=====================================================================
THE INDUSTRY STANDARD'S
B E A T S H E E T
A Weekly Report on the Convergence of Music and the Net
=====================================================================
| http://www.thestandard.com |
Tuesday, March 28, 2000
TOP STORY:
* Will CDnow survive?
After a failed merger, bad press from Barron's and plunging stock,
what else can go wrong?
NET NOISE:
* Layer3news.org: Where Music Longs to Be Free
DOWNBEAT:
* Teacher! Leave those kids alone!
Napster goes back to school
* Who's That Knockin' at the Door?
Paul McCartney's publishing company sues MP3.com
* Hook, Line and Sinker
Farmclub signs Fisher to record deal
SOUND OFF:
* If music is free, does that mean it's not worth anything?
/=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= advertisement =-=-=
Check out the Standard's all new Job Shop!
Come browse the hottest job opportunities in the Internet Economy.
Our new posting service brings together the top employers and the
top candidates in the Internet business space. Find your next gig
right here or post a job in front of the best web minds in the world.
Your next career move could be a mouse click away.
Visit JOB SHOP today. http://www.thestandard.com/people/recruitment/
=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=/
TOP STORY:
~~~~~~~~~~
Will CDnow survive?
After a failed merger, bad press from Barron's and plunging stock,
what else can go wrong?
By Julene Snyder
It can't be much fun being the president of CDnow these days. Less
than two years ago, founder Jason Olim was hailed by the U.K.'s
Independent as an executive "Hitting All the Right Notes." Back then,
his "still young" company was called "an important player - in both
the online and offline music retail industries."
Now, what's important about CDnow seems to be its stock's free fall
amid one bad break after another. On March 13, the company's merger
with Columbia House was called off, with each side saying it backed
away first. Last week, Barron's put CDnow high on its endangered
species list, predicting that it would run out of cash this month.
Although CDnow fired back with a press release, explaining that "it
has sufficient cash for at least six months," investors are showing
little patience. Will six months be enough time to turn the company's
fortunes around?
Olim, of course, remains optimistic, spinning the end of the merger as
a good thing. For nearly two years, says Olim, merger-imposed quiet
periods have kept the company from trumpeting its own virtues. "In a
way, the company fell off the map, and we weren't creating new
potential investors, because we weren't allowed to while we were in
merger talks," he says.
The news that the merger was off made the company's stock slide even
deeper into the doldrums. First issued to the public at $16 a share in
February of 1998, the shares had climbed as high as $35 before falling
to single digits and glumly settling there. Wall Street never approved
of the proposed merger with Columbia House, but when that company
pulled out of the deal, CDnow's stock plunged further.
Amazon.com, the online giant that's seen as CDnow's main competition,
continues to outsell it. In the fourth quarter of 1999, Amazon sold
$78 million of music, while CDnow sold $56 million. However, market
research firm PC Data reports that during February 2000, CDnow
surpassed Amazon.com as "the e-tailer ... with the largest number of
people buying while at home" - 1.03 million buyers for CDnow, compared
to 984,000 for Amazon.com. The numbers are a bit deceptive, says Olim,
since they include people redeeming free CDs offered through a
promotion. Amazon closed Tuesday at $70.13; CDnow at $5.06.
Despite recent troubles, Olim remains wildly enthusiastic about the
company that he founded in 1994 with his twin brother Matthew in their
parents' basement with an investment of $20,000. "The question you
have to ask yourself is: 'Is this a large market?'" says Olim. "The
answer is that music is gigantic. It's a $12 billion market in the
U.S. and $36 billion worldwide. CDnow currently sells about 1 percent
of all music sold in the U.S."
Olim shakes off suggestions that times are hard for his company. "We
have always been in hustle mode. We've hustled to launch new
applications, we've hustled to put together big marketing deals, we've
hustled to bring in big ad deals and we are working with a very strong
sense of urgency to bring in a great strategic partner who can provide
us with additional cash and some strong marketing capabilities." He
won't rule out an outright sale of the company, saying only that "Our
key objective is to create value for our shareholders."
