July 9-10, 2013
San Francisco, CA

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Thom Yorke hates the music industry. When Radiohead released the pay-what-you want In Rainbows in 2007, Yorke’s  goal was nothing less than the complete upheaval of the industry that he was a part of.

Unsurprisingly, little has changed. The Radiohead frontman still isn’t crazy about the music industry, though now it looks like he hates tech companies like Apple and Google just as much.

“They have to keep commodifying things to keep the share price up, but in doing so they have made all content, including music and newspapers, worthless in order to make their billions,” he said in an interview with the Guardian.

In Rainbows left its mark on more than just music.

From anyone else, Yorke’s comments would be panned as the ravings of a disconnected malcontent, but as the frontman of one of best and most innovative bands in the world, Yorke commands a lot of attention.

And he’s right — well, mostly. For Apple, Google, and Amazon, selling music isn’t really about the music at all — it’s about locking people into their ecosystems. The same goes for apps, movies, games, and books — commonly referred to as “content.” All of these media are just subtle variations of bits and bytes, and their statuses as unique art forms tend to take the backseat. (And let’s not even get started with streaming services like Spotify, which take music to an oxygen-like level of commodity.)

Yorke hates this reality and wants things changed, even though the momentum is clearly going the other way. ”I still think [the system] will be undermined in some way. It doesn’t make sense to me,” he said.

Yorke seems resigned, but perhaps he shouldn’t be. Since Radiohead spearheaded the pay-what-you want funding model five years ago, we’ve seen it applied to just about every form of media, including video games and comedy specials. Pay-what-you-want is even core to Bandcamp, where bands often offer their albums for free.

Yorke may be looking for a more revolutionary change in the way music is distributed online, but in many ways that revolution is already here.

Photo remixed via Flickr/opethpainter

July 9-10, 2013
San Francisco, CA

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2012 was a major year for the music industry — and not just because Snoop Dogg changed his name.

First, consider a report released today by market research firm NPD, which says that peer-to-peer music sharing dropped 17 percent last year. The study, which surveyed over 5,000 people, found that 40 percent of respondents said they were illegally downloading less music — or had stopped entirely.

Why? Because free and legal channels like Spotify, Rdio, and Pandora have become so useful that people don’t feel the need to download music anymore, much less pirate it.

But let’s not ignore another reality: The music industry’s attacks on services like Limewire (remember Limewire?) and Megaupload have also played a part in piracy’s decline. Twenty percent of respondents said they stopped downloading music because their favorite source had been taken down or because the spyware and virus factor had become too much to handle.

Coincidentally (or perhaps not), NPD’s report comes on the same day that the International Federation of the Phonographic Industry said that the music industry’s revenue grew .3 percent last year. Obviously, that’s not a significant increase, but it is the first one the music industry has seen since 1999. So while it’s not a major something, it is something. 

But NPD senior vice president Russ Crupnick says that there were many factors that went into the music industry’s slight turnaround last year.

“Whenever you see an industry growing, it’s probably due to a lot of factors — the music itself, better discovery tools, and even the retail environment. They all contribute to the health of industry, and streaming is one important component,” he told me.

Both reports remind me of a 2011 quote from Gabe Newell, the cofounder of video game publisher Valve, who knows a thing or two about being in an industry ravaged by piracy.

One thing that we have learned is that piracy is not a pricing issue. It’s a service issue. The easiest way to stop piracy is not by putting antipiracy technology to work. It’s by giving those people a service that’s better than what they’re receiving from the pirates

Newell was, of course, talking about people pirating games, but considering today’s news, he could have just as easily been taking about music piracy as well.

July 9-10, 2013
San Francisco, CA

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Total global music sales reached $16.5 billion in 2012, up .3 percent, with digital revenues jumping 9 percent.

That’s not a huge move, but given that it’s the first increase in more than a decade, the music industry has a legitimate reason to scream and shout, and let it all out.

“It is hard to remember a year that has begun with such a palpable buzz in the air,” Frances Moore, the CEO of the IFPI (International Federation of the Phonographic Industry) said today in a statement. “The music industry has achieved its best year-on-year performance since 1998. The direction of travel toward growth is clear.”

