The digital revolution might be making it harder for record labels and retailers to make money out of music, but the decline in album sales has spawned a new type of investment that is attracting fans and investment banker types alike. Slicethepie.com has financed 13 bands, earned 40,000 "scouts" more than 40,000 pounds ($79,700) and landed hundreds of investors some rosy returns since its launch seven months ago.
Interview: Brad Duea, President, Napster; Hybrid Subscription-Downloads Business An Advantage
Basically, Duea agreed that the concept of a DRM-free subscription service, at least one that allows a user to port music onto a device, doesn’t make sense, since there has to be a limitation on how that music is used and kept. He did note that the company is experimenting, on the mobile side, with subscription purchase services. So, for example, a mobile user might pay a set fee to buy a number of tracks each month. As for when the DRM-free store will open up, the official word is still in the first half of this year.
During the panel, Duea mentioned that after years of losses, Napster is finally pushing into positive cash flow, though I was curious how this squared with statements in the company’s 10-q filings, about the company benefiting from an impasse in establishing rates and paying music publishing fees. He admitted that the company could go back to being cash flow negative depending on the rate that is established and the level of investments the company makes this year, but overall, they’re standing by claims that Napster will generate cash this year.
Digital Music Biz Consolidation Predicted
The digital-music business should expect a spate of consolidation during 2008 and 2009, predicts London-based research firm Point Topic in a new report. The firm says that, in a global sector which has more than 498 digital-download services currently operating in over 40 markets, digital-music services with robust business models are expected to survive by being acquired by the major digital-music players, while the weak ones collapse.Among the major digital-music companies Point says are expected to embark on an acquisition spree are mobile-phone maker Nokia, PC software giant Microsoft, and RealNetworks Inc-operator of U.S.-based subscription-funded service Rhapsody. Point Topic calculates that legal digital sales currently account for nearly 30% of the total U.S. music market, and for about 20% of the business in Europe. In total, it estimates that digital music generated $2.9 billion in revenues in 2007, a 40% jump from 2006.Apple's iTunes Music Store continues to dominate the digital-music sector in the United States, United Kingdom, France and Germany.
Music exec: "Music 1.0 is dead."
Consider the statements that were made today without controversy:
- DRM on purchased music is dead
- A utility pricing model or flat-rate fee for music might be the way to go
- Ad-supported streaming music sites like iMeem are legitimate players
- Indie music accounts for upwards of 30 percent of music sales
- Napster isn't losing $70 million per quarter (and is breaking even)
- The music business is a bastion of creativity and experimentation
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