Artist Quote of the Week

“Music is spiritual. The music business is not.”

-Van Morrison

Foreign Country Royalties

Another major source of income for many U.S. writers and publishers are the performance, mechanical, synchronization, video and artist royalties generated in foreign countries. In the area of successful songs, television themes and film or TV underscore, often more than 50% of a writer's and publisher's income is generated by uses in countries outside of the U.S. Performances (radio, television, Internet, movie theaters, live, etc.) are handled by foreign performing rights societies, with the monies collected for U.S. works forwarded to the U.S. performing right organizations for distribution.

Mechanical royalties - as opposed to the U.S. statutory rate - are computed on a percentage of the dealer price or the suggested retail list price of the audio recording. These royalties are usually collected by the mechanical right society in each country and then paid to the music publisher who, in turn, pays the songwriter.

In many other royalty-generating areas, foreign laws and practices are different than those in the U.S. and, therefore, effective and knowledgeable representation (whether by your performing rights society, publisher or other representative) is a necessity for proper collection in this area.

Canadian Album Sales Slump

The Canadian music biz continues to be rocked by lackluster sales, with album sales dropping 15% this week compared to the previous week, and tumbling 30% from the same period in 2007, according to the latest figures from Nielsen Soundscan.

The top-selling album in Canada for the week was Death Cab For Cutie's "Narrow Stairs," on Warner Music Canada with around 11,800 copies sold, while Madonna's "Hard Candy" (Warner Bros) stayed at No. 2 with 11,300 copies sold.

However, sets like the self-titled third album by Montreal's Simple Plan (Lava/Atlantic) remained in the Top 40 with slightly more than 1,000 copies.

Although largely unwilling to go on the record, Canadian music industry insiders admit to being shocked by the decline. "Our office has been talking about it today," says one distributor. "Wow. A thousand units to go Top 40 in Canada? I don't like to paint a negative outlook on these things, but..."

Canada's major labels have been struggling; at this point, admits one major label publicist, "I don't know what it takes to sell records."
Overall, album sales in Canada for the year to date are down 17% to 10.4 million, compared to 12.5 million in the same period in 2007.

One publishing industry source says the situation simply reflects the fact that the structure of major labels in Canada and elsewhere have to change.

"A major label can't be happy with a band selling 200 copies off the stage at their show, because their cost structures can't support that," the source notes. "That's crazy and that's what's wrong with the business these days.

Artist Quote of the Week

"In this business, the first rule is, never act out of desperation, because there is always someone out there looking to sucker you."

--Kevin Czinger, Volcano Entertainment Founder

The EMI Mess

The situation continues to worsen at EMI Group, a company battling against sagging recordings and a difficult restructuring. According to a recent Sunday Telegraph report, label group owner Terra Firma has now extended its terms with lender Citigroup, and signed onto revised turnaround benchmarks. The London-based paper pointed to a three-month extension with Citigroup, one that postpones a nearing, June deadline.

That offers some breathing room, though it also cranks the pressure even higher on EMI. Meanwhile, Citigroup has been unable to repackage its EMI loan, considered an ultra-risky bet on the street. Additionally, less-restrictive terms of the Citigroup loan are making it difficult for the bank to impose onerous demands on Terra Firma, according to various sources.

Another source close to the situation was less concerned for Citigroup and other creditors. "The lenders will get their money in the end," the source told Digital Music News, pointing to the multi-billion pound equity value carried by EMI Music Publishing. That opens the possibility of a worst-case liquidation ahead, a move that would stem the bleeding and realize current-term valuations.

Meanwhile, the day-to-day appears to be a grind. Fresh recruits like ex-Googler Douglas Merrill are part of a turnaround strategy, though the mood on the inside is reportedly grim. That could be a contributor to recently-missed financial targets, as well as untapped acquisition and licensing opportunities. Just recently, news surfaced on a plan to eliminate another 1,000 jobs, on top of a previously-disclosed reduction of between 1,500 and 2,000.

Napster Goes DRM-Free

As promised, Napster has stripped DRM from all paid downloads on its digital music service in favor of unprotected MP3s. As of today (May 20) all six million songs in the Napster catalog are now available to purchase without DRM protection. The company first announced plans to make the switch in January.