Just two years ago, Moore said, the major digital music services such as iTunes and Spotify only were in 20 international markets. Now, they’re in over 100 countries, including Brazil, India, and Russia. Digital music sales are clearly where the growth is, and markets as diverse as the U.S., India, Norway, and Sweden, digital revenue has overtaken physical revenue.

Source: IFPI

Global digital music revenue

Music still has a long way to go: digital revenues were 34 percent of the music industries revenues. And they’re growing fairly slowly, too. Digital revenue of $5.6 billion in 2012 is up only about 10 percent from 2011′s $5.1 billion.

But the trend is, finally, up.

And it’s not just downloads. The IFPI says that subscription revenue is up also. In fact, it’s growing quicker than the download business: up 44 percent from 2011. In some countries like Sweden, South Korea, and France, more people subscribe to music than download it, a trend that appears to be catching on in the U.S as well.

Of course, the IFPI says that illegal and pirated songs are still a major roadblock to music industry nirvana. Megaupload figures prominently in this narrative, and the IFPI says that FBI estimates of “damage to the creative industries” by pirating on Megaupload was in the region of a half billion dollars.

All told, the IFPI and its national affiliates found and requested removal of 15.9 million infringing music files in 2012, a process that it says “remains an unsatisfactory and inefficient remedy to tackle massive online infringement.”

All told, however, the music industry is finally going up and to the right in revenue as well as impact, with 68.9 billion legal streams of music in North America alone in 2012, along with 1.6 billion albums sold.

One thing that doesn’t appear in the IFPI’s massive 36-page report?

Any mention of the man who dragged the music industry kicking and screaming into the digital age: Steve Jobs.

Image credit: IFPI

July 9-10, 2013
San Francisco, CA

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Musician Amanda Palmer has managed to raise more than $1 million for a new album through a Kickstarter project, making it the seventh project to break the million-dollar mark in the crowdfunding platform’s history.

For those not familiar with Kickstarter, it’s quickly becoming the way cool projects raise money when the entertainment industry either doesn’t want to take a chance on it or can’t make money off it.

Musicians, artists, gadget engineers, and plenty of other creators can set up a project on Kickstarter with various levels of pledges. People who support the project can then fund it into existence by pledging various amounts of money for one of those levels, such as Palmer did with her forthcoming album.

In addition to being the seventh project to break a million, Palmer’s page is the highest funded Kickstarter music project ever. To give you some perspective, the second-highest-funded music project reached a little more than $200,000.

Palmer, who has a diehard following of fans from her time in the band The Dresden Dolls, among other endeavors, has since deemed the crowdfunding platform as the future of the music business.

Her initial goal of $100,000 was easily reached within a day, and the fundraising finished with a total of $1,192,793. Pledges started at $1, which got you a digital download of the album along with exclusive content, and went all the way up to $10,000. A total of 24,883 people backed the project, with only two people signing up for a $10,000 pledge, which would have Palmer fly out to your home for dinner and paint a portrait of you.

But just because she raised more than $1 million, it doesn’t mean she’s clearing that amount. Quite the contrary, actually.

Before even signing up for the Kickstarter project, Palmer said she had already spent $250,000 on recording the new album. “Terrifying? damn straight,” she writes of the experience in a recent blog post.

Palmer also broke down the line-by-line cost of her project’s offers in (very) rough estimates:

• $150,000 for business management expenses
• $105,000 for 7,000+ high-end CD-books & thank you cards
• $100,000 for 4 to 5 music videos
• $80,000 for 2,000+ art books
• $75,000-$100,000 for Kickstarter and Amazon payment fees
• $30,000 for 1,500+ vinyls & cards
• $30,000 for 100 copies of the Neil Gaiman/Kyle Cassidy photo book
• $30,000 for 300 Arts & Crafts/7-inch packages and vinyls.
• $25,000 for artwork to be sold at the art shows
• $15,000-$20,000 for designers to do various things
• $15,000 for 100 painted turntables
• $10,000 for touring expenses for six cities
• $10,000 for expenses related to 35 house parties

After all these costs (most of which were estimated by Palmer a week before the project’s funding deadline ended), it cuts the Kickstarter project’s total funding considerably — leaving her with $192,793.

