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Music Businesses Cloud DRM Media Apple

That Digital Music Service You Love Is a Terrible Business (fortune.com) 240

An anonymous Slashdot reader quotes an article from Fortune: Rdio goes bankrupt, Pandora hangs out a 'For Sale' sign and then gets rid of its CEO, artists and labels ramp up their criticism of YouTube. Now we have Tidal in acquisition talks with Apple, while Spotify complains about Apple treating it unfairly... the digital music business is becoming an industry in which only a truly massive company with huge scale and deep pockets can hope to compete... Rdio went bankrupt last year in large part because it couldn't afford to make the licensing payments the record industry requires of streaming services. Deezer, a European service, postponed a planned initial public offering partly because its business is financially shaky for the same reason... [Rhapsody] is still racking up massive losses... Spotify has found it almost impossible to make money, primarily because of onerous licensing payments...

[A]ll the available evidence seems to show that the digital-music business, at least the way it is currently structured, simply isn't economic. The only way for anyone to even come close to making it work is to make it part of a much larger company, like Apple or Amazon or Google. That way they can absorb the losses, they have the heft to negotiate with the record industry, and they can find synergies with their other businesses. In other words, music as a standalone business appears to be dead, or at least on life support.

The article links to an essay by a former eMusic CEO arguing high royalty rates make it impossible to have a profitable business, and the music industry "buried more than 150 startups -- now they are left to dance with the giants."
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That Digital Music Service You Love Is a Terrible Business

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  • Uhh... (Score:4, Insightful)

    by ShooterNeo ( 555040 ) on Sunday July 03, 2016 @05:37PM (#52440381)

    So it seems like there's 2 problems here :

    1. These "services" all offer an awful lot of service for free, but have to pay per song played. This is a guaranteed trip to the poorhouse.

    2. Those payments per song? They don't go down with scale or time. Google and other internet companies, their cost of delivering service goes down with technology advances and sheer size. It costs google a lot less to deliver gmail service or web searches than when they started.

    The only way this can work is if the record labels - who own everything and do not have to pay themselves - offer a service. Kind of how all of the free porn sites who also own most of the porn producers are owned by the same company.

    • Re:Uhh... (Score:4, Interesting)

      by Anonymous Coward on Sunday July 03, 2016 @06:11PM (#52440547)

      The better way this can work is reset copyright back to its original length of time - 14 years, and also set maximum royalties that they can charge for the privilege of their copyright. The industry might suffer a bit (boo hoo), but the artists will come out ahead since self publishing is much easier now. Their royalties would climb dramatically without the industry skimming so much.

      Of course the best way is to abolish copyright altogether, and artists get paid for performing their work like the rest of us. Getting paid when a machine plays a recording is ludicrous!

      • Re:Uhh... (Score:4, Insightful)

        by CohibaVancouver ( 864662 ) on Sunday July 03, 2016 @06:30PM (#52440605)

        Of course the best way is to abolish copyright altogether, and artists get paid for performing their work like the rest of us. Getting paid when a machine plays a recording is ludicrous!

        Hey Anonymous Coward, quick question. My brother is an author. How does he get paid for 'performing' his work?

        • Re:Uhh... (Score:5, Funny)

          by MightyYar ( 622222 ) on Sunday July 03, 2016 @06:54PM (#52440685)

          The topic was music, but maybe he can sell hats.

          • Re:Uhh... (Score:5, Insightful)

            by mwvdlee ( 775178 ) on Monday July 04, 2016 @02:23AM (#52441651) Homepage

            Yeah, nobody actually WRITES music, it's just people on stage singing whatever and playing random notes.

            • Yeah, nobody actually WRITES music, it's just people on stage singing whatever and playing random notes.

              Not really - it only sounds that way.

            • Did you not read the comment that I replied to? His brother is an author, and he cannot get paid for performing his work. A musician can certainly get paid for performing his work. Unless you are arguing that he meant "music author", in which case - nice try.

