Perhaps the greatest challenges to companies like MySpace Music and Facebook may not be from the big players, but startups that offer artists greater control over their work and pricing flexibility.

This is fair picture. Forecasts generally call for moderate growth in online advertising through 2009. eMarketer expects the market to increase 14.5 percent in 2009.

Even with this outlook, digital music companies face challenges above and beyond what lies ahead with the economy.

MySpace Music is definitely the big player, but criticism about the service ranges from a poor UI to how they treat indie labels. Add to that a potential competitor like Facebook and the issues intensify. Brooks took repeated questions about why they gave the major labels preferential treatment. Brooks said that MySpace Music will phase in new services to provide the indies more of a presence. That reality materialized today. Digital music distributor IODA has signed on to make its catalog available on MySpace Music.

But perhaps the greatest challenges to companies like MySpace Music and Facebook may not be from the big players, but startups that offer artists greater control over their work and pricing flexibility.

Rise of the Band Blogs?

Of the startups that presented at the conference. Bandcamp received some of the highest acclaim. BandCamp is a blog platform designed for musicians. The platform is similar to Blogger or Wordpress but with limited flexibility. The service is free. Sites are designed for search engine optimization. The site has a Flash player but everything around it is HTML. BandCamp includes an analytics platform that details page views, music sales and what tracks musicians played. The service integrates with Paypal. Tracks may be offered for free.

Artists determine the price for their music. The artist uploads their tracks as .AIF or .WAV files. BandCamp converts the file and then offers the artist a selection of different formats for their play list. Artists may choose to sell the music as an mp3, for instance, at a high or low bit rate, setting the price accordingly. There even appears to be the ability to do variable pricing, something the majors have wanted to do for quite some time. BandCamp takes no cut from the sale. Musicians host their own sites.

For BandCamp Founder Ethan Diamond, the service is about giving artists control. He likes to call themselves the "very nerdy" fifth Beatle who takes care of all the geeky stuff so the band may do what they do best.

In his presentation, Diamond sharply criticized the practices of companies that do not provide artists with complete ownership of their works. Diamond has said before that Imeem and MySpace Music both fit into this camp. The companies that engage in this practice he called "online sharecroppers."

Already The Dynamics Are Changing

Steve Jang, vice president of marketing and business development at imeem, sat on the panel with Brooks and Batt. He seemed pretty quiet compared to his colleagues.

He must have had a lot on his mind, listening to his counterparts talk about the business. As we reported this week, Imeem is up for sale. They've laid off 25 percent of their staff. Warner Bros, as you may recall, sued Imeem earlier this year. They later dropped the suit in exchange for an equity stake in the company.

And so, who will purchase Imeem? Is this a play for Facebook?

Oh, these times are a changin'. :-)

I'm covering the event for ReadWriteWeb, primarily looking at the overall impacts that policy developments and the economy are having on the music industry. But also how these forces may affect the underpinning structure of the industry and the artists who create the music. I'll be shooting video, too, interviewing speakers and conference participants. To kick off our coverage, here are five important online music biz people we plan to track down at the conference...

This startup depends on advertising revenue. With the recession underway, the revenue picture is unclear. Tim is here to discuss policy issues, one he is quite familiar with. Westergren became the defacto spokesperson in the long running battle in Congress over webcasting royalty rates.

Discussion point: What's the next hurdle for Pandora in the public policy debate about webcasting rates?

Josh Brooks, vice president of MySpace Music. The jury is out on the MySpace venture with the big labels. Last week, MySpace Music scrapped its equity deal with the labels. The labels had hoped for a big payday with that equity stake. They're now looking at an advertising share, which is a big question mark considering how much the market appears to be slowing. Josh is being pretty mum about how thing are going at MySpace Music.

Discussion point: Some have criticized that independent labels are being treated as second tier citizens by MySpace Music. Additionally, there had been some expectation that the indie artists would receive an equity stake much like the big labels were going to receive. What now?

