Can Spotify’s free music pay off?

The Observer, Sunday 29 November 2009

Katie Allen and Richard Wray

Spotify’s digital music service has been hailed as the future of online music. But can its business model hold up?

Despite having spent less than £5,000 marketing itself since its launch three years ago, Spotify is fast becoming a household name, pulling in the punters with an offer that looks too good to be true: all the online music anyone could want, for nothing except the bother of having to listen to an advert rather less frequently than on radio. And it’s legal.

But the trouble with things that look too good to be true is they often turn out to be exactly that. Questions are being raised about the financial viability of the Stockholm-based business and the nature of the ties it has with the music labels whose content it showcases.

The world of digital music is littered with failures and also-rans, with names that would not look out of place at the bottom of the bill for a college rock festival. Spiralfrog and Ruckus both collapsed earlier this year. Both had backers among the labels but neither managed to build a profitable long-term business on the idea of using online advertising to subsidise a free music service. Rival Qtrax, meanwhile, hit the headlines after a glitzy launch last year, only for it to emerge that it did not have the rights to the tracks it was offering. It has still not launched.

It is clear that relying on advertising to back up your online service is tough. The UK has its own ad-backed streaming music service, We7, which is more advertising-heavy than Spotify, playing quick “blipverts” before most songs. Even so, the going is hard, admits chief executive and founding investor Steve Purdham. “The only thing we have to do now is to get the final piece of the puzzle working, which is to get enough advertising sales that actually cover the fact that when you fancy listening to Robbie Williams we can actually pay for that. That is starting to happen,” he said.

We7 is backed by singer Peter Gabriel, whose last foray into digital music – OD2 – is now part of Nokia. It hopes to break even in the UK towards the end of 2010, but that is by no means a certainty.

“We7 is the business challenge of climbing Everest – if you think about survival on the face of Everest, it’s not very nice,” Purdham said. “So running a business that is just scrimping and scraping and not really growing is actually not survival, it’s death. In my terms, there are only really two outcomes. Either we will grow or we will die. At the moment everything is going the right way but it’s still a very challenging business.”

Spotify is trying to build a hybrid business model, looking to generate revenues not just from advertising but by persuading people to sign up for a monthly subscription to an ad-free service which can also be used on a host of mobile phone handsets including the iPhone. Music industry sources suggest that in some of its markets Spotify has a conversion rate – people moving from the free service to a subscription – of about 12%. Spotify says it has more subscribers in the UK than anywhere else. It is also partnering with internet service providers who bundle it with their residential broadband packages – it already has a deal in Scandinavia with TeliaSonera.

But last week the blogosphere was alight with speculation about Spotify’s model, fuelled by reports in its home market that it paid Lady Gaga – through the Swedish performing rights society STIM – a mere 1,150 kronor (£100) for a million streams of her song ‘Poker Face’. Spotify stresses that payments to STIM only represent a fraction of the money received by rights holders and the figure is only for one country. But those reports have raised questions about how much money the music labels are making from Spotify and whether they have an ulterior motive for supporting the firm.

To make a service such as Spotify legitimate, two groups must get a cut: the owner of the copyright in the composition – the publisher – and the owner of the copyright in the sound recording – the record company. Traditionally the payment to the record company is far higher than to the publisher, the assumption being that music publishing enjoys steadier earnings over a longer time. For the UK’s radio industry, these two groups are looked after by PRS and PPL. PRS has moved into the licensing of online streaming services on behalf of publishers, charging 0.085p per track. But rather than collective bargaining through PPL, the companies have decided to do their own deals with most streaming sites.

As part of that process all four music majors – Universal, Warner, Sony and EMI – plus Merlin, which looks after a host of independent labels, have taken a stake in Spotify. This has raised speculation that the labels have accepted a lower than usual return, to let Spotify get itself established and allow them to use it as proof of their willingness to work with online companies. Spotify has been very useful in persuading politicians involved in legislating against unlawful peer-to-peer file-sharers that the industry is willing to work with legitimate services.

It has more than 6 million users, roughly half in the UK, and the more than 6.5 million tracks are creating over a billion streams a month. When he announced plans to sever the broadband connections of pirates, Lord Mandelson mentioned Spotify as an example of the commercial alternatives to piracy. “In the context of government there is no doubt that Spotify does provide the labels with the chance to say ‘here’s the carrot, now give us a stick please’,” said one music industry insider. But Spotify’s PR man dismissed this as “That’s one heck of a conspiracy theory! We’ve come a long way in a short period but we know we’re far from perfect. That’s what drives us.”

There is embryonic evidence in Sweden that the rise of legal, free music services are helping switch people away from pirate sites. According to industry body IFPI Sweden, music sales are up 18% in the first nine months of this year.

Rob Wells, head of digital at Universal Music Group International and the man who negotiated the Spotify deal on behalf of the label, denies the industry is using Spotify as a Trojan horse. “We don’t do these deals because of government pressure,” he said. “We do these deals because we are strategically excited about selling more music to more people. It’s as simple as that and the side effect of that is it’s great the government looks at these deals and says Universal is doing something.”