“There’s expenses I’m not even TALKING about here: the cost of our new website designers, my full-time staff (I have two: Superkate and Sean), the tour equipment, band costumes, gear cases, stage backdrops, and gazillion other incidentals,” she explains. “The mind boggles.”

The point of her cost breakdown is that, despite shunning the traditional music industry model, the music business is still an actual business with real operating expenses. And while Palmer might end up making nothing on the Kickstarter project, which isn’t her only source of income for the music it helped produce, that doesn’t bother her.

“If I break even on this project, I still see this as a massive win,” she said. “First of all, this Kickstarter and its success is going to open the door for a lot of other artists, especially major-label refugees like me. Paying now for value later is what historically would’ve been a label’s primary purpose. Now YOU are able to bankroll and finance and KEEP CONTROL WITH THE ARTISTS.”

So, what’s next for Palmer? The musician/artist/crowdfunding visionary said she’d run naked through the streets, yelling hallelujah, if the project reached more than a $1 million by May 31. Beyond that, she’s got plenty to keep her busy.

We’ve reached out to her for further comment, and will happily update this post with a response when and if we hear back.

Photo via Amanda Palmer

He co-founded Napster in 1999; a decade and change later, he’s taking on the industry from a new angle as an investor in and board member at Spotify.

Ever since music changed from a physical medium to a digital medium, Parker has been disrupting the space and trying to figure out what shape the record industry might take next. In the past, Parker has said that what Spotify has become lives up to his original vision for Napster.

“I think we’re all trying to figure out what is the ‘next’ music industry, and I think the guys at the record labels are just as confused about that as the rest of us,” Parker told the audience at Web 2.0 Summit in San Francisco yesterday.

A new kind of record label

In the good old days of physical music — LPs, 7-inch singles and cassette tapes — manufacturing, distributing and retailing music took a lot of planning, time and money, Parker noted. With the advent of digital distribution, he said, “Suddenly, one of the primary limitations on the ability to release an unlimited number of artists in a year goes away.”

Distribution isn’t the only roadblock that’s melted away over the past few years. “Look at the fact that promotional methods [such as radio] were extremely limited,” said Parker. “Then, you look at MTV — even more limited … The record labels hated it, because it controlled their destiny.”

However, in today’s brave new world, where kids run around with MP3 players instead of transistor radios, even promoting and collecting music has changed.

“Because of platforms like Spotify, you can consume music, share music, build a collection, without ever having bought the music,” said Parker, whose forays into that territory terrified, enraged and panicked the music industry back in the late 1990s and early 200s.

“You can sample on an unlimited basis. It costs nothing to make each additional copy. And you find out about music primarily through your friends.”

As for finding new music, Parker places a lot of emphasis on Facebook. While he said that Spotify was and is a neutral platform and has the same terms with Facebook as it has with its other digital media partners, he also noted, “Facebook has always been a great promulgator of information … you saw this with video from YouTube, spreading virally. But because of copyright issues, there was no way to enable that same kind of virality for music.

“So the dream with Spotify was to integrate with Facebook so that viral distribution could be brought to the music industry.”

Of course, with digitization and the onset of Internet culture, facets of the business from promotion to A&R (that’s artists and repertoire, the process of finding new bands to sign) have also undergone huge changes. “All of these historic limitations that basically created and defined the dynamics of the record business no longer exist, so all the departments within a record label don’t make sense anymore,” Parker told the Web 2.0 crowd.

A new kind of band

On the flip side of that coin, bands these days have a drastically different experience.

Rather than gigging around town and hoping an A&R rep catches and loves your show, musicians are building up grassroots fanbases online, making and selling their own merchandise and generally finding ways to promote their music with or without help from the music-selling machines within a record label.

Parker equated the old way of picking and promoting “star” acts to pulling back and snapping a rubber band; the intial investment took some time, but once it was released, it flew.

“You could take an artist from zero to number one pretty reliably with a high rate of predictability, and you could do it over and over. Now, it takes a lot to make it,” he said.

“There’s a different process, a different set of rules.”

And for many bands, Parker said, getting things done for yourself is a big part of the new paradigm.