The new MP3 files will be of higher quality than the DRM version (256 kbps compared to 192 kbps). But will still cost only 99 cents. And unlike other digital retailers also making the switch over to DRM-free files -- such as Wal-Mart -- Napster has the support of all four major labels as well as all its existing indie label and aggregator deals.

Most notably, Sony BMG is on board, replicating the "agency" model it started using with the AmazonMP3 store.

The move gives Napster the largest catalog of legal MP3s on the Internet, far outpacing the 2 million songs on AmazonMP3. However Napster at heart remains a subscription service.

"We're really focused on subscription and driving subscribers as our business model," says Napster COO Christopher Allen. The MP3 store, he says, is designed to not only sell more a la carte singles, but eventually convert customers to its monthly subscription plans.

"It's a way for us, through MP3s, to get some exposure to our subscription service," he continues. "They may be initially attracted to the MP3s... and I think it will result in more subscribers over time."

The profit margin on a monthly subscription fee is much better than that of an a la carte download, which is why Napster will continue making subscription its core model. The company is gambling that the proliferation of Internet-connected devices -- such as mobile phones, home stereos and eventually car radios -- will some day convince music fans that a monthly subscription to access all the music they want from any device is more compelling than buying it.

Until that time comes, however, selling digital music in an interoperable format like MP3 is a fairly compelling offer. Napster still allows users to listen to any song in its library in full for free up to three times. Adding the option to purchase any song as well in a manner that is fully interoperable with any device is considered a much-needed development.

"It's great that they're doing it," says Jupiter Research analyst David Card. "Back in the day, they originally thought selling singles and albums would be a good way to get people used to their product and then upsell them on subscriptions. That just has never played out. But part of the reason was that when you bought those songs, they couldn't play on the most popular device-the iPod. So this will be a chance to really test that, because the service isn't crippled anymore."

The DRM-free move however has not yet made it to the Napster Mobile service, which is the default mobile music service for several wireless operators worldwide, including AT&T Mobility (which also counts eMusic as a digital music provider). As of now, music purchased via Napster mobile will still be encoded in the Windows Media DRM.

But Allen says that will change "soon." Like all other mobile music services, Napster Mobile operates a "dual-delivery" model-sending one copy of any song purchased from a supporting mobile phone to the users PC, and another to the phone itself, both wrapped with Windows DRM.

Allen says Napster and its carrier partners are currently testing a new system that would send a DRM-free version to users' computers, and another copy to the phone without the Windows technology. Napster president Brad Duea has previously stated such a system would make Napster Mobile available to 12 million phones compared to the 12,000 it is today.

Napster said it would continue to support all Windows Media DRM files purchased to date, unlike the now-defunct MSN Music service. However there is no program or promotion to let customers replace their previously purchased DRM-laden files with the new unprotected versions.

MySpace Free Experiment Pays Off

Pennywise, Poundwise: MySpace Free Experiment Pays Off

Major labels have been fighting against free content distribution for years. But a number of established artists are embracing the gratis giveaway, and driving dollars into more controlled areas.

The biggest players in this discussion are Radiohead, Trent Reznor, and most recently, Coldplay. But others, including Pennywise, are also pushing gratis concepts and helping to define best practices in the process.

In March, Digital Music News reported that the band attracted 500,000 takers on a free album giveaway driven by MySpace Records. That figure eventually notched to 640,000, according to MySpace, though 400,000 actually completed the process to secure the MP3s. "On top of the 400,000 downloads, we've scanned over 20,000 albums in the US and another, roughly 25,000 overseas," MySpace Records executive J. Scavo told Digital Music News on Friday. The giveaway officially ended in April.

The campaign involved a sponsorship tie-in with Textango, a mobile-based billing and download delivery platform. Scavo also noted that the band was paid for their participation, a move that helped to allay fears of traditional product cannibalization.

Now, the band is seeing some meaningful results, boosted by the MySpace project. That includes a well-charting single, and according to Scavo, significant jumps in concert tickets, tour guarantees, and merchandise sales. After playing sold-out dates in Japan and Australia, the group is now hosting shows in the United States through mid-June. And the band is being factored into the Vans Warped Tour this summer. "If you ask them, their career has been revitalized far beyond their expectations," Scavo said.

Unlike the Radiohead and Reznor campaigns, the Pennywise initiative did not include a paid option, closing off potential recording revenue from willing buyers. And looking forward, the next steps are somewhat uncertain. Scavo could orchestrate another pet project with similar parameters, though broad-scale participation by major labels in MySpace Music could complicate future initiatives.

