Some of you might have already noticed it: There ain’t much going on here recently. I have to appologize. I’m currently starting a new business which as you can imagine is consuming quite a bit of my time.
Nevertheless I want to come up for air real quick and post some links to what I think have been the relevant developments in music during the last couple of weeks.
First, there is this media hype regarding the proposed merger of Live Nation and Ticketmaster. I wrote a feature story on that for MusikWoche which can be found here (PDF in German).
Then it should be mentioned that despite doomsday predictions Universal Music Group appears to be in rather decent shape.
Choruss is trying to make inroads onto U.S. college and university campuses. Watch a video by Warner Music’s Jim Griffin explaining the concept during his keynote at the Digital Music Forum East. You’ve read about this before, here and here.
Even though conservative members of the German grand coalition government have been asserting that they would support pro-copyright legislation that would help strengthening the position of rights owners it increasingly looks like the current administration will not be shaken by the entertainment industry’s push for a “three strikes” rule. Germany’s federal minister of justice (U.S. = attorney general), Brigitte Zypries, a member of the more liberal leaning Social Democrats, recently made it clear she does not want to persue that route.
Zypries had called for a meeting with the six largest internet service providers in the country to discuss how a graduated response model like the one discussed in France could be implemented in Germany. Disconnecting filesharers from the internet seems to be a hot issue in law-making circles. However, Zypries does not see this happening anytime soon. According to her position, the three strikes concept is incompatible with German privacy and telecommunications laws.
“I don’t think that is a fitting model for Germany or even Europe”, Zypries has been quoted. Labels shouldn’t delude themselves. The German government’s opinion sounds determined: “Preventing someone from accessing the Internet seems like a completely unreasonable punishment to me. It would be highly problematic due to both constitutional and political aspects. I’m sure that once the first disconnects are going to happen in France, we will be hearing the outcry all the way to Berlin.”
For years the recording industry in Europe and especially in Great Britain has been pushing for an extension of copyright protection for performing artists. Last year these plans arrived on the EU stage with Charlie McCreevy, the EU Commissioner for Internal Market and Services, introducing a term extension directive that will be voted on sometime this year, possibly as early as February.
Most music industry trade organisations have welcomed McCreevy’s plans that tries to be balanced in extending the protection term from 50 to 95 years while including a “lose it or use it” provision that would pass copyrights back to the musicians if the labels don’t publish their work, and a fund for session musicians. But not all interested parties are seeing the balance in the EU’s plans. While McCreevy claims that under his directive session musicians would benefit considerably the Open Rights Group says that some 80 percent of recording artists would only receive between €0.50 and €26 each year if the proposal becomes law.
McCreevy, however, is positive that the new proposal would allow performing artists to make a claim for remuneration based on sales, giving them an average yearly payment of €2,000. “Opponents to the extension argue that an additional annual income of around €2,000 per year for session players is not significant enough to allow performers to participate fairly in the millions that the proposal would provide for record companies,” McCreevy recently said. “Well, to that criticism I can say that the average annual pay-out might not appear significant to academic critics but €2,000 extra per year is significant for an average session player.”
But most study groups and economic experts have concluded that a term extension would give little benefit to artists and a lot to major media and record companies who could continue to market their catalogs. Most prominently, Andrew Gowers, the man who held a far-reaching investigation into copyright reform for the British government, called the proposals “out of touch with reality” and Prof. Bernt Hugenholtz at the University of Amsterdam, who advises the EU on copyright matters, called McCreevy’s directive a “deliberate attempt to mislead Europe’s Parliament”.
Add to that Martin Kretschmer, a professor at the University of Bournemouth, who said that the market penetration of the four largest music labels is so vast “there are almost no significant recordings reaching back more than 50 years which are controlled by other companies.” More than 70 percent of the revenues resulting from a copyright extension would go to the record labels, he added. As lengthening their exclusivity over pieces of music would enable them to charge higher retail prices, they could reap extra profits of between €44 million and €843 million per year. Notably, the only study supporting an extension came from UK label body BPI.