Derek Slater, Google: Derek works in public policy at Google. Slater is formerly with the Berkman Center.

Discussion point: Google's public policy strategies and how it relates to the new platforms in development by music technology companies.

Gary Greenstein, Wilson Sonsini: Greenstein is a former attorney with the RIAA. He played a major role in establishing webcast rates when he worked with Sound Exchange.

Discussion point: How does Greenstein see licensing models changing and what are his views on the RIAA position concerning "making available."

Ethan Kaplan, Warner Bros Records: Ethan began his career in the music industry developing a fan web site for REM. The band hired Ethan to develop its web presence. Ethan is now vice president of technology at Warner Bros. Ethan is a huge advocate for open source. He has created a Drupal network for artists on the Warner labels.

Discussion point: What is the state of open source development in the music industry?

We have a few more people we plan to talk with here at the conference. We'll be back this afternoon. In the meantime, leave us your comments and perhaps questions for the 5 people listed above.

In this post we explore last.fm's feature set, how it compares to MySpace Music, and what we can expect to see from last.fm in the near future. Richard Jones also discusses how last.fm has managed to avoid the legal difficulties that have plagued Pandora.

RJ: Well, we liked the Last.fm/YouTube mashup Tim Bormans made so much that we hired him! Internally we've been working on multi-tag search which is available at our Playground, which allows you to search for music using multiple genres (folk + rock + gabba, etc); also on Playground we've been tweaking our Musical Soulmates app, which you could possibly consider the prototype for a future Last.fm dating service ;)

And of course, scrobbling continues to be an almost default setting for new music services now - from Hype Machine to Muxtape (RIP) to Blip.fm to the new version of VLC (which has 4 million downloads already since launch a couple of weeks ago), it seems like everything has to integrate scrobbling now. Great for us obviously, and great for our recommendations which will continue to improve as more people scrobble. People are scrobbling at a rate of 800 million times a month currently.

RWW: In terms of features, Pandora is similar to last.fm, in that both services have great recommendations and allow the user to discover new music. Both are streaming music services, yet it just seems to be Pandora - of all the 4 major services we've discussed so far - that has been having legislation issues. Can you clarify for our readers how last.fm has managed to avoid those sticky issues, when Pandora hasn't? I think many people are confused about that.

Last.fm is about more than just online radio. We've got millions of tracks available free-on-demand as well, and beyond that there's a massive social network element to the site. We also offer videos, the biggest events listings on the web (personalised to your taste), and our own audio and video content under the Last.fm/Presents banner. So the point is, online radio is only one of the things we do, so the legislation affects us only in one particular area of the Last.fm experience. As online radio is pretty much the single focus for Pandora, it understandably hits them harder.

The wider issue here, of course, is that royalty rates are high, and the debate around this needs to continue so we can reach a mutually beneficial and economically workable resolution. We don't want to see legitimate online broadcasters stifled by this - it's not good for music fans, artists or the wider music industry.

RWW: Lastly, one of the most interesting aspects of online music is its ability for new artists to be discovered. It's something MySpace has done well in the past, but we get the sense the perfect solution hasn't been found yet. As our own Marshall Kirkpatrick asked recently:

"How about a service that scans my iTunes library and my online listening history, determines my genres of interest and then never plays music from artists I've already listened to. Or makes sure to play some that I haven't."

Does last.fm have a feature like that coming up? ;-)

RJ: Do you think Myspace has done this well in the past? As you can tell from my reply to your first question [see Part 1], I would argue that Myspace has been a rather difficult site to navigate unless you're after popular stuff - and it's possibly going to be more of the same on Myspace Music, as the major labels jostle for frontpage real estate and push more indie/obscure music off the page.

Our recommendation system is being constantly refined to give music fans the best music discovery service on the web. I think we've got that covered. What's equally important is that these artists being discovered, if they're Long Tail or DIY, get the same kind of licensing and royalty breaks that more established artists get, which is why our Artist Royalty Program exists.

