The headlines were filled with music-related news this week and given my recent posts on the topic of music in the digital age, I felt it was appropriate to write a Special Music Edition of Drama 2.0’s The Web Week in Review.
The brain drain at Google continues.
In a story that some thought may have been an April Fool’s prank, it was announced that Google’s vice president of engineering Douglas Merrill has left Google to join beleaguered record label EMI to head up the label’s digital division.
Merrill, who is trading in an office at the Googleplex in Mountain View for an office at the Capitol Records building in Los Angeles, will be tasked with helping EMI figure out how to adapt to a changing music industry that faces significant challenges, including rampant piracy.
Merrill has already stated that “suing fans doesn’t feel like a winning strategy” and for the most part, he is probably right.
But he’s not being paid to state the obvious. The real question is – will he be able to come up with strategies that work?
Google isn’t the only internet company that lost an executive this past week.
Ian Rogers, general manager of Yahoo Music, resigned to run Topspin Media, a stealth startup that bills itself as “the future of digital artist services.“
While it’s not surprising that a Yahoo executive like Rogers would leave the company given the uncertainty that must permeate Yahoo headquarters these days, Rogers has also been an outspoken critic of DRM and may have found his vision for Yahoo Music at odds with the company’s.
In a blog post, Rogers stated that Topspin Media’s goal is “help artists earn a living through software.“
A lot of startups have tried to do this and failed and while Rogers could pull it off, I personally think Douglas Merrill actually has less of a challenge at EMI.
According to new research figures, Apple’s iTunes has overtaken Wal-Mart as the leading music retailer in the United States.
It’s not entirely surprising. iTunes surpassed Target as the number two music retailer in the United States just several months ago and with physical album sales declining while online music sales increase, iTunes is positioned to benefit.
Although Steve Jobs is married, there are reports that he once dated folk singer Joan Baez. Now that he’s officially one of the most powerful men in music, it’s time he built a closer relationship with the industry. I suggest a divorce and marriage to Madonna. Talk about a Silicon Valley-Hollywood power couple.
If Steve Jobs doesn’t have any plans to make his move on Madonna (or Mariah Carey), he might want to soon. MySpace, which has always had a strong music focus, is betting that it can leverage its position as the most popular social network in the world to rival iTunes.
MySpace, which has 5m artist profiles and whose current music section receives 30 million visits each month, has inked deals with Sony BMG Music Entertainment, Universal Music Group and Warner Music Group to launch MySpace Music, which “will allow its legion of users to buy and stream millions of songs.”
It is reportedly still in talks with the missing major – EMI.
MySpace Music is a joint venture between MySpace and the participating labels and will be an interesting test for ad-supported music distribution as well as social media’s ability to drive commerce.
In an interview with AdWeek, MySpace CEO Chris DeWolfe predicted that advertising will be a “significant” part of the music industry and noted that MySpace considers advertising to be one a “core competency.”
Unfortunately he didn’t provide much detail on the MySpace Music business model.
There is no shortage of opinion on the news and while I think MySpace Music has a shot at success if executed well, those heralding the deal as an indication that the record labels finally get it miss the bigger picture – if consumers continue to steal music in large numbers, platforms like MySpace Music, like the record labels themselves, may have a hard time making it worthwhile.
The music industry is changing but all of the change isn’t being led by the internet. Concert promoter Live Nation has lured Jay-Z away from Def Jam Records. What did it take? A cool $150m.
Under the deal, Jay-Z will “give the totality of his creative output — from songs to touring revenue to un-hatched entrepreneurial ideas” to Live Nation, which will reward him with $25 million up-front, $5 million annually for his own label and $10 million per album for at least 3 albums.
Of course, this is not the first mega-deal Live Nation has offered to popular recording artists. It lured Madonna with a $120 million deal and announced a touring and merchandising deal with U2 this week as well.
The New York Times notes that some question the sensibility of such deals:
“Given the trajectory of Jay-Z’s record sales — 2003’s The Black Album sold 3 million copies while 2007’s American Gangster barely cracked 1 million — he would have been crazy to turn down the deal. But how sane is Live Nation? Last year the company reported a $12 million loss, and even the most optimistic projections for Jay-Z’s sales and entrepreneurship would make it tough for the company to recoup its investment.”
The key for Live Nation is concert sales and this is where it gets interesting for consumers and music industry critics who might applaud the fact that a major artist like Jay-Z has left a record label.
Live Nation’s exclusive arrangement with Ticketmaster ends in 2008 and when it does, Live Nation will control more of its concert ticket inventory, giving it more leverage.
New York Times reporter Josh Tyrangiel understands what that means:
“Having a single company control so much of the live music market is almost guaranteed to mean one thing: ungodly ticket prices. In 2007, the cost of two seats to see Phil Collins and a re-united Genesis warble Mama was around $400, while two of the best seats for Jay-Z’s current 28-date Live Nation tour with Mary J. Blige go for $500.00. Anti-trust laws prevent Live Nation from selling more than 10% of its own tickets, but at those prices, 10% adds up fast. For consumers, the pain could be acute.”
Music industry haters like Michael Arrington, who suggest that music is overpriced and that touring is going to have to be a primary revenue generator for artists not only miss the point that these revenue generators are only truly viable for the Jay-Z’s of the world, but that for fans of these artists, the arrangement might not be any more friendly on the wallet.
If anything, Live Nation’s growing power and increasing presence in areas of the music business previously controlled by the record labels highlights the fact that the labels might lose out but entities just as large and eager to make big money are ready to pounce for profit.