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THE STANDARD'S
B E A T S H E E T
The Latest Digital Music News - and It's Free
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For more on digital music, visit
The Standard's Media & Marketing page:
http://www.thestandard.com/subject/marketing
Tuesday, May 15, 2001
TOP STORY:
* Tune In, Pay Up
NET NOISE:
* Garageband.com
BEATS:
* Unlikely Bedfellows vs. MP3.com
DOT DOT DOT:
* Napster, Natch ... Bad Religion Redux ... Getting the Ax at Supertracks ... Felton Speaks ...
Launch.com Cuts Staff
SOUND OFF:
* This week's question: In the real world, can a Web site like Garageband.com launch a band into the
big-time?
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TOP STORY
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Tune In, Pay Up
With the launch of a new subscription-based Web radio service, MusicMatch hopes to beat the odds
and get actual folding money from consumers.
By Julene Snyder
RANCHO BERNARDO - Interstate 15 has the dubious distinction of being the most clogged freeway
in all of Southern California's sprawling San Diego County. With thousands of commuters traversing
the corridor from their homes in suburbs like Rancho Bernardo to offices further south in downtown
San Diego, a 20-mile commute can take as long as 90 minutes.
It's a drag, but not if you go against the flow. Speeding along for miles on the way from San Diego to
the music software company MusicMatch in Rancho Bernardo, traffic was terrible for the cars
commuting in the other direction. Outside the company's Spanish-style office, one could almost forget
the thousands of people sitting in traffic a few hundred yards away, but for the constant, unlovely
thrum of their idling engines.
If there's a digital-music corollary here, it's that companies can find ways to work the system to their
advantage. Traffic is awful? Relocate the office to the suburbs so workers can commute against the
flow. Need to make money on the Net? Try to get your customers to pay. At least, that's the hope at
4-year-old MusicMatch, which launched a beta version of a new subscription-radio service last week
called Radio MX.
Now that the dot-com crash-and-burn has lent new urgency to the quest to generate income, content
sites from Salon.com to Yahoo to RealAudio are testing the waters to see if visitors will pay for
features they once could get for free. And while MusicMatch's original plan was to sell digital
downloads, the industry's lengthy struggles over how to compensate copyright holders led it to focus
on its popular jukebox software, which it claims is the "world's first all-in-one digital music jukebox."
According to Bob Ohlweiler, the company's senior vice president of business development, the plan
now is to charge subscribers $4.95 a month, $12.95 for three months or $49.99 a year for the
opportunity to create personalized radio stations based on their favorite artists, era, tempo or genre.
The MusicMatch jukebox has garnered stellar reviews in the past, offering artist information, album
art and the ability to burn CDs from existing digital music. Now, there's the Radio MX component,
described as a "near music-on-demand service" with CD-quality streaming music. That "near" is
crucial, given the Digital Millennium Copyright Act of 1998, which prohibits Webcasts from
announcing upcoming songs and from playing more than three songs from a particular album in a
three-hour period. These rules are in effect on Radio MX, but you are given the name of the next artist
up and a handy "skip" button so you can stop a song before it has a chance to annoy you.
There are bells and whistles a'plenty, but the interfaces of previous MusicMatch products have been
criticized for having a glut of options that can be overwhelming to digital-music novices.
While that might be true, those previous free versions of MusicMatch software have garnered a
respectable following; Ohlweiler says that the company has 18 million registered users (9 million of
whom are characterized as "active"), and that it made $9 million last year in software sales from the
2.5 percent of users who upgraded to the MusicMatch "Plus" version. He says the MusicMatch
audience skews older than one might think: The average age is 31, with more than 57 percent of users
earning more than $60,000.
But the big question is, will they pay cash to listen to ad-free radio on their computers? That's the main
challange facing companies like MusicMatch, says P.J. McNealy, a senior analyst at Gartner Group.
