MySpace Better Than Record Deal?

Tomorrow could be a slightly frightening day for record companies. It marks the unveiling of the first single of Tila Nguyen, who goes by Tila Tequila, on iTunes. That wouldn't be such a big deal if she were just a small signed artist who came along everyday.

It is such a big deal because she has used ONLY her MySpace page to get her fame and fortune. Her MySpace page where she has almost 1.7 million friends, which has led to newspaper articles and a Time magazine article simply about that. She has now decided to break into the music industry, and her single "I Love U" was produced by Lil Jon.

Tuesday the following question may be answered, is it better to have 1.7 million friends on MySpace or to have a record deal?

Ms. Tequila, a onetime model for Playboy.com, born in Singapore, where her family moved after the Vietnam War, rejected offers from record companies and is hoping that her MySpace fame can help her break into the business on her own.

“I’m very nervous because this has never been done before,” Ms. Tequila said. Thanks to online communities like MySpace, aspiring artists can “speak to people so much,” she said. “It’s not just advertising and music; it’s your fans really getting to know you.”

If she does succeed in selling her single without going through the record companies, her efforts may have long-term implications for the industry. But according to Eric Garland, the chief executive of BigChampagne, an online market research firm, it may be too soon to mourn for the record companies.

It may be too soon to mourn for them, but it certainly will be a big day on Tuesday if all 1.7 million friends decide to pay 99 cents to download her song, which comes with a free full length music video. When a preview of the video showed up on YouTube on February 16th it was the most watched video of the day.

I'm excited to see how big a connection is possible between social networking and music sales. There are a lot of people out there who would love to support her simply because she refuses to sign a deal, a lot who would probably support her because they think she's hot, and then the huge percentage of people who will just download her song illegally and wait until the music video is on YouTube. Because one has to wonder if people who are using MySpace as their source of finding new music are going to be likely to purchase it on iTunes, when they could continue finding free streaming music on MySpace all day long, or even just playing the free videos off Tila's MySpace page, some of which have her dancing and singing anyway.

Everyone saw this coming soon, but did they think it would be tomorrow?

Making CD Sales Worse...

As if there weren't enough CDs being sold around the world already, online retailers had to go and sell CDs for around half price. Legit CDs too, that just happen to cost less for them to buy than they would here, so they can sell them for relatively cheap and still make money. Where are they based, you wonder? Hong Kong, of course.

One website under the watchful eye this week is CD-Wow, which is owned by Music Trading Online. CD Wow, which has five million UK customers, sources its product directly from official record company suppliers around the world. The CDs - from artists including Robbie Williams, Radiohead, Coldplay, Snow Patrol and Oasis - are genuine, but their sale in Britain breaches copyright laws.

The United Kingdom is particularly upset because copyright law prevents music being imported from outside Europe without the consent of the copyright owner. Not to mention CDs cost around 6-7 pounds each on the website when they would be over 10 if purchased in the UK at a store.

The decision by the British Phonographic Industry (BPI) to challenge CD Wow, a music retailer, over the practice would set a precedent that could affect other websites that use similar tactics. The BPI accuses the internet company of importing the goods without the permission of the owner of the intellectual property rights. It says that there have been 39 cases where copyright law has been breached.

The CD-Wow business has at all material times been a very substantial concern. As at 2002 it was supplying some 10,000 units per day to the UK market. It is currently the second biggest player in the online music buying market in the UK.

Having 5 million customers goes to show that they're doing something right, and if business is booming and it's possible to still make money off selling CDs at that price, maybe the industry in the United States could learn a thing or two.

Satellite Radio Monopoly!

Yesterday XM and Sirius Satellite Radio announced that they have agreed to an all-stock merger of equals with a combined enterprise value of approximately $13 billion, which includes net debt of approximately $1.6 billion.

Together they would create a company that earned combined 2006 revenues of approximately $1.5 billion and approximately 14 million combined subscribers. Mel Karmazin, currently CEO of SIRIUS, will become CEO of the combined company and Gary Parsons, currently Chairman of XM, will become Chairman of the combined company.

The companies said yesterday that their $13 billion merger — code-named Project Big Sky by XM — would give consumers a broader range of programming, while eliminating overlapping stations that focus on genres of music. At the same time, they said, they could cut duplicated costs in sales and marketing.

The companies cited several reasons for the merger, including synergies for content programming. They also hope to improve on products such as real-time traffic and rear-seat video and introduce new ones such as advanced data services including enhanced traffic, weather and infotainment offerings.

The companies’ services are, for the moment, not compatible. If the merger were approved, officials said yesterday, they would provide subscribers with technology that would allow them access to both services. Each sells subscriptions for $12.95 a month.

There will be some complications they'll have to work out though, which will be interesting to watch. For one, XM has prided itself on being advertising-free while Sirius sells ads on its talk radio fare. The cost of the combined service is yet to be determined, as is the name, and the fact that the companies are based in different parts of the country at the moment.