Taking a stake is a commercial decision, he adds, which also ensures labels can benefit from any potential sale or flotation, and is not a return for taking a smaller cut in revenues. “We have standard terms for any service like this and it’s a ‘greater of’ model,” he explained. “It’s the greater of three things: there will be a per play minimum, so in the event they have huge volumes of consumers playing tracks, they pay us on a per-play minimum; or they pay us on a share of advertising revenue; or they pay us on a per-subscriber minimum, whichever is the greater of those three things,” he says.

And the revenues are flowing, he stresses. In revenue terms, Spotify Sweden is now Universal Music Group International’s eighth largest business partner, out of 1,400. “Watch this space. Those guys are absolutely on fire, you are going to see some amazing developments over the next three to six months.” The labels are certainly excited about Spotify but it is going to take time before the rest of the industry is convinced that the Swedes really have changed the tune.

• Guardian News and Media Limited 2009

Top Ten Most Downloaded P2P File Sharing Clients

November 29, 2009

To get a better view on how the peer-to-peer scene is evolving with respect to what file sharing software people prefer to download, we keep you posted weekly with the latest numbers. So here’s a list with last week’s top ten most downloaded p2p file sharing programs – the chart is based on figures published by Download.cnet.com and it refers to the number of times a p2p client was downloaded from their site (click on the names for download):

P2P Client	Number of downloads(last week)	Number of downloads (total)
1.Limewire 5.3.6	473,888	194,534,021
2.Frostwire 4.18.4	240,853	25,080,578
3.BitComet 1.16	131,850	75,056,328
4.uTorrent 1.8.5	56,759	6,523,398
5.Mp3 Rocket 5.3.4	37,826	5,100,018
6.BitTorrent 6.3	26,214	15,827,443
7.Vuze 4.3.0.4	22,611	6,960,757
8.Limewire Pro 5.3.6 (buy)	9,624	875,860
9.Morpheus 5.4.0. 1080	7,710	174,058,773
10. Ares Galaxy 2.1.2	6,520	633,386

(http://download.cnet.com/windows/)

Why Rock n Roll matters: “The Other Education”

November 27, 2009

Op-Ed Columnist/NY Times

By DAVID BROOKS

Like many of you, I went to elementary school, high school and college. I took such and such classes, earned such and such grades, and amassed such and such degrees.

But on the night of Feb. 2, 1975, I turned on WMMR in Philadelphia and became mesmerized by a concert the radio station was broadcasting. The concert was by a group I’d never heard of — Bruce Springsteen and the E Street Band. Thus began a part of my second education.

We don’t usually think of this second education. For reasons having to do with the peculiarities of our civilization, we pay a great deal of attention to our scholastic educations, which are formal and supervised, and we devote much less public thought to our emotional educations, which are unsupervised and haphazard. This is odd, since our emotional educations are much more important to our long-term happiness and the quality of our lives.

In any case, over the next few decades Springsteen would become one of the professors in my second education. In album after album he assigned a new course in my emotional curriculum.

This second education doesn’t work the way the scholastic education works. In a normal schoolroom, information walks through the front door and announces itself by light of day. It’s direct. The teacher describes the material to be covered, and then everybody works through it.

The knowledge transmitted in an emotional education, on the other hand, comes indirectly, seeping through the cracks of the windowpanes, from under the floorboards and through the vents. It’s generally a byproduct of the search for pleasure, and the learning is indirect and unconscious.

From that first night in the winter of 1975, I wanted the thrill that Springsteen was offering. His manager, Jon Landau, says that each style of music elicits its own set of responses. Rock, when done right, is jolting and exhilarating.

Once I got a taste of that emotional uplift, I was hooked. The uplifting experiences alone were bound to open the mind for learning.

I followed Springsteen into his world. Once again, it wasn’t the explicit characters that mattered most. Springsteen sings about teenage couples out on a desperate lark, workers struggling as the mills close down, and drifters on the wrong side of the law. These stories don’t directly touch my life, and as far as I know he’s never written a song about a middle-age pundit who interviews politicians by day and makes mind-numbingly repetitive school lunches at night.

What mattered most, as with any artist, were the assumptions behind the stories. His tales take place in a distinct universe, a distinct map of reality. In Springsteen’s universe, life’s “losers” always retain their dignity. Their choices have immense moral consequences, and are seen on an epic and anthemic scale.

There are certain prominent neighborhoods on his map — one called defeat, another called exaltation, another called nostalgia. Certain emotional chords — stoicism, for one — are common, while others are absent. “There is no sarcasm in his writing,” Landau says, “and not a lot of irony.”

I find I can’t really describe what this landscape feels like, especially in newspaper prose. But I do believe his narrative tone, the mental map, has worked its way into my head, influencing the way I organize the buzzing confusion of reality, shaping the unconscious categories through which I perceive events. Just as being from New York or rural Georgia gives you a perspective from which to see the world, so spending time in Springsteen’s universe inculcates its own preconscious viewpoint.

Then there is the man himself. Like other parts of the emotional education, it is hard to bring the knowledge to consciousness, but I do think important lessons are communicated by that embarrassed half-giggle he falls into when talking about himself. I do think a message is conveyed in the way he continually situates himself within a tradition — de-emphasizing his own individual contributions, stressing instead the R&B groups, the gospel and folk singers whose work comes out through him.

I’m not claiming my second education has been exemplary or advanced. I’m describing it because I have only become aware of it retrospectively, and society pays too much attention to the first education and not enough to the second.

In fact, we all gather our own emotional faculty — artists, friends, family and teams. Each refines and develops the inner instrument with a million strings.