              In a vain attempt to move the discussion forward, I think perhaps ending copyrights for non-commercial uses would give enough monopoly money to authors while ending the undue burden copyright places on the populace at large. Let the booksellers and Holl

              • Did you not read the comment that I replied to? His brother is an author, and he cannot get paid for performing his work. A musician can certainly get paid for performing his work.

                Do you actually believe a large number of performers write their own music? Man if you heard any of the original creators of many works sing you'll be booing them off the stage, not asking them to perform.

        • Comment removed based on user account deletion
          • So instead of allow authors and alike to treat their job as "normal" as any regular job, they should throw themselves at the mercy of a handful of Gates and Bezos and pray their work isn't insulting or too critical for their royal highness.

            Well, yes, it worked for a while and got us the Sixtine Chapel and similar, but that's not really the independence any artist should be looking for.

            So the basic idea of making "art" a tradeable good so that a composer or author can live from selling his products like any

          • Hey Anonymous Coward, quick question. My brother is an author. How does he get paid for 'performing' his work?

            The same way artists through the ages have earned a living: Through the patronage of wealthy benefactors.

            For musicians, before recording, one way you made money was to charge for live performances. We are coming full circle. Musician who are talented make good money performing live. Recorded music is an advertisement, and cost a lot less to produce and distribute these days.

        • My brother is an author. How does he get paid for 'performing' his work?

          He could go to Kickstarter and post his ideas, and only write the actual work when the funding is provided. Many authors have done that. I have chipped in to fund a few books that I was interested in. All were eventually published (either on paper or PDF) and I was happy with the result.

        • Hey Anonymous Coward, quick question. My brother is an author. How does he get paid for 'performing' his work?

          Does your brother expect to be making money from his writing 30 years after he's dead? Because Spotify is still paying royalties for works where absolutely everyone involved in the recording has been dead that long.

          If you reform copyrights, you'll have better, more plentiful music.

          • by mwvdlee ( 775178 )

            If you reform copyrights, you'll have better, more plentiful music.

            And you'd have additional incentive for living artists to continue making new works, which is what copyright was intended for after all.

        • by dryeo ( 100693 )

          Another way is serialization. Release a chapter and then when certain funding goals are met, release another chapter. If it's a good book, the funding goal can increase with each chapter released. Authours used to do similar except releasing in a magazine or such.
          There's also things like book signings, release a limited amount of signed books, can even print up personalized copies.
          Personally I think it would be better to go back to the original 14+14 copyright term and make the authour make a token effort t

          • Very few works actually make money and even fewer make money for more then a decade. Good authours would still make money, the best just wouldn't be quite as filthy rich.

            Aaaaahahahaha filthy rich authors! hee hee good joke!

            Uh

            you were joking, right?

            Very, very few authors are even wealthy, let alone filthy rich. You get the very occasional one like J.K. Rowling or inexplicably E. L. James, but for the vast majority of authors, even really good ones, writing is not a well paid profession.

            And if you're not one

        • Of course the best way is to abolish copyright altogether, and artists get paid for performing their work like the rest of us. Getting paid when a machine plays a recording is ludicrous!

          Hey Anonymous Coward, quick question. My brother is an author. How does he get paid for 'performing' his work?

          By selling books and writing new ones? Do you think he should be paid every time someone reads a chapter of it?

        • Step 1: Run MIDI software in the background to convert keystrokes into MIDI instructions
          Step 2: Run VST to turn MIDI instructions into musical tones
          Step 3: ???
          Step 4: Profit
    • this is why apple is buying Tidal
      • by PRMan ( 959735 )
        Apple should buy Disney instead. And Google should buy Universal (because Sony and Comcast just don't go along with "Don't be evil"). So, that leaves Microsoft to buy Comcast. Sounds like a perfect fit. Then they can fire the MAFIAA and make the world a wonderful place.
        • by dgatwood ( 11270 )
          I've been saying that Apple should buy Disney for years. Apple wants to stream their shows, and Disney/ABC wants to bundle things to prop up their sports franchise, ESPN, which Apple doesn't want to force upon everybody. Apple could buy them pretty easily, fire the upper management, make the deals, and spin them off again to avoid becoming another Sony.
          • by rtb61 ( 674572 )

            Reality is they are all fucked. Too much old content preserved and available to compete against new content. For some reason the corporate delusion is people will continue to buy content like cheetos no matter how much content they already, think what the cheetos market would be if they could be recovered and reused infinitely.

