Music Ally

2009 has seen the rise of streaming services Spotify and Pandora (and the fall of several of their rivals); governments grappling with anti-piracy legislation; The Pirate Bay trial – and then its tragicomic sale saga; and hundreds of bright-eyed music start-ups and thousands of iPhone apps. And STILL no Yellow Submarine iPod.

We rounded up the key trends from the year for our final Music Ally Report of 2009, and the article is republished below in full. If you’re interested in our service in 2010, with its daily bulletin and fortnightly analytical report, click here for a free trial.

The ups and downs of streaming music

There’s no doubt that consumers like streaming music when it’s done well, as illustrated by the success of Spotify and Pandora this year. And it seems equally certain that streaming has a significant role to play in the future of the music industry. That role, however, will be alongside other revenue streams, rather than being the downloads killer it’s sometimes painted as being by the media.

However, as 2009 draws to a close, there is still huge debate around the economics of streaming music, with ad revenues nowhere close to paying for the licensing costs, and artists and labels still grousing about their royalty cheques while fearful about cannibalisation of music sales. ‘Freemium’ has replaced ‘ad-supported’ as the business model of choice; but even that has yet to prove itself as a truly sustainable option.

Bright spots were provided by SoundExchange’s webcaster settlement in the US, and PRS for Music’s JOL replacement in the UK, with both drawing warm words from streaming firms. But as we move into 2010, this area still provokes more questions than answers. Will a tweaked Spotify make it big in the US? What will Apple’s acquisition of Lala mean for iTunes? Can MySpace Music make the numbers work despite the continuing slide of its parent social network? It’s all to play for.

iPhone applications for everyone

The vast majority of the 100,000+ iPhone apps released so far have sunk without trace. Yet that bald fact hasn’t stopped the music industry from jumping onto the App Store bandwagon. In fact, the flow of new music apps increased in pace as the year went on.
On the services side, the iPhone at least proved that there is strong demand for mobile music – albeit of the streaming kind.

By late November, Pandora had more than 13m iPhone, Android, BlackBerry and Palm users, with half of all new signups coming from these mobile apps. Meanwhile Spotify drove a sharp increase in its Premium subscribers by launching its iPhone, Android and Symbian apps – complete with its offline cacheing.

However, 2009 also saw an explosion in artist-focused iPhone apps – and it was primarily on the iPhone, rather than rival smartphones. Many were creative, playful and innovative, although few managed to rack up the tens of thousands of daily downloads that Auto-Tuned app I Am T-Pain did. By the end of the year, iPhone users had been invited to remix Underworld, David Bowie and Soulja Boy; sing karaoke with Mariah Carey and Lady GaGa; and tap falling blobs to the strains of Metallica, Coldplay and the Dave Matthews Band.

This year saw hype and experimentation, but we sense 2010 will see labels and artists focusing more on ensuring their apps provide a return on investment – and even perhaps looking beyond the iPhone to Android, Symbian, BlackBerry and beyond.

Pirates on trial (and up for sale)

February this year was all about The Pirate Bay trial in Sweden, which saw three of the P2P site’s co-founders (plus its main financial backer) face the music (well, the music industry’s lawyers) in court. Predictably, the guilty verdict wasn’t the end of the story,
with a pending appeal and accusations of bias against the judge in the original trial.

The defendants were characteristically bullish despite having prison sentences hanging over them. The months since have seen pressure being applied by other means – for example through The Pirate Bay’s web hosting firm, and then in a separate civil case in the Netherlands. Give or take the odd outage, the site has remained online, though.

Hopes that the site might go legit via a sale to Swedish games firm Global Gaming Factory X were dashed during a surreal July when every day seemed to bring new revelations or pratfalls about the company and its loquacious boss Hans Pandeya. The sale wasn’t to be, although The Pirate Bay is continuing to attract interest from potential suitors.

Its troubles, as well as the recent court ruling forcing Mininova to scrub its site of links to copyrighted content, showed that while stamping out online piracy is a hiding to nothing, 2009 was more uncomfortable for the poster boys of the pirate world than they would have anticipated.

