iTunes and Amazon Have it All Wrong

According to IFPI’s Digital Music Report 2010, digital downloads accounted for $4.3 billion in revenue this past year. Sounds like a lot of money…but in reality, it could be a lot more.

These days, iTunes and Amazon seem to place the majority of their emphasis on the songs that are selling, and put the ones that aren’t so “radio-friendly” on the backburner.

Yet, as Chris Anderson described in The Long Tail, there’s probably as much money to be made in the tail as there is in the head.

In my opinion, iTunes & Amazon are taking the lazy approach. They’re basing their listings off of sales data, but for all of the songs that never receive mainstream exposure, they repeatedly get lost in shuffle.

Think about the big picture: Who knows each artist’s catalog better than their own fans? Nobody!

The easiest artist example for conveying this ongoing epidemic is Radiohead, a band that had a huge hit in the mid-90s with ‘Creep,’ but as 99% of Radiohead fans would probably tell you, it’s far from their best song. Hell, even the band refused to play the song for five years.

If you go to iTunes or Amazon, you’ll find the same story: Creep is at the very top of the list. If you go to the Radiohead page on Rank ‘em, it’s an entirely different story: ‘Creep’ barely cracks the Top 15!

Despite the problem with ‘Creep’ at the top of the list, it’s not even the biggest discrepancy in their catalog listing! That distinction would go to songs like ‘Airbag.’

If you were to visit Amazon’s Radiohead listings (as of 6.25.10), you would have go four pages in and locate listing #151 to find the song. Let’s get real: Who would ever dig that deep?

On the other hand, if you go to Rank ‘em’s Radiohead listings, the song is sitting pretty at #5 ahead of often more recognizable titles like ‘High and Dry’ and ‘Nude.’

Why so high? Because Rank ‘em gives the Radiohead fans a voice, and all of the Radiohead fanatics probably know the album ‘OK Computer’ like the back of their hand, and know about the greatness of that song (unlike some other services…). Wouldn’t you rather hear from them than a computerized system?

I could go on for days, but I don’t want to write a thesis. There will surely be plenty more to come on this subject, but in the meantime, I’d love to hear any questions or comments anybody may have!

Biggest Music Business News of 2009: Welcome Google!

I think this week's news about Google launching a music service, “OneBox,” could well be the biggest music business news of 2009. Considering the number of partnerships that were made, I can’t believe that the rumors stayed under wraps for this long while everybody was caught up in Facebook & Spotify talk over the last couple months.

Some people are speculating that Google will merely introduce their version of Yahoo!'s music service that launched over a year ago. I think Google has a much greater chance to succeed considering their growth and all of Yahoo!'s distractions. The mere fact that the most popular site on the internet is finally becoming directly involved in the music space is a BIG deal (Google-owned YouTube has become their indirect entry over time).

I personally think Google is asking for more trouble than they’re looking for by jumping into the complicated music streaming space, but I am ecstatic to see them make a splash as it will open the doors for greater competition and more opportunities. As Paul Bonanos noted in his GigaOm writeup, “Google might buy rather than build.” I think he nailed it and that enhances the future prospects for companies like mine (Rank ‘em) and many more.

Google has been the default music search engine for a while now. It makes complete sense for them to get involved in the space, but it won’t happen without some difficulties. The major record labels have been holding on to the outdated 20^th Century business model, and they have made unreasonable (and few) concessions in royalty rates to make many music startups (especailly those focused built upon streaming) viable businesses.

Google understands the Freemium model as well as anybody, and they will have a strong impact on the rest of the industry. I feel confident that the labels will change their ways soon enough, and iTunes won’t be able to justify the silly $1.29 price point for digital downloads for much longer. Music is moving towards FREE (I personally believe the ideal price point is $.25, but I’ll discuss that in another writeup), and I have high hopes that the 95% of all music consumed that is not paid for will trend significantly downward. Overall, I think it’s great to see Google (and Facebook) jumping into the exciting digital music revolution, and the music business is surely looking up!

iTunes New Pricing Scheme -> Bring On The Competition!

