Labels Are Spending Less On A&R And Marketing,
But Are Reaching Consumer "Tipping Point"
Reuters] Many critics of the recorded music industry charge that the major labels aren't investing as much as they once did in marketing and developing new, emerging artists - and new data suggests they may be right. According to a study released by industry body IFPI published on Monday (Nov. 12), record companies invested $4.5 billion in artists and repertoire (A&R) and marketing in 2011, down from the $5 billion they invested in 2008. The (potentially) bright news is that the A&R side fell less sharply than the marketing side, to $2.7 billion last year versus $2.8 billion in 2008, despite a decline of 16% in the trade value of the industry globally over the same period. According to the IFPI, global recorded music sales had fallen by around 1% year-over-year in the first nine months of 2012, after a fall of 3% in 2011. The industry peaked in 1999 when sales were $28.6 billion, and has shrunk every year since, reaching $16.6 billion in 2011. "The stats are getting better, the rate of decline is slowing," Max Hole, COO of Universal Music Group International, told reporters when the report was presented in London. "There's every reason to hope that in the next couple of years we'll reach the low point and start to go back to growth. We are at a tipping point of lots and lots of services coming on, and services that really are in touch with the consumer." [Full story:
Spotify Attracts $100 Million From Coca-Cola, Other Investors
New York Times] As Spotify closes in on $500 million in revenues for this year, the Sweden-based digital music service has lined up $100 million in new investment funding from such diverse partners as Coca-Cola, Fidelity Investments, and Goldman Sachs. The Coca-Cola investment is said to be about $10 million and represents a potentially huge new pool of investment sources for digital music. As noted by the New York Times, most digital music companies have struggled to build lasting businesses and, while Spotify has 15 million users worldwide, it has yet to turn a profit. But as streaming music services spread around the world, the most prominent of them are attracting big investments. For instance, Deezer last month raised $130 million, largely from Access Industries, the holding company controlled by Len Blavatnik that owns the Warner Music Group. Spotify also raised another $100 million last year from Kleiner Perkins Caufield & Byers and DST Global, in a deal that then valued the company at about $1 billion. In addition to those companies, the Times says minority positions in Spotify are also held by major record companies and Merlin, an organization that negotiates digital licensing deals on behalf of independents. [Full story:
Westergren Defends Fairness Act At Future Of Music Summit
The Hill] Speaking at the Future Of Music Summit in Washington, DC this week, Pandora founder Tim Westergren said artists and groups that try to position his company as anti-musician are patently incorrect, and emphasized that the bill does not set royalty rates for Internet radio services. Critics of the bill, such as MusicFirst, have said that Pandora is more interested in its bottom line than fairly compensating artists, but Westergren insists that is a huge falacy. "It's really important for artists to try to parse the rhetoric around this," he explained. "What this legislation proposes to do is to provide us with the same rate-setting standards so when the Copyright Royalty Board considers our situation, they get to consider that evidence under the same sort of rubric. It doesn't set a rate....it allows us to operate on a level playing field." Westergren is a vocal proponent of the Internet Radio Fairness Act, which aims to put Internet radio services on the same royalty-setting standard as satellite and cable radio stations. Westergren has argued that Internet radio stations unfairly pay higher royalty fees than other digital radio services because they're placed under a different standard. If rates were lower, more online music companies likely would emerge to play even more music, generating even more royalty payments, he contends. [Full story:
NPD Group: Internet Radio, On-Demand Listening Increases Sharply
