Radar Waves

Aram interviews Pandora founder for Truthdig.com

This week, I interviewed Pandora founder and pianist Tim Westergren, to get his take on the recent webcasting rate hikes. The result is published in Truthdig.com, to which I recently started contributing media/tech news analysis.

Sinnreich: What do you think the impact of these new rates will be on the Internet radio industry as a whole?

Westergren: If these new rates really stick, it’ll stop. No legitimate webcaster can afford to stream. There may be a few large terrestrial stations that keep their streams going online as a loss leader, but the whole business and ecosystem around Net radio is really going to be wiped out. On the other hand, there are 70 million Americans currently listening to radio over the Internet. If you suddenly turn it off, the demand doesn’t go away. More Web radio will start sprouting up from countries where royalties aren’t strictly enforced, and people will start tuning in to them.

If you're at all concerned about the future of internet radio, I highly recommend you check out SaveNetRadio.org, which contains further information, as well as a petition.

EMI/iTunes announcing an end to DRM?

I'm pretty sure this isn't an April Fool's gag.

Got a couple of emails and phone calls today from the good folks over at EMI -- they're announcing something big tomorrow at 5am PDT (too early for me to rise -- even if the messiah came knocking, he'd have to wait). EMI honcho Eric Nicoli and Steve Jobs will be making a joint announcement about "AN EXCITING NEW DIGITAL OFFERING."

Based on recent rumblings, Jobs' disingenuous rant against DRM, and the fact that iTunes Music Store licenses are up again as of today, I'm betting the new announcement includes the following:
1. variable pricing
2. royalties on iPod sales
3. NO DRM!

That's just a guess. But if I'm right, this is pretty huge. An end to DRM would mean the real birth of a viable digital music market -- one that could even make up for the drop in CD sales. If all the majors get on board, and the iPod/iTMS blockade comes to a close, and consumers can actually fill their iPods with legally obtained, uncrippled major + indie label music for $100/year, I'll happily predict a $5 billion domestic digital music market within 5 years -- that is to say, by year-end 2012. (The domestic market was about $1B last year).

Of course, blanket licensing at the ISP level would be even better -- and currently represents one of the major "x-factors" in this crazy little chess game. More on that another time.

UPDATE:

Seems like the press release could be about something else entirely -- the long-hinted, never-arrived-at licensing of the Beatles catalog for digital distribution. This would also be pretty big -- speculation has typically placed the value of the catalogs' digital rights in the low billions, and word has been that EMI and the Beatles' publishing representatives wanted a heavy-duty upfront against royalties... Either way, tomorrow will probably be an interesting day.

UPDATE 2:

So it turns out I was right, by and large -- at least, on 2 out of 3 points. EMI is ending DRM for its digital catalog, and it's pumping the price point up to $1.29. In addition to the freedom of consumers to exercise their fair use rights, there will be an additional value-add in that the files will apparently be available in "bit rates up to CD quality" -- although every n00b knows that bitrates aren't everything -- there's a significant difference between MP3 and AAC at consistent bitrates, so they may just be plugging the quality gap between formats.

This is really pretty big news. The reasons are all tactical -- EMI wants to forestall any further talk of compulsory digital licenses (see above), not to mention sell more music, and Apple wants to forestall the otherwise inevitable loss of its market share to wireless competitors, esp. the carriers (look for the next generation of iTunes to have very robust, very prominent stream-my-library-to-my-phone capabilities -- just in time for the debut of the iPhone). However, the net effect is much larger; from the vantage point of history, this may very well be the day that the tide turned for the digital music industry, ushering in a period of peace, prosperity and rockin' good times for all. If only this kind of win-win-win situation were possible in the Middle East...

Incidentally, the only point on which I was wrong is that EMI apparently didn't demand (or didn't get) its pound of flesh, measured out in royalties from iPod sales. That's a multibillion-dollar pot of gold the labels would just love to dive into. Thank heavens, that would be a pretty disastrous direction for the industry to move in -- pretty soon, levees would be weighed against every piece of hardware that in any way handles digital media or information. Crisis averted, for now.

UPDATE 3:

Here's a link to a more in-depth article I wrote on this for Truthdig.com.

IP movies-on-demand about to explode

There's been a recent uptick in what the intelligence-types call "chatter" -- all about soon-to-launch video-on-demand services. iTunes has apparently cut a major deal with Disney, while Amazon signed on a bunch of other majors. Both services should be popping up any second.

