In yesterday's episode of RWW Live, our live podcast show, our topic was online music and we had 3 very special guests on the show: Dalton Caldwell, founder and CEO of Imeem; Lucas Gonze, founder of Webjay and until recently a senior member of the Yahoo Music team; and Rob Williams, Senior VP of Music Software at RealNetworks. Also on the show were Sean Ammirati (host), Richard MacManus and Marshall Kirkpatrick. The audio is archived below for your listening pleasure.
In this post we feature some of the highlights from the show, which included many interesting factoids about Imeem, Yahoo Music and Rhapsody. But more importantly there was a lot of fascinating discussion of online music trends and where the music industry is headed.
The show started with a discussion about the killer feature set for online music, based on a post Marshall wrote recently. Marshall noted that the user experience in online music is not as good as it should be in streaming music websites.
In reply Lucas said that the listening experience has changed since around 2000 - e.g. people who follow mp3 blogs enjoy the personalities and the "constant sense of flow" of new music. In terms of streaming music, he said that there is a close connection between the songs and the community - it isn't intended to be decoupled. He said an ideal listening experience now is one that mixes music with fun, the social aspects.
Dalton said that Imeem started out as a social network, then the music came later - not the other way round. They slowly added music features, as people asked for them; and that has steered the product. He said that online music shouldn't be about consumption, but online community and self-expression. He thinks sites that are primarily community focused, rather than just listening to lots of music, are the ones that have succeeded most in online music. He also said technical advantages are key - he pointed to Imeem's acquisition of Snocap and its upload technology.
Sean asked Dalton a bit more about how Imeem got into music. Dalton replied that originally Imeem was meant to be a social network where people could express their tastes in media, whether that be video, music, etc. But they have turned into a music specific site, due to how their market evolved.
Rob from RealNetworks talked about how Rhapsody has had success in web services. He said they're continuing to build out their APIs across a range of devices. He spoke about their partnership with iLike. He says music discovery, social networking and music creativity are important features these days. The way they do things is work on the backend and partner with lots of companies. One point that resonated with us was that online music services should work more together, in a federated way. e.g. you can move personalization data around and get recommendations across the likes of last.fm, Imeem, Rhapsody etc. He mentioned OAuth and OpenID as some of the standards being used to do this.
Lucas segued off Rob's point about standards, using that to point out a key difference between Imeem and Rhapsody. He said that Rhapsody is a 'pure play', it's for obtaining music. Whereas Imeem is a social network that uses provisioning to complement its strategy. So which of these two things will be better business models?
Rob's response was that Rhapsody has a developer program which it is using to expand its reach. He said that Imeem focuses on developers too, but they focus more on web developers whereas Rhapsody targets hardware developers too. Dalton agreed that they focus on web developers.
Marshall asked Dalton for an update about the Imeem developer platform and specifically how it compares to the "wide open" Seeqpod API, which has been leveraged a lot. Dalton replied that there are 2 ways the Imeem platform is encompassed - the 'off website' version and the 'on Imeem' one. The widget and embeds is being integrated into eg Slide's Top Friends, and Apture (a blog plug-in that features an Imeem player). In terms of the 'on Imeem' API, that hasn't been shipped yet. That will be similar to Facebook's platform, so that developers can build new media experiences inside Imeem.
Sean asked a question from the podcast audience, about what Imeem's business model is for their platform. Dalton replied that the vision is to make it mostly ad-supported. They also want to do rev share. They still have to complete building out the technology for ad serving for online music. He doesn't think the subscription model would work for their audience.
Lucas said there is a lot of skepticism in the music industry (labels, artists etc) about ad-supported revenue.
Marshall mentioned that recorded music is just a loss leader, and monetization can be made with tours, merchandise etc. Rob replied that for artists there is a lot of money in that. So he said there are really good businesses being built off the online music platforms - eg recommednation engines like last.fm, connecting artists to their fan base (e.g. iLike), Ian Rogers' new company topspinmedia.
Dalton said that at Imeem they're trying to change the relationship people have with music, focusing not on monetizing consumption, but monetising self-expression and attention in music.
Imeem screenshot
Lucas said that the value in online music isn't in the download, but in all the things around it - socialising, shows, etc. So the business is in supporting the user to do all those things.
Marshall brought up the topic of DRM. He said that there seemed to be 3 different points in the spectrum of DRM in online music:
a) Rhapsody embraces DRM the most and the requirement that subscription be ongoing;
b) Imeem playing in the middle with Google Open Social integration;
c) Yahoo focuses on open standards
So Marshall asked how long will big players be able to use their large audience to compete with small more open players?
Lucas said that he no longer speaks for Yahoo, but they've changed over the last six months to "embrace openness and become a connector". Yahoo Music eschewed its own subscription product and made a deal with Rhapsody. He said that interoperability with Imeem would probably also be a popular move within Yahoo. He said though that there is immaturity of current open products, specifically mentioning OpenSocial. Secondly, companies like Yahoo need to figure out how to make money from the open strategy. He said that Rhapsody's strategy is very open, but the big question is can that be extended to record labels and artists as well as users.
