Fixations on Facebook

If your company is facing tight margins and low profitability, as many are now, then how can you accept any work distractions that drain your overall productivity?

- Rebecca Wettemann, vice president of research for Nucleus Research, an internet technology research firm

In Sharon Gaudin, "Facebook Use Cuts Productivity at Work," Computerworld, July 22, 2009

In a survey of 237 employees of companies that don't restrict Facebook in the workplace, Nucleus found that 77% do in fact use it during work hours. 87% of those said they had no clear business reason for using the site. Separately, an Ohio State University found that "college students who use Facebook spend less time studying and have lower grades than students who don't use the popular social networking site."

You would think that these findings along with Nielsen’s assertion that “people spend more time on Facebook than any on other Web site” would make Facebook by far the wealthiest place on the web (maybe on the planet) from advertising money. That spot still belongs to Google, for interesting reasons. One of them is that advertisers worry that people are blind to ads when using social media. In that connection, an advertising executive at a conference asked rhetorically why anyone would want to see an ad when she was composing a note breaking up with her boyfriend.

Are Ringtones a Public Performance?

A finding that consumers infringe the public performance right each time their phones ring in public threatens to stigmatize millions of consumers as lawbreakers.

- Digital rights organizations Electronic Frontier Foundation, Center for Democracy & Technology and Public Knowledge

In Wendy Davis, "ASCAP Strikes Sour Chord With Consumer Advocates," Online Media Daily, July 6, 2009


The Electronic Frontier Foundation, Center for Democracy & Technology and Public Knowledge have together filed papers asking a Federal district court in New York City to rule against the American Society of Composers and Publishers (ASCAP). ASCAP was founded in 1914 to collect money--"licensing fees"--for its members whose copyrighted musical compositions are performed in public, including on radio and in theaters. In recent years, ASCAP has taken the initiative to collect licensing fees in digital media such as the internet. Now the organization is arguing that it is entitled to licensing fees for ringtones because, it says, the playing of ringtones is a "public performance." It wants AT&T to pay the fee for the ringtones it sells to its customers.

The Electronic Frontier Foundation, Center for Democracy & Technology and Public Knowledge reject ASCAP's argument about the public nature of a mobile phone's ring, comparing it to a person playing a CD in a car with the window down. The group notes too, that if the court forces AT&T to pay, the charges will be extended to consumers.

The Fall of the Large Retail Music Store

Unfortunately the large retail music store is a dinosaur. It does matter because it was also a social gathering space, and that's one thing that buying music online lacks.

- Tony Beliech, a former Virgin Megastore employee

In Ben Sisario, "Retailing Era Closes With Music Megastore," New York Times, June 15, 2009

The real estate firms that own the last of the large record stores in New York City have determined that the land is worth far more than the store sales are worth. They are consequently shutting the store and leasing the location to a fashion chain. Mundane as this reason for closing is, it does reflect the larger trend away from CDs and other physical music recordings. "From the industry's peak in 2000 -- when some 785 million albums were sold -- until the end of 2008, album sales fell 45 percent, according to Nielsen SoundScan. Even with the rise of iTunes and other online outlets, however, CDs have remained consumers' format of choice, though that advantage is slipping. As recently as 2006, CDs accounted for more than 90 percent of album sales. Last year that proportion dropped to 84 percent, and so far in 2009 it is 77 percent."

There are also still many small music stores in New York City, some even still selling vinyl records. Most album sales today are made at chains such as Walmart and Best Buy; FYE is also a factor. ''The Titanic that is physical media started slowly sinking in 2000,'' said Michael McGuire, an analyst with Gartner, a market research firm, when asked about Virgin. ''Certainly this is a traumatic event for those who worked there, but it's an expected product of the digital transition.''

Can Hosting Illegal Music Links Be Legal?

Defendants deliberately refuse to take any meaningful steps to deter the rampant infringement on their Web sites, even though they have the ability to do so.

- EMI, in a lawsuit against the SeeqPod and Favtape music sites

In Wendy Davis, "EMI Sues Music Search Engine, On-Demand Site," Online Media Daily, February 25, 2009

The record label EMI is suing music search engine SeeqPod, music-on-demand site Favtape, and the companies' investors for copyright infringement. EMI says that the two are helping consumers to procure copyrighted music that is circulating on the web illegally. The activities of the sites, however, raise difficult issues regarding the definition of copyright infringement. According to the Digital Millennium Copyright Act's, even websites that host materials found to be violating copyright are not liable if they take off the material as soon as they find out. Courts have tended to safe harbor provisions might protect even companies that host infringing material from liability, provided they remove it in response to takedown requests. Links to unlawful material would also seem to be exempt until the firms posting the links are notified they should not be there.

The record label's executives contend, however, that SeeqPod and Favtape know that many of their links are to illegally versions of songs, and that this knowledge should make what they are doing illegal. They further contend that sites that legally license the label's music are being harmed by the existence of Seeq and Favtape.

