There seems to be quite a bit of optimism lately in the realm of digital music and what the future holds for subscription services. So far 2011′s album sales are already up from the previous year, with a big bump from digital, and at least one major label is claiming that they’ve finally figured out “free”. Glassnote artist Mumford & Sons became the third artist ever to sell 1 million digital albums, and even MTV has announced a second O Music Awards show, celebrating music and technology, which is set for October 31st… Spotify was quick to release new user data within only a couple months of launching its service in the U.S., and while they are clearing unclear in terms of paying versus free and how many are U.S.-only as opposed the world-wide, the overall statement is that a lot of people are trying out the service. The announcements in the music arena made during Facebook‘s recent f8 conference also helped boost the outlook of not only Spotify, but a number of other digital music services including MOG, Rdio and iHeartRadio that were also included in the social networks big changes. And while most eyes remain on the Swedish-start up, the competition continues to counter with new moves of their own. Rdio announced this week that it will be launching a free on-demand streaming service, that has no ads, and an unspecified limit on free-listening, which follows a similar move by MOG… Meanwhile, Rhapsody has acquired Napster from Best Buy, in a purchase that will raise the longtime streaming service’s plateauing numbers… Elsewhere, Apple revealed during their press event on Tuesday that its new iCloud service will be extended to Europe, following recent reports that the company was seeking worldwide music rights from labels and publishers… And after only a few months as the new owners of MySpace, Specific Media held presentations for top-level advertisers at Radio City Music Hall on Monday, trying to generate excitement for the site, which will be focused primarily on music and video content. Creative partner and investor, Justin Timberlake (who has also been tapped to play Neil Bogart in an upcoming biopic of the Casablanca Records co-founder) was on hand for the presentations as well.
Monday afternoon saw the official news of a major deal that has been in the works for months that unites Live Nation Entertainment and Universal Music Group in a new pact joining UMG’s management properties, including Sanctuary, Twenty First Artist (and presumably the new producer management arm Twenty First Republic that was formed earlier this year with World’s End) and 5B Artist Management, all under LN’s Front Line Management… Apprehension by banks to finance private-equity firms in buyouts and mergers is growing, according to an WSJ article this week, and that might mean the stable of bidders for EMI is shrinking. It might also mean the likelihood of the music group being sold intact is also lessening… Tomorrow is Facebook‘s big f8 conference, where they will announce many new features and major redesigns, and music fans are looking forward to the expected integration of new streaming services like Spotify, MOG and Rdio. Some are expecting Pandora to be added to that list as well, given the redesigned and relaunched player from the web radio service today, which includes among other things increased sharing capabilities and the removal of the cap on free-listening hours. Exactly how seamless the integration of media services into the social network is unclear, as MediaMemo points out, FB was originally planing on allowing users to access music and video services without ever leaving the site, however now that has changed. Announced speakers and panelists at the conference will include CEO’s from Spotify and Turntable.fm along with Clear Channel Chairman‘s Bob Pittman who has been busy promoting iHeartRadio and manager Troy Carter among many others… Elsewhere, video site Vimeo has launched a Music Store in a new partnership with Audiosocket, that will help video creators easily find and license music… R.E.M. is calling it quits after three decades… Van Halen is reportedly ending their longtime relationship with Warner Bros. Records and heading to Columbia Records… And Jeremy Summers has been named EVP/Chief Marketing Officer at Interscope Geffen A&M.
MOG launches free music service
In addition to revealing more details about investors in the recent funding round, Turntable.fm has also announced that the company is indeed seeking licensing deal with the four major label groups as well as indie labels. This would help the service grow internationally according to CEO Billy Chasen, presumably in addition to offering new and more robust features that licenses would allow for. It appears Turntable is attempting to forge a new kind of licensing deal with labels, something that would fall in between the low-rates that web radio services like Pandora pay and higher ones paid by on-demand services like Spotify… Music streaming service MOG launched a new free ad-supported version of the service called FreePlay yesterday, in a what can be seen as a direct move against Spotify. The concept puts a twist on the freemium model, by giving free-users a “gas tank” of music, which they can refill in perpetuity through various actions like listening, sharing with friends, making playlists, and exploring MOG. A possible leg-up for the new service, will be utilizing its large blog-directory, MOG Music Network, with integrated blogs now able to share songs and playlists with readers via FreePlay tools… Rdio is also releasing a free version of their music service, though details are still few. It’s expected that more information will be disclosed when Facebook reveals its new music-plans next week at its f8 conference; Rdio along with MOG and Spotify are all expected to be partners in the new FB music features – Deezer is also expected to be announced as a Facebook Music partner in Europe… On the heels of all the streaming-music announcements this week, the results of a new study commissioned by mp3-retailer eMusic were released, and they show that 91% of those polled still prefer to own their music, while 76% use streaming services to discover music before buying. More details from the study are here… Meanwhile, Clear Channel has seriously bolstered its online radio service iHeartRadio after recently acquiring Thumbplay, and the company is quickly taking shots at Pandora, who until now has not faced any serious competition in the non-interactive web-radio space. Clear Channel media chief Bob Pittman told Forbes that he doesn’t see Pandora’s business as a “free-standing platform,” and that more functionality will continually be added to iHeartRadio, including possible features similar to Turntable.fm.
