I.B. Bad Slices Into the Core of Apple's Musical Makeover

Music Publishers Sue XM Over Device

It's Half Empty, Folks

Bulletin Board

Reprinted with permission from Hits Magazine

March 26, 2007

WINDS OF CHANGE: There's an imminent shift in leverage between the content holders and Apple, as the Big Four's deals with iTunes Music Store come up for renewal at the end of April. In the radical reshaping of music retail during the last half-decade, iTunes has morphed from an upstart into a major player, with the online power now accounting for 7-8% of U.S. music sales, putting it behind only Wal-Mart (25%) Best Buy and Target (13% each), and neck-and-neck with Trans World (7%). Apple has been wildly successful in its use of music to re-brand the company, as its market cap has exploded from $8 billion to $80 billion since the introduction of the iPod in October 2001 (the iTunes Music Store opened for business in April 2003). Over that time, Apple's momentum has continued unabated, as iTunes passed the 1 billion-download plateau in February 2006, hit 1.5 billion last September and is now closing in on 2 billion, while commanding north of 75% of online sales... Unlike its terrestrial rivals, Apple doesn't make price-and-positioning deals, although, as The Wall Street Journal pointed out earlier this month, there's intense competition for placement on the iTunes homepage, which can be had by playing ball with Apple and giving it what it demands, starting with exclusive content. By the same token, not playing ball generally leads to a company being penalized... New deals will soon be attempted by the content holders to change the current terms of engagement, with wonderers wondering what the majors can do to level the playing field, i.e., breaking Apple's near-monopoly in the online realm. Can they empower other online retailers by giving them the range of exclusives that iTunes now gets from the labels? Can they shift their primary focus to the mobile sector of the business, which many foresee as having the biggest upside in the long term? In any case, as long as iTunes is generating those kinds of numbers, Apple will continue to be a force to be reckoned with, especially at a time of transition from the CD to Internet delivery. At the same time, conversations are taking place inside every record company about the possible removal of copy protection—a notion that was viewed as heretical a year ago, but is now gaining traction out of a growing belief that DRM-free downloads will increase online revenues while at the same time loosening Apple's stranglehold on the market via the interoperability of song files... A concept that's taking hold in the artist community is the album-by-album deal pioneered by Prince and now being utilized by acts ranging from the White Stripes to Paul McCartney, as numerous well-established acts whose deals are up contemplate a similar course of action. There's much talk at present about coveted free agent Radiohead, which some believe will opt for the one-off approach, while others predict the band will choose to stay with EMI out of a strong relationship with the company and U.K. chief Tony Wadsworth.... The indie sector continues to gain momentum, as Sub Pop's Shins and Merge's Arcade Fire both debuted at #2 in this otherwise lamentable quarter, and expectations are high for the Arctic Monkeys' follow-up on Domino, coming next month. Not surprisingly, the majors' appetite for gobbling up available indies for use as farm clubs is voracious; Warner Music and UMG have been particularly acquisitive of late, snagging Roadrunner and Octone, respectively. Among potential acquisition targets are Metal Blade, Equal Vision, Epitaph, Razor & Tie, Broken Bow and Wind-up... Whereas in the past the indies simply couldn't compete with the majors in controlling the primary avenues of exposure, that no longer holds true in the Internet age. Others, however, view today's indie resurgence as cyclical, the contemporary equivalent of the mid-'60s, when indies like Atlantic, Motown, Island and A&M showed they could sign cool acts and sell tonnage with all the aplomb of the big boys... Longtime Sony Music gunslinger Michele Anthony has started a new venture said to be a consulting firm for artists and/or artist managers... With her new album, Introducing..., streeting this week, Virgin's Joss Stone is attempting to manage herself, which few other artists have done successfully. The soon-to-be 20-year-old follows in the footsteps of such acts as Bon Jovi and Prince, who have worked in the past with managers on a for-hire basis, without percentages. Said one skeptical insider, "Would you perform brain surgery on yourself?" Names in the Rumor Mill: Zach Horowitz, Rick Rubin, Simon Renshaw, Nickelback, Chris Hufford and Thomas Hesse.

HITS magazine is the most powerful information vehicle in the music industry, and is read religiously by all the top executives and everyone else.

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Reprinted with permission from Hits Magazine

March 22, 2007

EMI Music Publishing, Warner/Chappell Music, Sony/ATV, Universal Music Publishing and BMG Music Publishing have sued XM Satellite Radio over the XM + MP3 service.

The publishers seek to "put an end to the pervasive and willful copyright infringement" of their compositions distributed over the service to "iPod-like devices controlled by XM."

"We've read that XM paid Oprah $55 million to develop content," says David Israelite, President/CEO of the National Music Publishers' Assn. "Yet they haven't paid one penny to creators of music for copies on these devices."

