Music 2.0 and the New Economy

Don't buy the hype.

From Wikipedia:

New Economy was a term coined in late 1990s by pundits to describe what some thought was an evolution of the United States and other developed countries from an industrial/manufacturing-based wealth producing economy into a service sector asset based economy from globalization and currency manipulation by governments and their central banks. At the time, some analysts claimed that this change in the economic structure of the United States had created a state of permanent steady growth, low unemployment, and immunity to boom and bust macroeconomic cycles. Furthermore, they believed that the change rendered obsolete many business practices. When the stock market bubble burst, analysts soon realized they had been wrong.

A lot of start-ups were created and the stock value was very high where floated. Newspapers and business leaders were starting to talk of new business models. Some even claimed that the old laws of economics did not apply anymore and that new laws had taken their place.

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Pali Research: WMG Upgraded From Sell to Neutral

Vivendi Chief: Music Industry Doom Exaggerated

From Reuters:

Vivendi Chief Executive Jean-Bernard Levy has no plans to spin off the music unit Universal and he said on Saturday he believed the gloom surrounding the industry had been over done.

Speaking at the annual Midem conference, Levy said the music industry was going through a huge transition at the moment, with new business models for mobile and Internet services appearing all the time.

But he predicted there would still be a viable market for physical products like CDs for many years to come and he said the industry's future lay, as always, in spotting the right creative talent.

"I think altogether today there is an exaggeration in the industry," he told the conference. "Of course it is not doing that well, but look at us, we have flat revenues, a good two digit margins and it's not as dark as what many people describe."

"Back in 2003 the numbers didn't look very good," he said "(But) as a shareholder of Universal, I have seen the numbers go up quite sharply. We had in '03 a 3 percent operating margin business and we have today a 12 percent operating margin business.

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Warner Music Acquires French Tour Company Camus

From Reuters:

The French division of Warner Music Group has acquired one of the country's leading tour production and promotion companies, Jean-Claude Camus Productions, for an undisclosed fee.

Camus Productions, which has staged concerts in France for international acts such as Madonna, Michael Jackson and the Rolling Stones, will remain largely autonomous and will continue to be led by Jean-Claude Camus.

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More Hack Journalism Courtesy Chicago Tribune

Cayocosta

Amazing that virtually no one in journalism is willing to stand up and support artists and the industry against piracy.

Greg Kot of Chicago Tribune writes:

In the last few years, the music industry has combated tumbling revenue by suing costumers (sic), decimating artist rosters and laying off thousands of employees.

Tumbling revenue is employed here as a euphemism for piracy; and as usual, customers is used to describe music pirates.

But in the last few days, one important segment of the music industry actually came up with a rescue strategy that didn’t smack of panic, malice or desperation.

The Songwriters Association of Canada is proposing a $5-a-month licensing fee on every wireless and Internet account in the country, in exchange for unlimited access to all recorded music.

Bad idea and I'm not about to waste my time explaining why, as no one ever bothers to explain the opposite when proffering such nostrums.

Personally, I think it's a terrible idea to ask everyone to pay for those that refuse to; however, the industry and its artists have no other choice. Writing about the looting that is occurring but blaming the providers for it while obfuscating its immorality and direct consequences - for fear of alienating those engaged - is simply reprehensible.

EMI, Warner Bid for Chrysalis

From AP:

LONDON (AP) -- EMI Group, which recently outlined a painful restructuring plan, has made a bid for independent music label Chrysalis Group PLC, a newspaper reported Friday.The report in The Times also said that Warner Chappell, the publishing arm of Warner Music Group Corp., had also made an offer.

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WMG Rebounding on Heavy Volume

Cayocosta

WMG appears to have run into resistance last Wednesday at ~4.60, with buying into very heavy (4x) volume following on Thursday and Friday in an otherwise bearish market. Up another 2.7% this morning to 5.26.

