Digital music services - big updates to Spotify, Lala, and more.

There certainly was a lot of news and announcements in April even though it seemed to me that things got off to a slow start. Ultimately it turned into a Spring awakening as the month rolled on that it became a challenge to keep up with the avalanche of news, stories and announcements.

Some of the bigger stories? Facebook announces their new Open Graph protocol with Pandora as one of the first companies to partner with Facebook. It’s a start but will FB ever make music a spotlight of their service or do they consider music like any other social activity that makes up just another part of your life?

Spotify releases the first significant update in awhile with a heavy focus on sharing and social networking while Lala is finally being shuttered by Apple on May 31st.

Let the Apple game of speculation begin: iTunes in the cloud? Nope not anytime soon because Apple has something even bigger brewing and it has nothing to do with a streaming music service but maybe, just maybe given the timing of Lala’s shutdown, Apple will launch a music subscription service as early June? My guess is Apple will take it slow because of concerns from the labels and they will milk the a la carte market for as long as possible. Apple, as well, does a good job conditioning their users and fan boys so whatever they ultimately release will be carefully planned to stir maximum hype and ensure maximized revenue. I’m not really convinced that Apple cares much for the social aspects of music, seeing it more of a nuisance to achieving their media domination plans.

Let’s jump right in and see what April had for us to think, discuss and debate.

Investments and Funding

April was a very strong month for investment activity. A couple of notes: I have included some hardware/networking related investments which have a music component to them and as per my usual disclaimer, this isn’t a comprehensive list and the numbers have been pulled from public sources but it still gives us a sense of general investment activity in the music tech space. If I missed any investments, please don’t hesitate to comment below.

Total 2010 Investments as of May 10th, 2010

Q1/10: $99.6m

Q2/10 (to-date): $58.72m

2010 total to-date: $158.32m

• Zenverge, Fabless Semiconductor Company Building Digital Media Solutions for Content Storage, Playback, Mobility and Networking Closes $30 Million Series C Financing
• MXP4, the Leading Interactive Music Technology Platform, Closes $4 Million Investment to Accelerate the MXP4 Everywhere Strategy
• News Corp. raises bet on digital music as part of $10m series B investment in Beyond Oblivion
• Stitcher Secures $6 Million in Series B Venture Funding to Help Transform the Way We Listen to Talk Radio
• MusicMatic buys Mangrove’s share in Jamendo, intends to raise more funds
• Thumbplay, provider of mobile entertainment including music, videos and games raises $2.5m in funding
• Nimbit, provider of career management solutions for independent artists and labels receives $2.56m in new, unattributed funding.
• Yangaroo, a B2B digital delivery solution provider for music and advertising industries received $666k in Debt funding
• FameCast, an artist discovery engine received $2.71M in unattributed funding.
• Sleek Audio, raises $285k in debt financing

A couple of interesting funding articles you might find interesting…

• Help Fund Music Technology Startups via Musicians for Music 2.0
• Good News: There’s A Little More Funding Floating Around…

Music Services and Apps

Bandsintown a concert ticket aggregator, event recommendation and notification platform announced an API partnership up with Shazam, EMI and Reverbnation which will now expose concert date to 50 million people via these partner networks. I love that I can integrate my LastFM account (or Pandaro) with Bandsintown where they will track and notify me when my favourite bands are playing in town.

Senzoo.me – A simple and customizable fan-funding widget that encourages fans/consumers to pay back value creators like artists, developers, educators and musicians. Compared to similar platforms like Flattr and PaySwarm, Senzoo is extremely lightweight and does not require any technical skills to implement. Integrates with major blogging platforms (WordPress, Typepad, Drupal etc) and payments are handled through well established payment gateways like PayPal, Google Checkout and Amazon Flex Payment Services.

Beyond Oblivion – As mentioned above, this startup just received $10m in funding and is looking at an October 2010 launch date. What are they planning on doing? Well, in hyperbolic style, they plan to… “combine the stickiness of a social network with unlimited life-of-device access to the largest music library on Earth, within a vast ecosystem where content owners are paid per-play no matter if the original music file was ripped, bootlegged or legally or illegally downloaded.”