Also, apparently, the iTunes/DIS deal is pegged to the release of a widescreen video iPod. This is kind of tantalizing to think about -- have they finally replaced the buttons with a touchscreen? Will we be able to turn the thing sideways? And just how many degrees of abstraction are involved in a touchscreen version of a clickwheel emulator? If this news is true, Apple is once again edging out ahead of the pack -- cinematic aspect ratios are becoming normative even for TV broadcast, so RIP the square screen. Of course, the PSP has been doing the letterbox thing for well over a year by now, but who's counting?

In related news, Apple's apparently also set to launch the iPod phone. So says Digg, anyway. Good thing I just blew all that dough on a Treo.

BTW, check out the LATimes tomorrow (9/6). I'll be opining on this stuff.

UPDATE: Also in video-on-demand news, today the Sci Fi Channel posted the first of 10 original content webisodes gearing up to the October 6 premiere of Battlestar Galactica season 3. This is very smart cross-media programming, brand extension, targeting the hardcore fanbase, etc -- but, also, my wife and I are just plain stoked. Yeah, we're nerds -- wanna make something of it?

UPDATE 2: And here's a link to the LA Times story.

No love for Sony/BMG JV from EU courts

Very bad news for Sony/BMG: two years and countless millions into its joint venture, an EU court nixed the agreement, arguing that the EU regulators who allowed the deal to go forward in the first place were guilty of giving it "an extremely cursory examination," and failing to adequately consider the market dominance of the merged operations.

It's also bad news for EMI and Warner, which have been doing the mating dance in recent months, making bids for each other like a couple of lovestruck teenagers.

All in all, though, it's good news for everybody else. We're already down from six majors to four in the last decade, and the further reduction to three might just put the nail in the coffin for independent music distributors -- not to mention guaranteeing that the songs on commercial radio and TV would sound even more identical than they do today. You can pretty much spot the golden eras of music over the last century or so by measuring how diversified the market infrastructure has been.

If you're interested in hearing some soundbitey snippets from me on this story, check out today's Marketplace on NPR.

Aram discusses the new Napster on CNBC

Napster relaunched its Web site today, offering a free version of its service. I got up bright and early this morning to discuss it on CNBC (and immediately got an email from my friend/cousin Ed in Hong Kong, who saw me on TV there. Gosh, the world is getting small).

Here are the details of the relaunch, and my take on them:

1) Free on-demand songs and playlists. Users can listen to songs, albums or playlists on-demand at Napster.com, via any browser, on any OS, without having to give credit card information. They can listen to any given song up to 6 times, I think. It's a great way to introduce download-focused iTunes consumers to the wonders of subscriptions, and a good way to capture a lot of P2P users who download songs for either music discovery or one-off uses (Hey, remember that ridiculous tune by Bachman-Turner Overdrive? Hold on a second, I'll get it on Napster).

2) Ad-supported. Amazingly, Napster managed to ink licensing deals with the labels that are based around advertising revenue sharing. Of course, the labels have a minimum guaranteed license per use, but it's below industry standard fees. And Napster has a bunch of top-tier advertisers out of the gate (media and electronics, mostly, dunno if there's any CPG or services). This is a real boon -- in the past, it's always been the licensing fees that posed the steepest hurdle to free tiers of service.

3) A full-song syndication platform. This actually my favorite aspect of the relaunch: NapsterLinks, which allows publishers large and small to embed free links to full songs on their sites. No more links to Amazon clips, or quasi-legal ftp servers. I fully expect the blogosphere to embrace this technology (of course, it would be even better if they were supporting RSS and Atom, instead of simply providing HTML links -- but Napster execs assure me this is on the way). Oh, and publishers can also opt in for a portion of the ad revenue share when they post links to songs. Imagine that -- rewarding publishers for adding music to their sites, rather than charging them or suing them.

4) User-driven content. Napster.com has created a user-generated content and metadata repository called the "Narchive" (pronounced "narc-ive" -- yecchhh). I commend them for trying to recapture the "community" aspect of Napster O.G. and for attempting to enhance the user experience by going beyond commodity AMG/Muze metadata. But on the other hand, there are still a few bugs in the system: no Amazon-style rating system to separate the wheat from the chaff, no incentive/rewards to contributors (other than a byline), and no shared ownership -- every word written by contributors, and added to the Narchive (which, one would expect, will eventually become syndicated in competition with AMG/Muze) is the intellectual property of Napster. I smell Gracenote all over again.

