Kid Rock Boycotts iTunes, Champions P2P

The digital music revolution has been compromised, according to Kid Rock, because digital music stores and record labels still manage to hoard the lion's share of music revenue.

He advises fans to download his music for free from P2P services, although he himself doesn't have to. "I don't steal things," he told the BBC. "I'm rich." As for everyone else, he says, "Download it illegally, I don't care. I want you to hear my music so I can play live."

Rock's tirade was apparently precipitated by a request from his record label, Warner Music Group's Atlantic Records, that he publicly denounce file sharing. His response: "Wait a second, you've been stealing from the artists for years. Now you want me to stand up for you?" Ouch.

It seems there's no one way that artists are responding to the opportunities and challenges presented by the internet. It's official now: They're all over the map when it comes to downloads, DRM, file sharing and the rest of it, no longer offering the same rationales for completely different conclusions.

"ITunes takes the money, the record company takes the money, and they don't give it to the artists," added the country rock rapper. Instead, he says, the internet offers a "great opportunity for everyone to be treated fairly, for the consumer to get a fair price, for the artist to be paid fairly, for the record companies to make some money."

This makes a lot of sense, and it's the sort of thing that the digital music optimists among us have been saying for years. However, Rock expands on his idea, positing that anyone who needs something should just take it: "I don't mind people stealing my music, that's fine. But I think they should steal everything. You know how much money the oil companies have? If you need some gas, just go fill your tank up and drive off, they're not going to miss it."

Kid Rock's iTunes boycott is already in full effect. As of right now, none of his Warner-era albums are available on iTunes, and only his rarely heard debut album -- 1990's Grits Sandwiches for Breakfast on Zomba Recordings -- is available (clicking the link spawns iTunes).

Meanwhile, Metallica has been busy apologizing for its management company's testosterone-fueled deletion of early reviews of their upcoming album -- more on that soon.

http://blog.wired.com/music/2008/06/kid-rock-boycot.html

Digital music firms pay heavy price for labels' support

By Antony Bruno Sat Apr 5, 6:31 AM ET

DENVER (Billboard) - A stark truth facing any aspiring digital music service these days is that working with record labels is going to carry a hefty price.

The last 18 months have seen the major music labels accept new technological and business models -- such as dropping digital rights management and allowing ad-supported free music -- that have given rise to a new generation of digital music services. But the flip side of this willingness to experiment is a demand for higher upfront advances for licensing music and in some cases a substantial equity stake in the company.

Ad-supported download service SpiralFrog, for instance, paid more than $3 million in upfront advances to Universal Music Group alone before it even went live, and has paid additional millions in licensing fees since the original term expired. Imeem is said to have paid advances as high as $20 million and gave labels equity in the company. (Imeem disputes that figure but the equity stake is now a matter of public record.)

Sometimes the price is so high it sabotages the deal. A mobile messaging company recently walked away from negotiations in which a label demanded 85% of the company's gross revenue, even though the deal didn't involve any music licensing.

Labels say it's just the cost of doing business in today's music industry. Critics say it's stunting the establishment of a viable digital entertainment marketplace.

With CD sales in continuing decline and digital revenue still not making up the difference, labels are unapologetic about their insistence in mining every new revenue stream to its fullest potential.

"If you were opening up a retail store on Madison Avenue, I think you have to get a lease for the space," one major-label executive says. "If you want to build a legitimate business, there are costs associated with doing it, and that's no different in the virtual world than the physical world."

Truth be told, digital services -- or their forebears at least -- bear some of the blame for the deal terms getting to where they are today. Just a few years ago, revenue-sharing deals weren't that uncommon. However, according to former EMI digital executive Ted Cohen, labels soon soured on that model as services began gaming the system so that labels ended up with nothing.

That led to labels building "perceived value" of music into subsequent agreements along with various other checks-and-balances and advances designed to mitigate the risk of entering experimental deals. But even Cohen, now a consultant working on behalf of several digital music services, says the practice has gotten out of control to the point where economics are simply unsustainable.

"What was once considered a major advance -- $500,000 or $1 million -- is becoming a $2 million or $5 million advance and really over-the-top requests for equity," he says. "The deals are still unrealistic. If you raise $15 million to start a business, and have to spend $12 million just to pay off the content companies, that leaves you with $3 million to run a company. I don't know anybody able to do that."