mi2n] Market research company The NPD Group says 50% of internet users (96 million) listened to music on an online radio or on-demand music service in the past three months. Additionally, 37% of U.S. internet users listened to music on Pandora and other internet radio services, while 36% used an on-demand music service, like YouTube, VEVO, Spotify, MOG, Rhapsody, and Rdio. The audience for internet radio has grown 27% percent year over year, as the on-demand music audience increased by 18%, while the music audience for AM/FM radio fell 4% and the number of consumers listening to digital downloads declined 2%. "Although AM/FM radio remains America's favorite music-listening choice, the basket of Internet radio and streaming services that are available today have, on the whole, replaced CDs for second place," said Russ Crupnick, senior vice president of industry analysis at NPD. "We expect this pattern to continue, as consumers become more comfortable with ownership defined as a 'playlist,' rather than as a physical CD or digital file." NPD's "Music Acquisition Monitor" indicates that, since 2009, the percentage of Pandora users who also listened to AM/FM radio declined by 10%, those listening to CDs on a non-computer device fell 21%, and listening to digital music files on portable music players also dropped 21%. [Full story:
VH1 Launches New Platform To Give Artists "Digital Space"
Billboard.biz] Viacom Music Group, owner of MTV, VH1, and CMT, this week announced it is expanding its successful beta launch of Artists.MTV this year by launching a similar platform known as Artists.VH1. According to a company statement, Artists.VH1 will give new artists an opportunity to showcase their talent across VH1's multiple brands, channels, and shows, making tracks available for streaming. The discovery platform aims to provide a digital space for artist groups that currently are underserved, including adult album alternative (AAA) artists, catalog artists, and R&B and soul artists. "With the launch of Artists.VH1, we're filling a major void in the digital music space by providing non-mainstream pop artists and their fans direct access to one another reflective of what we deliver on air with our 'Storytellers' and 'You Oughta Know' franchises," Tom Calderone, president of VH1, commented. "The platform offers both established and emerging artists a homestead where they can have more access to their presence across our screens to control their image and opt into myriad opportunities, including music video rotation and song integration in our programs that will generate both exposure and revenue." [Full story:
CNET: Major Labels Unhappy With Apple's Proposed Licensing Package
All Access] According to CNET, the major record labels are less than elated by the terms of Apple's proposed internet radio service, and the Cupertino, CA-based company now is struggling to convince them to buy into the plan. "The negotiations are ongoing so the terms could change, but sources said Apple has offered to pay a lower royalty rate than Pandora pays even though it wants to provide iTunes users with the ability to do more with the music than Pandora's customers enjoy," CNET said this week. "In exchange for this greater flexibility with songs, Apple is offering a percentage of the ad sales generated by the service." CNET's sources say that some of the industry's leaders don't believe the percentage Apple put on the table is big enough, while others in the music industry contend it's good for the overall business if Apple takes on Pandora. Of course, if the labels don't accept Apple's proposed rates, Apple could join with Pandora in support of the proposed Internet Radio Fairness Act, which is strongly opposed by the greater music industry. To that end, CNET is reporting that the top record companies plan to quietly gather next week to discuss their strategy for fighting the legislation, with invitations sent to some of the top artist managers. [Full story:
U.K. Record Biz Criticizes Google For Not Burying Illegal Downloads
IT ProPortal] Google Play doesn't make sense when held up against the piracy the company's search engine allegedly empowers. That's the collective word from the U.K.'s recorded music industry, which this week criticized the new service that was designed to compete with iTunes and provide Android users with an alternative to music piracy. Instead, Google Play fails to sufficiently bury illegal music downloads in Google's search results, effectively "undermining artists," the British Phonographic Industry (BPI) this week said. "We don't think it makes any sense for them to be doing something which does support artists and then, on the other hand, undermine artists by referring consumers to illegal sites," the BPI's chief executive Geoff Taylor told the BBC. "We personally think that three months should be long enough to get it working. Taylor acknowledges that Google Play's arrival in the U.K. will open up the market to more competition, ultimately allowing consumers to have greater choice in accessing music legally, but urged Google to properly implement piracy-targeted tweaks to its search algorithm. Google responded by noting that Google Play is a completely separate entity from the search engine; as the company's Sami Valkonen said, "this is something that is hopefully going to make piracy obsolete because it's so easy to operate within the bounds of the law that there is really no need to go beyond them." [Full story:
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