            Sure like the sick adults they are, they can target minors for their pocket money, with new content, which the minors are fooled into believing they pathetic losers if they do not

    • by tepples ( 727027 )

      The only way this can work is if the record labels - who own everything and do not have to pay themselves - offer a service.

      One service offered by labels is relationships with vehicular listening platforms that do not require a cellular data subscription, namely FM stations and SiriusXM. (SiriusXM requires a subscription, but the annual rate is less than that of a typical postpaid cellular data plan.)

      I make an educated guess that another such service is familiarity with a large repertoire of music. Clearance personnel in a label and/or its affiliated music publisher might help review your songs to catch having accidentally copie

    • > 1. These "services" all offer an awful lot of service for free, but have to pay per song played.

      How come there is no free (pirate) P2P music streaming service, or at least no popular one? Build it on top of the existing torrent network or something similar so you don't have to start from scratch, add a distributed database so you know where each song is, and tada... is it that difficult?

    • The only way this can work is if the record labels - who own everything and do not have to pay themselves - offer a service.

      I don't get why Apple doesn't just buy the 4 major labels and be done with it. Seriously, Apple has more in spare change than the value of the entire music industry combined.

  • So what? Most dot-com businesses are losing tons of money these days. Most e-commerce is losing money hand over fist. It seems that investors are fine throwing money at unprofitable businesses for some reason.
    • By calling them dot-coms and using the phrase e-commerce, you sounds like a throwback to the 90s! On the other hand, it fits really well. So... yeah.

    • by Touvan ( 868256 )

      Exactly this. Netflix, a similar business, had figured out they needed leverage, so they started to produce their own content to draw a user base. They use that to negotiate more favorable deals with content providers. Valve did the same with Steam (though they started with their own content out of the gate). Nintendo did the same ages ago, etc.

      1. Stop whining.
      2. Get a better vision and understanding of business and competition.
      3. Profit!

  • by skaag ( 206358 ) on Sunday July 03, 2016 @05:43PM (#52440417) Homepage Journal

    Instead of working closely with the smaller companies to create a diverse and competitive market, their predatory (legal) and greedy (bad business) tactics caused the shutdown of many music startups, angering music lovers, and ultimately, they are shooting themselves in the foot because when only have Apple and Amazon to deal with, they will:

    1. Negotiate terms that leave the music industry with lower profits

    2. Eventually launch their own music labels, mimicking what Netflix did with Movies & TV series, to create further leverage

  • by Anonymous Coward

    Easy to pirate, easy to store. No excuse for people to not already have a large personal music collection.

  • That business where Pandora lets people stream music for free isn't making much money? Holy crap!

    • That business where Pandora lets people stream music for free isn't making much money? Holy crap!

      Remember that business where companies stream video programming over the airwaves ... It seems to be doing OK.

      • It's paid for by a robust advertising network. Same for radio. Pandora doesn't have that.
        • Pandora doesn't have that.

          Pandora has 2 options: 1. Paid subscription, 2. Ad supported.

          So, yes, Pandora does have ads.

  • by Lord Crc ( 151920 ) on Sunday July 03, 2016 @06:25PM (#52440587)

    What's so terrible about Bandcamp (which is the digital music service I love)?

    They seem to be doing pretty good [bandcamp.com], they're growing as well as being profitable.

    Best part (IMO) is that they also have lots of artists saying they appreciate Bandcamp. Here are some comments from that blog post:

    Bandcamp is the greatest platform for independent artists. I am glad to be a part of it, without it getting new fans would be difficult.

    We release small independent music compilations since three years here on BC. We worked together with more than 200 artists in these years. The most of them publish their music on BC too. I can confirm: More people buy the music on BC. That is what the musicians say in talks. And even our pay what you want releases have a really good perfomance.