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EMI to Cut 2000 Jobs, Focus on Catalog

From Joseph Schuman, Wall Street Journal:

EMI tomorrow plans to announce a restructuring that could cutup to 2,000 jobs and emphasize the profitability of its catalogue -- with the likes of the Beatles, the Rolling Stones and Norah Jones -- rather than its recorded-music division, the Times of London reports. Guy Hands, head of Terra Firma Capital Partners, which acquired embattled EMI last year, is expected to stress how half of the company's profits come from the catalogue division, which employs 1,100 people, compared with the 4,500 who deal with newly recorded music, the Times says. Mr. Hands wants to centralize sales, marketing and other support functions and also scrap EMI's current bonus regime for managers -- which is based on album shipments -- and replace it with one based on group profits, the paper adds.

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Trans World To Close 138 Stores

From Ed Christman, Billboard:

Trans World is preparing to shut down 138 of its 962 stores in another year-end pruning of its real-estate portfolio. Going-out-of business sales for the planned closures began on Dec. 7 and the closings are expected to be completed by the end of January.

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Total Music Purchased Up 14% In 2007

From FMQB:

Nielsen SoundScan has released its annual year-end sales figures, and while total overall music purchases were up, album sales continued their steady decline in 2007. Overall music sales; which combines albums, singles, music videos and digital tracks; increased to 1,369,000 from 1,198,000 with a 14 percent increase. While overall album sales (which includes 'track equivalent albums') fell by 9.5 percent, total album sales were down by 15 percent from 588.2 million to 500.5 million. The purchasing of physical CDs online grew by 2.4 percent. Also, 20 percent of total album sales for the year took place in the last six weeks of 2007.

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Bon Jovi Joins Van Halen in Scalping Game

From Alfred Branch, Jr., Ticketnews:

It appears that you can add Bon Jovi to the list of artists scalping tickets to their own shows for hundreds, even thousands, of dollars above face value.

Bon Jovi joins Van Halen and other artists in the ticket scalping game as a way of maximizing revenues on their current tour. Band, promoters and venues are now routinely withholding blocks of premium tickets from fans, which they later resell at significantly higher prices through various means, such as StubHub!, fan sites, Ticketmaster or auction sites.

They typically get away with it because the identity of the reseller is not always obvious, but they also face a potential firestorm, as in case of the wildly popular Hannah Montana/Miley Cyrus tour, if fans believe they are being duped.

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Apple Label Speculation

Cayocosta

Should Apple launch a record company, would the rest of the music industry continue to license content to iTunes - which would then represent a direct competitor's captive retail outlet?

Unlikely.

Such a move makes sense however, if Apple anticipates eventually losing some or all of its current agreements and/or working relationships with the majors.

Actually, Apple buying WMG might make considerable sense in that case.

Quick Links 12/21/07

France's SPPF Sues Limewire

Pre-Christmas CD Sales On The Up, Says BPI

Chinese Legalese Spells Mixed Results for Labels

Live Nation Launches Global Ticketing Business

From Yahoo Finance:

Live Nation (NYSE: LYV - News) announced today that it has entered into a long-term agreement with CTS Eventim which will enable Live Nation to launch its own ticketing business utilizing the most technologically advanced ticketing platform in the world. Live Nation will exclusively license the Eventim platform in North America, and Eventim will provide back office ticketing services in the UK and ticketing services across Europe. The new agreement will allow Live Nation to begin selling tickets on January 1st, 2009.

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MPAA Wins Case Against TorrentSpy

From InfoWorld:

The Motion Picture Association of America (MPAA) has won a lawsuit against the operators of TorrentSpy.com, with the judge ruling in favor of the MPAA because the Web site operators tampered with evidence.

In a ruling that could have implications for the privacy of Web site users, Judge Florence-Marie Cooper of the U.S. District Court for the Central District of California, ruled that TorrentSpy has infringed MPAA copyrights in a default judgment against the operators of the site.