Governments strike back against piracy

While the BPI and IFPI chased The Pirate Bay, governments around the world were mulling legislation to tackle online piracy at a consumer level. The process tended to be tortuous, to say the least.

The French government saw its Creation & Internet bill slapped down several times before it eventually became law, New Zealand axed its planned legislation following furious protests from consumer groups and ISPs, and stakeholders in the UK spent the year facing off over the government’s Digital Britain report – and the subsequent consultation period leading to the Digital Economy bill.

What the year showed was that the music industry and ISPs remain sharply divided when it comes to the finer details of tackling piracy, especially when it involves actions that may cause a stink among consumers. The UK government vacillated between the two, with ministers initially ruling out a three-strikes tactic, then veering towards ‘technical measures’ such as slowing down or capping broadband connections, before finally settling on temporary internet suspensions.

It remains unclear whether the bill will even become law before the next UK general election, with its potential change of government. Expect more sniping at January’s MidemNet between the two sides than was seen earlier this year.

Comes With Customer Confusion

At the start of 2009, there was still plenty of optimism around Nokia’s Comes With Music (CMW) service, as the handset firm prepared for new territory launches and sexier handsets than the pay-as-you-go model it launched with in the UK.

It’s a different story now, with widespread and public acknowledgement even within Nokia that its bundled music service has failed to catch fire with consumers. Music Ally’s revelation in October that only 107,000 people globally had signed up merely confirmed the industry’s expectations.

Problems with CWM included confusing marketing – consumers didn’t understand or didn’t trust Nokia’s promotional campaigns – as well as lukewarm operator support in key markets. On top of this is a mismatch between the length of a CWM subscription (12 months) and the 18-24 month contracts being pushed by the operators.

By the end of the year, Spotify was emerging as a significant rival, especially as it started to strike deals with operators to bundle its mobile app and a Premium subscription with Android and Symbian handsets. Even so, Nokia is nothing if not resilient: we sense there is at least one more big push in store for CWM in early 2010 before the company changes tack or gives up the ghost (or before Apple nails something similar for its iPhone).

The seamier side of digital music

Less-than-transparent contracts and deals? In the music industry? Surely not! But yes, one of the periodically recurring trends this year were accusations that somebody, somewhere was getting screwed in the digital arena. Usually artists.

So, the Featured Artists’ Coalition launched in a blaze of publicity, and before its attention was diverted by the file-sharing debate, it was making noise about how exactly artists would be fairly remunerated from upfront access deals struck by labels for services like Comes With Music.

Meanwhile, some artists were equally unimpressed with the economics of streaming music, complaining about tiny royalty cheques from the likes of Spotify – while Bob Dylan removed his back catalogue from ALL streaming services. Most recently, a former member of WMG act Too Much Joy embarrassed the label by revealing a pitiful digital royalties statement – and the convoluted process required to even get it.

Eminem’s former production company sued Universal Music Group (UMG) for a larger slice of digital royalties and lost, while his publisher sued Apple over unauthorised distribution of tracks, and settled out of court. Meanwhile, the long-mooted Allman Brothers lawsuit against Sony Music over digital royalties rumbles on.

Music games hit mixed notes

The industry excitement around music games in 2008 waned slightly in 2009, as sales fell from the genre’s peak. Even so, September provided plenty of fun with the launch of The Beatles: Rock Band and Guitar Hero 5, with the Fab Four winning the sales battle – at least initially. DJ Hero, however, delivered underwhelming early sales.

The successes of the blockbuster games led to a host of other vintage acts talking optimistically about the prospects for their own branded games in 2010. Meanwhile, iPhone developer Tapulous continued to strike deals for artist-branded games on that platform, while franchises like Rock Band made the jump to iPhone and handheld – offering downloadable content in both cases.

However, the row rumbled on between Warner Music Group and game publishers like Activision, though. Last month, WMG boss Edgar Bronfman Jr said that the label’s stance remains the same: “Where we’re not being recompensed anything close to what would be fair for artists and services, we see no reasons to license,” he said.