In its role as a radio broadcaster, XM claims it licenses its music from performing rights organizations ASCAP, BMI and SESAC. "The lawsuit filed by the NMPA is a negotiating tactic to gain an advantage in our ongoing business discussions," read an XM statement. "XM pays royalties to writers and composers who are also compensated by our device manufacturers. We are confident that the lawsuit is without merit and that we will prevail."

The publishers claim that the service delivers perfect digital copies of songs for its customers to copy to the devices, allowing subscribers to replay them for as long as they pay a monthly fee. Publishers insist that XM has not licensed the right to reproduce or distribute the recorded compositions.

The suit, filed in the federal District Court in New York, comes one month after a judge in the same court handed major labels a partial victory in their case against XM over the service. In January, federal District Court Judge Deborah Batts denied XM's attempt to dismiss the labels' lawsuit. The two suits could be joined into one, so the same judge would preside over both claims.

Sirius Satellite Radio, part of a proposed $13 billion merger with XM, settled similar claims with labels over its S50 portable device last year. While Sirius has not yet settled with publishers, Israelite expects negotiations to resume soon.

Although Universal Music Publishing Group and BMG Music Publishing are not named as plaintiffs, they are part of the suit since it was filed by the NMPA.

The publishers seek a maximum $150,000 per infringement, listing in the complaint more than 200 songs as a "small fraction" of the infringed compositions.

"We don't want to hold back the technology, nor prevent consumers' choice of how to acquire music," says Israelite. "But we must be sure that our creators are compensated properly when copies of their music are made."

HITS magazine is the most powerful information vehicle in the music industry, and is read religiously by all the top executives and everyone else.

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Reprinted with permission from Hits Magazine

March 21, 2007

With the quarter-pole of the year in sight, Nielsen SoundScan continues to insist things aren't so bad... even though common sense tells you it's getting worse, not better.

The good folks who track sales are insisting that they have recorded more individual music purchases than ever in its history at the quarter-pole of 2007.

If you include all album and individual digital track sales as single transactions, what the good folks at Nielsen are calling "Overall Consumer Music Purchase Decisions" are up 19%, with buyers making more than 46 million more of them than last year.

Well, whoop-de-do.

Other factoids to mull:

Consumers have purchased 288 million individual digital tracks vs. 242 million at this time last year.

Overall Album purchases, including Track Equivalent Albums (total # of Digital track purchases divided by 10, in order to provide a like-for-like comparison with traditional Album purchases) are down 10% this year to 118 million vs. 131 million last year.

Sales of physical CDs have decreased 20% over last year, from 112 million in 2006 to 89 million this year.

CD sales account for 90% of Traditional Album sales (an Album purchased in its entirety, whether physical or digital).

Sales of Digital Albums have increased 100% over last year. Digital Album sales account for 10% of Traditional Album sales.

Sales of Individual Digital Tracks have increased 54% over last year.

We now return you to your regularly scheduled depression.

HITS magazine is the most powerful information vehicle in the music industry, and is read religiously by all the top executives and everyone else.

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By Kenny Kerner

Norah Jones will be touring this spring in support of her latest Blue Note CD, Not Too Late. Tour dates will commence in Wallingford, Connecticut, on April 13 and conclude May 12 in Montreal, Canada. Jones will also appear at Jazz Fest in New Orleans on April 28.

Have you taken a look at the list of guest artists appearing on Timbaland’s new Shock Value CD? How does this grab ya: Justin Timberlake, Fall Out Boy, Kerri Hilson, Jay-Z, Snoop Dogg, the Hives, and Nelly Furtado.

The lukewarm 1980 film, Xanadu, which starred Olivia Newton-John and Gene Kelly and yielded a double-platinum album with music from ELO, Cliff Richard, and the Tubes, is moving to Broadway’s Helen Hayes Theatre. Previews will begin in May. Rumor has it that Jane Krakowski and Ben Vereen will co-star and ELO will contribute their hit song, “Evil Woman.”

MTV recently cut some 250 jobs in a cost-cutting effort and to invest money in new technologies—namely new digital businesses and networks. Boy, I remember the day when you could spend hours at a time just enjoying music videos.

Looks like the RIAA is still on the prowl for past and present illegal downloading considering the flurry of recent lawsuits they’ve filed. I’m not sure they will ever be able to put an end to it.

One of the joys of watching Tony Shalhoub as detective Adrian Monk every week is the show’s theme song written and performed by Randy Newman. Speaking about good television, check out Gene Simmons’ Family Jewels for reality TV at its best. This show is funny, entertaining, and gives you plenty of insight into why Simmons is one of the brightest minds in business today!

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