Posts Tagged ‘Apple’

Facebook's music plans: Five random thoughts & one prediction

Monday, October 20th, 2008

Facebook is in the news again about its plans for getting into digital music. Namely, the news is that Facebook doesn’t have plans as of yet to enter the digital music business. I posted a story about this today on The Industry Standard called The Facebook Music mess. If you’re interested, give it a read.

Facebook MusicAs I was working on the article, there were five extra things that I wanted to include but didn’t. Here they are:

1) MySpace is going to kick Facebook’s butt in music no matter what Facebook does. MySpace Music, which officially launched in September, has a huge lead on Facebook in the music business. Even before the company’s new music site launched, MySpace already had millions of bands and musicians signed up and using the site as a promotional tool. MySpace’s roots are in music, and this lead is going to be unbeatable for Facebook.

2) It doesn’t matter that Facebook will be #2 in social music. Even though Facebook will not beat MySpace, it will still be in the music business. And Facebook won’t mind being number two because the multi-billion dollar music business is large enough for there to be more than one winner.

3) The suggestion that Mark Zuckerberg is considering getting into music out of jealousy is preposterous. Facebook has millions of registered members and those millions of members want to listen to music. Zuckerberg and crew are going to have to figure out a business model that works for Facebook and its users, end of story. This has nothing to do with jealousy; it’s purely good business sense.

4) Facebook does actually have a chance to beat MySpace – even in music – internationally. I have written about this in the pastFacebook is going to dominate MySpace in the global arena. It’s possible that Facebook may even beat MySpace in music internationally, especially since MySpace hasn’t launched internationally yet.

5) The music labels are going to have to step it up because they are ridiculously behind the times. OK, this might seem unrelated, but really, the record labels are getting more archaic by the second. According to reports, Facebook is having trouble working out licensing deals with the giants. Apparently, the big four labels won’t give up their music libraries without getting an ownership percentage in Facebook first. That’s just ridiculous on so many levels. There will come a day (I think) when the labels realize that having access to Facebook’s enormous, loyal, repeat audience will be worth the trade of their content.

And here’s the prediction: Facebook will get into the music business in 2009 and whatever the company decides to do will involve a partnership with Apple and iTunes.

MySpace vs. iTunes

Friday, April 4th, 2008

My most recent article for The Industry Standard just went up – How MySpace Music could beat iTunes. If you’re interested, please give it a read!

The music industry is something that I’m really thinking about lately with the launch of Fat J Records and signing Cara Austin – so the recent news about iTunes overtaking Wal-Mart and MySpace Music’s launch are both of great interest to me. And there are a lot of things about the MySpace vs. iTunes topic that I didn’t have space to include in my article for The Standard. So I thought I would just list them here, kind-of stream-of-thought.

MySpace logoMySpace Music can beat iTunes by supporting musicians. This is the premise of the article that I wrote for The Standard. Basically, I think that if MySpace Music provides data about the fans that purchase music, ticket and merchandise to the musicians, it can beat iTunes. Go read the article for the whole argument.

CDBaby is a model of how MySpace Music could work. CDBaby is an unbelievable music retailer that caters only to independent artists. And this is what its privacy policy says (these points are directed at buyers who visit the site):

“Only the musician whose music you buy will know who you are. If you don’t even want the musician to know about you, just say so at the bottom of your order form.”

I use CDBaby to sell CDs for Cara Austin, and so far, NOT ONE person has requested that CDBaby withhold their contact information. This is because people who go so far as to buy a CD are usually fans – and they don’t mind the band or artist being able to contact them again in the future.  According to the company’s Website, CDBaby has sold 4,202,465 CDs to customers resulting in $71,482,212 paid directly to the artists.

iTunes is a store, MySpace is a community. I read this quote from someone involved in the deal, and this is a really important point. While there are millions of people who buy music from iTunes, the MySpace community that uses MySpace to discover new artists and read about what they are up to, will be a powerful environment for making a purchase. With the possibility of revenue coming from MySpace, artists will do even more to make sure that their pages are attractive, interesting and compelling. And the community of music on that site is going to get stronger and stronger. Imagine 5 million musicians adding content, video, new songs and new song versions – this is going to be incredibly powerful and impossible for iTunes to rival.