Indaba Music releases Mantis, a web-based Digital Audio Workstation (DAW) enabling anyone, from anywhere in the world, to record, edit and mix high-quality audio.

Headliner.FM – I really like this concept. Headliner is a social media cross promotion exchange that connects bands and artists to new fans. Fans will be more open to receiving recommendations from their favourite band to other similar/complementary artists. A great way for bands to leverage existing and well-connected networks and to share fan bases.

Mixtape for You – Based on Andrew Dubber’s “I Made You a Tape” idea, this new web service lets you create mixtape MP3s. Very simple site and limited in features, it’s a throwback to those days where you deliberated carefully to create the perfect mixtapes on cassette tapes for your friends, girl/boyfriend, spouse etc. My wife still has three or four mixtapes I put together many years ago which she still relishes today and I have a few hanging around in a box somewhere that I received from friends.

Songr – Another day, another music mash-up. Like a Digg for music, users submit song title/artist they are listening to and visitors to the site can bump a song up or down. The sites uses the YouTube API to pull the song in to listen/view the video.

AirKast – Digital content delivery platform and mobile app framework used by radio, television broadcasters and content publishers to distribute multimedia-rich content to mobile and connected consumer electronics devices.

WaTunes Launches Music Store Application on Facebook Platform – Pretty good launch timing in light of the Pandora and Spotify integration with Facebook. If users are already spending a lot of time on Facebook, they don’t need to leave the site to buy music (using Facebook currency perhaps?) that they may already be sharing and discussing with their Facebook friends.

Music related startups in Ireland – Naturally with such a focus on US startups, it’s a good reminder that there is a lot of digital music startup activity happening beyond our shores. Some of these Irish startups in this list are doing some pretty cool things.

Rhapsody Adds Offline Listening To Its iPhone App – Rhapsody is giving its iPhone app some bragging rights with an update that lets subscribers listen to tracks even when they’re not online. Users will now be able to download their Rhapsody playlists to their phones and by June, Rhapsody says it will add functionality so users can download individual songs and albums as well.

Amsterdam Music Hack Day – A weekend that brings together 150 of the best music and tech geeks produces a huge array of next-gen music apps. A list of all the hacks can be found here.

How Tech is Changing the Tone of Music as We Know it – A look at four different technologies looking to change the music landscape. Hypersonic sound is really fascinating. Sound is passed through a tightly focused beam that you can only hear when the beam is pointed directly at you.

Glee fans, grab the new iPhone karaoke app and annoy your friends.

Stereomood, an emotion based Internet radio station just released a new developer API.

LastFM is in the news again having dropped their on-demand streaming, and putting a renewed focus on scrobbling and personalized internet radio. Shortly after that announcement, they introduced a new program “Play direct from artist” that lets artists post full tracks for streaming.

Opinions, Insights and Analysis

Plugged/Unplugged: How Facebook Will Change Digital Music – “Facebook already has trained more than 400 million users in how these functions work within the Facebook confines. Applying them to the broader Internet holds significant implications for the music industry. For instance, it’s no secret that music recommendation and discovery is considered the greatest digital music opportunity. More music is being created that ever before, and the digital music services that can best introduce users to the new music best suited for them in the most seamless way possible will benefit not only the music service, but the artists and labels trying desperately to reach new fans.”

Digital Music Startups: Sexy, but Smart? – Insights from Adam Wexler, a young entrepreneur building out his startup Go Rank’em. Key point in this blog post is an interesting stat by David Pakman who says that only 5 out of 109 digital music startups have led to positive returns for investors.

A Billion Taco Vending Machines = Bigger Taco Industry – “Some in the music industry may question the economic impact of cloud music, but I think it’s a great opportunity to turn every device into a vending machine. Music is such a spur-of-the-moment emotional experience that if people hear a song and can get it with one click they will (if it’s easy). If every phone is a vending machine that’s a few billion more retail outlets to take the place of the vanishing record stores,”

Black Eyed Peas Will.i.am commenting at Twitter’s Chirp Conference – “The band of the future is not going to be a singer, a guitarist and a bass player. It will be a singer, a guitarist, a bass player and a code writer – the guy who does apps, computer animation. That is a group. It is going to be about self-contained content-providers.” I’m not a fan of Black Eyed Peas but his comment is rather insightful and on the money. It’s also the same sentiment I’ve heard from a few indie artists I know.

