MUSIC BUSINESS NEWS

Spotify Lost $42 Million Last Year...So Can It Ever Be Profitable?   Following in Pandora's footprints, Spotify has generated considerable attention and hype for its digital music service - but can it make money? That's the question raised by Business Insider which, noting that the company lost $42 million last year, says that digital "bears" believe it's "just impossible to make money from digital music, at least if you're not also selling beautiful high-margin music players to go along with it [like Apple]." But investors in both Pandora and Spotify see things differently, and the primary reason - at least in Spotify's case - is that its loss as a percentage of revenue was much smaller in 2010 than the prior year. This suggests that, as Spotify gains scale, it is also gaining leverage, which bodes well for future profitability. Indeed, while music licensing costs currently are bigger than the company's gross income, revenues grew a stunning 458% from 2009 to 2010. And, while licensing fee expenses also grew during the same time period, that growth was 345%, a lost less than revenue. AsBusiness Insider says, "costs growing less fast than revenue suggests there might be a light at the end of the tunnel...In fact, we think Spotify will likely at one point see profits." [Full story:Business Insider] Pandora Faces Mobile Ad Struggle Despite High Smartphone Usage   Pandora's digital music service is so popular among smartphone users that it's the most-downloaded free music program in both Apple's and Google's app stores. Interesting, then, that while more than 70% percent of the service's usage happens on smartphones and tablets, less than 1% of overall U.S. advertising spending is devoted to mobile devices. Pandora has struggled to attract marketers largely because the company is creating new types of advertising, blending 15-second audio clips, display ads, and video spots. Audio ads on the radio traditionally have been directed to local audiences, while display advertisers are more often national brands. Pandora's service is multimedia and focused on national and local advertisers, an experiment that most companies aren't used to. Still, the service - which had 23 million active users in fiscal 2011 - is projected to grow 21% annually and reach 159 million active listeners worldwide by fiscal 2021, according to Morgan Stanley analyst Scott Devitt. Ten years from now Pandora users are projected to stream an average 18 hours of ad-supported music each month, up from 13 hours last year. [Full story: Business Week] Pandora Announces In-Dash Partnership With Cadillac   Pandora this week announced a partnership with Cadillac whereby the music service is directly incorporated into the luxury car's CUE [Cadillac User Experience] system. CUE, which is designed to support Android, BlackBerry, and iPhone devices, will be included in the upcoming XTS and ATS luxury sedans, and will be a key feature of all future Cadillac vehicles beginning in 2012. Pandora EVP Jessica Steel said, "We're honored that Cadillac elected to feature Pandora as part of their CUE launch and are delighted that Cadillac drivers will soon have the option to easily listen to their personalized Pandora stations in their cars." And Don Butler, VP of Cadillac Marketing, added, "CUE will transform the luxury in-vehicle experience by integrating popular mobile app technologies, like Pandora, creating an optimal, personalized driving experience." [Full story: Daily Markets] O Music Awards To Pay Tribute To Steve Jobs   In honor of Steve Jobs' substantial influence in digital and online music, MTV has decided to pay musical tribute to the late founder of Apple Inc. at its O Music Awards on October 31. The event, which this time will take place in Los Angeles instead of Las Vegas, will feature a special musical nod to "the man behind the iPod and iTunes," with a number of up-and-coming artists performing iconic songs in homage to Jobs' huge contribution to digital music culture. But the awards show is not all about Jobs, as MTV also will also attempt to make it into the Guinness record books by hosting the world's longest dance party, as participants try to break the 55-hour barrier. Additionally, the first slate of performers and presenters has been revealed, and includes a mix of established stars and new artists, including Kelly Clarkson, the Band Perry, Demi Lovato, Mac Miller, Midi Mafia, and DJ Diamond Kuts. Additional performers and presenters will be announced in the coming weeks. [Full story:MTV.com] Research Claims Music Industry's "Digital Shackles" Encourage Piracy   Technology meant to thwart digital music pirates may actually spur them on. That's the key finding of a new study conducted by market researchers at Rice University and Duke University, which found that  removal of restrictive digital rights management [DRM] coding can actually decrease piracy. The research pits music lovers who want unrestricted use of digital music against record companies who want to control music distribution as they lose profits from digital piracy. "In many cases, DRM restrictions prevent legal users from doing something as normal as making backup copies of their music," observes Rice University's Dinah Vernik, one of the study's researchers. "Because of these inconveniences, some consumers choose to pirate." The recorded music industry's