CDnow Scotches Planned Merger
http://www.thestandard.com/article/display/0,1151,12884,00.html
Barron's Goes Mano a Mano With the Net - Again
http://www.thestandard.com/article/display/0,1151,13327,00.html
/=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= advertisement =-=-=
12 Essential E-commerce Research Reports
Now Available from The Industry Standard and Odyssey
Get a detailed analysis of the e-commerce trends that
drive consumer purchases in the Internet Economy.
http://www.thestandard.com/research/store/odyssey
=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=/
NET NOISE:
~~~~~~~~~~
Layer3news.org: Where Music Longs to Be Free
Don't let the relatively ugly design scare you away from checking out
Layer3news.org, which is unapologetic in trumpeting its central
mission: "dedicated to the community and to the 'music is free'
concept." You'll find candid interviews from digital music pioneers
like Dmusic's Angelo Sotira ("The MP3 community currently SUCKS"),
former Geeknews.net geek David Grant ("This business is very nasty")
and Digi-Sound's Jon Ovington ("the RIAA ... had found my stash of
illegal songs!"). Highly opinionated stories show up under headlines
like "RIAA.com Site Misleads Visitors" and "The IFPI Strikes Again!
(What a Pile of Morons)." Other goodies include a Top 10 list of the
best IRC conversations in recent weeks, member forums and a decided
lack of diplomacy. While the relentlessly in-your-face attitude can
result in some cringe-worthy word choices ("RIAA: Shall we all rape
MP3.com?"), the gist here is raw, passionate discourse about the
possibilities of the digital music revolution. If you disagree with
the party line being espoused, go ahead and jump into the fray. Just
don't forget to wear your asbestos suit.
-----------------------------------------------------------------------
DOWNBEAT:
~~~~~~~~~
Teacher! Leave those kids alone!
Napster returns to school
It's been a busy week for the little software that could. First,
Indiana University unblocked student access to the program, which
allows visitors to find and trade MP3 audio files. A press release
from IU's information technology department announced that it had
jointly invented a method with Napster to "reduce network congestion"
generated by multimedia file-sharing programs. The school joins a
number of other schools - including Northern Arizona University, UC
Santa Cruz, Gannon University, USC and SUNY at Albany - in restoring
students' access to the controversial program, which has been blamed
for clogging network resources and facilitating music piracy.
Meanwhile, a hack dubbed "Wrapster" hit the Net, allowing users to
trade any kind of files, including videos and software. As if that
weren't quite enough going on for one week, thank you, Salon.com ran a
cover story entitled "Artists to Napster: Drop Dead!" That piece
quoted musicians like Jonathan Brook complaining that Napster takes
money directly out of her pocket: "I know people using Napster are
chuckling about kicking big, bad record labels. But as evil as the
record companies may be, at least they're paying for your recording
budget, and at least they're promoting you, and paying for tour
support." In yet more Napster news, Judge Marilyn Hall Patel heard the
first volley of arguments in a pair of lawsuits brought against the
company in San Francisco on Monday, although no big legal decisions
were reached. We're told that her first question to Napster's counsel
was, "Please show me a non-infringing use of your program." Sadly, the
company's response to that query was not included in the eyewitness
report.
Who's that knockin' at the door?
Paul McCartney's publishing company sues MP3.com
In the midst of his much-publicized new romance, ex-Beatle Paul
McCartney apparently found time to green-light a lawsuit brought by
his publishing company, MPL Communications against MP3.com's "Beam-It"
service. The suit, brought in conjunction with Peer International,
claims that MP3.com "has publicly boasted that it has deliberately
copied over 80,000 compact discs containing copyrighted musical
compositions onto its computer servers without seeking or obtaining
the copyright owners' permission." It goes on to say, "Defendant was
frequently criticized in the press for providing mediocre music and
not promoting its more promising bands." To clarify: McCartney was
accusing MP3.com of providing mediocre music, not the other way
around. Among the songs in MPL's catalog are "Live and Let Die," "Mary
Had a Little Lamb," "Silly Love Songs" and "Ebony and Ivory" - all
doubtless at the top of the pops on the My.MP3.com playlist.