Facebook’s chance to win in this space is shrinking by the minute. Facebook is gaining on MySpace in the social networking space, but Facebook’s support of music is, well, pathetic. They are going to have one shot to try to release a music platform that users will like (and use) but it’s not looking good. With MySpace’s announcement of the support of three of the four major labels, one possibility is that Facebook already has the support of the fourth (but that is highly unlikely and just speculative on my part).

International will be huge. I read that MySpace Music isn’t going to be able to distribute music internationally yet. What? What is the licensing issue with that? My suggestion – sign up all the indies asap and start selling to Japan, England, Australia, and everywhere else that has an appetite for U.S. music immediately – or else that could be a place that MySpace Music will be vulnerable.

DRM free matters, but won’t be the thing that wins it for MySpace. As part of the announcement, MySpace announced that they music that is sold from its music store will be DRM-free. (DRM=Digital Rights Management, it is the protection that Apple places on its files that prevents people from being able to share them.) This is a big deal, but not the biggest, as this will just (finally) compel Apple to follow suit with iTunes.

There is still a perception issue that could cause MySpace some serious problems. MySpace has kind of a seedy image. The site’s design is fairly unattractive, and it’s hard to navigate the social network without running into something that borders on pornography or spam. The company is going to have to do battle against that perception to win back people who have become disillusioned by previous negative experiences with MySpace.

Can Apple prevent iPods from using this service? Technically, I’m not sure if there is a way for Apple to limit the sites from which the iPod can download music, but if users are unable to load music from MySpace Music to their iPods, that would be a serious setback to MySpace. It also would likely cause a revolt among iPod users against Apple, but it would still be a hiccup in the acceptance of the service.

Washing an iPod

Wednesday, March 26th, 2008

Yesterday, I accidentally washed Chris’ iPod. I went into the washing machine to pull out the clean clothes and something clanked. You know that sound you hear when you know that something was left in the pocket of a pair of pants, and you fear what it might be? You hope it was just a penny, but worry it could be a lipstick…you just aren’t sure which way it will go until you find the culprit.

Here is the iPod post-wash. (Notice how it looks perfect.)

 iPod post wash

I was hopeful that the iPod would survived the wash when I saw how great it looked.

No such luck.

Moral of the story: Don’t wash your iPod.

Update: Jason Meserve just sent me a link to this podcast: I washed my iPhone, now what? Apparently this is more common than I thought!

Consumers not the cause of Google's slide

Wednesday, February 27th, 2008

Google logoGoogle’s stock price is dropping, and people are freaking out. Yesterday’s stock price drop was in response to a recent report from Comscore indicating that January 2008 showed only flat growth year-over-year versus a 25% increase in Q4. This apparently is the result of lower click-through rates on paid search ads, and people are worried that this means that Google is exposed to a slowdown if there is a recession in the U.S.

The near-panic is somewhat understandable considering that the overall U.S. economy isn’t doing all that great, the tech folks are scared of another bubble, Microsoft is talking about taking over Google, Apple’s stock is dipping, and everyone is looking for someone – anyone – to believe in. Google has been the obvious choice for a long time, and no one wants the tech darling to falter.

But the thing that I take issue with is the notion that this decrease in clicks is a result of consumers clicking less because of a coming recession. These numbers from Hitwise show that there has been no decrease in overall search traffic to shopping sites – meaning that consumers are still clicking.

And if consumers are still clicking on search links, why would they suddenly not be clicking on paid search ads? Could this be because consumers suddenly have become more discerning about what is a “paid” result vs. what is a “organic” result? No way.

