Music Marketing

Ten months after Warner Music head Edgar Bronfman said that Apple’s Steve Jobs suggestion that dropping DRM copy protection from digital music was “completely without logic or merit,” Bronfman reversed direction last Thursday by licensing its catalog, DRM free, to the Amazon MP3 music store. Warner joins EMI and Universal in offering higher quality (256 kbps), DRM free mp3s through Amazon’s online store, leaving Sony as the odd man out in the major label circle.

On the surface it would appear that the majors are simply responding to consumer demand and giving music fans what they want. But the fact is, the majors hate the digital monopoly that Steve Jobs has with iPod/iTunes. They understand that the only way to increase their margins on digital music and regain some of the control that Apple has taken from them is to reach the billions of iPods floating around. Their endgame is almost certainly to get customers in the habit of purchasing mp3 files from a place other than iTunes (which currently accounts for 70% of all digital music sold).

DRM (digital rights management) is technology that copyright holders place on a digital file to restrict its usage. It’s a flawed, user-unfriendly tactic, and it will go away. But while it exists, I will continue to do my online music buying with DRM-free retailers emusic and Amazon.

Transworld (owner of Coconuts and FYE) just posted their dismal third quarter 2007 financials. The company posted a net loss of $14.3 million. Check the full report out here

Interesting quote from CEO:

“We continued to achieve positive comparable store sales in home video, video games, electronics and boutique during the third quarter, however, these results did not offset the decline in music,” said Robert J. Higgins, Chairman and Chief Executive Officer of Trans World Entertainment

No real surprise here. Transworld does not provide niche music products specific to a particular geographic location (all buying is done at corporate), they do not generally support the bands in their local community, and have not been quick to diversify into other lifestyle areas: all hallmarks of successful (mostly independent) retailers. It’s clear that the CD format will fade away over the next few years, but I think some retailers will weather the storm better than others.

Chris Anderson, the fellow who coined the phrase “Long Tail” in 2004, has a great post on his blog about the current state of the music industry. The short of it: every part of the music industry except the sale of compact discs is up.

Here’s an overview from his post:

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* Concerts and merchandise: UP (+4%)
* Digital tracks: UP (+46%)
* Ringtones: UP (+86% last year, but probably just single-digit percent this year)
* Licensing for commercials, TV shows, movies and videogames: UP (Warner Music saw licensing grow by about $20 million over the past year)
* Even vinyl singles (think DJs): UP (more than doubled in the UK)
* And, if you include the iPod in the music industry, as I’d argue a fair-minded analysis would: UP, UP, UP! (+31% this year)

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It’s key to realize that the music business is NOT the same as the record business. This is a fundamental concept featured in one of the courses I’m teaching: The Future of Music and the Music Business, authored by Dave Kusek. People are more into music than ever, it’s just the revenue streams that are adjusting. Great time for entrepreneurs to be sure.

I got this email first thing today:

THANK YOU FOR ORDERING ‘IN RAINBOWS’.

THE LINK BELOW IS YOUR UNIQUE DOWNLOAD ACTIVATION CODE.

PLEASE CLICK ON THE LINK OR CUT AND PASTE INTO YOUR BROWSER TO OBTAIN YOUR DOWNLOAD.
IF YOUR LINK APPEARS AS TWO SEPARATE LINES, PLEASE CUT AND PASTE THEM CAREFULLY INTO YOUR BROWSER.

THE ALBUM WILL COME AS A 48.4MB ZIP FILE CONTAINING 10 X 160KBPS DRM FREE MP3s.

IF YOU HAVE ANY QUESTIONS OR PROBLEMS DOWNLOADING YOUR FILE, PLEASE CONTACT OUR DOWNLOAD CUSTOMER SERVICE TEAM: downloadinrainbows@waste.uk.com

WE HOPE YOU ENJOY ‘IN RAINBOWS’.

—

Well, I do enjoy ‘IN RAINBOWS.’ Very much. And from what I can tell, there’s a whole lot of other folks that are enjoying this record today too. Nicci and I went down to Cambridge 1 for dinner (a hip pizza place in Harvard Square), and they were playing the record to a room full of folks there too.

Over and above anything else, this coordinated experiment shows that it’s still possible to build a huge buzz around a new record (not easy). Radiohead has succeeded in having many people hear their record for the first time, at the same time. If the new music business model involves using a discounted (or free) digital product to corral these folks into creating a word of mouth groundswell that can support a tour, merch, licensing opportunities, ringtones, etc, then it looks like they may have nailed it. They also have 6 other records (now available digitally for the first time on Amazon). Long tail anyone?

First, what the heck is Richard Wagner doing as the #1 artist on Amazon’s new MP3 store?

All signs indicate that the Amazon store will give iTunes a run for it’s money as the most popular online music store. First, all the music is DRM free (thanks in part to a feud between Universal and iTunes), and high quality. The site is incredible easy to use, searching for new music is intuitive, and my Wagner download (”Apostles Mean for Small Choir & Orchestra”, I had to hear what the big deal was!) took no time to appear in my iTunes interface. Songs are also variably priced as opposed to the flat $.99 or album only method that iTunes offers.

Yow!