The bottom line: Overall, I'm a fan. Good interface, and a much needed service from a consumer's eye view. If the blogosphere picks up on NapsterLinks, it'll lend vital brand cred to the company, and may even have a significant effect on subscriber numbers. But as long as the iPod rules the roost, and Steve Jobs remains the intransigent autocrat that he is (somewhere between Fidel Castro and Walt Disney, I'd say), Napster's still going to have a hard time building a big enough subscriber base to keep the ball rolling.

Aram discusses kids music on ABC World News Tonight

I'll be on ABC's World News Tonight this Friday (3/17) Monday 3/27, discussing the sudden explosion of the kids music market. I won't scoop the mouse house entirely, but here's my quick take on why this market is changing and growing:

Demand-side: Gen-X'ers are becoming parents, and their musical tastes are important, because they make the purchasing decisions. Factor in a post-9/11 baby boomlet, and the growing desire for "family-friendly" fare that always accompanies a wave of new media technologies.

Supply-side: Low, low, low marketing and promotional costs (plus, no need to hire the Neptunes to produce). Also, little risk that the pre-12 group or the 35+ group will file share in significant numbers.

Structural: A shift in music sales away from record stores and toward family-oriented general merchandisers, long tail-driven niche market growth, emergence of new music biz models like Razor & Tie, which relies heavily on direct response TV ads and other methods the majors won't touch.

We'll see whether any of that makes it into the story. Plus, bonus B-roll footage of me and my son playing music together and flipping through a CD holder.

UPDATE: The piece appears to be airing tonight (3/27)

Aram discusses DOJ digital music price-fixing investigation on KPBS's "These Days"

Yesterday morning, I did a live on-air interview with Tom Fudge, the host of a call-in show called "These Days" on KPBS public radio in San Diego. The subject of the show was the new DOJ investigation into alleged price-fixing in the digital music industry (following hot on the heels of Eliot Spitzer's self-promotional escapade).

My $0.02: On the one hand, the labels have a long history of, erm, questionable business practices, including a CD price fixing scandal only a few years back. So it's no suprise that they'd try to present a unified front to Apple and the lesser digital music sellers now that licenses are up for renewal and digital music is suddenly a multibillion dollar industry. On the other hand, the labels are in a much weaker position vis-a-vis Apple than they ever were in the brick-and-mortar world. Even Wal-Mart, the biggest music seller in the world, only accounts for about a fifth of US music sales. Apple, however, has most of the digital music pie to itself -- not to mention a cartel on MP3 players and functional DRM. This makes it impossible for the labels to bully them the way they bullied poor Best Buy and Circuit City.

Further mitigating their case is the fact that they've been visibly scrupulous to a fault on the subject of collusion in the digital music arena -- going so far as to avoid sitting in the same room, even when they co-owned digital music sellers MusicNet and PressPlay (which may help to explain why neither was able to do a thing under the labels' corporate umbrellas).

Anyway, I strongly suspect that the whole investigation is an outgrowth of license renewal negotiations. The conversation goes something like this:

Labels: We want to sell new releases for $3.00 a pop

Apple: You're nuts. We won't stand for it. You guys would still be sucking your thumbs and suing your own consumers if it weren't for us. Oh, wait, you still are... Well, anyway, you can forget about variable pricing. We know our consumers a hell of a lot better than you do, and 99 cents is the magic price point.

Labels: But we can't possibly make up for the loss in CD sales on flimsy 99c download margins!

Apple: Suck it up! We're selling iPods like hotcakes, beeeyotches.

Labels: Do you know who we are? DO? YOU? KNOW? WHO? WE? ARE? Start selling digital downloads at $3 a pop, or we pull our licenses. No soup for you!

Apple: Try it, and we'll dime you to the feds. Spitzer's already on your case.

Labels: You wouldn't dare!

etc.

At any rate, this seems like a bad idea. There are much better ways for the DOJ to spend its time -- even better investigations to launch into music industry practices. Why start pruning the fragile sapling of the mainstream digital music market just as it begins to bear edible fruit?

Here's a link to my interview.