It's April 7, 2009 and iTunes just introduced their new pricing scheme. You would think that signals a good thing, but not so fast. Starting today, you will find many of your favorite songs for $1.29, a 30% hike on the former price tag.

Let me start off by saying music is moving towards free. I won't say it's there yet, but it's sure inching closer. Why would iTunes be moving in the opposite direction?

It must be a natural heuristic that items <$1 are met without much consumer deliberation. Yet, once you cross the dollar threshold, you've entered an entirely new ballgame. I speak as a consumer within their target demographic! If I was ever willing to purchase singles for convenience purposes at $.99, I am a lot more tempted to deal with the "hassle" of pirating the material now.

It may just be a $.30 increase, but it sure feels like a $3 change. Have they not read the recent reports that indicated 95% of music consumed in 2008 was "illegally" downloaded? Are they really hoping to  bring that percentage down?

It's also funny & ironic to note how much I dislike the move to $1.29, but I commend the move to $.69 for some deeper catalogue material. Yet, I'm holding full judgement until I see exactly what percentage of the tracks see the $.69 price point. Additionally, this factor will not keep their customers from seeking alternatives.

Speaking of alternatives, I have been raving about the Amazon MP3 Store since it was initially introduced in October 2007. They have been offering "variable pricing" since day one, as well as DRM-Free content (less restrictions) & better bit rates (sound quality). The store also possesses a cleaner interface and such additional advantages as the ability to "preview all" of an artist's tracks at once compared with manually clicking one at a time on iTunes. 

It's a shame that most people don't understand that downloads from Amazon sync seamlessly with your iTunes library after your initial purchase.

Despite iTunes holding a ~80% market share of the digital paid download space, they better watch out for Amazon. Although pressure from the major record labels had influence over the new pricing scheme, iTunes just opened up the door for their first legitimate competitor in the six year existence. 

If that's the moral of the story, I guess that works for me. Here's to competition!

Bundle Packages = The 2009 Artist Release Strategy

The old model of one album release every two years is out. Artists spend so much time writing and recording for only a couple weeks of attention surrounding the release. It does not have to be that way. 

In the new model, weeks of anticipation should turn into months. I work closely with a great band out of Nashville, The Minor Kings, who have been in and out of the studio recording their 12-track official debut. As I have been preaching to them, it's all about BUNDLES! 

Below I've provided 5 prime examples of why bundle packages (think samples) are the new way to go:

1. Maintain the FRESH feeling of a new release
2. BUILD the anticipation
3. Acquire the ATTENTION
4. Allows for full CONSUMPTION
5. RECOGNITION x4

Bundle packages can be an extremely effective marketing strategy for artists. Yet, it will only work for artists whose entire body of work is quality material. If you are looking to be the next one-hit wonder, this should not apply. For all artists looking to make a career out of playing music, I highly recommend looking at the eventual album release as the ultimate destination and marketing the individual songs with an entirely different perspective. 

I would love to expand upon some of the examples above, but the New Year is approaching and I need to get ready for 2009!

Digital Music Startup Failures -> Lessons Learned

Over the course of the last year or two, I have seen plenty of articles hyping up innovative digital music startups like Muxtape, Qtrax & Soundpedia. All of them were relatively novel ideas that had serious potential for growth. Yet, these days you will find all three barely treading above water.

I have attached above an image of Compete's most recent traffic counts for all three startups. It's striking to see their rapid ascents and how quickly each has fallen (all in a ~year's time). Each company has it's own story behind it, and I believe there are some good lessons to be learned.

Qtrax got some great early publicity for attempting to become the first advertising-supported free peer-2-peer network. Early being the key word. They jumped the gun with announcements of completed deals with the 4 major record labels that delayed their launch. Unfortunately, consumers (and just as importantly reviewers) are not always willing to give second chances, and Qtrax has been fighting an uphill battle ever since. 

Muxtape was a huge (relatively speaking) success story for it's first few months in existence. Started by just one random dude, Justin Oulette, Muxtape allowed users to upload mp3s, and create their own playlists to share with the world.  I bet he never envisioned the onslaught of traffic that would ensue. Users quickly gravitated to its simplicity and ease of use (two components that are successful for all successful startups these days).