We've been doing this for 6 years, as I said, which is why it's kind of funny to be talking about this now because of Myspace Music. They're just catching up to free-on-demand after we pioneered the model almost a year ago. Now they've got to figure out how to make it easy to discover music that suits your taste (sharing playlists is one thing, but how do you find that music to share in the first place?), which we've been doing since 2002. After that, maybe they'll start paying unsigned artists. I would hope all this will come to Myspace Music at some point in the future - but it's happening on Last.fm now.

See also: Interview With Last.fm Founder Richard Jones: Part 1, The Competition and Part 2, Business Models

We started out by asking about the increasing competition in online music this year.

RJ: The space is crowded, I agree, and people now have a lot of choice if they want to listen to music for free. That's great for music fans - but what it means is that navigating through that mass of music is now the priority for them. It's all very well having millions of tracks at your disposal on Myspace or Imeem, but what's the use if you can't find what you want?

We have a unique recommendation system, drawing on the data of over 43 million individual songs, and the listening habits of 25 million music fans, enabling us to guide users through a 5 million + catalogue of freely streamable tracks and help them find stuff suited to their taste.

Recommendation and discovery is key in this space now - and we've been working on this for 6 years, and every day we continue to refine the process, so we're confident that we can continue to offer a better, more personalised music experience than anyone else online.

RWW: One of the things that's made Imeem a success this year - it's reportedly now the No. 1 streaming music site in the US - has been its licensing deal with all 4 of the major record labels, plus by their estimates around 80% of the indie music market. MySpace Music has 3 of the majors and has been criticized for its lack of attention to the independents. Can you clarify for our readers where last.fm sits in terms of licensing with the 4 majors and independents?

RJ: We have music from 3 of the majors, and renegotiations with Warner are ongoing. Our indie catalogue is equivalent to Imeem's - it includes millions of tracks from IODA, The Orchard, CD Baby and thousands of independent labels and artists - and we are currently in negotiations with Merlin. We continue to aim for the most comprehensive music catalogue online, and are making great progress towards that.

What's even more important, though, with regards to this point, is that we ensure all labels and artists are paid when their music is streamed on the site - and since the launch of our Artist Royalty Program, that means unsigned and DIY artists too. No one else is offering a share of revenue to unsigned musicians in this way.

RWW: You recently released a new version of the last.fm iphone app -- how crucial do you think mobile apps will be when competing against the likes of MySpace, Imeem and Pandora? Do you think you have any advantages over your rivals in this area?

We want the Last.fm experience to be accessible everywhere, so mobile is hugely important to us. At the moment the iPhone dominates, and our only competition there is really Pandora, which is limited to the US whereas our app is available in the US, UK, Canada, Germany, Spain and France, with more countries to come. Plus it's much more feature-rich and draws on a much larger music catalogue.

It's a cool app and I think it's the one that real passionate music fans choose because we really reach into the Long Tail in the music we play.

See also: Interview With Last.fm Founder Richard Jones: Part 2, Business Models and Part 3, Design & Features

Google Phone Unveiled, Can it Beat the iPhone?

This week, Google, T-Mobile, and HTC came together to introduce the first phone running the Google mobile OS, Android. The overall message at launch was focused on openness. But will the future of the mobile internet be driven by open platforms? That's what Google is betting on with Android, but more importantly, it's what T-Mobile is hoping will stop the flood of customers leaving their service for AT&T's iPhone.

To entice customers away from the iPhone, we now have the G1, a slick alternative with a touchscreen and an app store of its own. The companies want you to believe the G1 is just as good, if not better, thanks to the real QWERTY keyboard and the open nature of the Google OS. Now that we have all the facts, are you convinced?

RWW Predictions: Google's Android vs. Apple's iPhone

This week we asked at RWW Predictions: will T-mobile or AT&T adjust their entry price point (either up or down) for the HTC Dream and the iPhone respectively in 2008? Nearly half of respondants said no, there won't be a price adjustment in 2008.