Last week, my kids attended their first Springsteen concert in Baltimore. At one point, I looked over at my 15-year-old daughter. She had her hands clapped to her cheeks and a look of slack-jawed, joyous astonishment on her face. She couldn’t believe what she was seeing — 10,000 people in a state of utter abandon, with Springsteen surrendering himself to them in the center of the arena.

It begins again.

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Note: David Brooks is a columnist for the NY Times

RIAA CEO: 5 Reasons for Optimism in the Music Industry

By Mitch Bainwol

Published: September 20, 2009

The Wrap.com recently published a list of “5 Ways to Save the Music Industry.” Hey, we’re always happy to hear of any wise perspective, but a few of the recommendations slightly missed the mark, or were unnecessarily pessimistic. So, in the spirit of the column and a friendly debate, here are five reasons for optimism:

1. Our product, music, remains as popular as ever. While other businesses may scrap to generate consumer interest in their product, music remains as popular as ever, according to our surveys, and is an economic catalyst for many other industries.  Think about some of the news in recent weeks: leading technology company Apple rolls out a new line of its phenomenally popular music-listening gadgets as well as a major upgrade of the iTunes music store. Videogame developers Harmonix and MTV Games introduce a seminal version of its Rock Band franchise featuring the iconic Beatles.

Meanwhile, two of the most popular television programs, “American Idol” and “Dancing With the Stars,” are about music. And music is an essential, distinctive part of many hit shows like “Grey’s Anatomy” and “Gossip Girl.” Last spring ABC even launched an online “Music Lounge” for fans to locate and purchase music played on its most popular programs.  The common thread is that all are platforms for music. We no doubt continue to confront serious challenges to fully monetizing the value of music, but the fundamental relevance of music to the human experience remains as powerful as ever.

2. Long live the album. The album’s demise is exaggerated. CD sales may continue to decline (though the success of the Beatles’ remastered catalogue demonstrates an enduring appetite for compelling music in physical form), but so far in 2009, growth in digital album sales is again outpacing digital singles (17.5 percent vs. 11.7 percent).  Digital music is still a maturing marketplace, and fans are becoming increasingly comfortable buying not just the latest single online, but the entire album. Throw in the recent iTunes LP initiative from Apple and the major record companies and the album’s unparalleled significance is taken to the next level.

3. But it’s more than just the album. Too often, observers assess the health and vitality of the music business simply by comparing year-over-year unit sales. But that narrow analysis of yesterday’s music business fails to capture the whole story.  The modern music company is an increasingly diversified, full-service entertainment firm deriving revenues from a variety of different streams.

The success of a new album is not simply based on unit sales, but the cumulative revenues earned from album and single track downloads, online music videos, ringtones and other mobile phone content, digital radio performance royalties, video games downloads and licensing fees, background music to television shows and films, audio streaming sites, and countless other ancillary revenue streams. One example?  Revenues from digital platforms like satellite and online radio grew more than 70 percent in 2008 and should experience continuing significant growth this year and beyond.

4. Record labels make or break the day. A handful of well-known bands have elected to distribute their latest albums without the help of a record label. More power to them.  But, interestingly and tellingly, what connects the few oft-cited examples is that virtually all are established acts, with a devoted fan base and an established brand. That notoriety and fan support exists in the first place because of the unique marketing and promotional expertise of a record label.

Digital technologies have indeed made it easier for an artist to “DIY.”  But more often than not, it is the music label that can uniquely help the artist cross the bridge between anonymity and artistic and commercial success. There were more than 100,000 different albums released in 2008 alone, yet only 950 of them sold more than 25,000 copies. There are more than 2 million hip hop artists on MySpace and more than 1.8 million rock acts. It’s a sure bet that most of these acts are hoping that a label will pluck them from the mass of aspiring, unsigned artists online and take their careers to the next level.

Breaking through, developing and cultivating an audience, working with the most talented musicians and top notch equipment, leveraging opportunities in a cluttered multi-platform digital media world — all are the invaluable and irreplaceable functions of a modern record label.

5. Great music. TheWrap rightly plugged Jack White’s phenomenal musicianship.  He’s worthy of the accolades, but he’s hardly alone. This fall, fans will hear another great slate of albums from the world’s most talented bands and artists, including Alicia Keys, Nelly Furtado, Pearl Jam, Norah Jones, Bon Jovi, KISS, Leona Lewis, Tim McGraw, Shakira, Rod Stewart, Carrie Underwood and countless others. This is yet another encouraging sign of a music business that is energized, vital, relevant and here to stay.

Upheavel on the Charts

By Alan Jones/Music Week/UK 11/27/09

It is a week of tremendous upheaval on the US albums chart, with 26 new entries and 42 re-entries to the Top 200. By a process of deduction, that also means that 68 of last week’s Top 200 – more than a third – have gone missing.

The reasons for this unprecedented turnover are twofold. Firstly, with the sale week ending just ahead of the Thanksgiving holiday, the release schedules were stuffed to the gills. Secondly, and more importantly, Billboard chart rules were revised so that, for the first time since 1991, catalogue albums were allowed to compete side-by-side with current releases. In practical terms, for the last 18 years any album that was a) more than 78 weeks old and b) outside the upper half of the Top 200 was banished to the catalogue chart, with no chance of a recall. Until now.

