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Napster plans for user-friendly MP3s

Napster logo on Tower Records posterNapster (NASDAQ: NAPS) -- the mother of all file-sharing services that in 10 years' time has found itself one among many digital-music services struggling for its very survival -- is hoping its new move will attract more users. Today, Napster CEO Chris Gorog said the company is shifting to MP3 downloads free of digital-rights-management software [subscription required], or DRM.

The move is expected to occur sometime in the second quarter, but Napster has yet to finalize the arrangements with some of the four major music companies - Sony Corp. (NYSE: SNE), Warner Music Group, EMI Group and Vivendi SA's Universal Music Group. The final three on this list recently began selling MP3s on the download service available through Amazon.com (NASDAQ: AMZN). Sony has yet to report plans to sell its tracks as MP3s, but is reportedly expected to come forward soon.

Continue reading Napster plans for user-friendly MP3s

The Wal-Mart Weekly: Wal-Mart's ill-fated foray into digital content downloads

Welcome to the 43rd installment of The Wal-Mart Weekly, a column dedicated to bringing you insight, wit, facts, results, opinions and just a bit of everything else when it comes down to a very hot topic these days: Wal-Mart.

Last week, I looked at Wal-Mart Stores, Inc. (NYSE: WMT)'s 2007 in review and summed up all the retailing giant had going for it last year along with all the negatives against the company as well. Wal-Mart did a lot of things right in 2007, but still had to fend off daily attacks from its enemies and just about any other entity who took shots at the largest target in the world.

This week, I'll be looking at something that just happened this past week -- when Wal-Mart decided to end its year-old movie download service after middling to no success since its launch in 2006. Why didn't the retailer have any success in the move to offering entertainment content in digital, downloadable form? Read on.


Continue reading The Wal-Mart Weekly: Wal-Mart's ill-fated foray into digital content downloads

Radiohead and former label exchange words after money claim

It was bound to happen eventually. Backlash against English band Radiohead has emerged from the band's former label EMI Group plc (ADR) (OTC: EMIPY) in response to the method used to release the band's new album In Rainbows. You may recall that in October, Radiohead received a great deal of media attention and coverage after declaring that fans could "pay-want-they-want" for the new album. Despite hints that the band may have enjoyed a significant monetary figure from that decision, reports since then have claimed otherwise, stating the band took a loss when only about 40% of consumers paid any amount for the album.

The word slinging against Radiohead from EMI began late last week when an article for London-based The Times newspaper cited an EMI spokesman's claim that the band had demanded £10 million (roughly $20 million) upfront. Apparently, the £3 million offered by EMI and new chief Guy Hands was insufficient beside the fact that the label would not give up control over the band's previous six albums, a major point of contention for the band. According to the band's manager in the article, the band left the table when that point became unavailable. Radiohead front man Thom Yorke has since hit back at these claims in the band's official blog, dispelling the notion that Radiohead wanted a load of cash, while questioning EMI's decision to air its "dirty laundry" and backing the comments made by the band's spokesman.

Continue reading Radiohead and former label exchange words after money claim

Music industry debt plans frustrated by credit loss

The record loss in credits markets since August is dampening plans by music companies EMI and Warner Music Group Corp. (NYSE: WMG) to refinance debts and provide dividends to shareholders, while "reinvesting in core operations." The company's plans come at a time when the music industry is dealing with sharp declines in CD sales and the continued problems in the face of widespread digital growth, according to the Financial Times. Unfortunately, neither company is rumored to be pressing ahead with the plans. WMG stock has fallen nearly $20 in the past year according to the same report, a trend that could certainly welcome a boost.

These rumors come at a time when similar rumors have been announced that EMI wants to cut funding to trade groups like the Recording Industry of America, which work against piracy, and issue that the industry has been dealing with for a number of years. This plan hopes to benefit from the back catalogs of major artists and the potential future catalogs those artists will produce. The Financial Times notes "the steady revenues generated by music publishing have become increasingly prized by investors at a time when the future of the more glamorous recorded music business is uncertain." The major reason cited for that uncertainty is the industry's inability to create digital sales to replace missing CD sales.

In the end, the credit problems these companies face only indicate that new business models are needed. Luckily EMI seems to be leading some kind of change in the current model, after dropping the use of anti-piracy software in media files last April. If major retailers start to cut back on space allotted to CDs, which is another prediction the Financial Times quotes, the industry could face even more setbacks. Frankly, an expedited move toward the digital market is needed to offset a number of these problems, but that is going to take a major wake up call and changes in the credit market may serve as a needed rough shake.

Could a Radiohead world tour be 'revolutionary'?