Many rankled by these front-loaded deals accuse labels of going for the quick buck in order to meet quarterly revenue objectives at the expense of cultivating a lasting partnership -- essentially treating digital music startups as quick-fix ATMs rather than long-term investments.

"They're trying to match every dollar against a lost dollar, not nurturing new markets," Digital Media Assn. executive director Jonathan Potter said at Billboard's Music & Money Symposium in March. "That's not helping build a business. You need each party to have an equal incentive."

Yet one of the more controversial label demands -- an equity stake -- may in fact prove advantageous for services entering into such a deal. Labels receive dozens of partnership requests almost daily, many of which they don't think have any chance of surviving with or without their help. As such, they are only too happy to forget about them once the check clears.

But if the labels have an equity stake in the company, they have more skin in the game and a greater incentive to nurture the company along. Imeem, considered by some as the poster child for predatory label deals, is actually a case-in-point. Sources on both sides say Imeem's relationship with labels is proving extremely fruitful as a result of the equity deal--with Imeem executives advising some label execs on technical matters and some label execs clearing the lines of communication to their imprints. Imeem would likely prefer more access to labels' potential advertisers, but the deal is still young.

Imeem, however, is considered the exception, not the rule. Unwieldy usage restrictions and expensive licensing fees have already forced several promising partners out of the digital music space (Yahoo, Virgin, AOL). If the music industry wants to collect that Madison Avenue rent from the services of tomorrow, it may need to invest a bit more democratically today rather than trying to recoup the losses of yesterday.

"Here's the big disconnect," Cohen says. "In the physical world, they're paying Wal-Mart for the privilege of selling their music. In the digital world, they're asking the partner to pay them for the privilege of selling. The middle ground should be both sides treating each other with respect and both sides making money."

Reuters/Billboard

http://news.yahoo.com/s/nm/20080405/tc_nm/digital_music_dc_2

Ad dollars flood Web, but will they go far enough?

By Paul Thomasch Fri Oct 12, 12:42 PM ET

NEW YORK (Reuters) - Companies will spend a record $31 billion this year to advertise everything from toothpaste to home loans on the Internet, supporting countless news sites, social networks, video exchanges and blogs.

But some media veterans worry that expectations for online advertising may be getting out-sized.

Increasingly, they say, too much media depends on advertising as the only source of revenue. With new players from software makers to cable operators also trying to cash in, the dollars simply may not stretch far enough.

"I'm getting to the point where I feel like every answer to every business development pitch is 'We're going to be advertiser supported'," said Beth Comstock, president of Integrated Media at NBC Universal, which this year set up a fund to invest in media and digital companies.

"It's just not going to be possible," she said at a recent advertising conference. "There are not going to be enough advertising dollars in the marketplace. No matter how clever we are, no matter what the format is."

NBC Universal's television networks, cable channels and Web sites compete for advertising dollars with everything from niche blogs to big media peers like Time Warner Inc (TWX.N) and Walt Disney Co (DIS.N). In addition fast-growing Internet companies like Google Inc (GOOG.O) are snatching up advertising budgets.

But new rivals are entering the market. Comcast Corp. (CMCSA.O), the largest U.S. cable operator, expects at least $1 billion in online advertising in the next five to six years.

Verizon Communications (VZ.N) and AT&T (T.N) are looking at advertising opportunities on their video and wireless services, while startups like social network Facebook are seen as a new frontier for Web marketing.

Even Microsoft Corp (MSFT.O) has made a bold move into advertising with its purchase of Web marketing firm aQuantive.

THE MONEY FLOW

Until recently, the focus was squarely on how much money is moving into online advertising, rather than whether too many companies are making a grab for it.

There is little doubt today that a hefty portion of advertising dollars will shift to the Internet from TV, radio, print and elsewhere in the coming years. ZenithOptimedia forecasts that online ads worldwide will rise 28 percent in 2007, while the rest of the market grows at 3.7 percent.

Next year, ZenithOptimedia forecasts it to rise by 21 percent, and climb another 13 percent to $43 billion in 2009.

At that point, Web advertising would represent almost 10 percent of the $495 billion spent on advertising worldwide -- yet would trail spending on newspapers, magazines, and TV.

"There are billion of dollars that can still move," said Craig Lambert, Chief Digital Director of Colangelo, an integrated marketing agency based in Darien, Connecticut.

"Is there enough money flowing to support the businesses out there? I'd guess there is, just because there's so much money that has always been spent on TV and print," he added.