Rob didn't agree with the characterisation that Rhapsody was pro-DRM. He noted that at the end of June they launched a DRM-free music store (ReadWriteWeb coverage here). He also said that they're big supporters of the ad model. He also said that partnerships are an important part of their strategy, e.g. powering Yahoo Music and iLike (which gets them into Facebook). He told us that some demographics accept ads, but they've had issues eg with the Facebook crowd. So he said a blended approach is what they're pursuing - part ads, part track sales, part subscriptions, part discovery/buying track for your phone, etc. He said that music is a $10b market in the US, but so far only $1b of that is online.
Rhapsody DRM-free store
At this point I asked a question about the legal issues with online music, specifically pointing out that there is a 'have' and 'have not' situation in online music currently - with larger sites like Imeem, Yahoo, Rhapsody being able to make partnerships with record labels and avoid the legal issues plaguing the likes of Pandora, Muxtape and other small startups.
Lucas said there are two markets emerging: large scale, partnerships with labels, big traffic but low profit margins (Yahoo, Imeem, et al); the second market is small scale, uses media like artist sites, works in the "grey area" in terms of legal issues, has smaller traffic but higher margins. He points to Hype Machine as an example of the latter, which isn't paying anything [to record labels]. He said these two margins are emerging in parallel. He said that Muxtape was a red herring, as it was trying to become a big service, i.e. get too big to fail and so cut a deal [with labels].
Muxtape woes with the RIAA
Lucas said in a couple of years the wall between the large providers and small ones will start to go away, as music becomes more "webby" and interoperable.
Dalton said that small companies need to steer clear of the major record labels in order to survive.
Rob said that the backend, platform approach will make this easier, as small companies can use the big platforms provided by Rhapsody and others. So that is one way to avoid the legal hassles of music acquisition from music labels. Dalton said that he agrees, noting that at Imeem they try to "abstract away all the complexity" around licensing and streaming and hosting. He also said they acquired Snocap partly to get access to their registry of music from the major record labels as well UGC (user generated content) music. This enables them to build a platform that scales from UGC music to major record label music. So he says there should be no reason for startups not to use a platform in a couple of years.
Marshall brought up the issue of international. Rob said it's very tough, they have enough problems dealing with US laws around rights to use music. He said Pandora has had lots of issues with international laws. He said it probably will be never fully global, so it will stay in "the grey area" for many countries.
To wrap up the podcast, Sean asked everyone about the current poll we're running on RWW (see below). last.fm and Pandora are still the most popular apps with our readers, so Sean asked which apps will be the leaders a year from now?
Rob said that he hopes Pandora is still around and the statutory radio issues get worked out across the industry. He said there will probably be a number of new contenders, and he hopes there will be much more cross-service users (i.e. the ability to use more than one service).
Lucas said that Hype Machine has the opportunity to get pretty big.
Dalton said that the line between social networking services and music services is blurring, so he thinks apps that aren't just about music may become most influential - e.g. iPhone apps.
Marshall said he has high hopes for Hype Machine (our initial review and update) and also thinks Songbird (our review) has potential, with so many developers and an open framework.
I said that music discovery is key for me, finding new music. The likes of last.fm, Pandora, Imeem, Hype Machine are doing this for me now, but given Imeem's rapid growth recently there will probably be another 1-2 services that emerge over the next year that take discovery to the next level.
Hype Machine, beloved by a few in the panel
You can listen to the entire show here (select Episode 6):
Note about the podcast: We experienced technical issues with our podcast hosts Talkshoe during the recording, which affected our live listeners. Many people either couldn't login to the call or were thrown off midway through (including the host Sean!). We sincerely apologize for this, and we are looking into an alternative solution for upcoming shows. We're pleased to say though that the archived recording is 100% intact!
Don't forget also to vote in our current poll: What are your favorite online music streaming services?
Image: She sings, she sings by gwen
Comments
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I think for future Digital music store will increasing to support the manual/conservative selling
Posted by: Toga AC | August 26, 2008 7:42 PM
So basically we have a discussion from a bunch of people involved in content marketing and distribution, but no one from the content creation side, who may have challenged some on the 'ideas' floated.
Marshall and Rob may like to believe recorded music is a loss leader, because free content is what Web 2.0 wants, but repeating a statement doesn't make it true.
Evidently they have no experience in concert promotion, but basically touring is pretty much a loss making / hobby activity until you hit the point of being able to pull in 400 plus people every night, every town you play.
There are relatively few artists who can manage that - vastly fewer than involved in just recording. You may not be able to pull a crowd of 400 anywhere outside of London or New York, but you can easily sell 2000 recordings globally (which is roughly enough to make a low budget 'hobby' studio recording pay for itself, which is all many small musicians are looking for).
Not forgetting work that is effectively studio bound (solo work produced by multi-tracking, electronic, or involving large numbers of orchestral musicians).