Google versus the music industry

For a company whose corporate motto is ‘Do No Evil’, Google managed to rub plenty of music industry people up the wrong way in 2009. YouTube was the prime offender, with premium music videos removed from the site’s UK and German versions due to licensing disputes with PRS for Music and GEMA.

PRS in particular painted Google as a 600lb gorilla prepared to steamroller rightsholders and use music to fuel its multi-billion dollar business. The real issue, of course, was the fact that music videos weren’t making money for Google. Estimates varied about how much money YouTube was losing, but nobody thought it was profitable.

Google and PRS eventually settled their differences, just in time for the company to join battle with another industry: newspaper and magazine publishers. And in fact, as the year wore on, Google was involved with several positive partnerships with the music biz. It launched an ad-supported download service in China, helped UMG get its Vevo video portal up and running, and unveiled music features for its main search engine to drive traffic to legal download stores.

ISPs try their hands at music services

It’s already a truism that legislation-led crackdowns on piracy must be complemented by the rollout of more appealing legal music services. While ISPs were kicking back against the stick element when they thought it would be expensive, unworkable and/or intrusive, several were keen to grasp the carrots side of the equation. Even if they found it was trickier than they expected.

So, the big non-launch of the year (so far) has been Virgin Media in the UK, which partnered with UMG in June for the announcement of an “unlimited music download subscription service”, which would allow the ISP’s customers to stream and download as many tracks as they wanted from UMG’s catalogue, with the downloads being DRM-free MP3s.

It was genuinely groundbreaking – so groundbreaking, in fact, that months later Virgin was still trying to nail deals with the other major labels amid reports that they had been spooked by the potential cannibalisation of existing sales. At the time of writing, the service has yet to launch, even if Virgin recently confirmed a deal with tech firm Detica to keep to its promise of measuring piracy on its network.

And another 10 things…

Ad downloads doom: As streaming rocketed, so ad-supported downloads died a death. Well, SpiralFrog croaked and Qtrax made more empty promises. Can new player Guvera do better in 2010 and make the model work?

Beatles (not) for sale: The Beatles didn’t go digital in 2009, other than on limited-edition USB apples. However, BlueBeat provided mirth with its attempt to sell “psycho-acoustic” versions of the Fab Four back catalogue.

Out of the Euro-pan… At the start of 2009, pan-European licensing was a mess. At the end of the year it’s… a mess! But the year did see plenty of talk from politicians and industry stakeholders about cleaning it up.

Monetising viral videos: ITV made nothing from millions of plays of Susan Boyle clips this summer, but a viral wedding video gave R&B star Chris Brown a huge chart boost, thanks to his label claiming it on YouTube.

MySpace on the slide: Facebook reigned supreme in the social networking space this year, with MySpace losing traffic and executives at a rapid pace. New CEO Owen Van Natta promised a music-led comeback in 2010.

Webcasts get interactive: Music webcasts got a whole lot more interesting this year thanks to companies like Ustream, which wrapped social interactivity around live streams of gigs. Even YouTube went gig-crazy with U2.

Just the (pricey) ticket: Consumer distaste with secondary ticketing scams peaked this year, especially after Ticketmaster was caught sending Springsteen fans to its secondary site before normal-priced tickets had sold out.

All of a Twitter: Everyone had a Twitter account this year, with some artists using it better than others. Security scares were a problem, though, with Britney Spears and Kanye West suffering high-profile hacks.

Jobs’ worth: What would the music biz look like without Apple CEO Steve Jobs? We almost found out this year, but a liver transplant saw him back at work by Autumn. Next stop: an iTablet launch?

Good luck, square eyes: Despite YouTube’s monetisation issues, there were plenty of music video portals launching. Vevo, sure, but MySpace Music also got in on the act, as well as the VidZone service for the PS3 console.

If you’ve got this far, cheers! And a free trial of our research service can be had by clicking here.

Tags: apple, bob dylan, Comes With Music, Digital Britain, featured artists coalition, Google, Guitar Hero, iphone, nokia, Pandora, prs for music, Rock Band, soundexchange, spotify, the pirate bay, Virgin Media

This entry was posted on Tuesday, December 29th, 2009 at 11:30 am and is filed under Digital music history. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.