MySpace Music Launches

The long awaited MySpace Music service launched this week. We like what we see. It's going to be a very big deal.

Users will be able to assemble playlists from a huge catalog of songs from all four major labels and from independent distributor The Orchard, full length songs are all streamable for free, users will be able to purchase DRM-free MP3s through a close integration with the AmazonMP3 service and developers will have a gradually increasing amount of access to user activity data from the Music section. Screen shots in the post.

Muxtape Is Dead - Favtape Emerges as a Great Alternative

While Muxtape's Justin Ouellette posted a dire story about the shutdown of the popular mixtape service and his dealings with the music industry, Favtape has updated its service dramatically. Muxtape will effectively remain closed for the general public and will only return as a music hosting service for bands. Favtape, on the other hand, now looks like Muxtape on steroids, with embeddable playlists, album art, integrated YouTube search, a shuffle mode, and the ability to create tapes based on your last.fm and Pandora bookmarks.

SEE MORE WEB PRODUCTS COVERAGE IN OUR PRODUCTS CATEGORY

A Word from Our Sponsors

We'd like to thank ReadWriteWeb's sponsors, without whom we couldn't bring you all these stories every week!

• E.Factor is an online community for entrepreneurs.
• Strands provides real-time recommendations of products.
• Calais brings semantic functionality into your site.
• The Web 3.0 Conference is on October 16 - 17 in Santa Clara.
• Talklets is a Text to Speech system for your site.
• Compete Search Analytics is for search marketing campaigns.
• Direct Media Exchange is a solution for managing ad networks.
• Rackspace provides dedicated server hosting.
• The Defrag conference is on November 3-4 in Denver.
• EditMe lets you make a web site in minutes.
• Quintura is a visual-based search engine.
• Eurekster is a custom social search portal.
• MediaTemple provides hosting for RWW.
• SixApart provides our publishing software MT4.

Web Trends

RWW Live: Data Portability

In this week's episode of RWW Live, our podcast show, we discussed Data Portability - the ongoing campaign for open data across the Web. We had an amazing group of Data Portability leaders on the call: Chris Saad (Co-founder, DataPortability.org), Daniela Barbosa (Chair, DataPortability.org), Eran Hammer-Lahav (Open Standards Evangelist, Yahoo), and Angus Logan (Technical Product Manager for Windows Live Platform, Microsoft). Friend of RWW Chris Messina also popped into the call midway through. The discussion was very interesting, check out the recording here:

Download MP3

State of the Blogosphere 2008

Blog search engine and ad network Technorati released its 5th annual State of the Blogosphere report this week. Technorati says its findings indicate that blogging is now mainstream. We're not so sure. Although reading blogs is becoming increasingly mainstream, is writing them?

The Scannable World: Mobile Phones As Barcode Scanners

One of the promises of the mobile web was the possibility of being able to integrate the internet with the real world. One of the ways to accomplish this task is through the use of barcodes. The idea is that you take a picture of the barcode with your camera phone and you're then delivered to a mobile web site. This could effectively make anything - whether a poster, an ad, or an object - a virtual part of the world wide web. Although this technology has been available for years, it's only now with the birth of the smartphone, or more precisely, the next-gen smartphone, that the potential for this type of integration may finally be realized.

See also:
The Scannable World, Part 2: Scanning Your Web Printouts
The Scannable World, Part 3: Barcode Scanning In The Real World

Religion and Web Technology

This week, as part of our ongoing Mainstream Web Watch series, we looked into how religious groups are using Web technologies. In the first post we looked at LifeChurch.tv, a sophisticated rich media site that aims to preach Christianity over the Internet. What was really great to see is how LifeChurch is using best-in-class web apps to create each different aspect of their online presence - Twitter for real-time communication, Wufoo to create their online forms, Blip.tv for video teaching, Mogulus for live broadcasting, and so on. It has also developed its own web apps.