We will look at a couple of the winners and losers of that ruling later on, but for the moment we will concentrate on genuine new entries. Five of them crowd into the Top 10, with John Mayer racking up his second number one album, courtesy of Battle Studies, which debuts in pole position on sales of 286,000 copies.

Andrea Bocelli’s My Christmas holds at number two on sales of 185,000 copie, and is the first of no fewer than 44 albums of Christmas/winter songs in the chart.

As in Britain, Norah Jones fails in her attempt to make it four straight number ones. Her album The Fall debuts at number three on sales of 180,000. Floridian Christian rockers Casting Crowns follow at number four with Until The Whole World Hears (167,000 sales). It is their third Top 10 album – and they nearly score a fourth as their Christmas album, Peace On Earth, re-enters the list at number 15. It is the highest re-entry to return under the new chart rule, and instantly tops its original chart peak of number 24.

Also new to the Top 10: 50 Cent’s Before I Self-Destruct arrives at number five on sales of 160,000 copies, new lows for the rapidly-cooling Fiddy; and 15-year-old Canadian newcomer Justin Bieber, whose EP My World – consisting of seven songs that have all made the Hot 100 under their own steam – debuts at number six on sales of 137,000.

Current American Idol Kris Allen’s self-titled debut album enters at number 11. Allen, who won the eighth season of the competition in May, suffers the indignity of having the lowest debut and the lowest first-week sales of any Idol winner. His runner-up, Adam Lambert, debuts at number 72 with Take One, a collection of pre-contest demos. Lambert’s official debut album, For Your Entertainment, was released on Tuesday and is expected to fare much better, with initial sales projections suggesting it will be number two or three – though far adrift of Britain’s Got Talent phenomenon Susan Boyle’s I Dreamed A Dream, which will certainly open north of half a million, though how far north depends on how well Sony manage to supply stock over the long holiday weekend.

While Boyle is the latest UK female singing sensation to conquer America, the last – Leona Lewis – debuts at number 13 with second album Echo, on sales of 67,000. That is enough to make Lewis the top-ranked UK act on the list this week but a far cry from the 205,000 sales that earned predecessor Spirit a number one debut in April 2008. There is better news for Lewis on the Hot 100, where Echo’s first single, Happy, jumps 59-31 with a big increase in sales as she promotes the album. It thus eclipses its original chart peak of 50.

Paul McCartney is in hot pursuit of Lewis, debuting at number 15 with his new live album Good Evening New York, on sales of 55,000 copies. It is McCartney’s 31st entry on the Top 200 excluding his Beatles oeuvre and his seventh appearance with a live album. And speaking of The Beatles, they are the only UK act to benefit from the relaxation of the catalogue chart rule, with re-entries at number 118 for Abbey Road, number 152 for The Beatles (White Album) and number 189 for Sgt. Pepper’s Lonely Hearts Club Band. Their Beatles In Stereo set – a new compilation which was not subject to that rule, of course – dives 53-151, as it falls out of stock again.

Other UK acts on the chart are Sting (If On A Winter’s Night, 12-25), Rod Stewart (Soulbook, 23-39), Muse (The Resistance, 71-92) and The Bee Gees (The Ultimate, 142-176).

Under the old chart regulations, gospel singer Fred Hammond’s album The Unstoppable would have dipped 132-158 this week. Instead it dives 132-200. That mass influx of catalogue titles also conspires against several UK acts, ending the chart careers – at least temporarily – of Joss Stone’s Colour Me Free!, David Gray’s Draw The Line, Snow Patrol’s Up To Now, Robbie Williams’ Reality Killed The Video Star and Coldplay’s Viva La Vida Or Death & All His Friends. The latter title’s disappearance comes after a 74-week chart career. Ironically, under the old rules it would have been retired from the chart three weeks from now, and would never have been allowed to return. The new rules, though resulting in its absence from the chart this week, mean that it could return at any stage in the future even on the very week when it would have been excluded under the old rules. Crazy.

On the Hot 100, Jay-Z and Alicia Keys continue at number one, Jay Sean is still the top UK export, in cahoots with Americans Lil Wayne on Down (off 7-10), and Sean Paul and Lil Jon on Do You Remember (30-30). Muse’s Uprising slips 53-54

Imogen Heap: A new business model

[UPDATE September 2, 2009: Imogen Heap's album Ellipse debuts at #5 on US Billboard top 200 and #4 on Canadian top 200! Also, related article posted here: http://ow.ly/lmIB]/ Deep Dive Marketing

It’s been a while since someone in the music business impressed me.  Finally, somebody has impressed me so much that it inspired me to launch my long-overdue company website and marketing blog.  This is the story of how one woman and 700,000 (and climbing) followers on Twitter are creating the new music business model.

During the past ten years we’ve seen dramatic shifts in the music business. Since the launch of Napster and other peer to peer sharing sites there’s a growing sense among consumers that music – at least the songs – should be free.  We’ve seen record label executives struggle with the changing environment, we’ve seen some independent artists thrive, and we’ve seen some major-label artists go independent and take advantage of this turn.  Is it that we must give the songs away for free? Or is there some other asset of perceived greater value that we can offer fans, and still successfully sell music?