My question for Google would be about how much of this decline comes from the dip in clicks on AdSense partner sites. My bet is that the clickthrough rates have dipped significantly on partner pages. Why? Primarily because of the click fraud prevention that Google has been implementing, as well as the “accidental clicking” measures that Google took back in November.

Google click change

Remember, this was the second change that Google made to its ads; the company first changed the paid results on its main search pages in April, a move that many advertisers said led to a decline in the number of clicks, but not in the amount of revenue that they were earning.

And this might just be the bottom line. If there is no growth in the number of clicks, but revenue is growing, Google may have figured out a way to increase ROI for advertisers. Like this Businessweek article says, we’ll have to wait for earnings in April to find out for sure.

How to get over the fear and start your own business

Tuesday, February 12th, 2008

Starting a business all begins with the first step - the statement, which then turns into a belief, that later turns into a mantra  – that I AM STARTING A BUSINESS. This step happens differently for everyone, but this is my story of how I got over the fear and started a business, supplemented with the stories of friends and acquaintances and the entrepreneurs featured in the book Founders at Work: Stories of Startups’ Early Days. (All the quotes below are from that great book. If you are an entrepreneur, buy it today, it will inspire you.)

Start image

I’m convinced that in order to be able to get over the fear and start your own business, most people go through some combination of the following things:

You can’t keep doing what you have been doing. I am pretty sure that starting a business involves some level of desperation. For me, when I made the decision to start my own thing, it was early 2007, I was working for Ziff Davis Media, heading the product development team for the Web Buyer’s Guide. Things were going great with the division – we were one of the favorites in the company, making money hand over fist with a long list of the top clients in the industry. I was working with an amazing team of people, I truly liked and respected my bosses and the people who worked for me. But I was growing increasingly dissatisfied with my job. The problem was, with things going so well, I had little hope that they would ever change. The better things went with the group, the worse I felt about the job because I had to keep things going, to make sure that the clients stayed happy, to just do more and more and more and more of the same.

I love building new things. I like the creativity of it, the innovation of it, the challenge of trying to figure out how to solve problems. I enjoy gathering a team of people who can all collaborate to get something done. And I like the thrill of launching something new. I couldn’t possibly stand to stay still, the lack of creativity was sucking me dry. I had to do something else.

You realize that the only way to do what you want to do is to start your own thing.  Once I knew that I wanted to do something else, I knew that I wanted it to be related to using the Internet, and I knew that I wanted it to be creative. But the more that I thought about it, the more that I knew that going to just some other company wasn’t going to solve my problems. I already worked with really great, smart people. And another company would make me specialize, as well. I realized that what I really wanted to do was have the flexibility to do lots of different things, all the time, just the way that I wanted them done. There is no job description that reads that way.

“I think the hallmark of a really good entrepreneur is that you’re not really going to build one specific company. The goal – at least the way I think about entrepreneurship – is you realize one day that you can’t really work for anyone else. You have to start your own thing. It almost doesn’t matter what that thing is.” – Max Levchin, Cofounder PayPal

You understand the odds are against you, but you believe that you will beat the odds. The statistics for businesses to fail are staggering. It’s something like 8 out of 10 businesses don’t make it past the first year, and 8 out of 10 of those don’t make it past the second year. Something horrible like that. But, I believe I will be one of the successful ones. Why? Because I know I can do it, which is not a good reason, I’m sure. But if I didn’t believe that I would succeed, I would never have started in the first place. There has to be some level of (sometimes irrational) optimism in every business founder.

You figure out your biggest points of fear and try to work around them. For me, the prospect of starting a company led to three major fears. One, I didn’t know how to do the stuff related to starting a business because I hadn’t done it before. So I found some mentors and a business partner who have vast experience in this area and who can help me when I have questions. Two, I was concerned about putting Chris (my husband) and I in debt because of the business. I overcame that fear by taking a very small salary out of the initial seed money. I took a fairly substantial pay cut, but having just a small monthly income gives me the peace of mind that I am at least not going backward in my financial situation. Three, I was concerned that everyone I knew would think I was crazy. That issue was not something I could fix, but it was a personality flaw anyway, so I decided that being faced with that type of opposition would help me to grow as a person so it was worth facing the fear. The fears will be different for everyone, but all business owners will have to figure out how to face them.