See also:
Religion and Web Technology, Part 2: Shalom Hartman Institute
Religion and Web Technology, Part 3: Inside Islam

SEE MORE WEB TRENDS COVERAGE IN OUR TRENDS CATEGORY

RWW Enterprise Channel

Zoho Part 2: The Cookbook

Last week, we covered how Zoho is defying conventional wisdom in the Web Office market. But is being unconventional all it takes for a bootstrapped start-up to take on both Microsoft and Google, in head to head evaluations by giant enterprises such as GE? Far from it. Whenever you see a surprising 'overnight sensation', you will usually find years of hard work and careful execution.

In Part 2 of this story, we revealed some of Zoho's cookbook.

Email us if you're interested in writing for ReadWriteWeb's Enterprise Channel.

SEE MORE ENTERPRISE COVERAGE IN OUR ENTERPRISE CHANNEL

That's a wrap for another week! Enjoy your weekend everyone.

Users will be able to assemble playlists from a huge catalog of songs from all four major labels and from independent distributor The Orchard, full length songs are all streamable for free, users will be able to purchase DRM-free MP3s through a close integration with the AmazonMP3 service and developers will have a gradually increasing amount of access to user activity data from the Music section. Screen shots below.

The MySpace Music interface looks quite nice, with drag and drop playlist creation, dynamically re-populating players and a pop-up player that plays music when you leave a page. There are a lot of nice little touches.

One of the most interesting might be that when you're listening to an artist in the music player, you see a feed of their most recent profile activity right next to it. MySpace says this means "you can be a part of their lives and they of yours!" That might be an insultingly condescending way to describe it, but the feature is cool.

Below: Search and playlist building.

Below: The player.

The Business

There's been some question about who will run MySpace Music and sure enough, the project is launching without a CEO. The company gave us a typically disingenuous PR explanation that they "are being really picky" about selecting one.

That's inconsequential for users, though, isn't it? Brand advertisers paying for all this streaming music is great news for us. MySpace wouldn't go into any details about anything financial but said they had "a very close relationship with Amazon." Who knows what that means? Maybe that AmazonMP3 really hopes to ride MySpace's coat tails to market dominance and thus gave them a good break.

What About the Competition?

We've written extensively about competition in the streaming music space but we asked MySpace about Imeem in particular. SVP of Product Strategy Steve Pearman said "it's hard to build community around content alone" (probably news to Imeem) and pointed out that MySpace could be considered the world's second largest provider of email service behind Hotmail.

Apparently the point is that MySpace is a huge full-service stop where people are already gathering. We buy that and we think MySpace Music will be a strong player. This author intends to try it out at length, if for no other reason than to get away from the PR agents crawling all over Facebook. We've written about what the perfect streaming music service might look like - we wonder how close this will come.

Check it out for yourself later tonight and let us know what you think.

As SfGate.com reported tonight, Imeem is the third-largest social network in the United States after MySpace and Facebook; and it's now the No. 1 streaming music site in the US.

King of the Online Music Deal

There's a lot to like about Imeem. Starting with the music. As we noted in March Imeem has licensing deals with all four major labels and "80% of the indy music market", which means that you can find almost anything you want on the site and listen to it for free.

The user experience is also great - it's also another of an increasing number of sites powered by Adobe's Flex and Flash technologies. And check out Fanbase, an Adobe AIR app that Atlantic Records (a subsidiary of Warner Music Group) created in collaboration with Imeem. We reviewed Fanbase recently and said it is "no ordinary desktop music player". We explained that instead of simply streaming tunes, Fanbase lets you connect with other users through an integrated chat feature while also viewing a continuous feed of both the official and the unofficial news, photos, and videos. You can also customize the app by choosing which artists you want it to display from the dropdown menu or the "Manage" screen.

Imeem Lording it Over MySpace Already

Imeem is leading the charge in the free, ad-supported online music market. It has deals with all four of the major record labels: EMI, Universal, Sony and Warner Music. In contrast, MySpace only has three of them - EMI hasn't signed with MySpace. What's more, according to SFGate Imeem also has a deal with Viacom's MTV Networks to show videos from Comedy Central, MTV and VH1.