SeeqPod already faces a separate copyright lawsuit by Warner Music, filed in January 2008. Both cases raise an important issue that will help shape the ability of the music labels to control their music online.

The RIAA's Next Step?

Perhaps we have a chance to rebuild the music business after a period of tremendous looting.

- Rick Carnes, president, songwriters Guild of America

In Greg Sandoval, "Sources: AT&T, Comcast may help RIAA foil piracy," CNet.com, January 28, 2009

Reliable rumors are circulating that AT&T and Comcast, two of the nation's largest Internet service providers, will be among a group of internet service providers (ISPs) that help the Recording Industry Association of Amera (RIAA) to battle illegal file sharing. The RIAA is a lobying group that represents the four largest recording companies. It said last month that it would no longer battle piracy by filing lawsuits against individuals. This approach through the ISPs may represent their new tack.

The approach would involve the RIAA's telling the ISP to send a presumed copyright violator a "take-down notice"--a request that the person stop offering music files for uploading onto the internet. If the person doesn't listen by the third notice, the ISP would stop the person's internet connection. "The entertainment industry has been trying to get laws passed throughout the world that would force ISPs to implement a 'three strikes' policy."

No word has emerged so far about what the music industry would give ISPs in return for their circulation of the notices and for pulling subscription-paying customers off their services. One model may be found in Disney's relation with Verizon. In return for sending the take-down notices, Verizon got permission to transmit twelve Disney TV channels over its broaband (FiOS) network.

Profiting from Internet Radio is Tough

It's a real shame because Yahoo was such a pioneer in this field. It should serve as a cautionary tale of what can happen when copyright holders want too much money.

- Tim Westergren, founder and chief strategy officer of the Pandora web music service

In Michael Liedtke, "Rising royalties send Yahoo's Launchcast to CBS," Associated Press via The Industry Standard, December 4, 2008

Yahoo Launchcast is the second major music website this year to turn to CBS for streaming its internet radio services and the ads connected to them. AOL Radio, owned by Time Warner Inc., hooked up with CBS in June, 2008. Both Yahoo and AOL were responding to a March 2007 decision by the U.S. Copyright Royalty Board that raised the royalties for music streamed over online radio. "That aided the music industry, which is desperate to offset steadily declining revenue from compact disc sales, but it meant by some estimates that royalties could eat 70 percent of Internet radio stations' revenue." Yahoo's executives have also been trying to cut costs substantially in the face of revenue shortfalls.

CBS Radio can afford to carry this type of streaming despite the higher royalty rates for two reasons. One is that some of its internet radio channels steam news and sports-talk formats that attract advertising put do not have to pay music royalities. Launchcast's music-only approach, playing News and sports-talk stations don't have to pay the higher rates because they don't play music. The second reason is that CBS executives believe that they can target ads to listeners better than Launchcast could--based on ZIP codes--and that this ability will help them garner more advertising money while playing music.

Many internet streaming companies, including much-acclaimed Pandora, are under strong financial pressure. Clearly, as Tim Westergren suggests, the Royalty Board's ruling has made a web filled with a huge number of independent music streamers a thing of the past.

Does MySpace Music Point to the Future of the Music Industry?

If this works, then that is a good statement for the future of the music business. And if it doesn’t, then it tells where the industry is going. In other words, this is a must-win move for the record labels, who are increasingly looks hapless and, well, unable to deal with change.

- Om Malik, media-industry blogger

In Om Malik, "The Fact & Fiction of MySpace Music, Gigaom, September 24, 2008

On September 24, MySpace, the social-networking site owned by News Corp, introduced a service that lets users listen to streaming audio for free. They can also purchase song downloads, and make playlists. Four of the five major music companies (EMY, Warner Music, Universal Music, and Sony BMG) are on board in this joint venture with MySpace (EMI so far is missing), with the streaming part supported through advertising.

For MySpace, the new business is an attempt to derive more revenue from its site. Although it has about 120 million visitors to its site, MySpace has not been getting the amount of advertising this number would suggest. An important reason is that many advertisers don't want to take the chance of putting their messages next to lewd photos or writings put up by MySpace members. This new sub-site will, the firm hopes, provide a safer haven for commercial messages.

For the major music firms, MySpace Music represents yet another hope for finding revenue during a period in which CD sales are declining, piracy is still rampent, and Apple's iTunes, though successful, is not giving them the kinds of profits they want. Although hope runs high for great success among major recording-firm executives, Om Malik notes that his discussion with people in the record business, particularly among independent labels, was more sobering. He quotes MySpace's chief operating officer, Amit Kapur, as having told the Wall Street Journal, "We’re not only going to be [the music firms'] home on the Web…We’re going to be the place they make a living.” Malik comments, "Perhaps Kapur is right, and as one of our readers pointed out, they will be able to generate a lot of revenue through ticket sales and merchandise. But I wonder how many ways that revenue will be sliced and how much will actually end up in an artist’s pocket. What do you guys think?"

Sony Buys All of Sony BMG

It’s a less risky business. The advent of the cellphone as a conveyor of music globally takes away a lot of the risk.