MySpace is now planning to premiere the video for the lead single, "The Western World," on May 21st. The album, Reason to Believe, comes roughly twenty years after the band first formed in Southern California.

Artists Quote of the Week

The music industry can make you feel like a prostitute.

-Jonathan Davis

Facebook Music Dances With iTunes

Facebook launched its new music section for bands in a tie-up with iTunes.

The new section lets bands create their own profiles, making songs, photos and music videos available to fans. The service - which takes the social networking war to MySpace - also lets acts sell tickets and merchandise through a deal with the Music Today service.

Tracks can be streamed and Facebook is providing a link to iTunes in order that acts can offer songs for sale to fans visiting their pages.

Facebook denizens can become fans of their chosen artists, can rate and review the music and can choose to receive messages from acts.

100 artists have already set-up Facebook profiles to help launch the service, the first draft includes Coldplay, the Dave Matthews Band, Cee-Lo, Gnarls Barkley, and The Decemberists.

Facebook has also introduced a wave of applications bands can deploy on page, including tools for the creation of unique Facebook pages; a Flash Player; a Music Player; a Discography tool, a Music Shop and bulletin sending software, iCast.

Sony BMG/IPods

o, there might not be an iTunes subscription plan, but that doesn't mean the labels are any less enthusiastic about a monthly cash drip. According to their CEO, Sony BMG is "working on" its own subscription service, which would "provide access to our entire music catalogue for all digital players, including Apple's iPod" for about $9 to $12 a month. Better yet, he said it's "even possible that clients could keep some songs indefinitely, that they would own them even after the subscription expired."

One big question is how the DRM would work, since subscription music is obviously totally tied up, but not all players support the same DRM scheme: Zune's got its own set of chains and the iPod's got FairPlay. So they'd probably have to have player-specific subscription setups.

But here's the real problem: A subscription to a single label for $10 a month? The only way it makes any sense for consumers is if they're sitting on a fat pipe to all four of the majors, and likely, it's the only way they'll bite. And maybe still, only with Apple mojo to boot, if history's any guide.

Clear Channel Expands Online Plan,

Following up on its erockster Internet radio initiative during Coachella, Clear Channel is expanding its online presence with a number of new services -- including a personalized radio player, lyrics page, and widget strategy, among others.

Clear Channel is not yet providing many details about the new personalized radio feature, only that one is coming by the end of the summer. But Billboard has learned it is negotiating with Pandora to offer the company’s customized radio service across all its Web properties nationwide, but no deal is finalized at this time.

Pandora allows users to build a custom playlist of sorts based off the characteristics of one song. The system recommends songs that sound similar to the one first chosen, based on a catalog of about 500,000 titles.

The partnership should prove a major boon to Pandora, which is struggling with how to remain operational under the weight of the new Webcaster royalty rates. The exact details of the deal between the two parties have not yet been disclosed, and Clear Channel declined to comment on the specifics.

But adding such a feature is considered essential for Clear Channel to stay competitive in the online space. Competitor CBS Radio earlier this month unveiled plans for a similar custom DJ feature called Play.It, working in conjunction with sister company Last.fm. Both efforts show how terrestrial radio stations are responding to listeners' increasing demand for more control of their listening experience.

"Online, there is a lot of variety and choice," says Evan Harrison, Clear Channel executive VP and head of the company's online music and radio unit. "If we don't expand our offerings under our umbrella, people will just go elsewhere for it."

Clear Channel's earlier this month introduced its first nationwide-format Internet radio station in erockster. To date, Clear Channel's online presence has been that of local stations broadcasting in the Internet.

In other news, Clear Channel has added a lyrics service provided by Gracenote. Available immediately, the service adds a lyrics link to each song profile streamed online which takes the listener directly to a page providing the lyrics. Lyrics links also now appear on the home page of individual stations, artist pages and more, and will be promoted via on-air house ads from its many terrestrial stations.

Gracenote has compiled the myriad of publishing rights required to post the lyrics, and provides it as an outsourced service to other customers such as Yahoo Music.

Finally, Clear Channel is creating widgets of it member station Web sites allowing fans to stream the station from social networking profiles. Widget syndication firm Clearspring is providing the backend technology. The effort starts with widgets of the "Stripped" live performance series, and will eventually expand to incorporate streaming stations, erockster and other Clear Channel applications.