Enter: Imogen Heap.  Some people may recognize Imogen as the beautiful vocalist of Frou Frou.  Others may be familiar with her song “Hide & Seek” or the song she wrote for The Chronicles of Narnia, “Can’t Take it In.” But even if you’ve never heard of her, it’s time to pay attention — Imogen Heap is changing the way business is done.  Or perhaps she’s just bringing music back to its roots — the relationship between musician and fan — and exploiting all the technical advantages available.  In a time when some music industry veterans seem to be afraid of the way technology is changing their business, Imogen Heap is using these technological advances to her advantage.

Chapter 1: Along Came Twitter: This is not to say Heap began her online relationship with her fans on Twitter.  Prior to the emergence of Twitter, Heap maintained a healthy MySpace profile with more than 14 million profile views and 350,000 fans.  She often posted blogs and bulletins and called for fan participation and feedback.

However, Twitter allowed Heap to efficiently update her fans about the making of her new record, Ellipse (release: August 25, 2009).  When I first began following Heap on Twitter she had just over 20,000 followers.  It was the early days of Twitter and while most people were posting their daily whereabouts or the progress they made doing their chores, Heap was chronicling the making of her album, a process that took 2 years. During this time she also purchased the home she grew up in and built a recording studio.  Heap documented all of this on her Twitter profile, making fans part of the process along the way.

Heap not only shared clips of music in progress, images of her recording studio, and the day’s triumphs, she also shared her frustrations, her insecurities, and often sought advice from fans.  In response to the many @replies Heap often received, she thanked her fans repeatedly. She also made it a habit to circle back with fans to let them know what decisions she ended up making upon hearing their input and would often show them the results with pictures, audio, or video.

Chapter 2: vLogging: To complement her dialog with fans on Twitter – and to tell a story with more than 140 characters – Heap maintained a regular video blog on YouTube.  In total, she posted 40 episodes, during the past 2 years, each running between 3 and 12 minutes long. Although, they’re publicly available, Heap’s vLogs make viewers feel like they’ve been invited into her home (indeed, most vLogs are shot in Heap’s home) for an intimate conversation. The vLogs capture Heap’s personality, her fun and celebratory nature, and allow fans to really get to know Heap even though they may never have met her in person.

The vLogs are not solely focused on the making of Ellipse — they include Heap’s adventures in learning how to drive (and passing her driving test);  remodeling her childhood home and turning her former playroom into her studio; and her New Year’s celebration. Each time she posted a vLog, Heap notified fans via Twitter, Facebook, and MySpace.

In March 2009, Heap posted a vLog calling for fans to help create her new press bio. The challenge – all submissions had to be made via Twitter, in the standard sub-140 characters. The final product is quite impressive and can be downloaded here.  Heap makes sure to give credit to the 81 Tweeters who helped co-write (or co-tweet) her new bio.

The result of Heap’s diligent vLogs and authentic fan engagement is a YouTube channel with more than 519,000 views and individual videos with as many as 122,000 views. Most important, each video is accompanied by hundreds of comments from fans expressing their excitement about Heap and the upcoming release of Ellipse, as well as their gratitude.

As fans became more and more engaged in the making of Heap’s album and the virtually, real friendship they shared with her, Heap allowed them to participate even further in the making of Ellipse.

Chapter 3: Flickr: In May 2009, Heap asked fans to submit samples of their work in order to be considered to collaborate with Heap on the album artwork and packaging.  3 fans were chosen to help create the artwork and all fans were asked to submit photographs that could potentially be included in the album packaging.   Heap created a Flickr group and asked fans to tag and submit all entries there.

Specifically, Heap was looking for images that capture the feeling or meaning of specific lyrics from the songs on her new album.  She posted the lyrics for reference, along with detailed instructions on the Flickr page. After sorting through more than 1,000 entries, Heap chose 11 fan-submitted photographs to be included in the final album artwork. Winners receive a cash prize, plus credit on the album.

Chapter 4: Building it Together: What Heap accomplished, all the while making a record, is truly brilliant.  She now has more than 735,000 followers on Twitter, each of whom feels invested in the making of Ellipse and is eagerly awaiting its release.  They’ve been there every step of the way, offered their opinions and insights when asked for advice about songs, helped create Heap’s bio and album art, and were the friends who were always willing to lend an ear… and a hand.

Chapter 5: Taking it Back (With A Little Help From My Friends): The story doesn’t end with the completion of the album.  A new load of work begins when the record is done – promo tours, interviews and radio shows. As part of the promotion machine, labels often send out advance copies of albums to music critics.  In early July one such promo album made its way to eBay. How did Heap find out about this? Twitter, of course.

A fan sent Heap a Tweet and notified her about the eBay auction for her as of yet unreleased album. Heap was outraged, as she puts it, not because she doesn’t want the music to get out there (she wants her fans to have the music), but because some opportunistic person who had nothing to do with the album stood to make a lot of money from its pre-release sale on eBay.  In fact, the man who posted the auction could have made $10,000,000, if only…

After Heap verified that her unreleased album was indeed posted for auction on eBay, she presented her Twitter followers with a little challenge — to make Ellipse “the most bidded-on item ever on eBay.” In typical form, fans responded en masse, bidding Ellipse up to $10,000,000.  Later Heap said, “it was going to be the most expensive album ever bought.”  Soon enough, eBay got wind of this and pulled the auction down.