Unfortunately, this quick ascent led to the attention of the RIAA. The RIAA can only focus on so many things at a time, but they were not going to allow a popular "illegal" streaming site to remain afloat despite promoting music discovery and subsequent purchasing. Thus, as quickly as it went up, it came down.

Then there's Soundpedia out of Singapore. They claim to be a music discovery community. You heard of that before? Yeah, it's called MySpace for some. Last.FM for others. It's a tough space to be in with the ever-increasing digital music population.

Soundpedia's demise has been the most gradual of the bunch. They are still kicking...but barely. Soundpedia has never really been able to differentiate themselves or find their own niche in the digital music space. They had their traffic peak back in November 2007, and it's been downhil ever since. Considering they rely on advertisements for revenue, they are in serious trouble with a unique visitor count that continues to dwindle down (at ~10k in October '08).

These stories  reminded me of discussions held at the Digital Music Forum East (coming up February 25-26, 2009) this past February in New York. Multiple panelsits were talking about how difficult is was becoming to create a legal music discovery platform because either the laws just can't keep up with technology or the labels increasingly difficult demands. I agree these barriers could use some work, but I firmly believe their are solutions without pulling an Imeem and going "illegal" before settling to go the "legal" route (and royally screwing their margins in the process).

I think we got one in mind...until then...

HypeBot Shout-Out

Thanks to Bruce Houghton @ HypeBot, one of the best sources for the latest digital music news, for using my recommendation in his recent podcast! 

I asked Bruce to discuss Terry McBride's suggestion for a $.25 price point for digital downloads. Just because Steve Jobs & Co. created a $.99/song price, does that make it right? At what price point can we influence the X-generation to start consuming music legally? There is a better solution!

The Ultimate Batting Order...For An Album

Over the last two years, I have been helping out a phenomenal band out of Nashville, TN, The Minor Kings. With their infectious edgy-rock sounds and contagious live shows, these guys are definitely going places. Whatever IT may be, they got IT. They are currently wrapping up their official debut album. Soon enough, the rest of the world will discover what they have been missing.

I have always believed a great album is reminiscent of a World Series Champion Batting Order. There's a reason why they are World Champs. They have all the pieces in places that brought them to the ultimate stage: The superstars (the HITS), the role-players and the proper management to get the job done.

With that being said, I wanted to show my thoughts as we build the ultimate lineup card...for an album. Imagine the album has 2-3 HIT songs, 4-5 that epitomize the unique sound, a ballad to slow it down and a dark, dark song to end it all that will leave everybody scratching their heads. Here we go:

Track 1/Lead-Off: You got to get the album off to a good start (we need baserunners!). Set the tempo. Is this a rock album? If so, make sure it rocks! The rest of the experience can be contigent upon grabbing the attention right here.

Track 2/On-Deck: Keep the tempo up. If the lead-off track didn't do the  job, this one better! We're building up to somethign good. The runs will start coming soon. Don't lose their interest.

Track 3/In-the-Hole: This one must be somebody that can get on base, essentially a track that is consistent. It doesn't need to be the hit song, but it should be indicative of the band's unique sound. 

Track 4/Clean-Up: The Star Track. The most POWERFUL guy on the team. He'll bring it all home. Everybody can rock our to this one!

Track 5: Still a "big-bopper." He's there to protect the clean-up hitter. You don't want to pass this one over, or in this case "intentionally walk" this guy. 

Track 6: The Next Hit. Do not crowd the order. Who knows, this one could be THE one, but you can't predict it until it happens. If it does, we can adjust accordingly...on the re-release.

Track 7: Slow it down. Show 'em a different side. This one is not as powerful as the "meat" of the order, but he gets the job done.

Track 8: It's hard to fill out an entire quality lineup card. If you get caught napping after the last one, he'll sneak up on you. If you have to stretch it at all, this is the place to do it.

Track 9/End-of-the-Order: The other side is tired from the last eight. They are ready to be done...in a bittersweet kind of way. What's left? Very simple. Leave them asking the question: What just happened???

There you have it. Now, that is a quality album lineup! Can you handle it?