Artist Quote of the Week

"People don't buy plastic and paper, they buy emotions."

Scott Young, Wherehouse Entertainment

Label Execs Talk Digital Sales

At Sony BMG Music Entertainment digital sales are running at 40% of overall U.S. sales volume pace this year, and Thomas Hesse, president of global digital and U.S. sales predicts that the company will achieve a 50/50 split next year.

That was one of the revelations that came out of the NARM panel on music industry leaders talking digital strategy on the last day (May 7) of the organization’s annual convention.

Of Sony BMG's digital sales, two-thirds are online computer downloads and subscriptions while one-third are mobile sales, Hesse added.

Following Hesse on the panel, Universal Music Group Distribution (UMGD) executive VP/GM of digital distribution Amanda Marks said that digital downloads now account for 54.7% of all digital sales volume, while subscription services account for 7.3%, and video downloads and streams combined for about 3%.

Moving over to mobile, Marks reported that mastertones account for 26.7% of all digital sales, while ringbacks are at 3.9%; mobile OTA track downloads are 3.7%; mobile OTA video 0.3% and other mobile products 0.4%.

During her segment, Marks took umbrage to press reports that say ringtones are over. She said UMGD’s mastertones are up 23% year-over-year, citing high sales from rapper Lil Wayne. Meanwhile, she noted that subscription services are up 20%.

Both speakers predicted that ad-supported services will soon hit its stride and be a steady income producer.

Warner Music Group To Test Dynamic Pricing

Warner Music Group is testing a dynamic pricing system for digital albums provided by partner Digonex technologies.

Under the agreement, Digonex will basically act as a middleman between WMG and the various digital retailers selling WMG content. The company's technology analyzes how full albums are purchased -- at what rate, in what timeframe, and in what volume -- and then recommend either raising or lowering the price based on the incoming data.

Contrary to popular assumption, it is not a simple case of raising prices on better-selling albums and lowering prices on slow movers. In some cases, the company recommends lowering the price on a hot-selling album in order to spike even more sales and increase overall volume.

WMG's test of the system will begin this month, for a limited time and on a limited section of the label's catalog. The companies did not say how long the test will run, nor did it identify exactly which digital retailers are participating or which WMG artists will be involved.

Doing Business As (DBA) a Fictitious Business Name

A fictitious business name, assumed name, or DBA (short for "doing business as"), referred to as "trading as" in the UK, allows you to legally do business as a particular name at minimal cost, and without having to create an entirely new business entity. You can accept payments, advertise, and otherwise present yourself under that name. In fact, if you present your business under a name other than your proper legal name without proper notification, it may be considered fraud. Fortunately, filing for an assumed name is so easy and inexpensive, there's really not much excuse for not filing one.

Artist Quote of the Week

"In the music business bigger is not necessarily better. In fact, I believe smaller is actually better."

-Chuck Kaye, Dreamworks, SBK Publishing

Judge Sets ASCAP Streaming Fees

License fees that AOL, RealNetworks and Yahoo! must pay to ASCAP for streaming music of the performing rights organization's members have now been set by a federal court judge.

The three services, which are parties to a rate-setting proceeding in a
federal District Court in New York, may obtain a non-exclusive blanket license from ASCAP for unlimited performances of all songs in the PRO's repertoire through Dec. 31, 2009.

The fee for the license is 2.5% of the service's "music-use-adjusted
revenue."

Music-use-adjusted revenue is determined by multiplying the total revenue of the licensed business unit (i.e., the digital service's business unit that streams music or other content that includes music), less customary deductions for advertising sales commissions and traffic acquisition costs, by a music-use adjustment fraction.

That fraction is determined by using as a numerator the total number of hours music is streamed to users by the service (as currently measured by each service) and by using as a denominator the total number of hours of use of the service's Web site (as measured by comScore or other means approved by the court).

"This historic decision, for the first time, provides a clear framework for how the online use of musical works should be appropriately valued," says ASCAP CEO John LoFrumento. "This decision also provides clear validation of the flexibility and applicability of the ASCAP blanket license model relative to the use of musical works on the Internet - something the court itself specifically noted in its written decision."

The 153-page decision was made public late yesterday.