With the astounding success of Radiohead's bold gambit earlier this month to market and sell their new album online (at least initially), Billboard is now reporting that the band will embark on a large-scale tour next year. Although this is a typical move in the music industry, and certainly "normal" band news, it has me wondering whether a large-scale tour by Radiohead will be or can be as industry changing as the release of In Rainbows.

Undoubtedly, a new worldwide tour by Radiohead will look very similar to past tours the band has taken around the globe, in particular their 2001 and 2003 global expeditions. Billboard reports that when the band toured last year it was "almost for creative reasons, definitely not for financial reasons." The tour was limited to few European and North American venues. With In Rainbows, the band has followed that trend into the selling of their album, allowing fans to set the price, which apparently averaged around £4 ($8).

A worldwide tour in the scope of past Radiohead tours and other contemporary efforts by other artists is certainly not one for "creative reasons," since the amount of travel would be overwhelming. Financially, such an endeavor would be expensive, but not simply in economic terms. Thom Yorke, the band's front man has been gone on record in the past "over the effects of touring on climate change." For a band as socially conscious as Radiohead have been with their music, such a concern is not surprising, but the report does not indicate the band looks to miss out on engaging the music with fans.

In any case, the answer to my question is that there is no answer, at least not yet. It is unfortunate that preliminary plans are not any more decisive, but albums and tours are the pillars around which the music industry is built. If one can be shaken up so fundamentally, then why can't the other one? The real question is how can a tour be shaken up?

Led Zeppelin to enter the digital market next month

The music catalog of heavy metal band Led Zeppelin will become available in all digital stores on November 13, reports Billboard this morning. Following AC/DC, the band has also entered an exclusive agreement with Verizon (NYSE: VZ), making the mobile music provider the first to offer "full-song over-the-air downloads, ring tones, ringback tones, alert tones and wallpapers."

Warner Music Group (NYSE: WMG) will make the catalog available on the same day that a new career spanning compilation album, Mothership, will be released by Atlantic Records. A week later, a new "remixed and remastered" version of live album The Song Remains the Same will also be released and offer six new songs for the album. Finally, as was previously reported, Led Zeppelin will also play a "one-off" performance at London's O2 Arena on November 26, to honor the memory of Atlantic Records co-founder Ahmet Ertegun.

All told, it seems that November will be a very busy month for the British band. It is quite surprising to see Led Zeppelin have waited so long to offer digital downloads, considering that the remastered versions that will likely be uploaded by Warner Music Group were first released thirteen years ago. The release of the How the West Was Won live album in 2003 seems like a more apt chance to move into the market in retrospect, but here we are four-and-a-half years later.

The only remaining major digital market holdout now is The Beatles, and their move is expected in the new year.

Universal recruits record companies to compete with Apple's (AAPL) iTunes

A new report today indicates that Universal Music Group chief Doug Morris is aiming to create an industry-wide competitor to Apple (NASDAQ: AAPL)'s iTunes Store. According to BusinessWeek, Morris has already enlisted Sony BMG, a merger between Sony Entertainment (NYSE: SNE) and Germany's BMG, and is in talks with Warner Music Group (NYSE: WMG). The service Morris intends to create will be called Total Music and "move digital music beyond the iPod-iTunes universe by nurturing the likes of Microsoft (NASDAQ: MSFT)'s Zune media player and Sony's PlayStation and by working with the wireless carriers."

The move comes after Morris and UMG declined to renew a multi-year contract with Apple in July because Steve Jobs and company would not "ease stringent terms limiting how record companies market their music." At this time, Universal's music remains available on iTunes on a month-to-month basis.
The new subscription-based service would ask "hardware makers and cell phone carriers to absorb the cost of a roughly $5-per-month subscription fee so consumers get a device with all-you-can-eat music that's essentially free." In that model, the music companies would take the fee and the manufacturers and carriers would sell more devices, in theory.

The new service is also attempting to bank on calling music a utility that consumers are entitled to own. BusinessWeek comments that this is a lot like the iTunes model but takes it one step further, and
reminds us that the music companies have set up subscription services before and failed to maintain a place in the market. The one question that remains is whether consumers buying the devices and subscribing for $5 will be able to keep the music they download? If this model is based on iTunes, then that would be a resounding yes. Otherwise, it is simply another service that takes the control of music "ownership" out of the consumer's hands. It's hardly a utility if you have to give it back.

George Harrison's solo catalog goes digital

Following the solo catalogs of Paul McCartney, John Lennon, and Ringo Starr, George Harrison has joined the digital market this week.