'chairman of the bored'
Today came the announcement that Edgar Bronfman Jr. will be exiting his role as CEO of Warner Music, a post he has held since 2004. He’ll remain on as chairman of the board at Warner Music Group, while Stephen Cooper will take up the reins as new CEO. Cooper’s track record, primarily as an interim CEO with a focus on turning around troubled companies, includes stints at Metro-Goldwyn-Mayer, Krispy Kreme Doughnuts and Enron, among others. It’s expected that Bronfman’s focus will transition to the current bid for EMI Group, continuing his long-desired goal of combining the two companies. If merger efforts fail, his continued involvement at Warners is questionable… Research In Motion is reportedly working on a new music service that will utilize the popular BlackBerry Messenger service, with some major labels supposedly already onboard, though it’s unclear exactly which ones. The service as it’s being described, though not by RIM, would be far from robust, but it’s being characterized as possible positive note for the struggling smartphone maker… A legal fray that has the Village People‘s original lead-singer attempting to regain copyright control over his share of a number of works including “Y.M.C.A.” may prove to be telling in the coming battle over “termination rights,” that will pit many big-name artists against labels – a storyline that hit the mainstream media this week… Music and imagery from The Beatles are featured in a new anti-piracy video as a part of the UK-based Why Music Matters campaign. There’s a bit of irony here, as pointed out by Peter Kafka on AllThingsD, in that the Fab-Four’s music is still only (legally) accessible digitally in one place, that being iTunes, where it was first made exclusively available 10 months ago. With a plethora of other new digital music services out there, one can wonder how long it will be before the group’s music will be more widely available… Elsewhere, Music Ally has obtained a report that provides insight into Spotify‘s subscriber numbers, particularly for the period following new restrictions on free accounts that were in acted earlier this year. Get the details HERE, but essentially with the changes, the number of free user accounts dropped by over 1.5 million, while the paying user base increased by roughly 1/3 of that amount. The conversion of users from free to paying isn’t insignificant, and that’s good news for Spotify, who has to pay royatlies regardless of whether a user pays for the service or not, but losing over 1 million potential listeners is not exactly good news for artists… And a group music publishers who joined a class-action lawsuit against YouTube-owner Google in 2007, came to a settlement this week, a resolution that in part will see pubcos given the opportunity to enter into a licensing agreement to receive royalties for musical works included in videos on the site. According to at least one person familiar with the situation, artists should expect to start receiving accounting for YouTube royalties from publishers right around the time they start receiving it from the record labels.
The owners of Bug Music are once again shopping for a buyer according to a report by Bloomberg this morning, with a target price of between $330 and $400 million for the publishing company. Acquired by a group of investors led by Spectrum Equity in 2006, the pubco was on the block as recently as last year, and while a sale was never completed, presumably due to lack of a high enough bid, insiders share that BMG Rights Management came close to completing a deal. It’s likely that they’ll be among bidders again this time, along with the 30 interested companies, according to the report, including Sony/ATV, which signed NDA’s to receive an offering book for Bug… Of course a higher profile auction is Citigroup‘s unloading of EMI, which has an early August deadline for first round bids now expected, according to reports today. Warner Music has been the front-runner in early EMI sale talks, along with the KKR/Bertelsmann-backed BMG (read our pt.1 and pt.2 posts on that scenario), though a New York Post piece yesterday has Warner’s debt impeding a successful acquisition, and in speaking with the Financial Times over the weekend, Bertelsmann CEO Hartmut Ostrowski cautioned his company wouldn’t get involved in a bidding war for EMI and is only interested in offering a reasonable price. Those in the know still expect both companies to be on the shortlist over the coming weeks… In related news, it was announced today that Access Industries officially completed their acquisition of WMG… And elsewhere, charter sponsors for the U.S. unveiling of Spotify, including Chrysler, Coke, and News Corp’s The Daily, reportedly paid $1 million each to be included in the launch, with their branding prominently displayed in the service, and each getting 10,000 membership codes to giveaway as well.
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?