Radiohead (who fulfilled their Capital Records contract with their last release, and are presently “unsigned”) have apparently set up a Web page where one could purchase their new record in digital form at whatever price one wants to pay for it. A physical release is also available, for 40GBP

Check it out:

http://www.inrainbows.com/Store/index.html

A couple of interesting things to consider:

1) The proper physical release streets in December with tons of bonus material:

From www.inrainbows.com:

[start]

This consists of the new album, in rainbows, on cd
And on 2 x 12 inch heavyweight vinyl records.
A second, enhanced cd contains more new songs, along with digital photographs and artwork.
The discbox also includes artwork and lyric booklets.
All are encased in a hardback book and slipcase.

[end]

The package sounds amazing, but thanks to the weak USD, I’d be paying more than $80 for it.

2) The digital release (with less music) is available two months prior to the physical release.

I love the idea from a band in Radiohead’s position. They make the bulk of their income on stadium shows and merch, and they have the name recognition and reputation to pull off a 40GBP package (which has a much higher margin for them as they do not need to split any proceeds with a label). It takes the Stars experiment of breaking street date with their digital release a step further by dropping the financial component.

Prince has always been a bit of an enigma to me. Although I was a relatively early adopter (Purple Rain was one of the first cassettes I ever bought, right after Duran Duran Rio), I sort of lost interest by the early 90s. But even when I wasn’t listening to his music, I was always keenly aware of Prince’s marketing chops. The slave/symbol thing might have been a little out there, but great marketing – it kept Prince in the public eye when there was a bit of a lull due to a fight with his label.

That being said, I jumped back on the Prince train with his 2004 Musicology release and subsequent tour. The music was impressive, but even more impressive was Prince’s tour sales strategy. Prince gave away a copy of his new record with every ticket sold on his arena tour, and SoundScanned every one (meaning that every CD that he gave away with the price of the ticket was counted as a sale by SoundScan, the company the record industry uses to account for retail or show sales). It was a brilliant idea for a couple reasons. First, his record reached #1 based on these show sales, which generated even more press for him. Second, it shows that Prince understands the power of “word of mouth” to sell his music.

At least that is what I thought. I was surprised to read today that Prince took a page from Metallica’s playbook by personally fighting YouTube and demanding that his footage be removed. Prince has hired a firm, appropriately named Web Sheriff, to remove the offensive videos. I found the description of their difficulties to be pretty funny:

“In the last couple of weeks we have directly removed approximately 2,000 Prince videos from YouTube,” said Web Sheriff managing director John Giacobbi. “The problem is that one can reduce it to zero and then the next day there will be 100 or 500 or whatever…” he told Reuters.

Seems like an exercise in futility to me.

Perhaps this is another brilliant press move on Prince’s part. But I think the YouTube video of Prince’s solo at the end of “While My Guitar Gently Weeps” from the 2004 Rock and Roll Hall of Fame show did more to raise his visibility than pretty much anything else he could have done at the time. It doesn’t seem right to me that someone who would spit in the eye of his record label by bundling his CD in with newspapers in England would fight such a powerful promotional vehicle.

The Arts and Crafts label is a good example of label that understands the importance of a brand. Much the same as Stones Throw, I know that 9 times out of 10 times I’ll be into what the label puts out. Maybe it’s the fact that more than half the bands on the label have members who play with Broken Social Scene (who are great), but I like to think that they have a particular aesthetic and musical taste that mirrors mine. It makes me want to support them and buy their records/downloads.

Which leads me to the unorthodox release of the new Stars record. Days after the record was mastered, the label released it online, months prior to its retail street date. The following was posted on the bands Website:

Traditional music business practice says we are to begin sending out copies of this album now. We give advance copies to print publications in hopes of securing features that coincide with our September date. We meet with radio stations in hopes of securing airplay. etc, etc.

Inevitably someone will leak the album.

Throughout this process, the most important people in this value chain, the fans, are given only two options – wait until September 25th to legally purchase the new album or choose from a variety of sources and download the album for free, at any time.

We hope you’ll choose to support the band, and choose to pay for their album. However we don’t think it’s fair you should have to wait until September 25th to do so.

We believe that the line between the media and the public is now completely grey.

What is the difference between a writer for a big glossy music magazine and a student writing about their favourite bands on their blog? What differentiates a commercial radio station from someone adding a song to their lastfm channel? or their myspace page?

As such, we are making the new Stars album available for legal download today, four days after its completion. The CD and double vinyl versions of the album will still be released on our official release date, September 25th. We hope you will continue to support music retailers should a physical album in all its packaged glory be your choice of format.

It’s our hope that given a clear, legal alternative to downloading music for free, you will choose to support the creators.

We hope you enjoy it as much as we do.

Sincerely,

Stars and Arts&Crafts

Whether these motives are indeed true, or this was just a really shrewd marketing move by the label…I’m not sure. Arts and Crafts may have a point…I do know that the press are eating the record up, with positive reviews in Rolling Stone, Pitchfork, Stylus and about a hundred million music blogs. Press may be propelled to cover this release more thoroughly as it’s the first time this tactic has been taken. But if every artist did the same, would press be so kind? What if your fan base is less computer savvy than Stars? Will they still be able to find the record if there is no retail or radio coverage? Independent retail definitely holds a grudge when they think they have been wronged (read my Smashing Pumpkins commentary here). Does this even matter anymore?