-Howard Stringer, chairman of Sony Corporation

In Mark Landler, "Sony and BMG End Their Partnership in Music," New York Times, August 6, 2008

Sony and Bertelsmans recently announced they will disband their four-year-old joint music venture, Sony BMG. Bertelsmann decided that the recording business would continue to tank and that the value it had in the venture would continue to decline, so it sold its stake to Sony for $900 miillion. Sony accepted the gamble of owning the recording company because its executives believe that the purchase of of music through cell phones and Sony's PlayStation Network will bring in stable revenues despite internet piracy. Also building revenues would be increased music sales in huge markets such as China and India, Stringer said.

For its part, Bertlesmann seems to be turning away from consumer media to invest in new service businesses such as education. Last month, the company sold its North American book and record clubs to a private investment firm. Bertelsmann did, however, keep one part of its music legacy: its administration of rights of European musical artists, a business that generates a small amount for such a big company--less than $20 million a year in sales. To Bertelsmann executives, though, artists rights is one area of the music industry with decent prospects, and one that fits with Bertelsmann's growing emphasis on service companies.

--> See chart in article: Share of US music album sales, 2008 -to date

Singer Chris Brown's Product Placement

[B]y the time the new jingle came out, it was already seeded properly within popular culture.

-Steve Stoute, chief executive of Translation Advertising

In Ethan Smith and Julie Jargon, "Chew on This: Hit Song Is a Gum Jingle," Wall Street Journal, July 28, 2008

Stoute is a former senior executive at Interscope Records. He is now the chief executive of Translation Advertising, which is a unit of Interpublic, the agency holding company. One of Stout's goals for Translation is to use music to support the aims of clients. In 2003, for example, he hired Justin Timberlake to write and record a song for McDonald's that expressed its "Im Lovin It" theme. The Timberlake song, though, was never released as a recording. In 2007, as part of a promotion for the Wrigley gum company, Stout engineered a new wrinkle. He enlisted R&B singer Chris Brown to write a melody that could also be used as a jingle for the client Doublemint gum ( the favorite Wrigley gum among African Americans). He asked to write lyrics for a recorded version of the song and the jingle.

Jive Records released the recording in 2007, and it became a top-ten hit. Only the phrase "double your pleasure, double your fun" would have given away the connection to Doublemint; that was its longtime slogan. Nevertheless, Translation and Wrigley kept quiet about the connection between the song and the gum. As Stout suggest, they wanted the song to become part of the target audience's life. Then, when new gum commercial echoed the song with new lyrics, the commercials would reinforce the song and the song would reinforce the commercial. A few record company executives seemed concerned that the song was created for advertisers without telling the audience. But they said they went ahead with its release because "the song was so potent and strong. That overruled us being maybe a little hesitant."

Translation and Wrigley undoubtedly see this as a triumph of a new form of product placement. In an where recording artists are industry struggling to find new ways to make money from their songs, and where marketers are struggling to find ways to get target audiences to connect emtionally with their brands, it is not hard to predict that we will see attempts to copy and extend what Chris Brown and Translation have done.

Gossip Girl's Trend-Making Machine

We tried to launch trends from the get-go.

-Eric Daman, costume designer Gossip Girl

In Ruth La Ferla, "Forget Gossip, Girl; The Buzz is About Clothes," The New York Times, July 8, 2008

The CW Network's Gossip Girl, which centers on the machinations of young ladies in a Manhattan private school, is popular with teenage girls. Although its TV ratings are only middling (though some argue that many more people view it online), the show is having a broad impact on the retail marketplace. "Merchants, designers and trend consultants say that Gossip Girl, which is in summer reruns on the CW network before returning Sept. 1, just in time for back-to-school shopping, is one of the biggest influences on how young women spend. Fans stride into boutiques bearing magazine tear sheets that feature members of the cast and ask for their exact outfits. Or they order scoop-neck tops and hobo bags by following e-commerce links from the show’s Web site." According to Daman, this type of influence--along with the product-placement cash that comes with it--is what the program's creators intended from the start. Daman had worked previously on Sex and the City. Gossip Girls brings a similar materialistic sensibility to its script and screen. The Times writer treats all this quite benignly, quoting someone who tosses it off as "eye candy." But many of the items are quite expensive, and at a time when many US families are suffering financially one wonders what kinds of tensions these induced desires cause. Clearly, too, the program is another example, of the blanket commodification of television programming.

Monetizing Music Through Sponsorship

We know that with both Gen X and Gen Y consumers, music is their No. 1 passion point. But we also know that they don’t always want to buy it. .... People want content to be free. With that in mind, we still need to monetize it. So, partnering with a brand is an interesting way to do that.

-Brad Gelfond, VP-brand partnerships and asset development at Warner Bros. Records

The comment reflects how the recording industry is looking for new business models.

In Claude Brodesser-Akner "Ashley Tisdale's Deodorant Promos for Unilever Show Rules Have Changed," Advertising Age, April 17, 2008.