Hook, Line and Sinker
Farmclub signs Fisher to record deal
If any band was going to get a record deal off the Internet, it was
bound to be Fisher. After all, the band boasts that its songs have
been "played on or downloaded from various Internet sites nearly 3
million times in the last year." News that Farmclub.com/Interscope had
inked a deal with the duo - lyricist/singer Kathy Fisher and
producer/composer/keyboardist Ron Wasserman - hit the wires this
morning. The group is expected to release its major label debut in
August.
SOUND OFF:
~~~~~~~~~~
This Week's Question: If music is free, does that mean it's not worth
anything?
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: What's the most logical way to compensate
artists for downloading their music?
"All artists should release low-bandwidth versions of their songs that
sound grainy for free distribution on the Net. Music lovers can trade
these songs freely. Then the music lovers can purchase the
full-bandwidth versions for their own private hi-fi listening
pleasure."
- Chris David
"There should be a central music association that sells monthly or
annual subscriptions, i.e., $19.95 a month/$200 a year or less. This
allows unlimited download of music. Proceeds are divided among artists
and labels based on the number of downloads of their music. This is
how cable TV works except they use rating services and have
significant advertising revenues."
- John Stokes
Boeing Engineer
"Pay them - it's as simple as that. With companies like Magex and its
link-up with Intertrust, they have given a way to monetize the content
online. Music files (most formats not only MP3s) can be secured and
purchased over the Net, and the artist gets paid - no different from
selling in the high street. Music is not for free, and people
shouldn't expect it for free. Musicians suffer for their art, and if
you take away the reward, you may take away the incentive and music
will DIE."
- Karl Nielson
The YoYo Partnership, London
"Now that we're all used to getting music for free, it will be
difficult for the music industry to force the listener to go backward
and pay for music downloaded from the Internet. The model that makes
the most sense is for the distribution sites to continue offering the
music for free while accepting the responsibility of paying royalty
fees to the labels. The sites will have to derive revenues from
traditional methods such as advertising and online sales."
- Elise M. Neils
"Just call it all Pay-Per-Song: Any time a server plays, somebody
pays, usually, of course, the one who's running the system (and who
will get reimbursed by either the consumer or an advertiser). And
ASCAP (or any other likely institution) distributes the revenues
according to a standardized log generated by the site."
- Hubert Gertis
STAFF
~~~~~
Written by Julene Snyder. Send newstips and press releases to
julene@well.com.
GET THE MAGAZINE
~~~~~~~~~~~~~~~~
4 RISK-FREE issues at this URL:
http://www.thestandard.com/account/magazine
GET MORE NEWSLETTERS
~~~~~~~~~~~~~~~~~~~~
The Industry Standard newsletters cover the media, stock market,
e-commerce, music, law and more. Enter your e-mail address at the
following URL and select the newsletters you wish to receive:
http://www.thestandard.com/newsletters/
To UNSUBSCRIBE to any newsletters, log in at the following URL and
select the newsletters you wish to cancel:
http://www.thestandard.com/account/newsletters/unsubscribe
GET MORE NEWS
~~~~~~~~~~~~~
Go to http://www.thestandard.com for more coverage on the Internet
Economy. For technology news, go to our parent company's site at
http://www.idg.net.
ADVERTISING INFORMATION
~~~~~~~~~~~~~~~~~~~~~~~
For more information on advertising in The Industry Standard
Newsletters, contact Sacha Lien, Online Account Manager
mailto:sachal@thestandard.com
FEEDBACK AND PROBLEMS
~~~~~~~~~~~~~~~~~~~~~
Send letters to the editor at letters@thestandard.com.
Please contact us with any problems that arise.
Send e-mail to: customerservice@thestandard.com?subj
ect=Online Newsletters.
You can also contact us via phone or mail:
The Industry Standard, Customer Service
(402) 293-0386 (phone)
(402) 293-0794 (fax)
The Industry Standard, Production
315 Pacific Ave.
San Francisco, CA 94111
(415) 733-5400 (main)
(415) 733-5401 (fax)
Copyright 2000 The Industry Standard |