Early returns are good: Hundreds have signed up for a trial of the subscription service in the past
week. Of course, only time will tell how many stick with it once the bill comes due. If the company
reaches its current goal of converting 100,000 of its 18 million registered users into active subscribers
by year's end, it will reap a cool $500,000 a month in income. And if negotiations with major labels
and publishers are successful, the company plans to sell tens of thousands of individual digital songs
by summer's end.
Negotiations for licensing deals, of course, are the big "if" in the equation. "If they can become a
distribution point for music, they can seamlessly integrate it into the software and make it one-stop
shopping," McNealy says.
Talks with the major labels are "moving forward," Ohlweiler says, and the company has just started to
meet with publishers. While the majors have been slow to cut many deals so far, McNealy says he
expects to see an ongoing series of announcements from the industry in the next few months regarding
licensing catalogs. Obviously, MusicMatch hopes to be among those with good news to share. In the
meantime, because the company doesn't advertise, Ohlweiler says that virtually all of the new traffic is
a result of word-of-mouth. "Hey," he says, leaning forward intently, "Music is not a 'sounds like.'
Music is your first kiss. Music is a night out with friends."
As I got back on the freeway, marveling again at the free-flowing lanes heading south, I cranked up
the radio loud and sang along.
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NET NOISE
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Garageband.com
Valiantly continuing its fight to convince music lovers that music they've never heard of doesn't
necessarily suck, Garageband.com which counts former Talking Head Jerry Harrison among its
co-founders announced a new-artist development program last week dubbed the "New Deal." While
the program's name sounds vaguely familiar, the service itself would likely have FDR scratching his
head. In a nutshell, those who bootstrap themselves up with the New Deal must first have recognizable
talent (by getting great reviews from site members). Then, they must sign on as a "featured artist," try
to drive sales of thousands of CDs and if they're successful at that get chunks of money along the
way, until they ultimately get a shot at making the "greatest album ever recorded" with a $250,000
recording budget. The site promises that bands playing the system right can "keep creative control and
get sweetheart terms: You keep the masters, the publishing rights, and earn a 13-15 percent royalty."
For those of us who don't aspire to be rock musicians due, of course, to our lack of time rather than
dearth of talent Garageband.com offers up a series of incentives to review new music, ranging from
"unlimited free MP3s," to free CDs for frequent reviewers, to the enticing "power to decide which
new bands get the big breaks." Let the jockeying begin.
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BEATS
~~~~~
Unlikely Bedfellows vs. MP3.com
Tom Waits, Heart and Randy Newman jump on the lawsuit bandwagon.
What do musicians Tom Waits, Heart's Ann and Nancy Wilson, and Randy Newman have in
common? It sounds like the setup for a bad joke, but it's a safe bet that no one's laughing over at
MP3.com about the news that the artists are banding together to sue the company for copyright
infringement. Sure, the San Diego-based company's been down this road before see MP3.com vs.
Universal, MP3.com vs. TVT Records, et al, ad infinitum but getting yet another big packet of legal
documents in the mail can't be a fun way to start your day. What brings the disparate artists together is
the fact that they all own the rights to their own master recordings unusual in and of itself and,
consequently, weren't covered by the $100 million that MP3.com paid to the major labels for alleged
copyright infringement of its My.MP3.com service. The artists are claiming that their collective 270
songs are worth $40 million, or the legal maximum of $150,000 per song. The complaint, filed in Los
Angeles Federal Court last week, says that maximum statutory damages are being sought because
anything less "has already proven to be ineffective in thwarting MP3.com from attempting to profit by
virtue of its theft of the intellectual property of Plaintiffs and others." The litigants' attorney, Bruce
Van Dalsem, told SonicNet that other artists who own their own publishing rights may join the suit.
Greg Wilfahrt, MP3.com director of public relations, released the following statement on Friday:
"MP3.com believes the claims made in the lawsuit filed by Gradstein, Luskin & Van Dalsem on behalf
of Mr. Waits, Mr. Newman and members of Heart are grossly overstated as to the facts and
circumstances."