Cooper, in a ruling made public Monday, agreed with the MPAA that defendants Justin Bunnell, Forrest Parker, Wes Parker and Valence Media had destroyed evidence after another judge had ordered them to keep server logs, user IP (Internet Protocol) addresses and other information. TorrentSpy billed itself as a central location to find files distributed on BitTorrent P-to-P (peer-to-peer) networks.

The defendants' conduct was "obstreperous," Cooper wrote in her decision. "They have engaged in widespread and systematic efforts to destroy evidence and have provided false testimony under oath in a effort to hide evidence of such destruction," she wrote.

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Microsoft, Nokia in Mobile DRM Deal

From Eric Sylvers, IHT:

Microsoft and Nokia, which both make operating systems for mobile phones and compete for control of that market, are coming together in a rare accord in an effort to take advantage of the expected explosion of the sale of mobile digital content in the coming years. Under the agreement to be announced Monday, Microsoft's PlayReady DRM technology - which helps content owners like music companies and service providers deliver digital content while restricting access - will be loaded directly on some Nokia phones beginning early next year.

The market for mobile content - music, games, graphics, video and adult material - will exceed $44 billion in 2011, up from $20 billion this year, the market researcher iSuppli estimates. But many consumers have balked from the beginning at the restrictions put on them with DRM. And some analysts argue that the technology has limited the growth of digital content sales.

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Corporate Sponsorship: Levi's Jeans Record Company

From Sydney Morning Herald:

This year the Levi's jeans company started its own record label, Levity, to foster Australian and New Zealand music. Levi's pays the recording, distribution and marketing costs, and the acts agree to appear in the company's marketing.

The Sydney band Mercy Arms and the New Zealand group Cut Off Your Hands were the first to sign. They have released EPs and are to go on tour in the next few weeks, significant steps for two relatively unknown acts.

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Related: Red Bull to Enter Music Industry

New Model for Lossless Downloads

From Kevin Hunt, Chicago Tribune:

An agreement in October between Olive Media and MusicGiants envisions a vastly different consumption of digital music, where owners of media servers (like Olive's) download CD-quality music files (like MusicGiants') that are also freed from the restraints of Digital Rights Management.

Olive, a San Francisco company, started selling German-made music servers a couple of years ago but its partnership with MusicGiants arrives as a dramatic counterpoint to the iTunes formula. It's a niche now, maybe forever, because what's good for Apple is also good for the major music companies, who would rather sell low-quality, encrypted music files. It's called protecting their investment.

Unless, that is, people demand something better. For now, MusicGiants attracts fans of unencrypted, hi-res jazz (Concord Music Group), classical (Naxos), blues (Alligator) and indies (Razor & Tie). Pop, as in the most popular music in the United States, is a no-show other than the Paul McCartney-led downloads from the EMI catalog.

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HMV Tops List of 3-Year-High Shorted Equities on FTSE250

From Iain Dey, Telegraph:

Hedge funds are beginning to make big bets on a collapse in the share prices of Britain's mid-sized companies.

The latest data reveals that the level of "short" positions - bets on falling prices - is now at its highest for three years on stocks in the FTSE250.

Top of the list is HMV, the music retailer, which has seen 34 per cent of its shares in issue pass into the hands of short-sellers. Paragon, the struggling buy-to-let mortgage lender, is the next biggest short in the index with 21 per cent of its shares shorted.

Other big shorts include Debenhams, the department store group, Bradford & Bingley, the mortgage bank, CSR, the semi-conductor manufacturer and Johnston Press, the regional newspaper group.

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Geffen Staff Reductions Begin

Reports indicate Geffen folded into Interscope.

From Digital Music News:

Geffen Records has now triggered a significant staff reduction, an expected development. Just last week, an inside source to Digital Music News projected layoffs in the 8-10 person range, though estimates varied on Thursday. Elsewhere, Billboard pointed to a total headcount reduction of roughly 15 across both Geffen and Interscope Records, and the layoffs of publicists Jim Merlis and Jycorri Robinson.

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