BIG SITES GET BIG DOLLARS

Others also take the position that there should be sufficient advertising money to spread around.

Jeff Brooks, Chief Executive of digital and direct marketing agency Euro RSCG 4D, sees a "huge gap" between the amount of time people spend on digital media and the amount of advertising money it attracts.

"The thrust of ad spending online, while dramatic in its growth quarter over quarter, still represents a disproportionately small percentage of total advertising dollars," he said.

The catch, according to some, is that much of the money flowing toward the Internet is concentrated on a few dozen of the most popular sites. That has left smaller, less well-known sites at a severe disadvantage when it comes to attracting advertising money and surviving.

In the United States, the top 50 Web sites accounted for more than 90 percent of the revenue from online ads in the first half of 2007, according to the Interactive Advertising Bureau and PricewaterhouseCoopers. The top 10 sites accounted for 70 percent of the revenue.

All the while, the number of Web sites continues to grow, creating more competition for audiences -- and advertisers -- who can also choose among video games, movies, TV, portable music and every other type of media entertainment.

"It's not like the old days, when it was 'if you build it, they will come,"' said Jonathan Sackett, Chief Digital Officer at Arnold Worldwide, a Boston-based advertising agency. "Now if you build it, they probably won't."

One alternative for Web sites would be to bank on subscriptions rather than advertising revenue, but few existing outlets have been successful with that model.

The reason is that unless the site offers extraordinary content, people simply refuse to pay for it, said Mark Miller, president of RMG Connect, an advertising and marketing agency.

"If Warren Buffett wanted to put out his own subscription newsletter online, well, I'm sure he'd get a bucketful of people to subscribe to it," Miller said.

http://news.yahoo.com/s/nm/20071012/tc_nm/advertising_web_dc_1

Docs: Pay Per Transaction Output Agreements

http://www.rentrakppt.com/content/services/output_programs.html

Actual PPT output agreements for Warner Home Video, Sony, 20th Century Fox, Lions Gate and First Look / DEJ.

Article: Rev-Share Still Lives

Rentrak's Graham doesn't see studios budging much on selloff restrictions, since they don't want to risk cannibalizing their new sellthrough.

On the studio side, sources say three of the six majors — Buena Vista Home Entertainment, Universal Studios Home Entertainment and 20th Century Fox Home Entertainment — have opted not to enter into any long-term deals with the chains.

All the major studios have PPT deals with Rentrak, with variations. Most offer output deals for DVD and videocassettes, with Buena Vista's and Universal's PPT involvement limited to VHS. Upfront fees ranging from nothing to $1.50 (Universal and Buena Vista charge $3.75 and $6.75 for VHS). On average, retailers then keep 60 percent of the rental proceeds, and all but $1.25 to $3.80 of the selloff take.

Last March, Warner Home Video tweaked its revenue-sharing program to include a back-end minimum guarantee back to the studio.

Rentrak also has deals with a variety of smaller suppliers, including Wellspring, Ardustry and MTI. PPT programs also are available for some video games, with upfront fees averaging $8.50 to $12.50 and participating retailers getting 54 percent of the rental proceeds.

http://www.rentrakppt.com/content/news/news_09-16-05.html

Article: Netflix discusses downloadable movies

Barry McCarthy, CFO of online movie rental company Netflix (ticker: NFLX), presented at the Morgan Stanley Small Cap Conference on June 15th. (That means that Morgan Stanley hosted small cap companies, not that Morgan Stanley is becoming a small cap stock...) Here's his argument why DVD rentals will not be displaced by movie downloading:

The studios make all of their money selling DVDs and almost none of their money theatrically. And they make practically no money at all on pay-per-view...

So, if you're a studio and you're trying to decide whether you're going to license content for electronic downloading, the decision is pretty simple. Two bucks electronic downloading, 18 bucks wholesale. Before you're going to license content for electronic downloading, you have believe that the market at two bucks of incremental revenue is so elastic that it's going to overwhelm the revenues you already generate from DVD and grow your business.

And no CEO is going to make that bet, which is why there's virtually no content licensable, on a subscription basis, for downloading. And that's the reason downloading is not the technology of the 21st century. Technology can do it. There will be a box in your home, that you can afford, that's going to drive that technology to the TV set. And there will be consumer demand for it. But there will not be content for it; not in abundance. And so that concept, I think, is DOA.

