land the other majors? Lots of cash, and most likely a number of concessions in the area of how much free music it offers… Meanwhile, Google has plenty of cash, and reports continue to indicate that it has no problem plunking it down for labels to launch Google Music. While rumored timelines for a launch continue to contract and expand, a possible major stumbling block for Google, and other services in the same cloud, is music publishers. Matt Rosoff wrote a piece this week citing a source that claims publishers want to be paid for every download. Meaning that the key aspect of the locker-based service would conceivably force users to pay multiple times for the same song when downloading at different locations and on multiple devices. Something consumers will surely scoff at… The end of last year saw plenty of anticipation and predictions about a streaming service from Apple, however the talked has quieted this year as the company remains mum. However recent comments from Spotify executives have accused Apple of putting pressure on labels in an effort to keep the service from launching in the U.S., presumably to give themselves more time to finish working on a yet-to-be confirmed streaming version of iTunes. Not unheard of when considering the continued pressure it puts on artists and labels who do business with Amazon… Stay tuned.
Which way is the river flowing?
Over the weekend The New York Times published what has become an annual gloom and doom report regarding the state of music sales, using the International Federation of the Phonographic Industry‘s report as the guidepost. In addition to the continued slump in physical, the recap for 2010 concentrated on the plateauing of digital sales and “not a lot of progress” in digital after a decade. However as Evolver.fm points out, the piece focused heavily on the slowing at marketplaces like iTunes and Amazon, while paying less attention to revenue generated from newer services like Pandora, Spotify, YouTube, etc – which is not the same as digital sales. The IFPI’s report contains various points of optimism, like in the growth of mobile access to subscription services due to new technology and compatibility improvements, as well as the significant expansion in the customers of new “freemium” services… Elsewhere, a Financial Times piece this week adds to the growing reports of Doug Morris seeking an early exit from his contract with Universal Music Group owner Vivendi, although it’s still unclear if he will get released in time for a presumed takeover for Sony Music CEO Rolf Schmidt-Holtz, whose contract is up at the end of March. More red rover continues between UMG and Sony, as Lucian Grainge taps former Sony A&R executive Larry Jackson as EVP of the IGA family of labels…. Meanwhile Guy Hands reportedly will get a last chance to hang on to EMI Music, as Citigroup asks the Terra Firma boss to make an offer to keep control of the music company, which is thought to be valued around £1.6 billion.