“About the next day after I said no to starting Apple…my friend Allen Baum called me in the afternoon and he said, ‘Look, you can start Apple and go into management and get rich, or you can start Apple and stay an engineer and get rich.’ As soon as he said it was OK to do engineering, that really freed me up. My psychological block was really that I didn’t want to start a company. Because I was just afraid. In business and politics, I wasn’t going to be a real strong participant. I wasn’t going to tell other people how to do things. I wasn’t going to run things ever in my life…I just couldn’t run a company. But then one person said I could be an engineer. That was all I needed to know, that ‘OK, I’ll start this company and I’ll just be an engineer.’ To this day, I’m still on the org chart, on the bottom of the org chart – never once been anything but an engineer who works.” -Steve Wozniak, Cofounder, Apple Computer

You realize that other people do this all the time. The other thing that really helped me was to realize that other people start companies all the time, which led to the feeling that if they could do it, I could do it too. Chris started a business in 2006, and it was doing well, so that was encouraging. I was part of a company that was a start-up that was acquired by Ziff Davis, so I had seen how it was done firsthand. Although starting a company was daunting, just knowing that other people had started companies in the past was helpful.

“We both had parents who were entrepreneurs, so the idea of running your own business was a normal thing. There are people who come from backgrounds where they’re used to working for a company, and they couldn’t dream of doing it themselves and not having that safety net. When your parents and family are entrepreneurs, you know it’s nothing special. I worked at big businesses and I worked at small businesses beforehand, so the idea of starting your own business was just a normal thing.” – Dan Bricklin, cofounder, Software Arts

You weigh the benefits vs. the risks and responsibilities. For me, the timing was right to start a business. I was married, with an income-producing husband (who is also an entrepreneur, but his company, which builds medical devices for spine surgeries, had four submissions into the FDA for approval and it looked good that they were going to make it). I didn’t have any kids, no mortgage, no debt. My risk was very low because my responsibility was light. This is one of the reasons that so many young people are starting companies, because it doesn’t hurt them too much to do it. If things fail, they can always put on their resumes that they were the founder of a company. People who have a lot of responsibility have a harder time making this jump, and it is really important that they carefully weigh the risks before starting anything.

You jump in, even if it’s stupid. At some point, after you consider all these things, you just take the plunge. For me, that involved going to my bosses, thanking them for everything they had done for me, and resigning from my job. I was lucky because I was able to make a slow transition, I gave them a lot of notice, and I took some time off between Ziff Davis and my new business. Not everyone will have the luxury, but at some point, that statement has to be made: “I’m going to start a company.”

“There are a lot of programmers that are very tentative about starting their own companies. There are a lot of working programmers doing something they hate, with some company that they hate, but they need money to pay the mortgage. So they figure, ‘I’ll develop something in my spare time. I’ll put in 1 hour every night and 2 hours on the weekends and I’ll start selling it by downloads.’…But because they never really take the leap and quit their job, they can give up their dream at any time. And 99.9% of them will actually give up their dream. If they take the leap, quit their job, go do it full-time – no matter how much it sucks – and convince one other person to do the same thing with them, they are going to have a much, much higher chance of actually getting somewhere. Because they either have to succeed or get a job. Sometimes ‘succeed’ seems like the easier path than actually getting a job, which is depressing. So quit your day job.” – Joel Spolsky, cofounder, Fog Creek Software

Tomorrow, I’ll talk about what happens after you make the leap.

My iPhone Web Clip icon

Tuesday, February 5th, 2008

This is pretty trivial, I admit, but since I heard that the most recent iPhone update allows you to create a custom icon for your Website that will be deposited on the iPhone home page, I have wanted one for 16th Letter. It doesn’t help that I saw BoingBoing’s and TechCrunch’s and had some Web clip envy.