The Open Rights Group doesn’t want to let this proposal pass by the Commission and the European Parliament. That’s why they produced a little clip to inform MEPs on the background:
Becky Hogge, director of the Open Rights Group, accuses McCreevy of concocting a “fairy tale” with the story of the “poor performer who has played on a track in the 1960s and has collected royalties for 50 years. We are told that [without extension] he will lose the main source of income at the very time he needs it most. This looks simple enough for MEPs to give it a happy ending.” However, Hogge adds, “all the evidence shows that the term extension directive will do very little and almost nothing to help the poor performer and everything to line the pockets of the world’s record labels.”
The directive will be discussed at a meeting of the EU Parliament’s legal affairs committee, scheduled for February 11 & 12.
What do you think? Should Europe introduce a term extension? Who would benefit from it most? And why would that be a good/bad thing? Drop me a line in the comments.
Actually, going to Midem should be mandatory for anybody who wants to cover the music business. There is probably no other place where one can find as much expertise and inside stories as in mid-January at the Côte d’Azur. That’s bad for me, because I didn’t go this year. If you need to know what’s going on over there in France I recommend you check one or all of these sites:
This music industry claim saying that 95% of all downloads are illegal and unpaid for is causing British legislators to act. Since record labels and ISPs won’t come to terms on how to limit filesharing (even though both parties had agreed to a “Memorandum of Understanding” half a year ago), the situation isn’t really changing. No voluntary agreement has so far deterred anybody from getting their music for free online. This failure to come up with a workable solution has now startled UK politicians.
According to information obtained by the Financial Times, UK “ministers intend to pass regulations on internet piracy requiring service providers to tell customers they suspect of illegally downloading films and music that they are breaking the law.” This provision will be part of the upcoming report Digital Britain, prepared by Lord Stephen Carter who in the current UK administration is in charge of technology and communications.
The proposed new law would also make ISPs collect data on serious and repeated infringers of copyright law, which would then be made available to music companies or other rights-holders who can produce a court order for them to be handed over, the FT reports. Who would take care of that? A new monitoring body called Rights Agency which would be overseen by Ofcom, Britain’s broadcasting regulator (think FCC).
The costs for this Rights Agency are to be shared by both ISPs and rights-holders, says the draft. What consequences repeat offenders would have to fear remains to be seen. The FT report provides no details to that question. I’m sure ISPs and labels in France and Germany are watching this closely.
The French have been working on this for months now, so have the British. Even the content industries in the United States are leaning this way now. No wonder then, that the consensus-driven worlds of business and politics in Germany are getting on the bandwagon, too. I am talking, of course, about what has become known as the “3 strikes rule” or the “Reposte Gradueé”. The German trade org BVMI has been pushing this since last year.
Handelsblatt recently reported that Brigitte Zypries, federal minister of justice (U.S. = attorney general) has called for a meeting with the six largest internet service providers in Germany to discuss what a graduated response model could look like. The ISP summit is said to be scheduled for January.
Seperately, MusikWoche reports that Zypries is already planning a follow-up meeting with representatives from the music industry. Behind closed doors, the labels and the ISPs are apparently already talking about this sticky issue. However, the official position of the providers remains hostile. Being a deputy aiding the music industry’s goals shouldn’t be an ISP’s business, said Andreas Maurer, spokesman for 1&1 Internet – one of the six providers scheduled to meet with Zypries.
Apart form 1&1 the other ISPs lined up for the summit are Deutsche Telekom, Arcor, AOL, Freenet and Kabel Deutschland. Local studies say that 70% of all illegal filesharers could be convinced to stop their behavior with a graduated warning system.
Welcome back, readers of Höf’s Mixtape. Sorry it took me so long to get back online. While I was kicking back in Germany the music world continued to create news. More than I anticipated, actually. In retrospect, though, none of them were real game changers or sensations. But for matters of completeness and for my own sanity I compiled what I think deserves mention.