“There’s this DIY, indie notion that you’re the master of your own destiny,” he said. “If you’re not in dire straits and you’re a functional person with a day job, you can pull yourself up by your bootstraps.”

Is disruptive online TV coming next?

Parker said that he spends his time time these days pretty evenly between Spotify and Airtime, a stealth project he’s working on with Napster co-founder Shawn Fanning.

Airtime has received an initial $8.3 million round of institutional funding from major Silicon Valley VC firms and big-name angels. Given the provenance of its co-founders, we’re hardly surprised.

“We can’t talk about what the product does or will do,” said Parker to Web 2.0 Summit attendees.

However, it has been suggested by the local rumor mill that the startup will have something to do with video content. Parker did say, “It’s so annoying that even on-demand TV is so screwed up,” but he didn’t specifically link this statement to his intentions with Airtime.

July 9-10, 2013
San Francisco, CA

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The next big thing for the consumer web could actually come from one of its oldest content verticals: lyrics. Services like RapGenius and TuneWiki are spearheading a new way of publishing and making money from song lyrics.

Lyrics are a massively underestimated market segment, says Tom Lehman, co-founder of RapGenius, one of the progenitors of this “lyrics 2.0″ movement. “People don’t understand how popular lyrics are, and how much people like to read and understand them,” he says.

In fact, a staggering two percent of all Google search queries are for lyrics. The share of Bing’s pie is even larger, at seven percent. After ‘Facebook,’ the term ‘lyrics’ is the most common search term on Google in the US.

The existing lyrics services, spoiled by the high demand and dearth of disruptive thinking, have left the field wide open to those who see this shadow opportunity. Lehman referred to the shoddiness of existing lyric services as “so bad, it’s a meme.” Indeed, most of the incumbents, topped by MetroLyrics, AZlyrics and Sing365, hail from a bygone era of the web where banner ads, popups and poorly conceived user experiences were the norm.

Lehman describes the system as fundamentally broken. “Rather than pummeling users with ringtone ads, which are scams anyway, why not take a longer-term approach?” he asks, referring to monetization strategies based on stirring peoples’ passions about artists and their music.

Yet these existing players still manage to command incredibly high traffic. The world’s highest-trafficked lyrics site, MetroLyrics, sees over 31 million monthly unique visitors according to Quantcast and Alexa estimates. Such traffic, despite their relatively unchanged and low quality experiences, shows that anyone who’s able to deliver value from innovative uses of lyrics has a chance to reap big rewards.

A Blueprint for “Lyrics 2.0″

At the core of the new offerings is a basic re-imagining of how people interact with lyrics. According to Lehman, existing sites tend to view lyric queries as a “superficial reference” type of activity where users merely try to confirm what they hear (is that really a bathroom on the right?). In his experience, that view is overshadowed by a deeper desire to connect, engage and even obsess about lyrics through analysis and discussion.

RapGenius’s product caters to that new context, seeking to build knowledge and community through user-populated, highly detailed in-line explanations of lyrics, especially rap and hip-hop lyrics, which often have insider references and other deep meanings that are seldom understood on the first listen.

So far, more than 30,000 users have signed up to discover, interpret, explain, and debate lyrics with one another. More than 10,000 songs are fully explained by the community, some songs being viewed tens of thousands of times with contrasting interpretations and viewpoints on key lines. The site expects to reach over 5 million monthly unique visitors soon.

The site design is minimal and modern, a clear departure from existing services, which took aesthetic cues from the big sites of their heyday, making RapGenius more Tumblr than Altavista. The well-conceived layout with its intuitive highlights and bubble overlays is perfect for the infusion of explanations, analyses, context and criticisms to song lyrics. The same approach is envisioned for their upcoming mobile experience, which already sees 17 percent of site traffic (redirecting to the desktop version at the moment).

James Hritz, vice-president of monetization at TuneWiki, another social music company that’s placing big bets on lyrics 2.0, corroborates the trend. “Lyrics are about self-expression, community and learning,” he says, pointing to RapGenius as a service that “gets” this need. His own firm is radically re-envisioning its lyrics offerings to provide deeper, more meaningful experiences to music consumers in the vein of RapGenius.