Despite being the last solo Beatle catalog to be made available, Harrison's catalog is the most recent to be upgraded and remastered for physical release, and those editions are the versions now available in digital stores. While that is no surprise, what it means is that there are two albums actually missing from the new digital catalog: 1974s Dark Horse and 1975s Extra Texture (Read All About It). It seems apparent from remarks by Harrison's widow, Olivia, that the remastering work will not cease because of this move.

All that remains now is for The Beatles catalog to be made available, but that is still rumored for some time in the new year. With that addition, quite a body of work will be available for fans and listeners digitally, even if the solo catalogs are not true successors to the group's catalog. It is unfortunate that the solo catalog's would be made available before the group catalog, especially for new fans that have no guide to understand how the music of the solo catalog's follows and makes distance from the output of The Beatles. Some might see that as a positive in light of views that The Beatles were a John or a Paul show, but that is what it is.

The reality of the situation is that The Beatles managing company Apple Corps Ltd. was in dispute with Apple Inc. (NASDAQ: AAPL) for so long, pushing off other projects like remastering (which now seems to coincide with the pending digital release). The Apple vs. Apple case ended in April 2006 in favor of the iPod makers. Apple is reportedly one of the major companies in talks with The Beatles representatives to get the band into stores like iTunes.

EMI memo divulges new digital plan

Guy Hands, the Terra Firma executive, who is now the "top executive" at EMI, recently warned staff that record labels need to let the CD go and embrace digital "opportunities" if the industry is to survive in the expanding market, according to a report by Billboard. Terra Firma is a private equity firm based in London that succeeded in buying out EMI in late July and since then both EMI and Terra Firma have been quiet about the direction EMI would go in any business model.

Citing the recent move by Radiohead to take their music directly to the fans (Radiohead was previously an EMI "act"), Billboard reports that Hands "proposed labels act more like venture capitalists" taking both profits and losses from artists recording and touring -- in direct opposition to the standard model of paying artists up front for album production. If that becomes operating procedure, EMI's move in April to discontinue use of Digital Rights Management technology could soon by overshadowed by more "pioneering" and inventive ideas, hopefully designed to give fans better access to the music they crave.

While it is not surprising that the new executives in charge of EMI would shake up the tired model, it is quite telling that a leaked memo as revealing as this could only come in the wake of Radiohead's move for their new album In Rainbows. It seems all too apparent that the record labels needed a very stable artist to make the first move toward a more fan-based market, as opposed to any label risking a move away from the tried and failing model that Hands' cites. EMI is apparently the first label to embrace these new ideas, as was indicated by the DRM move, but hopefully the bigger companies will follow suit in due time. How long can they sit on their "hands?"

Amazon's new music service... rotten for Apple?

Apple, Inc. (Nasdaq: AAPL) and Amazon.com, Inc. (Nasdaq: AMZN) have been hot companies and, yes, hot stocks. But the two companies are taking shots at each other.

Of course, as was expected, Amazon.com launched its digital music store, which has about 2.3 million songs. But as the company is wont to do, it has engaged in some price cutting. For example, a song costs between 89 cents to 99 cents. An album goes for $5.99 to $9.99.

Well, to get some analysis on this, I turned to Rafi Mohammed, who is an expert on pricing. He operates Pricing for Profit and is also the author of the book, the Art of Pricing. According to him:

"Amazon's entry into the digital music market will significantly affect Apple. Drawn by steep discounts, many music aficionados will switch to Amazon's service. This will inject some much needed competition into the digital music market, which will help music companies gain negotiating power. Additionally, a strong iTunes competitor may offer co-branding opportunities for music device makers. My prediction: this is the catalyst to music companies moving to their beloved variable pricing (some prices higher than others) model and new digital music players that will successfully challenge Apple's iPod."

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Amazon (AMZN) launches beta of MP3 music store; Apple (AAPL) cringes

In the latest slap to Apple, Inc.'s (NASDAQ: AAPL) iTunes and iPod platform, Amazon.com (NASDAQ: AMZN) has released a "beta" (as in, being tested) version of its 'Amazon MP3' digital music store as of today, accessible through www.amazonmp3.com. While Apple continues to be the largest seller of digital music files on the planet, its recently launch of the 'iTunes Plus' selection was hailed as a larger experiment in the music industry's transition from the CD to the file download. The experiment? Apple removed digital rights management (DRM) copy protection from these iTunes Plus files, making them susceptible to file trading among friends and all over the Internet.

The music industry knows that DRM-free music file downloads are the future, and are relenting from paranoia about internet users everywhere stealing music slowly but surely. In Amazon's case, its new MP3 store features over two million songs from 180,000 artists represented by over 20,000 music labels. And what do you know -- that entire music catalog is being offered in DRM-free MP3 format, making all two million songs virtually universal to every music player from the iPod to in-dash CD players in most new cars. And, without protection, buyers are free to copy and share the files -- without any protection -- to their heart's content. That's the potential mushroom cloud-size problem the music industry execs go to bed with each night.