Read more at http://www.thestandard.com/article/0,1902,24323,00.html
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DOT DOT DOT
~~~~~~~~~~~
Napster, Natch ... Bad Religion Redux ... Getting the Ax at Supertracks ... Felton Speaks ...
Launch.com Cuts Staff
The latest research suggests that the average number of files that users make available for download
on Napster has fallen more than 80 percent in the months since a judge issued a modified injunction
against the file-swapping firm, but the legal fight grinds on. Both the major labels and Napster filed
notices of appeal earlier this month, and the big issue is apparently over file names: Napster says it
needs them to block songs properly, and the labels counter that it's not that easy since users come up
with file names all on their lonesome. While it's hard not to wonder if this particular dead horse hasn't
been beaten quite enough by now, those who crave more can read on at
http://www.thestandard.com/article/0,1902,24393,00.html .... Awww, we almost got all choked up at
the news that not only was neo-punk band Bad Religion "coming home" to Epitaph Records (home of
bands like the Donnas, NOFX and Pennywise), but that label owner Brett Gurewitz is rejoining the
band he co-founded way back in 1980 for at least its next studio release. It's a post-punk Cinderella
story! ... Supertracks, the Portland, Ore.-based content-delivery company that recently hyped its
BridgePort system as a way to turn "streaming media into a profitable and sustainable business," laid
off 38 employees or 60 percent of its remaining staff last week. This follows the November layoffs of
40 workers. Word is the company is looking for potential buyers. ... If you've followed the aftermath
of the SDMI Challenge and you're in the Palo Alto, Calif., area you may want to pop over to
Stanford University on Thursday afternoon to hear Princeton University professor Edward Felten
speak about being "forced to withdraw from publication a paper analyzing several security
technologies designed to prevent the unauthorized copying of recorded music." For more info, contact
simons@acm.org ... Music portal Launch.com laid off another 60 workers, or 26 percent of its staff,
on Monday. A terse company announcement said the company has "discontinued planned European
and Japanese expansion" and signed a "non-binding agreement for $5 million in financing," which
should fund the company through the third quarter. The company laid off 20 workers in January.
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SOUND OFF
~~~~~~~~~
This week's question: In the real world, can a Web site like garageband.com launch a band into the
big-time?
E-mail your opinions to julene@well.com with "sound off" in the subject line, and we'll print a
selection of the responses in next week's newsletter. Letters may be edited for clarity and length, so
keep them short and include your name and affiliation, if any.
Last week's question: Should the music industry take more responsibility for keeping explicit content
away from children?
NO. It is the parents' responsibility to raise their children. Just because parents cannot police their
children 100 percent of the time does not mean that it becomes the industry's responsibility. The First
Amendment prevents Congress from abridging freedom of speech. Although the courts allow Congress
to restrict commercial speech to a limited extent, parents should do a better job of teaching their
children how to live a moral life (or maybe not have kids if they can't do that). If kids can understand
the explicit content, then they can also understand what is wrong with it. I don't want any laws that
end up restricting what adults hear.
- Paul Ryneski
Attorney, e-commerce proprietor and Web page hobbyist
Yes and no. Ads should be stickered. Lyrics should be posted online. Retailers should make that
service available in their stores. However, when the clerk with the green hair, tattoos and enough
piercings to compete with granny's pincushion takes your money at the record store, I really don't
think he/she gives a rat's ass how young you are. The problem is, it's not nicotine and it's not liquor. It's
what gets gained or lost in the translation based on your experiences, or those you wish to pass on to
your children. I'm relieved I'm not a parent, and I feel for those who are caught in the crossfire of
issues like this.
- Belle Green
Forage and Find Marketing
STAFF
~~~~~
Written by Julene Snyder (julene@well.com).
Edited by Michele Keller (mkeller@thestandard.com).
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