The big question of the moment is whether or not the merger will be approved. The transaction is subject to approval by both companies' shareholders, the satisfaction of customary closing conditions and regulatory review and approvals, including antitrust agencies and the FCC. The issue is that the FCC has already hinted that it might not approve a merger of the two satellite giants.

Optimistically, pending regulatory approval, the companies expect the transaction to be completed by the end of 2007.

Will this save satellite radio? Probably not, but at least they won't have any competition besides AM/FM radio, iPods, and Internet radio.

Are We Losing Our Interest in Music?

Music itself has never been more valued by the business world, with marketers desperate to exploit its commercial worth. Mobile-phone manufacturers are scrambling to be able to offer users the chance to watch the best music videos on the move, and the promises of the new iPhone take it a step further offering the optional widescreen view as well.

Big companies are pouring sponsorship money into live music venues and festivals in the hope that the feelgood factor of a favorite band will help to enhance perception of their brand. Advertisers have come to recognize the benefits of a recognizable soundtrack. Yet the unstoppable advance of digital downloading means that the financial model on which the music industry has been built is crumbling. Hopes that legal downloads would compensate for the fall in sales of CDs were hit by a slowing up in growth last year, which is yet another red flag that one would assume the record industry would care about.

Revolution is not too strong a word to describe the changes introduced by MySpace. There's no better example of this than Enter Shikari, a St. Albans band who have been so successful in building support online that they have been able to shun all approaches from the record industry. In November, with a fan base estimated at 40,000, they sold out the Astoria, one of London's best-known venues. By releasing singles on their own, as downloads, they are able to take a far higher share than if they had signed a contract. That said, the vast majority of bands marketing themselves on MySpace are not making any kind of living. Hence the emergence of other websites, such as sellaband.com and slicethepie.com, dedicated to helping unsigned bands to make money.

Just as the industry is itself in turmoil, so the artists are having to rethink how they operate. That means a greater focus on live performance and gathering revenue from merchandising. One example being Ozzfest, which is being held free this summer, being referred to as "Freefest".

"We're reaching the same point we did years ago when kids no longer wanted to pay for overpriced CDs," said Sharon Osbourne in a statement. "As a result, they found alternative ways of getting music. That's what's happening with summer touring in this country: It's out-pricing itself." The corporate sponsors are taking care of the costs, but at the same time none of the bands playing Ozzfest are going to be paid, even though they had in previous years. It'll be interesting to see who agrees to play when they are basically going to have to pay to be there, and then they'll need to rely on just merchandise sales and perhaps exposure.

Diversity is seen as the key to survival. Companies like Sony BMG are convinced that branching out into areas such as television, advertising and sponsorship will create new opportunities and potential earnings for its artists. But then again things like American Idol that feed winners straight into the arms of Sony for a record deal that is arguably not as good as one they could have gotten on their own after being the first runner up.

MySpace, Ozzfest, music on TV, DRM, and new technology are all going to affect our interest in music over the next year, and we can all hope the industry plays their cards in our favor...wait, who are we kidding? They'll have to.

YouTube Faces Competition On Its Soapbox.

Microsoft has been working on new programs since 2005 to compete with Google and Yahoo, and it was only a matter of time before YouTube had a competitor. The time is now!

Being released only in a beta form to select testers until now, today Microsoft allowed anyone to try out the site by going to this website. In the same way YouTube does, it allows users to upload videos in almost any format, and tag or categorize them to allow for easy searching.

Their unique draw is that you can search for videos at the same time that you are watching one, something that you can't currently do on YouTube. With the YouTube loving generation wanting what they want when they want you, one can imagine this could be a popular feature, cutting down on the time spent finding the next great video. It also appears to have a more personal feel in comparison to Google and Yahoo, and is definitely more user friendly as it suggests videos constantly instead of requiring a search. Also, you can easily post videos on your website or blog using the standard permalinks and embed codes they have listed on their website, which you can either post or send to friends. Another interesting tidbit of information has come to light, that Soapbox will display videos in various formats dependent on your browser. For Internet Explorer it will use Microsoft's .wmv format, for other platforms it will use Adobe's Flash (formerly Macromedia Flash).

The issue of copyright will be interesting to watch, because Microsoft may be able to cut deals that YouTube wasn't able to, or perhaps vice versa. The success of Soapbox overall will depend on whether or not the YouTube trend is going to continue or not. If so, there's no reason why they couldn't both have thousands or millions of fans. Jumping into the ring when YouTube, Google video, Yahoo video, and Myspace video are already competing seems like it would tough to come from behind without any real innovation, but then again when has Microsoft ever completely failed at something? They will just find a way to integrate it into everything they already own.

In a day of being live, the most viewed videos have only been viewed a few thousand times, which causes me to wonder how much of a success it will be, but at first use Soapbox loads quickly and seems rather user friendly.

iPhone? iDontThinkSo.