Research: Music recommendation is *the* big opportunity – “Word of mouth recommendations from friends and family is the most powerful way of driving purchases.” Lefsetz has been writing and talking about filtering as being the next big thing.

Anatomy of a band website – Lots be honest, most band/artist websites leave a lot to be desired. Most are static, brochure-type sites that don’t engage fans and/or nurture an active and vibrant community that demands repeated frequency visits. Which bands do you think are effectively using their websites? Nine Inch Nails comes to mind. Others?

Spotting the Creators of Peer Influence – “People make over 500 billion impressions on each other about products and services every year.” In a trust-based economy, consumers are influenced by their peers, friends and family. Personal influence is the new advertising? How will this play out for artists? And how does it tie into the music filtering and personal recommendation process?

Excellent RAIN Internet Radio Summit coverage from the NAB conference in Las Vegas. A lot of insights on internet radio and mobile apps. A recommended read.

Witnessing The Atomization of Artistic Culture. – “The internet gives us far more choice than the limits imposed upon us by broadcast media. We know of more bands, we can get tour dates pushed to us, can sample music long before it is released and we can reserve tickets well before the show. But we are doing this across many more artists, spreading our limited disposable income around in ways we didn’t when we had fewer choices. Nevermind that we are offered billions of other entertainment choices from video games, YouTube, Facebook games and even Crowdreel and Bitly.TV.”

A decade of digital: 10 things for 2010 – “Digital is not a channel. It’s a suite of platforms, channels and tactics that will, ultimately subsume its parents entirely. Digital marketing is not simply a new place to disperse persuasive symbols, but the emergence of any entirely new behavioural grammar, as companies and their customer begin to engage with each other in entirely new ways in entirely new spaces, where everyone has an equal voice.”

Upcoming Events

• Digital Music LA – Los Angeles, CA, May 11th, 2010
• OpenMusicMedia Toronto – Toronto, ON, May 12th, 2010
• San Francisco Music Hack Day – San Francisco, CA, May 15th and 16th, 2010
• NARM Convention – Chicago, IL May 15th to May 17th, 2010
• SF MusicTech Summit – San Francisco, CA – May 17th, 2010
• Future of Music Coalition Presents D.C. Policy Day – Washington, DC – May 25th, 2010
• Open Music Media Montreal – Montreal, QC – May 25th, 2010
• transmitCHINA Conference – Shanghai, China, June 2nd to 4th, 2010

We spend a lot of time with our faces buried in our computers so let me end this recap by saying get out there and support live music! The best technology we have is our ears, our hearts and the magic created by artists and their instruments!

See you next month.

Gabriel Nijmeh is a software business analyst, passionate music lover and guitar player. He currently advises a couple of music startups, including Mediazoic, a real-time social DJ platform and co-founded the Toronto edition of OpenMusicMedia which brings people together to openly discuss the intersection of digital music, media and culture.

This is a guest post by Gabriel Nijmeh, a business analyst and music technology enthusiast.

What a month of news and announcements coming from the digital music and tech world. The big Internet guns (Google, MySpace, Facebook) and a pack of known and new startups were battling for the top digital music business headlines. Funding, new music services, the ongoing debate about ad-supported vs. subscription business models, music ownership vs. access and new mobile apps, the debate and discussions continues.

Show Us the Money

Starting off with funding, the past few months has shown an apparent thaw in venture capital flow as as quite a number of music startups have attracted investor’s money. After a bleak period in the financial markets, the stocks markets have rebounded but overall economic recovery tells another story. There are no shortage of analysts, market pundits and economists who have declared the recession is over but the rebound will have to prove itself. Some are saying that the tech sector will lead us out of the “great recession” as evidenced by strong results at Apple, Google, Amazon, Intel and IBM. Techcrunch is reporting that Q3 venture financing Is Up 17.5%.With all the latest announcements, there is no shortage of confidence or eagerness to plant some stakes in the online digital music business. Amie St, Deezer, Shazam, GlobalGrind, Ecast, Free All Media, Band Metrics, Conduit Labs, MOG all announced financing deals over the past couple of months.

