iTunes (again) rumored to strip DRM

More rumors about iTunes going completely DRM-free are circling. Now AppleInsider is spreading the word from French tech site ElectronLibre. This is the same old story, spiced up with a little bit of preciseness. Or rather, alleged preciseness. The speculation sees Apple to start selling DRM-free downloads by tomorrow (Dec. 9th). 

Nonsense, says CNet’s Greg Sandoval and points to industry sources who told him that even though the labels and Apple are indeeed negotiating, none of the agreements are signed. Not even finalized to be signed. So, don’t hold your breath. 

But maybe another rumor reported by ElectronLibre will materialize: It says that between December 26th and January 6th iTunes will give away a whole lot of free media to boost download levels. The French site mentions that users in Germany, France and the UK will be allowed to “télécharger sans limite”. I’d take that with a grain of salt …

But let me ask you this: How many existing iTunes Store customers would actually care if Apple went DRM-free?

EMI and Sony BMG on board with Griffin/Warner flatrate model

The flatrate model proposed by Jim Griffin and Warner Music which tends to be falsely described as a “music tax” is gaining ground. Eliot Van Buskirk at Wired.com’s Epicenter blog has more details and this still looks almost exactly like the plan Griffin had layed out during a panel at SXSW in March. 

Users, in this specific scenario students at U.S. universities, will be able to freely use any kind of source for digital music – no matter if these sources are considered legal or not by current standards – in exchange for a monthly fee paid in connection with the users’ internet service. Music bundled with broadband, music flatrate, blanket license – call it what you want.

Epicenter has learned that EMI and Sony BMG have signed on to the Griffin/Warner plan and that a new third-party organisation dubbed Choruss will be charged with collecting the fees and distributing royalties to copyright owners. Apparently every student in this latest approach would be charged an extra $5/month for unlimited access to un-DRM-ed music. Can you hear Gerd Leonhard say “music like water”?

The slideshow which reignited the debate was shown at a variety of schools, including Columbia, Cornell, MIT, Penn State, Stanford, University of California at Berkeley, University of Chicago, University of Colorado, University of Michigan, University of Washington and University of Virginia. 

No details yet on who will monitor usage of the networks and how they will document which music was downloaded most in order to assess payout via Choruss. What about BigChampage?

More action to come, I hope.

TeliaSonera adds music flatrate to online and mobile accounts

This is the kind of flatrate we will see more and more in the future. An ISP mounting “feels free” access to a catalog of music on top of a data plan. TDC in Denmark is doing it with 24-7, Sony Ericsson and Telenor follow that concept with PlayNow plus, Nokia’s Comes With Music combines the music access with a handset purchase, Deutsche Telekom is reportedly preparing some offering along these lines. And now, TeliaSonera, one of the biggest mobile providers in Skandinavia and the Baltics is launching Telia Musik, an all-you-can-eat service for some 13.3 million mobile customers. 

The service will initially be launched in Sweden and will be free of cost for the first three months. After that customers pay 99 kronor ($12.98 / €9.49) per month to access a catolog of three million songs from majors EMI, Universal and Warner Music (no Sony BMG), plus the indies served by The Orchard and Bonnier Amigo. 

The catch here: songs come DRM-ed which could make Telia Musik a non-starter. Nevertheless, TeliaSonery soon wants to launch the service in Norway, Finland, Denmark, Estonia and Lithuania.

How to “plug online music leaks”

If you are one of the people who angrily beat their head against the wall when your music leaks online before it arrives at retail, then you will appreciate these five easy steps, courtesy of Billboard’s Antony Bruno. 

Have fun with this sisyphean task ….

EMI is worth less than the sum of its debts

I found some interesting numbers on why the EMI purchase is weighing increasingly heavy on Terra Firma. The article in today’s Wall Street Journal contains information that sheds some light on the problems Terra Firma is facing with its investment which was made at the height of the private equity buyout boom early last year. 

For instance, it currently costs Terra Firma £931,000 to insure £10 million of EMI debt. That’s a growing matter of expense, up 7.5 percent from last month. All the debt funding for Terra Firma’s buyout of EMI Group was provided by Citigroup – £2.7 billion in total. The investment firm had hoped to sell some of the EMI equity to other investors and Citigroup had planned to offload the debt. But then the credit markets froze up.

Terra Firma has already written down its investment in EMI to 70 cents on the dollar. Citigroup, under pressure to reduce its own debt, considered trying to offload the bonds this quarter or in the first quarter of next year, but decided against it, not wanting to sell at fire-sale prices.

Some more details can be found in a profound analysis of the Terra Firma/EMI deal in the Financial Times. The paper points out that today, sixteen months after the deal, the value of EMI has plunged, leaving the company worth less than the sum of its debts. 

By comparing EMI to the valuations of Warner Music Group and Sony’s buyout of Sony BMG from Bertelsmann, Enders Analysis suggest that EMI Music Publishing - the part of the business which is doing really well – could be worth up to £1.1 billion ($1.64b), while the struggling recorded music division of EMI should have a price sticker of around £300 million ($447m). 