TuneWiki has already learned a lot about how powerful lyrics can be. With a user base that’s 60 percent international, many flock to the service to use lyrics as a tool to learn English. Since TuneWiki’s software can directly translate its database of more than 4 million fully licensed lyrics to any of 45 different languages, people can hear their favorite tracks in English and read the lyrics in their native tongue. The site’s Lyric Legend iPhone Game that debuted last year was an early demonstration of how lyrics have disruptive powers companies like MetroLyrics simply haven’t executed on.

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The San Diego-based company just announced Crosslink Capital (the largest investor in Pandora) has given them $6 million. This is their first institutional round.

TakeLessons is the largest network for music classes in the United States. Launched in 2006 with $1.7 in  funding from angel investors and founder/ CEO Steven Cox, the company has 60 full-time employees in San Diego and 1000′s of contractors.

“You have a company in San Diego that has consumed very little capital and obtained a large foot print,” says Eric Chin, partner at Crosslink Capital. “If you had done this in the Valley you would have needed more capital.”

TakeLessons software helps recruit, vet, validate and supports teachers in 35 types of music (guitar, piano, singing, etc). Only the top 10 percent of teachers that apply to the network are accepted. The demand side lets users choose, schedule and transact with a trusted brand that didn’t exist until TakeLessons. Today the network has expanded to 2,800 U.S. cities.

The company has also partnered with Best Buy, which has expanded their presence even further. TakeLessons CEO Steven Cox spoke to VentureBeat and explained how the Best Buy connection came about.

“I was on the treadmill at 5:30am watching CNBC and a guy from Best Buy said ‘we’re moving into music. There’s demand and we are opening 100 stores that are like giant music stores,’ ” says Cox. “He also said lessons and education would be offered.”

Cox cold called that Best Buy executive immediately, but didn’t get a call back. His call wasn’t returned until after the 4th try. The two talked for a few minutes and then a week later Cox was invited to Best Buy headquarters for a meeting. Twenty-two months later, a partnership deal was signed.

“The whole premise is that Best Buy wanted to deliver services around their products,” says Cox. “They did a bunch of research on lessons but needed to build the technology. Instead, we built out a very strong network for them. They are using all of our teachers, our scheduling systems, billing, everything.”

TakeLessons was used in 26 Best Buy music stores in August 2010. By September 2011 it was in 70+ more. TakeLessons also employs 90 teachers located in the stores.

The concept for TakeLessons has roots in Cox’s musical upbringing (his parents are musicians) and his entrepreneurial instincts. The company began to materialize after two events. First, the drummer in Cox’s rock band quit so he could focus on teaching music in order to support his family. Second, Cox’s voice lesson teacher moved out of the country, without notice and without refunding his $600. That’s when he started working on TakeLessons.

“Instructors were good at teaching music but they weren’t the best at using technology to run demand and market themselves,” says Cox. “It was a free for all, fragmented industry. We went out and built a business and once we proved our model we were introduced to the right guys.”

It was one of TakeLessons original investors that introduced Cox to Crosslink.

“When we met him, it was an instantaneous connection,” says Crosslink’s Chin. “A company’s culture and ability to execute comes from the top. Steve is a natural born leader. It’s the number one thing I look for. Number two is a company going after multi billion market opportunities. TakeLessons meets both of those requirements.”

Chin recalls that when he visited TakeLessons in San Diego even the company’s janitor could recite the company’s mission. Two members of the Crosslink deal team ended up using the service. One was a concert pianist, the other a father wanting to take guitar with his son. Chin says both found what they were looking for.

“We’ve been following market places for the last decade and invested in other companies that are doing a marketplace for services,” says Chin. Those companies include sports media site Bleacher Report and virtual bookkeeping site Balance Financial.

“We are looking at a bunch of other companies in this space,” he says.

If your company is interested in joining Crosslink’s portfolio, just make sure you hit the perfect pitch. Sorry, I couldn’t resist!

July 9-10, 2013
San Francisco, CA

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With the iPhone app Didiom, syncing music files to your phone may become a thing of the past. That’s why we’re choosing Didiom as the first innovative app for VentureBeat’s Mobile App Spotlight.