During a time when many music fans are clamoring for free music, Heap’s fans actually helped ensure her music wasn’t prematurely leaked. As usual, Heap thanked her followers with a Tweet: “Well that was fun! Will get it removed and make sure none of you get bumped off eBay for helping me out there. Love to you! Heap sleep now.”

Chapter 6: Heap TweetUps: Although Heap enlisted her fans to help stop an unauthorized, early release of Ellipse, she continues to do what she can to make sure her fans remain part of the process and hear the music first. During a recent trip to the US, Heap launched “TweetUps” in New York and Los Angeles.

As she said during the Los Angeles TweetUp in early July, for Heap, the final part of the process is when the fans get to hear her music for the first time. Usually, the artist isn’t present in the homes, cars, and offices of fans when they’re listening to the album. Heap wanted to change this and to experience Ellipse through the ears of her Twitter followers.  Heap created the TweetUps so that she could preview her album for the fans who helped make it and who provided support and enthusiasm along the way.

Fans line up for Heap TweetUp, Los Angeles

The Heap TweetUps took place in small venues in New York and Los Angeles. The time and location of each TweetUp was announced one day prior to each event, on Twitter.  At The Hotel Cafe, in Los Angeles, Heap greeted fans who waited in a line that rounded 2 corners and stretched beyond a city block.  Once inside, fans were treated to an open bar (it was a 21+ event) and then invited to hear Ellipse for the first time.

Heap introduces each song

Heap introduced and discussed the inspiration for each song’s genesis before pushing “play” on iTunes. Then, she stepped out of the light as fans listened for the first time. While music fans can often read or listen to an interview about the making of an album or the inspiration behind their favorite song, it’s rare that they get to sit with their favorite artist, listen to her introduce the music, and be in the room with her while the songs are playing. . .  all before the album is publicly released.  Beyond just playing the songs for the first time, Heap shared what, for her, and her fans was another pivotal experience, bringing the making-of Ellipse full-circle.

Imogen Heap signing autographs for fans after the TweetUp

After previewing a handful of songs from the album, Heap offered to meet and sign photos for everybody who attended the TweetUp.  When the venue announced they needed to clear the room so they could prepare for that evening’s shows (the TweetUp took place in the afternoon), the long line of fans awaiting autographs didn’t seem concerned. Through the process of making an album with Heap, they learned she wouldn’t let them down. True to form and putting her fans first, Heap moved the meet & greet to the alley outside the venue. After a busy week of radio interviews and countless meetings, Heap took her time, speaking with and thanking every fan who was there.

Chapter 7: Cafe Heap: Now that the album is finished, the making-of vLog series has obviously come to an end. However, there’s still more to do between now, the album’s official release (August 25, 2009) and Heap’s upcoming tour (TBD beginning November) which means there’s still more for Heap to share with her fans. What else could she possibly do?

Last week Heap announced Heap Cafe – a live video chat that will take place (likely in her living room) weekly.  During the making of Ellipse Heap held a few live chats on uStream, but now she’s formalizing that into a weekly meeting. During her most recent video chat on uStream, Heap played piano and asked fans to chime in and tell her what to play.  “Play it faster,” “play it in the key of A,” “play anything!” the fans furiously typed in their suggestions. It was a fun experiment and another opportunity for fans to literally shape Heap’s music in real-time. All the activity, coupled with uStream’s integrated Twitter application, made #heapstream a trending topic on Twitter.

Heap Cafe will debut this week on a new platform, Vokle. They’re set to take place every Sunday, but there’s been mention that the first chat will take place Thursday, July 23rd. The best way to make sure you don’t miss Heap Cafe? Follow @imogenheap on Twitter.

Chapter 8: The Beginning: With over a month until its official release, Ellipse is currently #39 on the iTunes Top Albums chart. Heap seems to be gaining 1,000+ followers per day on Twitter. Fan enthusiasm continues to climb, with people Tweeting: “I would pay any price for Ellipse,” “finally had to cave & get twitter so i could get @imogenheap ’s beautiful video,” “Thank you so much for allowing us to download Canvas. It’s such a lovely video. I would have paid many times over to get this.”

People are Tweeting about paying for music?! Imogen Heap has started something…

Holiday Sales !

Susan Boyle’s First-Week U.S. Album Sales Projected At 550K+
November 24, 2009 – Retail
By Edward Christman, N.Y.
U.S. music retailers say they are realizing Susan Boyle’s dreams, as her album “I Dreamed A Dream” is blowing up way beyond sales expectations.

Label and distribution executives, meanwhile, project that based on early sales returns at the big box stores and pre-orders at direct marketers like Amazon and QVC, Boyle’s album is in contention to beat this year’s top debut-week seller, Eminem’s “Relapse.” That title scanned 608,000 units in the week ending May 24, according to Nielsen SoundScan. That week also represents the best overall sales week for an album this year.

Meanwhile, Adam Lambert’s “For Your Entertainment” is also outperforming sales expectations, despite—or perhaps because of—the risque performance he turned in at the American Music Awards on Sunday, Nov. 22. Label and distribution sources project that “For Your Entertainment” could sell about 225,000 units in its first week.

Likewise, Lady Gaga and her three-pronged sales attack on consumers’ purses is also much stronger than expected. Of the new “The Fame Monster” deluxe edition, “The Fame” original version, and “The Fame Monster” EP, also just issued, the former two combined could sell about 150,000 units while the EP is expected to top 200,000 units.