Instead of rounding up the old news in chronological order I am listing them by relevance. So this is what’s been missing here:
The biggest tours of 2008 were not by the biggest CD sellers. The global #1 was Madonna with a gross of $281.6 million according to Pollstar, followed by Céline Dion with sales of $236.6 million. Bon Jovi sold tickets worth $176 million. Fellow Jerseians Bruce Springsteen & the E-Street Band raked in $166 million in ticket revenue, and The Police managed $120.6 million in sales. Completing the list of Top Tours in 2008 are Neil Diamond, the Eagles, André Rieu, Kenny Chesney and Coldplay.
Steve Jobs decided it’s time to say good-bye to the old pricing dogma of 99 cents per song and got rid of DRM in the iTunes Store as well. Downloads (in the AAC format!) will now come without digital locks at three different price points. Watch for iTunes users predominantly cherry-picking songs at 69 cents. $1.29 anybody?
Related I: iPhone users can now shop wirelessly at iTunes via 3G (fast, sort of) and EDGE (really not fast at all). Can you hear AT&T and other carriers who are trying to sell DRM-ed OTA downloads cussing at Jobs?
Related II: Apple so far has sold six billion songs via iTunes. Averages around two billion a year now.
The recorded music market in the U.S. remains a battlefield. Album sales were down 14.4% in 2008 at 428.4 million units according to Nielsen SoundScan figures. Digital track sales rose 27% to 1.07 billion units, digital albums gained 32% and sold 65.8 million units. The CD album which still accounts for 84% of the entire business collapsed another 19.7% to 360.6 million copies sold. Vinyl, however, made a comeback to 1.88 million albums (an increase of 89%).
More SoundScan I: Album market share (catalog & current combined) leader was again UniversalMusic with 31.52% of overall sales (slightly down), followed by Sony BMG (25.30%, slightly up), Warner Music (21.38%, up by more than one point) and EMI (8.97%, slightly down). The combined share of independent labels decreased half a point to 12.83%. The same pecking order applies to download market shares.
More SoundScan II: The best selling albums of 2008 were “Tha Carter III” by Lil Wayne (2.874 million units), “Viva La Vida”/Coldplay (2.144 million), “Fearless”/Taylor Swift (2.112 m) and “Rock N Roll Jesus”/Kid Rock (2.018 m). Top selling album artist was Taylor Swift who had two titles in the Top Ten for a total of over 4 million sales. The best selling digital tracks were “Bleeding Love” by Leona Lewis (3.42 million units), “Lollipop”/Lil Wayne feat. Static Major (3.161 million), “Low”/Flo Rida feat. T-Pain (2.979 m) and “I Kissed A Girl”/Katy Perry (2.977 m). Top selling digital artist was Rihanna with a total of almost 10 million sales.
More SoundScan III: Where does the shrinking number of album buyers get their fix? The mass merchant category (Wal-Mart, Best Buy, Target, etc.) is still #1 at U.S. album retail with a share of 37% (down 3 points, though), followed by chain music stores (i.e. f.y.e.) with a 33% share of the market (also down 3 points) and the non-traditional outlet segment with almost 25% (up 7 points) and indie music stores covering the rest. NTOs include digital, internet, mail order, venue and non-traditional retailers, with digital accounting for 65% of the segment.
While 2008 was an annus horribilis for the U.S. record industry, the business accross the pond did far better than expected. BPI figures show the labels sold 133.6 million albums in the UK - a decrease of only 3.2% (some pundits were fearing up to 10%). The singles market was up 33% with 115 million units (mostly downloads) sold. 2008’s best selling album was Duffy’s “Rockferry” with 1.685 million copies. But Take That came awefully close with 1.446 million copies of “The Circus”. The record only had one month to achieve this sum. Even more impressive: The best selling single was “Hallelujah” (a Leonard Cohen cover) by X factor winner Alexandra Burke. The track sold 888,000 units in just two weeks. Overall entertainment sales in the UK were encouraging considering the tight consumer budgets everywhere. The Entertainment Retailers Association (ERA) said its members sold more product in 2008 than ever before.