And now I have one. So go ahead, add it to your iPhone (or iPod Touch)!

iPhone Web Clip icon

iPhone icon up close

Here are the instructions on how to create your own Web Clip icon, from Apple.

This is another set of step-by-step instructions.

I hear that this is pretty easy to do. (I had a developer who did this for me, but he said it was a piece of cake.)

What's going to happen to the music industry?

Tuesday, January 8th, 2008

Everywhere I turn it seems that there is a story about the demise or revolution of the music industry (depending on your perspective), sparked by two huge music-related stories that broke last week.

The first was the report that music sales were down 9.5% in 2007. The bright note from that report was that the sale of digital music tracks was up 45%, but even that huge leap didn’t help the industry overall. The second was the announcement that Sony BMG will be joining the other three major labels in offering DRM-free songs.

The music industry is scrambling to deal with the impact of the Internet on its traditional business models.

Going out of Business Music WorldIn this October 2007 post, Michael Arrington of TechCrunch sums up nicely the issues that are facing the music industry, and ReadWriteWeb echoes some of the same sentiments. Basically, sales of CDs and digital downloads are not going to make huge amounts of money for anyone going forward. Both argue that the real money will be made from ticket sales for live performances, merchandising, and special limited-edition physical copies of the music.

But there is money being made from digital downloads – it’s just not of the scale that the major record labels are used to. In 2007, there were 844.2 million digital tracks sold. Radiohead’s recent experiment, in which the band released an album online for free download and asked listeners to pay what they wanted, made them more money from the digital distribution then they made from the digital distribution of all the rest of their albums combined. If this seems strange, there is a simple reason – Radiohead was released from their contract with their record label, a contract that in the past excluded them from any royalties from the digital distribution of their music (remind anyone of the current writer’s strike?) Many signed bands and musicians are currently stuck in contracts like these, the relics of an era when digital distribution didn’t really matter.

Of course, there is still money being made in the music industry, but as fewer people are buying CDs (that are costly to produce and distribute) and as more people are downloading digital music (that is practically free to reproduce and distribute), less money is being made. And, the money is being spread among more musicians. The Long Tail is in full force in the music industry, allowing more people to make money as consumers spend their dollars on a wider variety of music and musicians.

So this puts the music industry in this strange position. The indie artists, who are making some money on their small but loyal audiences and the Long Tail, but often not enough money to live off of, would be psyched to get a record contract because the record companies have the marketing and distribution capabilities that they don’t have access to. The big (and already famous) bands, are trying to get out of their contracts in favor of the freedom that the indie artists enjoy. And the record companies are panicking. This is creating a weird, wild situation where everything is about to totally implode if change doesn’t happen quickly.

The really big question is: What online business model is going to work for the music industry going forward? Any successful model will have to support both the record labels and the artists who are producing music. And it will have to be one that consumers will spend their money on.

Here are my predictions:

  1. The new model will be all about the audience.In the past, bands knew how many records or songs they sold, but not the name of the individual that bought them. Digital download and distribution, as well as social networking sites like MySpace, now let musicians know much more intimately who their audience is. By collecting the name of the individual who downloads their song (whether they pay for it or get the download for free), musicians will be able to have a much more personal relationship with their audience - and they will be able to re-market to them in the future. As musicians begin to realize that having the name of their fan is worth more money than the $0.70 they get from iTunes, they will either begin  offering all their songs for free, or Apple will have to adjust their business model and begin sharing data with the artists. Radiohead may have been the first major label to try offering free downloads, but many others are following suit. Trent Reznor (of Nine Inch Nails fame), just produced a Saul Williams album and released it online the same way that Radiohead did – and he has told everyone about the data that they collected. Reznor is bemoaning the fact that only 18.3% of the people who downloaded the album paid $5 for it. He thinks that this stinks (and it might) but he is neglecting the really exciting fact that 154,449 people downloaded Williams’ album! That is an audience of 154,449 if you at least collected an email address. That is a significant fan base - and in my opinion, it is going to be the primary model of the future.
  2. Musicians will begin releasing songs more frequently, as well as more versions of each song. When digital downloads become the norm (and that day is close), there will be no need to stick with the CD format where musicians release all their fully produced songs in one giant lump. Instead, they’ll release things as they are done, there will be more live performance and acoustic versions of songs, and more interesting bits, more looks into the recording studios, more evidence that songwriters and musicians are humans and that every version that they play isn’t perfect. (UPDATE: Looks like Mark Cuban agrees with this prediction.)
  3. Record labels will try to hold onto their business models. They will succeed only until current contracts run out, but they will eventually fail. They will do this not because they don’t see the writing on the wall, but because they can’t figure out how to change.
  4. A new type of record label will emerge. The new label will serve more as a helper to the artist than an owner of the artist. This new label will assist with marketing, bookings, networking and the other promotional aspects of the music business. But instead of owning all the rights to the artist, musicians will PAY their labels for their help, and the musicians will retain their rights. The new labels that will be successful will be the ones that know how to do SEO, online marketing and social networking. These types of labels will become the norm. (And they probably wont’ be called record labels.) (UPDATE: Looks like CNET agrees with this prediction: “If we end up ridding the world of labels, we’ll only have to re-create them–in some other, probably more nimble form.”)
  5. Apple will be one of the new “record labels.”
  6. Many new online and digital services will rise and fall. In 2-3 years, we’ll be left with the winners. At least three of the winners will be companies that no one has even heard of yet.
  7. There will be new ways to buy music. Walking through Target, no longer will you head to the music section to buy music. Instead, as you hear a song piped over the airways, or walk past a TV that is playing a music video and decide you like the song, you will be able to use your phone or mp3 player to purchase and and download the song instantly.
  8. The stuff inside the CD case will still be valuable in digital format, but it will look completely different. People still buy CDs for the lyrics and the liner notes inside – as well as for the artwork and the experience of opening the case and looking through the packaging. This won’t change, there will always be a market (although a smaller one) for the special edition hardcopy CDs. And it won’t be long until someone comes up with a way to sell that stuff in digital format, as well. But although the digital information will be the same, it won’t look the same as the CDs of today. This will be a huge money-maker, much bigger than anyone expects.

UPDATE: This Music Lessons post by Seth Godin is an awesome add-on to this article. Go read it.

Photo by SqueakyMarmot

The greening of the world

Tuesday, October 16th, 2007

Environmental protestBeing environmentally conscience is trendy right now. Let me be quick to say that I think this is a good thing, I don’t mean to belittle the movement with my choice of words. I also think that the United States has hit a tipping point, and that environmental causes will never go back to being just left-wing issues, due in part (at least) to the work that Nobel Peace Prize winner Al Gore has done to educate the masses on environmental issues. Along the way, Gore has managed to recruit a large number of high-profile celebrities to the cause. The verdict? It is now “cool” to be green. Today is “Blog Action Day” and 19,745 bloggers (including myself) have signed up to blog about the environment. Along with bloggers, companies are moving to earth-friendly messaging. When something is as cool as “being green” is cool, it’s time to market that angle for all its worth. Some examples:

GM has a corporate responsibility section of its Web site with numerous assertions of its greenness.

Steve Jobs wrote a letter about Apple being green. (Greenpeace disagrees, claiming that the iPhone contains hazardous chemicals.

P&G’s Environmental Science Department is (thankfully) asking the same questions as consumers of its products, such as “When the ingredients in Tide and Crest disappear down the drain, where do they end up?”

My verdict: Green may be getting popular, but we still have a long way to go before we get it right.

* The little girls in the picture are my friends Charlotte & Rob’s daughters.

~ Red Door ~