Together with the launch of its platform in March, Imeem also has an extensive widget program in place. This means that Imeem music can be listened to on a wide range of websites - giving it another advantage over MySpace.

Imeem has a second-to-none pedigree in Internet music, having been started by people from companies like Napster and Tivo, and acquiring Napster founder Sean Fanning's Snocap late last year. To be fair, MySpace has a pretty decent background in music too - it was said to be the driving force behind MySpace becoming popular in the first place.

In terms of users, Imeem had more than 27 million unique visitors in June according to comScore and it has 65,000 new users register each day. The company also says it gets more than 85 million total unique visitors of its widgets. These are impressive stats, although MySpace is still much bigger - with an estimated 120 million users.

But Can it Earn Money?

It's not necessarily all rosy. According to a recent CNN article, Imeem may struggle to earn a decent revenue. It estimates that Imeem is getting an average CPM of $4 per page, which CNN thinks is insufficient to pay the record labels. CNN states that the major labels control 86% of all album sales in the United States and that they "generally want to be paid about a penny each time someone listens to one of their songs at a website like Imeem." However Imeem counters that they have "ad revenue-sharing" arrangements with the record companies, rather than the standard penny-a-song contracts. Also Warners has invested in Imeem. The same CNN article estimates MySpace Music revenue will be around $3 CPM, so even here Imeem seems to have the upper hand.

Both Imeem and MySpace will continue implementing alternative revenue models. For example Imeem had a deal with movie star turned musician Scarlett Johansson, who released her album "Anywhere I Lay My Head" exclusively on Imeem in May.

Conclusion

There's no doubt that Imeem has serious momentum, and backing (Sequoia Capital and Morgenthaler Ventures are investors). With all 4 record labels behind it and an especially cozy relationship with Warners, together with traffic that is rocketing upwards, Imeem appears poised to tip big time into the mainstream. You cannot of course count out MySpace Music, it is a joint venture after all with 3 of the 4 big record labels. But Imeem's growth rate and buzz is reminiscent of that of YouTube just before it got huge.

Watch this space, or should we say listen to it.

The next stage in the evolution of popular niche music blog PitchforkMedia.com, Pitchfork.tv is among several forthcoming music video sites, the first out of the gate.

Projects like Pitchfork.tv and the forthcoming Videogum (newly acquired music blog Stereogum plus video) were undoubtedly conceived well before MySpace Music was announced - heck, that was just last week. One has to wonder, though, if the established leaders in the music industry is in trouble not just because of the proliferation of free MP3s around the web, but also because of the mainstreaming of what used to be considered alternative music.

Non-pop music has gotten big enough globally that there are now running battles in the streets of Mexico between Emo fans and angry bigoted crowds seeking to beat them up.

When the MySpace Music mega-portal was announced, we asked: where's the long tail of independent music that was so key to MySpace's early growth? It's on sites like Pitchfork.tv MySpace says it will expand to include the long tail of music in time, but whether that site will be able to produce the authentic, informed content that sites like Pitchfork and Stereogum can would even then be a big question.

On the other hand, all of these people might be so "ironic," the music so homogenous that it will never scale or make more than an annoying blip on the mainstream music industry radar. That's possible, too. These folks are pretty ironic about being ironic, though, which may or may not be a good thing.

The Features

The site looks good. Video quality is high, there's an embeddable player but no commenting or social features. That's almost a relief. Some of the content is embeddable and some of it isn't.

In addition to a healthy list of music videos from bands ranging from The Chemical Brothers to Ted Leo and the Pharmacists, there's also a section for recordings of live concert performances and another that showcases premium content "for one week only." The first One Week Only segment is a documentary about The Pixies 2004 reunion tour. It's well produced and fun to watch. Site navigation is good. It's a good little site.