reaction: phooey. In fact, music industry executives are quick to point to alternate research that says DRM systems actually stymied piracy, citing a study conducted at Uppsala University in Sweden that found that physical music sales would be 72% higher and digital music sales 131% higher in the absence of piracy. Not so, Rice's Vernik contends. "Removal of these restrictions makes the product more convenient to use and intensifies competition with the traditional format [CDs], which has no DRM restrictions," she insists. "This increased competition results in decreased prices for both downloadable and CD music and makes it more likely that consumers will move from stealing music to buying legal downloads." [Full story: Tech Trend] CD Baby Launches Artist-Oriented "MusicStore for Facebook"   CD Baby this week launched a new MusicStore for Facebook, which integrates directly with artists' band pages, allowing fans to listen to, purchase, and share their music via the social media site. CD Baby then handles all transaction processing, music delivery, customer service, and artist payout. According to a company statement, the MusicStore for Facebook shows fans all the relevant artist and product info, and allows artists to choose between offering 30-second sample clips or full song streams when people click to hear the music before purchasing. ""Because we have all necessary artist content and information in our database, our new MusicStore takes just five minutes to set up," says CD Baby president Brian Felsen. "It's beautiful, seamless, and integrated. And I'm excited that artists are responding: in the first days since our 'soft' launch, without any promotion whatsoever, we've already deployed over 1,500 artist stores. It's direct to the fan, and CD Baby handles all the logistics: the credit card processing, the delivery of downloaded MP3s, the warehousing and shipping of CDs, the customer service, and the accounting - so artists can focus on what matters: writing, recording, and performing." [Cull story: news release] Sweden's X5 Generates Big $$$ Through Digital Compilations   No artist + no catalog + no studios = no profit? Not necessarily! X5 Music Group, based in Sweden, has defied many odds to generate a comfortable profit in the classical music genre by releasing massive compilation albums. As Mashable reports, the music group doesn't have any permanent in-house musicians and instead focuses on back catalogs of classical music and creating custom compilations with such titles as "The 99 Darkest Pieces of Classical Music" or "The 50 Most Essential Pieces of Classical Music." Indeed, last year X5 was the number two classical label in the U.S. with a 20% market share, and charted 13 #1 Billboard Classical albums - more than any other label except Universal Music Group, with whom X5 currently is in distribution discussions. X5 has been able to generate substantial income through some simple tricks: The albums are inexpensive to produce, the artwork is simple but striking, X5 distributes through all major music sites [iTunes, Amazon, Spotify, Rhapsody, etc.], and designs albums with "music search engine optimization" in mind. "Think of the person that types 'classical' into the iTunes search box," says Scott Ambrose Reilly, X5's new U.S.-based CEO. "That's the kind of person we're trying to sell to." Of course, as Mashable notes, "compilation records have existed for a long time, but few have realized the importance of optimizing those compilations for social search and the modern music consumer." [Full story: Mashable] CMT's Jay Frank Launches "DigSin," New Digital Music Company   Former CMT SVP/Music Strategy Jay Frank has launched DigSin, a digital music company where subscribing fans can get all music releases for free. Characterizing DigSin as a "departure from the usual record label model," Frank says the company will "focus on single song releases from new artists all with an eye towards maximizing the listening audience. [DigSin] is the result of years of examining the new ways music fans find and listen to music." Short for "digital single," DigSin is designed to "cultivate exposure through a targeted database of music fans who will receive every label release for free in both the genre and format of their choosing. "As DigSin's fan base grows, so will the company's ability to generate revenue in both traditional and non-traditional ways," Frank explains. "To succeed as a music company today, you must be open to multiple new revenue streams and new ways of thinking. Through a combination of free music, social networking, analytics and traditional promotional outlets, we will be a new model for music companies for the future." [Full story: All Access Music Group] Al Bell Presents American Soul Music  ... And American Soul TV If you're into classic and contemporary Soul, R&B, Blues, Gospel, Jazz, Hip-Hop Soul, Rap Soul, and Neo-Soul, we invite you to listen to Al Bell Presents American Soul Music. Former Stax Records owner and Motown President Al Bell personally has programmed this awesome radio station online, presenting your favorites from the 1960s and '70s [and some '80s], a lot of the best new music that's being released today, and some real gems you haven't heard in a long, long time. Come to www.AlBellPresents.Com and hear it for yourself! And now...join us for Al Bell Presents American Soul TV here.