Didiom lets you stream music to your iPhone or iPod Touch (or BlackBerry, or Windows Mobile 6 phone) from your Windows PC over Wi-Fi and 3G. It’s available in two flavors: A free, or Lite, version that lets you stream up to five songs, and a Pro version that offers higher-quality audio and unlimited streams for $9.99 a year.

Setting up Didiom is simple: First download the desktop client, then create a Didiom account, and finally choose the music folders you’d like to sync with the service. Didiom gives you access to songs, podcasts, audiobooks and playlists — though it won’t support files encrypted with DRM from iTunes and audiobook company Audible. (Apple now sells unencrypted MP3 files on iTunes, but older files may have DRM.)

The Pro version lets you stream audio at up to 128 Kbps quality — which is noticeably worse than CD quality. Still, the quality drop is a decent trade-off for the convenience of accessing your music from practically anywhere.

In my testing over AT&T’s 3G network in New York, Didiom managed to quickly find my music library, and it was able to play back files within a few seconds of accessing them. The app itself is well-designed and stable. Didiom takes advantage of the iPhone 4’s multitasking capabilities, allowing you to listen to songs without staying in the app, although it doesn’t integrate with the iPhone’s native playback controls.

Didiom, short for “digital distribution of music”, started out as a graduate project for founder Ran Assaf. In an email interview, Assaf mentioned that his original plan in 2004 was to let users stream music from a large licensed catalog. Eventually, the company pivoted its focus to placeshifting, or the ability to access your files from anywhere.

Driving the service is a peer-to-peer (P2P) placeshifting technology that Didiom has been developing since 2004, which makes streaming files from computers to phones easier. With Didiom, your music never hits any intermediary servers — instead, it’s encrypted and piped directly from your PC to your phone. That’s a far less problematic approach than other pioneers of streaming, like MP3.com, an online-music pioneer which copied files from users’ libraries and stored them on its own servers. That last step — copying them to servers — raises potential copyright issues. And that’s what Didiom smartly avoids.

When asked if music labels took issue with the service, Assaf said, “We demonstrated the technology to the labels. They did not raise any concerns. It was important for them to know that Didiom is not a music locker service, and that we do not duplicate or upload music from the computers of our users to our servers.”

Assaf counts other services like Orb, ZumoCast, and Simplify Media (which Google acquired earlier this year) as Didiom competitors. He says that Didiom stands out “in terms of speed, navigation, streaming quality, user experience, DRM support, compatible devices and availability on app stores.” He added that Didiom’s streaming technology is more stable, and less prone to error due to Internet outages, as well.

Didiom certainly performed better in my testing than ZumoCast and Orb. When it comes to music, I also prefer Didiom to Libox, an innovative streaming service we’ve covered in the past.

Didiom, founded in 2005, is based in New York City. The company has received some funding from angel investors but is primarily bootstrapped.

Developers: Want to get your app featured like Didiom? Then submit your app for consideration!

The Intel AppUp developer program is sponsoring VentureBeat’s Mobile App Spotlight. However, VentureBeat’s editorial staff selects apps for the program according to its customary editorial standards, without input from Intel.

The company has created a content management system which centers around a dashboard (image below). The system allows customers to create promotions to grow their Facebook presence, in part by encouraging “likes” — the one-click way a Facebook user connects with a Page — and asking for email addresses. One example: Bands might ask users to “like” a page or enter an email address to unlock a group of songs or share with their friends for a chance to win back-stage passes. Promotions can be measured and tracked

Damntheradio is currently in beta and plans to make its money by charging customers per promotional campaign. Campaigns can range from $450 to $2,000, said cofounder Johnny Hwin. Beta customers include Linkin Park, Enrigue Iglesias, and Universal Music’s Island Def Jam.

Several other tools exist to launch promotions and other activities on a Facebook page, including Wildfire, a social media marketing company that gives users the ability to build and launch campaigns across multiple networks, as well as Promotions for Fan Pages, a Facebook application that allows users to launch sweepstakes, contests, coupon giveaways, special deals and more.

The San Francisco-based company, founded in 2009, is backed by IO Ventures. Founders include former tech and product leads at Apple, RockYou, and Hi5.