What is on the horizon is HDVD.

http://internet.seekingalpha.com/article/1408

Article: Viacom Snubs Web TV

By Tim Beyers June 19, 2007

If you want your MTV, parent company Viacom (NYSE: VIA) is there for you. But if you want your Web TV, go see Apple (Nasdaq: AAPL). Viacom wants nothing to do with you. Not yet, at least.

Who wants Web TV?
It's not that Viacom dislikes the Web -- CEO Philippe Dauman would just rather hog the remote. Here's how he explained it to attendees at a recent Deutsche Bank conference on media and telecommunications:

... We're very careful not to provide our content in a way that is competitive with the 24-hour channel offering that we have ... The "Joost" platform has a lot of content on it that hasn't appeared on air in many years. We now have a way to expose Beavis and Butt-head to audiences that haven't seen it in many parts of the world. I don't know if that's good for humanity or not.

Oh, come on, Philippe. What have you got against The Great Cornholio?

Actually, he has a point. Viacom derives nearly all of its profit from licensing and distribution payments from Comcast (Nasdaq: CMCSA), Time Warner (NYSE: TWX), General Electric (NYSE: GE), and other network operators. Competing with them is bad for business.

And it's not like Web TV is a big business yet. Netflix's (Nasdaq: NFLX) "Watch Now" library includes more films I'd rather avoid than see, though it's been fun to spend recent lunch hours with Lee Marvin and the rest of The Dirty Dozen.

Dauman knows that, which is why he's boosting Joost, which was created by the same guys who brought you Skype. Joost is similar technology in that it promises high-quality, free TV programming, using the Internet to deliver video.

Content is king, and it travels first-class
What's the allure for Viacom? Advertising. Beavis and Butt-head have been off the air since the '90s. They're dead as an advertising platform. Unless, of course, they earn an audience through Joost.

But Dauman is thinking even bigger, citing PepsiCo (NYSE: PEP) in his presentation at the Deutsche Bank conference:

They are [a] charter advertiser on our mobile deal with Sprint Mobile, where we are selling advertising for the first time on mobile ... We have a "Laguna Beach" virtual world where one of the prizes in that virtual world is to get a can of Pepsi. So it's really cool on that virtual site to be walking around with a can of Pepsi. That's a fantastic promotion for them, and they love it.

But will consumers' thirst for all things digital translate into a real thirst for sugar water? Everyone seems to think so. An online campaign -- even in virtual worlds -- contributes to online ad spending, which Jupiter Research predicts will exceed $19.9 billion in 2007 and rise to $35.4 billion by 2012.

The business of channel surfing
And yet the Web may be a bit player in Dauman's ultimate strategy: to create as much content as possible and cross-market it everywhere.

Sure, that sounds obvious, but don't underestimate the commitment it requires. MTV has suffered from lower ratings lately. So has BET, Viacom's channel aimed at African-American viewers.

But Dauman is investing in each, hoping to profit from a handful of hits that can produce licensing and advertising revenue for years to come. BET, in particular, has his attention:

BET [has] had very little original programming. So we've approved a three-year plan to dramatically increase the proportion of original programming on BET across many genres. We have 16 new shows launching this year. Most of them in the third and fourth quarter.

Smart move. Creating original programming will up ratings, create long-term value, and present licensing opportunities.

A Foolish finale
Dauman doesn't have it easy. A courtroom brawl with Gootube seems inevitable. And, with Tony Soprano gone and American Idol slipping in the ratings, TV isn't exactly the hang-on-the-edge-of-your-seat experience that it once was.

Fortunately, none of that should hurt Viacom. Not much, at least. Dauman is right. Between MTV, Comedy Central, BET, and Paramount Studios, Viacom has more than enough star power and plenty of distribution power ... for now.

What remains to be seen is whether Dauman can deliver more than classic recyclables like Beavis and Butt-head. He'd better. Today's investors are betting on it.

Article: Video may not be best way to monetize online

Online video is hot and everyone is scrambling to figure out how to best monetize it. Google just launched their “adsense for video” product, Advertising.com has Instream, and there are a host ofstartups attacking the problem as well. I think these online ad network plays are very interesting, as are all the infrastructure plays betting on the underlying rise of online video.

http://lsvp.wordpress.com/2007/05/25/video-may-not-be-best-way-to-monetize-online/

Quote: What's the Business Model

Interesting article on P2P vs. CDN.

http://newteevee.com/2007/05/18/p2p-streaming-and-cdns-what-will-really-work/#more-1316