Of course, all estimates come with the caveat that sales projection models are built around a Tuesday release date, while this week new releases came out a day early on Monday, due to the Thanksgiving holiday weekend.

How well Boyle’s album performs will in part have to do with replenishment, as accounts reported that many stores are on the verge of being out of stock and re-orders have been placed. Based on past performances of hot-selling titles, Sony Music Entertainment likely will keep pace with demand. But it’s scrambling to do so, allocating product daily and making multiple shipments this week to each account. Sony Music’s ability to deliver product will be hampered by the holiday weekend, which begins Wednesday afternoon/evening.

While distribution projections for Boyle’s album start at the 550,000 mark, some executives are reluctant to guess how high it will go. If Sony can keep product rolling and if big boxes “have stock on Black Friday, who knows how well the album can do,” says one veteran prognosticator, who thinks the Boyle album will sell at least 700,000 copies this week.

Meanwhile, Adam Lambert’s shenanigans on the American Music Awards may have upset the sensibilities of viewers and gatekeepers at “Good Morning America,” which canceled his scheduled appearance on this morning’s show. However, the only impact his AMA performance has had on sales seems to have been positive.

Boyle, however, is proving to be the big story of the week. According to
Hastings Entertainment senior VP of merchandising Alan Van Ongevalle, the album is outperforming the chain’s expectations. The chain has never performed well in mainstream pop albums, “so it’s doing extremely well for us,” he says. “Last week, John Mayer was our No. 1 record and that is in a genre we do reasonably well in, and so far in one day [Boyle] has done more than he sold all week. We are not out of stock yet on her, but we are heading that way quickly.”

Van Ongevalle adds that the chain placed a re-order before release date and that he expects to be in stock for the holiday weekend.

QVC reports that it had pre-orders of more than 81,000 units for the Boyle album, its best sales performance in ten years, while Amazon says the album has generated its largest global pre-order in its history. Amazon doesn’t disclose numbers, but sources say its U.S. pre-order alone reached 80,000 units.

Meanwhile, Rihanna’s “Rated R” is said to be underperforming expectations so far in its debut week, “which is weird because she is on television everywhere talking about Chris Brown and a lot of teenagers are looking up to her,” says the head of purchasing at a wholesale account.

But others point out that Rihanna usually doesn’t have a big first week on a new release. “Good Girl Gone Bad,” her best-selling title with 2.5 million units, according to Nielsen Soundscan, tallied 162,000 units in its debut week for the period ended June 10, 2007. That’s in line with current projections for “Rated R,” as provided to Billboard by major label sales and distribution executives.

The Business of Lady Ga Ga

Dirk Smillie, 11.25.09, 12:00 PM ET/Forbes

In an interview last winter, Lady Gaga recalled her anguish at being ignored as she performed at a bar filled with drunken NYU students. No one paid the slightest attention to her until, fed up, she decided to strip down to her lingerie. “I started playing in my underwear at the piano and I remember everyone was all of a sudden like ‘Whoa!’ And I said, ‘Yeah, you’re looking at me now, huh?’ “

Yes, we are. In the cacophony of the music business, Gaga has broken through the clutter with muzzle velocity, becoming a superstar in scarcely a year. Her first album, The Fame, is the best-selling debut album of 2009. Her single Just Dance has been viewed 87 million times on YouTube. Gaga’s tracks have clocked 20 million downloads this year. One of them, Poker Face, is the most downloaded tune in the history of U.K. digital music.

Before she was Gaga, she was Stefani Germanotta, an obscure go-go dancer who worked burlesque bars in lower Manhattan. A precocious talent, she played piano by age 4 and clinched a seat at NYU’s Tisch School of the Arts at 17. But her fame and commercial success hasn’t followed the career template of Madonna (a trained dancer who worked her way up the club circuit) or winners of American Idol (where pop stars are selected by celebrity panel).

In Pictures: Brand Gaga

Gaga’s business model starts with an incongruous product. Listen to Gaga’s Poker Face and you might imagine it’s Britney Spears in a track suit. But watch the video and you’ll see a work of conceptual porn. Gaga, a 23-year-old blonde with bulletproof bangs and 3-inch lashes, slinks across stages in gleaming metal bustiers, smoked latex underwear and thigh-high stiletto boots. Performing Paparazzi at the Video Music Awards, she ended the set dangling above the stage in gauzy white La Perla lingerie, horrifying her audience as fake blood gushed from her bosom.

All this debauchery is purposeful fodder for social media and the mainstream press. “She’s a perv, but Lady Gaga understands viral marketing better than anyone on the pop scene today,” says magazine industry veteran Simon Dumenco. By showing up wearing a bird’s nest or a model of the solar system on her head, every Gaga appearance becomes an item (11,500 mainstream media stories cite her this year). “She is directing every frame of her music and her life, imagining how clips will appear on YouTube and what people will tweet after she appears on the VMAs,” says Dumenco.

She’s meticulous about imagery, especially the sets of her live shows. Preparing for a gig in Los Angeles, she discovered that a stage had been painted a radiant shade of white. “This isn’t the freakin’ ice capades!” she yelled at the crew. It was repainted.