An easy way to make money live - cover someone else's songs. There is always an audience for tribute bands, the more banal the better.
Merchandise has a similar problem - it may work fine for young Emo bands, but there are vast realms of music listened to be people who have grown out of wearing band T-shirts, badges and posters. Not forgetting unofficial merchandise being a major problem (and unstoppable under copyright law, unless it uses a trademark).
Again, it's another one of those naive or wishful answers - my litmus test would be someone believing in this model enough to actually set up a company based around it (that would lend money to bands to record music in return for a share of their touring and merchandising income). Shared risk, shared profit - classic venture capitalism.
It's interesting that all the people who propose these models are instead far more interested in a business model that works around 'free' (more correctly producer subsidised) content with their business making money from advertising revenue. Any revenue sharing so far has made record company royalties look hugely generous.
The problem is that a model that works for Radiohead or Madonna is not a model that works well for a large number of small artists.
Posted by: JulesLt | August 27, 2008 1:05 AM
Well...
this is the future: Music will be completely free within the next 5-10 years.
We don't even need to discuss about DRM or anything. That free high quality music works, shows the website www.jamendo.com
Try it out yourself, tons of new artists who give away their music!
Posted by: Midi-Memi | August 27, 2008 5:11 AM
I see a couple of things coming up:
1 - personalised streamable music everywhere - your computer, your car, your phone etc. This is just starting to happen with the advent of the iphone & the lastfm/pandora apps
2 - combination of streaming your own music (like muxtape/8tracks) or streaming music held on another site's servers (eg last.fm/hypemachine)
3 - broader social acceptance of social music discovery (sites like last.fm or hypemachine still remain the preserve of IT or music geeks)
4 - All these things will have to be paid for, so consumers will accept some form of subscription, possibly in combination with advertising, in return for better engagement/services from the major labels.
and finally you missed 8tracks off your voting list - its like muxtape but better and more legit.
Posted by: Pastor Bob | August 27, 2008 5:34 AM
I agree with JulesLt. It's silly to have a conversation about the "Future of Online Music" while shutting out the artists who make the music. You'll be hard pressed to find a musician who will agree that "there is a lot of money" in touring and merchandising. Those kinds of comments are good for a laugh, but not much else.
Posted by: Marcello | August 27, 2008 7:35 AM
Speaking of interoperable music, there are tracks published directly by artists on their own profile pages, often on large social networking sites such as MySpace but increasingly on their own sites. MySpace, Bebo, and YouTube are the leading social networks, but there are other smaller networks such as hi5, Cyloop, Goldmic, Blackplanet, and PerfSpot that focus on specific genres (e.g., hip hop) or specific ethnic communities. There are also white-label web-based tools such as Marc Andreessen’s Ning or Ian Rogers’s Top Spin that provide customizable social networking functionalities.
Listening to music on musicians’ profile pages while also commenting on the artists’ work and networking with other fans – the “social network music” experience – provides a more immersive, interactive experience that’s different from downloaded MP3’s. The younger demographic, especially, are avid consumers of social network music.
Qbox.com aggregates and integrates the tens of millions of streamable tracks spread across multiple social networking sites through downloadable application, the Qplayer. You create your own playlists and Qplayer provides continuous playback across the different social networks, similar to how Twhirl integrates Twitter and Friendfeed. It is essentially an online remote control for all streaming music across the social Web.
This model differs from those of other streaming services, such as Pandora, Imeem and Last.fm, in that Qbox lets you search and discover music on artists’ profile pages that provide streaming music for marketing and promotional purposes for free. The Qplayer application works as a dedicated browser to open the artists pages that stream music. Because Qbox simply brings the user to artist pages that already provide free streaming music, it is free from the ghost of onerous royalty fees. This would mean that Qbox – which has already carved out advertising space on the Qplayer application – may generate ad revenues without playing royalties.
Posted by: Ian | August 27, 2008 8:35 AM
(..continued) If Qbox's model works, artists may be able to realize meaningful revenues even with free streaming.
Posted by: Ian | August 27, 2008 8:39 AM
Greetings everyone, great debate - I have a contribution to make, via my new book, Music 2.0> Download the free PDF (237 pages) via www.music20thebook.com ... enjoy. And be sure to read www.musiclikewater.com ;)
Posted by: Gerd Leonhard
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August 29, 2008 3:01 AM
I think the future of online music conversation gets too bogged down in the discussion centered around connecting artists to fans in a one-to-one sort of way. Consider why playlisting, mixtaping and even HypeMachine are popular.
Most people don't want to have a relationship with an artist, they want to have a relationship with music.
I actually believe investing in one-to-one sort of things is pointless (where's the ROI), and not enough effort, by anyone, is being put into enabling a more dynamic (and more profitable for artists) middle layer. This would be the layer that enables fans to have a relationship with the music they enjoy, without the hassles or the friction that goes along with the engagement that's desired by every standalone artist and the record labels that need the resulting revenue.
Posted by: Bruce Warila | September 1, 2008 9:00 AM