The Apple iPhone does look amazing, and judging from the comments on the NY Times blog which seem to be representative of the country, its unveiling is much anticipated and going to be a hit. Maybe even the 1% of the world market hit that Steve Jobs is aiming for.

Or maybe not. It all depends on whether the special features of a $499/$599 phone are worth it to everyone. It's true that the iPhone can access the internet, but if already travel everywhere with a laptop, is it worth doing everything on your phone, using teeny tiny buttons? Or the opposite problem, are you someone who requires more than just the standard email program and Safari? Adobe Acrobat? Good luck with that.

Where the corporate world is concerned, the device isn't secure enough, nor is it designed to run with corporate systems. There are already recommendations out to IT departments to start creating policies which won't allow the iPhone to access corporate networks.

Replacement for an iPod then, you ask? I don't think so. Maybe for those who are representative of the 'average 300 songs on their iPod,' but for all of the people who have thousands of songs, 4GB of storage space won't hack it, and 8GB might not either.

2G data coverage, when 3G exists? The speed is comparable to dialup or just slightly faster, which is fine for extremely limited web browsing and email, but anything extensive? Try again. Other smart phones include common features that the iPhone failed to include.

The battery has the same problem as iPod batteries...that they can't be removed or replaced, without a hefty fee that is. Who is able to give their phone up for a week or two these days, to send it back to Apple to get the battery replaced? Nobody I know.

Do you love having your most frequently dialed people on speed dial? Good luck pressing "5, send" on your iPhone. Maybe they will come up with a method that is easier than needing to scroll through a possibly ridiculously long phone book for every call.

$600 for a phone that could be easily lost or stolen, in a world where most phones are either free or heavily discounted with a 2 year service plan? $600, when many customers are going to be considering paying another $100-200 to cancel their current contract to switch to Cingular? Not to mention Cingular is going to be rolling out new rate plans to go with the iPhone. I don't know about that.

In China, they have already wasted no time coming up with a copycat version of the iPhone. Should be interesting considering it uses Windows instead of MAC software, which implies that it may be easier to add other programs onto the phone once they become available. As a PC fan, I'd have to say I'm interested. Check it out. Reviewers are already saying the Meizu M8 is everything the iPhone should have been. The website points out how interesting it was that Steve Jobs claimed they were 5 years ahead of technology, when it took about 5 days for this clone to come out.

My personal problem with the iPhone is the touchscreen, that I get the feeling I might damage within 2 weeks of owning, the same way I cracked the top screen of my new V3X within 2 weeks of owning it. Apple, what's going to stop the screen from breaking after being dropped once from 2 feet off the ground?

Are you one of those businessmen who can't use it, someone like me who can't keep things in one piece, someone who doesn't want to spend money on a phone when they could get one free, an avid music listener, or someone who is a diehard Verizon/T-Mobile customer?

Apple hopes not!

Jobs Saving The Day...Again

Steve Jobs has been on fire, all over the entertainment news for the past few weeks. As if the iPhone announcements weren't enough, on Tuesday he posted his thoughts on music, calling for the beginning of the end of digital rights management systems. Finally, someone who realizes!

Laying out three possible paths for the future in his article, Jobs makes his opinion clear. Between staying the course, making DRMs cross-licensed open systems, or dropping DRMs and selling unprotected downloads, the clear choice should be selling unprotected downloads. DRM hasn't stopped many people, if anyone, so it should be abolished.

Jobs said the music industry must radically evolve toward a market in which people can easily use any online music service, even if music companies have to remove the technology that protects their copyrights. Makes sense, considering it would do nothing but make online music services more popular.

Because of current anti-piracy technology, songs purchased from iTunes play only on the iPod, while songs purchased from other online music services, such as Rhapsody and Yahoo, do not. "Imagine a world where ... any player can play music purchased from any store, and any store can sell music which is playable on all players," Jobs wrote.

"Forcing would-be competitors to sell music incompatible with the popular iPod is not showing any signs of working," the story notes. Removing DRM might attract powerful new players to the market, and writer Antony Bruno names five possible entrants into the music-download business in 2007 as Amazon.com, Limewire, MySpace, eMusic, and Yahoo Music.

"I don't think Steve Jobs would stick his neck out on this point if he didn't believe the music labels will come around," said Chris Castle, a music and technology lawyer who represented peer-to-peer network Napster. "The industry has been moving toward this for a while. This could be the year that it starts to take hold." I agree, imagine if you could use shop around and use whatever music service you wanted, but have it be compatible with your iPod without needing to do something illegal.

Digital music sales were expected to decline in the next year, but perhaps Steve Jobs will be responsible for saving the record industry once again. What a hero, you would think. Until you took a second to ponder his motives.

Once DRM gets the boot and Apple has no choice but to open its software in Europe, it's only a matter of time before the US consumers demand the same. Steve Jobs is thinking about the future and his DRM statement will have put the consumers at odds with the major labels(who obviously want to keep DRM)--making Apple look golden.

Hmm...