The question remains, if EMI will be able to meet its obligations to Citigroup in spring of 2009. The company has shown in the six months to September that it can improve its numbers. Will that be enough? CEO Elio Leoni-Sceti said in November: We have an investor that is fully committed to grow this business and to achieve the vision that we have set for ourselves. That is Terra Firma and Guy Hands. They have stated on more than one occasion how determined and committed they are to our growth and to turn around this business and put us on the right track.” And: “You will not hear me saying this is 100%, I think it would be silly for any company. But I’m telling you I’m very comfortable with meeting the covenant.”

Terra Firma may need to put more money into EMI to avoid defaulting on Citi loan

Here are the latest ugly news on EMI. The company might default on a loan from Citigroup, if it doesn’t meet certain covenants by March 2009. There has been talk about this before, as I mentioned here last week. The Wall Street Journal today reports that EMI will have a hard time coming up with enough money to satisfy Citi. 

According to the WSJ, Terra Firma has had to help EMI with a cash injection of £10 million three months ago. That’s less than many had feared, but it shows that EMI still needs the drip for the time being. 

Terra Firma reportedly has raised as much as £250 million last year for contingencies, which could be used to inject into EMI if necessary. During recent months, however, it looked like the UK major was on a path to recovery when the new CEO Elio Leoni-Sceti announced improved HY numbers. 

There aren’t any details on what exactly EMI’s obligations to Citigroup are for March, but a company insider told the WSJ that EMI’s internal forecasts say it will generate enough cash. EMI expects to report £280 million in EBITDA in the fiscal year ending March 30. If it does indeed meet this target, Terra Firma will likely avoid having to inject more cash into the business, the source told the Journal.

This sounds good on paper, but it remains to be seen which releases will actually deliver these kinds of earnings. EMI’s release schedule for the coming months doesn’t exactly consist of blockbusters. Sure, new albums by Keith Urban, Lilly Allen, LaFee, Beastie Boys or Pet Shop Boys will do quite well. But will that be enough to save the fiscal year?

Warner and Jim Griffin keep pushing flatrate to universities

What’s with this American paranoia about taxes? Nobody likes to be forced to give away hard-earned money. But that’s a different story.
Can somebody please explain to me why so many commentators label the concept of blanket licensing as a “music tax“? This is a deliberate misrepresentation of what I remember Jim Griffin talking about at SXSW in March. In fact, the concept which Griffin and Warner Music Group are trying to put to work almost exactly mirrors the approach of UK industry body BPI towards the ISPs. 

From what I learned so far, nobody is saying that you would have to sign up for a bundle that combines internet access with the right to download as much as you want. It is simply a new product. Just like Comes With Music or the TDC/24-7 concept. These are opt-in concepts. Calling them a “tax” is polemic. 

I’m with Peter Kafka here who thinks the majors deserve some credit for trying new ways of montezing their content. It will be a tough sell, but if you want to make money with music you’ll have to gradually move from selling units to selling access. Maybe you’ll have to move fast …

Here is what got it all started last week: Presentation Educause/WMG

Sweat vs Schweaddy Balls

Boy, this is terrible. But the man’s gotta pay the rent, right? And he’s gotta eat, too. 

Talking about Sweat and McD “meat”: I think it is again the season for some Schweaddy balls. Here we go: 

Couldn’t find the clip on Hulu. So please go here.

Selling recorded music – it is still possible

The UK music business – notwithstanding the collapses at Woolworths/EUK and Pinnacle – is still doing fine this holiday season. Just as the one-day sales of Take That had suggested their latest album “The Circus” is the current top seller in the British market, propelling overall sales levels to new hights this year. 

“The Circus” sold 432,490 copies in its first week. That’s a number most label executives would be proud of if they were able to achieve it in the U.S. – a market with more than five times the population of Great Britain. 

How did the Brits do it? The key factor here seems to be pricing. Supermarket chain Asda is offering “The Circus” for a mere £5.88 ($8.66) and Amazon MP3 is almost giving it away at £3 ($4.45). 

That, of course, begs the question: What cost do these sales records come at? Is this the pricing level we will have to adjust to? Many think so. What’s your take? Drop me a line in the comments.

UK music biz feels like in war, huddles to aid victims of Pinnacle collapse

Looks like there has been a lot of talking between labels, distributors and retailers over the weekend. Judging by today’s coverage of the situation in the UK, where independent distributor Pinnacle hat to enter into administration last week, the business is taking immediate action. 

The British music industry seems to agree that letting face Pinnacle clients the same fate is not an option. According to Music Week, the biz is rallying around to help those labels caught up in the spiral. 

Distributors have already inked contracts with some of Pinnacle’s leading labels – notably Rough Trade with PIAS and Dramatico going to ADA – while a raft of new deals are nearing completion. ADA is understood to be close to signing contracts with Epitaph, Eagle Rock, VP Records, Greensleeves, Cooking Viynl, Essential and Jazzee Blue, while PIAS UK managing director Peter Thompson and Proper Distribution managing director Steve Kersley have been in talks with a number of labels. The majors are also mucking in, providing support for indie labels caught up in Pinnacle going into administration last Wednesday. They have offered to help labels get their releases into stores in the run-up to Christmas and into the new year. Universal commercial director Brian Rose says, “We have been speaking to a lot of record companies in the last 24 hours. We have offered to help people with their distribution and sales.” Dramatico chairman Mike Batt adds, “People do draw together in times of adversity. It is a bit like the war – people forget their quarrels.”

And over at MusikWoche they offer a little bit of history on the Pinnacle story.