    I've bought a lot of really great music on Bandcamp, the artists like it. So yeah, what's so terrible again?

  • by DerekLyons ( 302214 ) <fairwater.gmail@com> on Sunday July 03, 2016 @06:47PM (#52440659) Homepage

    When examining whether a business is, or can become, profitable - you can't just look at expenses. You have to look at the income side too.

    The submitter, and the linked articles, signally fail to do so.

    • by Kjella ( 173770 )

      When examining whether a business is, or can become, profitable - you can't just look at expenses. You have to look at the income side too. The submitter, and the linked articles, signally fail to do so.

      With physical goods the price will rise with general costs to maintain a margin because consumers have to buy their groceries somewhere. For digital music consumers could always go back to piracy, I'm pretty sure the digital music companies have already found the sweet spot for what people will pay for convenience.

  • and they industry has always been awful except for a few people at the very, very top. This is new how? Outside of socialism and basic income I don't see a way around this. It's like anything where you've got people who do it because they love it. You can pay them a lot less than their actually generating.
  • Subscribed for years, they died a few months ago. Odd thing was, my favorite channels were the old radio dramas from the 30s and 40s, and the attempts to revive the form in recent years.

    Had a couple prog rock channels I'd listen to as well, but the old time radio seemed to be my go to thing.
  • by khchung ( 462899 ) on Sunday July 03, 2016 @08:52PM (#52441021) Journal

    Posting to undo a mis-clicked mod.

  • by evilviper ( 135110 ) on Sunday July 03, 2016 @09:28PM (#52441137) Journal

    Introducing the EvilViper Streaming Music Service.

    Front-end looks just like Pandora/iHeartRadio/etc. But on the back-end, it searches all the MP3s on your device to see if you already locally have the song it was going to play. If so, file is played locally, not streamed. No bandwidth is used, and no royalties need to be paid. Customers appreciate the superior sound quality, less cellular data usage, and fewer pauses between songs.

    In addition, when you like/thumbs-up a song, in the background it is PURCHASED as an MP3 from Amazon or similar. You don't notice the purchase, but you now own the song. Repeated plays cost nothing. If your device is reset, or you use the music service on a different device, the songs you purchased are first downloaded from Amazon and playback resumes.

    The EvilViper Streaming Music Service will also make deals with smaller and independent artists and labels. Those who offer the cheapest terms will see their songs featured more prominently, and repeated more often (until/unless customers vote not to hear them again), at the expense of a little less big-name music, for a big savings.

    • by dwywit ( 1109409 )

      Sign me up!

    • IF:

      * the app had configurable limits for local storage and purchases

      * it started with non-RIAA artists only (yes, painful, but worth it in the long run if you survive)

      * it had a rating system with novelty, similarity, and unique user request frequency per day

      * it cut out Amazon - have your own secured cloud service

      * you charge for a resync (it's only fair, to cover your storage and bandwidth costs), keep the cost low but still profitable. Bandwidth and storage aren't that expensive.

      THEN I think you could h

  • ... and still run by the founder. Magnatune [wikipedia.org] ... I love it and have gigabytes of their music, much of which is regularly played..

  • I've said this all along.
    Say Spotify gets $10 a month from you, they take $5 for themselves and their expenses then they just divide the other $5 up evenly between whatever artists you listened to weighted by number of songs and time. Don't "pay per play" instead "pay what's available". If you only listened to one artist in that month, that artist would get all $5, even if you listened to only one song.

    Then Spotify is simply guaranteed $5 a month, and royalty fees take care of themselves.

  • As an older guy with hundreds of records and CDs who wants to keep building my own library of digital music but doesn't have to pay for songs I don't like to get the ones I want (figure it out), I'd be interested in a service where I pay a minor subscription fee ($10-25/year) for the right to stream an album or two at a time, so I can check out new music that interests me. Then pay maybe 99 cents per song for a decent DRM-free MP3 download for the songs I like and want to keep. A FLAC download for the snobs

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