Continue reading Amazon (AMZN) launches beta of MP3 music store; Apple (AAPL) cringes

SpiralFrog's free music: Should Apple (AAPL) worry?

SpiralFrog logoFree music downloads, sweet! Digital music newcomer SpiralFrog went live yesterday, giving away tunes to all us Thifty McLintpockets, sticking it to iTunes, asking only that we show a little love to its sponsors. Are we back in the Napster shopping-spree days of 2000, ready to grind our employers' networks to a standstill?

Not quite. The tragically titled SpiralFrog -- run by the private Mohen Inc., whose interests appear to be solely this venture -- bills itself as "the market-driven solution to illicit pirate file-sharing sites." It claims to be gunning not so much for Apple (NASDAQ: AAPL)'s iTunes or Amazon (NASDAQ: AMZN)'s forthcoming MP3 site, but instead challenging amorphous peer-to-peer MP3 networks like LimeWire and Soulseek, priding itself on being free of viruses, spyware and other nasties.

Not that this is a bad idea -- it's actually a very good, very natural idea. No need to point out that well before websites gave away content for a smattering of mortgage lenders' ads, radio, network television, magazines and newspapers were all available freely or at least affordably as advertisers footed the bills. So why couldn't music downloads work as well?

Continue reading SpiralFrog's free music: Should Apple (AAPL) worry?

Is Apple's (AAPL) iPod ruining music?

The Wall Street Journal's Lee Gomes makes an interesting argument [subscription required] about digital music that iPod and iPhone buyers should consider: "[B]ecause both compressed music and the iPod's relatively low-quality earbuds have many limitations, music producers fret that they are engineering music to a technical lowest common denominator. The result, many say, is music that is loud but harsh and flat, and thus not enjoyable for long periods of time."

According to one expert, high frequencies which sound good on a CD may sound poor on an MP3. Music today is also being released at higher volume levels, which can also weaken the distinctions between high notes and low ones in a track.

So add that to the list of complaints about Apple Inc. (NASDAQ: AAPL). MP3 and iPods are weakening the quality of recorded music. Part of the problem is the ear buds that are commonly used with iPods are relatively poor quality.

But hopefully engineers are hard at work making MP3 technology better, just as they did with CDs when they first came out. Either way, don't count on CDs making a comeback any time soon.

The $3,000 iPhone bill

The New York Times [registration required] reports that Dave Stolte took his Apple Inc. (NASDAQ: AAPL) iPhone to Ireland and England in July and returned home to a little surprise -- a bill for $3,000.

Stolte's $3,000 phone bill was a result of unanticipated European roaming charges. Consider the case of mortgage consultant, Neil Dingman. Dingman used his iPhone only a few times on a European trip this summer and had expected to see just a small increase in his next bill for roaming charges. But he failed to turn off an iPhone feature that automatically checks e-mail. Thus his iPhone roamed over networks in Italy, Croatia and Malta more than 500 times. And he ended up with $852.31 in roaming charges.

But Stolte's story has a happy ending. Thanks to the posting of Stolte's bill on the Internet, AT&T Inc. (NYSE: T) went from giving him a $100 credit to full credit for that $3,000 iPhone bill. The lessons? Turn off the e-mail checking feature if you're out of the U.S. And if you get a ginormous iPhone bill -- post a complaint video on Google Inc.'s (NASDAQ: GOOG) YouTube.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the stocks mentioned.

Apple's (AAPL) new iProducts underwhelm market

As I was following Apple. Inc.'s (NASDAQ: AAPL) "The beat goes on" event yesterday, I caught myself wondering this: can Apple roll out incremental features to its iPod line and get the market excited once again? I'm not sure that happened, as Apple shares remained stagnant during the event and then closed down almost nine points. This on a day when the company refreshed its entire iPod lineup with new "models." Ehh.

Did Apple just suffer along with many other tech stocks in yesterday's downtick, or was it something more? Apple CEO Steve Jobs has a wonderful way of making the world think each 'new' Apple product is somehow a first or one-of-a-kind, but most aren't any longer when it comes to the iPod line (save the iPhone, which is easily a revolutionary product).

Basically, Jobs trotted out the same products -- from the iPod Classic to the iPod Nano to the iPod Touch -- with incremental feature upgrades and more marketing glitz than a glazed donut. The market seemed unimpressed, all things considered. But, there's more.

Continue reading Apple's (AAPL) new iProducts underwhelm market

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