Interviews with Digital Media Thought Leaders
Getting Paid for Music
Podcast Audio | Posted by Phil Leigh on August 25, 2008
Sales of recorded music in the United States are nowabout 30% lower than when Shawn Fanning introduced Napster in 1999. Sales in the physical form (e.g. CDs) are down by nearly half. There is little doubt that the Internet has been a “game changer” for the record label business.
In this audio program we explore a couple of ways that the Internet can add revenues. One is already generating more money for the industry and promoting new artists. The second appears to be an idea whose time has come.
The first example is Internet radio whose potential was amplified recently by the 3G-iPhone and Apple’s iPhone Apps Store. Our first interview is with Tim Westergren who is the founder of Pandora (Internet Radio). Tim reports that iPhone downloads of Pandora software have nearly doubled the number of new subscribers daily.
Moreover, Pandora enables listeners to buy tracks with the “push of a button” and Tim notes that they are one of the top affiliates for download stores like iTunes and Amazon. Pandora engaged a 3rd party research firm to investigate the buying habits of its listeners and discovered that 40% are buying more music than before joining the service and only 1% are buying less. Finally, unlike the broadcast radio stations, Internet radio pays mandatory royalties to the record labels.
Confessedly, Pandora also announced that the royalties that it pays the record labels are too high. About $17 million of the company’s total annual revenues of $25 million are used to pay such royalties. However, the impact of the iPhone apps store is changing the whole conversation about Internet radio. There are two ways to solve the problem.
First, the labels can agree to accept lower royalty rates. Second, Pandora can seek incremental revenues by utilizing more advertising. My guess is that the likely solution will involve a combination of the two.
The second new way to get paid for music stems from our interview with Chris Wallace of The Super Group. His company is a website design and construction firm that specializes in providing interactive tools designed to engage website visitors. I contacted Chris because I read an article in The Wall Street Journal about his management policies.
He permits employees to work of projects of their own during “downtime”. Although The Super Group retains the rights to the work product, employees appreciate the opportunity to pursue their passions on company time. When they work on personal projects, Chris feels they tend to be extraordinarily productive.
For example, in a recent contract with The Weather Channel, Chris’ company created an interactive animation tool that website visitors can personalize and send to friends and family. The background audio was music composed by one of The Super Group employees during his office “downtime”. Thus, wherever the animation gets sent on the Net, so also does the music.
Chris and I explore ideas for creating interactive animations that might apply to musicians and an associated advertising sponsor. For example, an Indiana Jones animated game might contain background music of John Williams, thereby generating revenues for both the Indiana Jones trademark as well as John Williams’ music. Coke or Pepsi might, hypothetically, sponsor the game much like Dr. Pepper seeks identity with Jones by placing images on individual bottles.
Categories: Podcast Audio
Tags: Apple, Chris Wallace, digital media, Internet video, iPhone, iPod, music, Pandora, Recorded Music, The Super Group, The Weather Channel
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[…] In this audio program we explore a couple of ways that the Internet can add revenues. One is already generating more money for the industry and promoting new artists. The second appears to be an idea whose time has come. - insidedigitalmedia.com […]