On Gaga’s Twitter page, 1.6 million people track her outlandishness. They learn of Gaga’s problems with hairspray and get updates on her father’s recent heart surgery. Having that many followers can be perilous. Last month Gaga posted a link to one of her own videos on fashion icon Alexander McQueen’s Web site. After a single tweet by Gaga, her rabid fans streamed in and crashed the site’s servers.

Gaga leverages buzz by sharing the limelight with other, mightier entertainment brands than her own. “There’s an art to fame,” Gaga once told Vancouver television. Performing with members of the Bolshoi ballet, she wore a hat designed by Frank Gehry that resembled a mini Bilbao and played a piano painted by Damien Hirst. This year she collaborated with Beyonce and Michael Bolton. In October she showed up on Saturday Night Live with Madonna, where the two of them, dressed in matching dominatrix gear, tussled in a mock catfight (and near kiss).

One surprise: Gaga’s outré sexuality hasn’t fazed corporate marketers. Branding guru Steve Stoute, who paired Jay-Z with Hewlett-Packard, is working on a handful of tie-ins for Gaga. This month he inked a deal for her with Mac cosmetics. Next will be Gaga-branded electronic sunglasses, he says, similar to the ones that often cover half her face in concert.

Also in the works: a rock opera whose soundtrack may come from her new album, The Fame Monster, released this week. Gaga’s 41-city “Monster Ball” tour begins Nov. 27 and reportedly involves 14 costume changes. The tour will be tough to match Gaga’s own standards. As she reminded herself in an interview, ” ‘Now that you have everybody watching, Gaga, you’d better be f***ing great.’ “

In Pictures: Brand Gaga

 

Depending on Steve Jobs

By Peter Burrows/Business Week

Right after unveiling new iPods and iTunes software at an event on Sept. 9, Apple (AAPL) Chief Executive Steve Jobs invited singer Norah Jones on stage to perform for the assembled tech and media pundits. “Like you, we love music,” he told the crowd. “That’s probably the primary reason we do this.”

The music industry had better hope Jobs & Co. keeps that passion because, from a business point of view, music isn’t nearly as important to Apple as it once was. While Apple built its comeback over the past decade on its music-playing iPods, sales of those devices are expected to be flat in the years ahead.

So Apple is shifting its focus to new kinds of content. The Sept. 9 event was billed as a music-oriented affair, but Jobs spent much of the time showing off the game-playing abilities of the iPod Touch and new camcorder features in the iPod nano. Analysts say the most critical driver of Apple sales in the future will be the thousands of software programs, or “apps,” that owners of iPhones and iPod Touches can download from the company’s online App Store. “It’s no contest,” says Needham analyst Charles Wolf. “Apple’s strategic future is tied to the App Store. There is no strategic importance to music anymore.”

That leaves the music industry in a precarious spot, since Apple plays a more important role in their business than ever before. It is the world’s largest music distributor, having passed Wal-Mart Stores (WMT)in early 2008. Apple sells around 90% of song downloads and 75% of digital music players in the U.S. Since so few people are interested in listening to music on non-Apple products, digital music schemes that aren’t blessed by Apple typically die young. The upshot: While the record labels need to crank up digital sales to counter falling CD sales, they’re dependent on a company that’s becoming less dependent on them.

Apple executives insist music is still central to the company’s mission. IPhone owners want music along with those other apps, and digital downloads are growing fast. Apple says it has ratcheted up the number of employees on its music team over the past two years.

Apple is also providing more room for others to innovate as it broadens its focus. For example, the company long took a dim view of outfits that tried to develop iPhone apps that competed with Apple’s services. But on Sept. 10 the company quickly approved an application by Real Networks’ Rhapsody, which sells music subscriptions as well as songs for download. “We sailed right through,” says Rhapsody Vice-President Neil Smith.

The question is whether other companies can come up with the record-selling innovations the major labels once looked to Apple to create. There are some successes. An application from startup Pandora for personalized radio stations is downloaded about 20,000 times each day from iTunes, says Tim Westergren, Pandora’s chief strategy officer. The company’s popularity helps the labels two ways: Pandora pays the labels for any music played on its service (unlike regular radio stations), and Pandora’s internal surveys show that 45% of people who use Pandora buy more music, while only 1% buy less.

These are intriguing innovations, record label executives say. But none of the apps will be as important to music sales as iTunes itself, and some experts worry Apple isn’t doing enough to improve the core service. Though the latest version of iTunes has new features, including a simpler approach to sharing songs, there’s “nothing groundbreaking,” says Ted Cohen, a former EMI executive and now managing director at consultant TAG Strategic.

Music executives are beginning to recognize that Apple’s attentions are shifting. “Our biggest concern would be if they started resting on their laurels [in music],” says one senior executive at a major label. “We need them to continue innovating.”

YouTube’s Top Money Makers Are Record Labels (SNE, GOOG, UMG)

Jay Yarow and Kamelia Angelova|Nov. 20, 2009, 5:34 PM

Music videos from Sony and Universal on YouTube have more advertising sold against them than any other group, according to analysis from TubeMogul.

Below is an approximation of the daily share of YouTube’s monetized views based on the number of videos that carry ads in YouTube’s daily top 100 most-viewed.

This is why Sony, Universal, and YouTube are teaming up to launch Vevo, the big web music video site, December 8th. According to TubeMogul, 3.94% of YouTube’s daily views come from the two labels.

This also shows how broad YouTube’s base of publishers is, since only two represent more than 1% of the daily share of monetized views.