At the RIAA some people started using their brains. The label group decided it’s time to end the witch hunt on music fans. Since the RIAA started suing alleged filesharers in 2003 legal proceedings have been opened against about 35,000 individuals. P2P fans shouldn’t pop the champagne bottles yet, though. The WSJ wrote: “Instead, the Recording Industry Association of America said it plans to try an approach that relies on the cooperation of Internet-service providers. The trade group said it has hashed out preliminary agreements with major ISPs under which it will send an email to the provider when it finds a provider’s customers making music available online for others to take. Depending on the agreement, the ISP will either forward the note to customers, or alert customers that they appear to be uploading music illegally, and ask them to stop. If the customers continue the file-sharing, they will get one or two more emails, perhaps accompanied by slower service from the provider. Finally, the ISP may cut off their access altogether. The RIAA said it has agreements in principle with some ISPs, but declined to say which ones.” Good luck with that.
Just when you think reason is taking over, something stupid happens. Like Warner Music pulling their content from YouTube. It’s about the money, what else.
Meanwhile, Universal Musicsays online video streaming is making a significant contribution to the company’s bottom line. eLabs EVP Rio Caraeff told CNet that the category was up 80% last year in U.S. revenues. Company insiders estimate Universal’s video streaming business at around $100 million.
As a result of the EUK drama British retail chain Zavvi (formerly known as Virgin Megastores) went intoadministrationon December 24. Some 2,300 permanent staff and around 1,000 part-time workers are in danger of losing their jobs. Zavvi operates 125 stores, HMV is said to be interested in buying some of the locations.
Stateside, retail chain Trans World Entertainment (f.y.e.) also experienced a dissappointing holiday sales season. Comparable store sales in the nine weeks to January 3 decreased 14%. Total sales for the period were $287 million (down 24%). TWE closed 18% of its locations during the quarter.
What to do when your CD sales are tanking? If you ask Mike McGuire at research group Gartner, all you need to do is let go of the physical format alltogether. Rather than focusing on the the retail CD as a primary revenue generator, McGuire says, labels should move to a “digital first” strategy before Christmas 2009. Well, I don’t know …
Universal Music Germanybought out joint venture partner X-Cell Records.
The highest German Court (BGH) ruled on the licensing of music as ringtones in a case that had been ongoing for years. In short, music publishers cannot ask for a two-tier licensing system that compensates both, the actual recording and the sound editing. Expert comments can be found here and here.
Prince wants to release three albums this year. All without the help of traditional label means. Physical formats will be carried by one undisclosed major retailer, digital will be handled by one as-of-yet unnamed download store.
Removing DRM for download sales at Amazon MP3 so far has failed to put a dent into Apple’s lead with iTunes. But at least they can claim to be #2 now without being heckled.
2009 will be a year of jam band glory: The Dead will go on their first tour since 2004, Phish will reunite and probably play Bonnaroo, and the Allman Brothers Band will celebrate their 40th anniversary with some live shows.
This is probably the worst possible way to deal with that situation. It will keep the story in the headlines even longer and won’t let Coldplay and its management look good.
This is being handled badly. Why? Do they need the money so much that they can’t afford to pay the old guitar wanker his dues?
“With the greatest possible respect to Joe Satriani, we have now unfortunately found it necessary to respond publicly to his allegations. If there are any similarities between our two pieces of music, they are entirely coincidental, and just as surprising to us as to him. Joe Satriani is a great musician, but he did not write or have any influence on the song Viva La Vida. We respectfully ask him to accept our assurances of this and wish him well with all future endeavours. Coldplay”
Just like Bob Lefsetz said: Watch this clip and make up your mind. This is a no-brainer and Coldplay has lost the battle over public opinion already.
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?
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 …
Even though conservative members of the German grand coalition government 
The 
The 