Duncan Freeman at Indie Music Tech is keeping tally of all 2009 music tech related investments and should have Q4 update for us before year’s end.

Access vs. Ownership, Downloads vs. Streaming and the Battle of Business Models.

Is this really a “versus issue” or can access, ownership, bundling, downloads and streaming all co-exist? The digital music business is like a pinata and many companies are lining up to take a few whacks believing inside is a pot of gold.

Google, MySpace, Facebook make music moves — It was only a matter of time before Google and Facebook made a direct move into music. Too little too late? A good thing for consumers, artists, labels? The general response seems to be “ho-hum”. The Google music announcement is at least five years too late, and doesn’t offer anything new or compelling to either artists or consumers. It just formalizes and attempts to monetize Google music searches. Dave Kusek has posted a piece entitled: Google Music and the New Payola – Some Things Never Change and lays out who the winners are. More analysis here and here.

Dell and Universal Team Up to Offer Pre-Loaded Music Bundles — Dell and Universal have teamed up to give consumers a chance to purchase pre-bundled DRM-free MP3s when buying a new computer.  Dell is also partnering with Napster to offer a year of Napster Unlimited on selected laptops.

Daniel Ek of Spotify expands on the idea of packaging music and getting it into people’s existing billing habits and he is walking the talk but announcing that Spotify and 3 UK are hooking up to bundle Spotify premium with the HTC Hero phone. Will this be the future of music purchasing?

MOG’s $5 Monthly Music Service Highlights Spotify Obstacle – Earlier in the summer MOG secured new funding and come US Thanksgiving, MOG will be the newest music streaming service. It was clearly noted by MOG’s CEO David Hyman that a free, ad-supported service is not possible due to the high cost of licensing on-demand music for the United States. This raises questions about Spotify’s US offering in early 2010. Will they offer an ad-supported service or go directly subscription-based?

Lala App Turns iPhone Into Dime Jukebox — Pending Apple approval, Lala has an iPhone app ready to go that will let users stream music for only 10 cents a track on their computer and iPhone/iPod touch. As for the business model, LaLa claims they earn on average of $67 per user which is 300 percent more than what iTunes reels in. Sandy Pearlman has been espousing 5 cent downloads for more than four years and Lala is the closest to realizing the idea.

Free All Music to offer free MP3s, new ad model — In the “it’s be done before BUT…” category. Free All Music which just recently raised $1m in seed funding and is set to launch, will be offering free MP3 downloads in exchange for selecting and viewing a 15-20
second ad. For people with time and a no money, it’s not a bad deal. For those with no time and with money, this isn’t a big deal given the effort and song download limits. Will this ever prove to be a sustainable business model? Digital Music News provides a good analysis.

Opinions, Insights and Analysis

With all these announcements, new services, new business models comes the obligatory opinions, insights,   and analysis.  Here are a few over the past few month:

Digital music – who’s making money? – For years, people have been using sites like Pirate Bay and P2P to download music and now that there so many legal online music services then ever before, will music fans open up their wallets to these services? This is a massive bet on the behavior of the modern music fan.

Is Streaming The Future Of Music? Don’t Be So Sure — “Streaming makes technological sense. But it doesn’t make financial sense. Which means we’re confronted, once again, with the single, glaring, ineradicable fact of the internet age: what’s exciting and welcome for consumers is almost always catastrophic for the poor bastards who produce the content.”

Will the music industry ever extract real value from digital? — A thoughtful piece about tempering expectations that services like Spotify are the next big thing. As CD sales will continue to erode, the future of the music market will be a fragmentation into a number of niches.

Q&A: A front-row seat for media’s meltdown – An insightful interview with Eric Garland, CEO and co-founder of Big Champagne where he talks about the impact digital technology has had on the music and movie industries.

Music Services and Mobile Apps

Activity in the mobile music front keeps bubbling as more developers come to the table with new music based apps for the iPhone/iPod touch in particular . The biggest iPhone/iPod touch music app released this month was Rock Band. It comes with 20 tracks and the option to purchase more music in-app. Tap Tap Revenge 3 was also released this month and works on a very similar premise where using Apple’s in-app service users can purchase music bundles.  Not surprisingly, both apps are in the Top 10 Paid Apps list.

In a related note, which some might call short-sighted, a market analyst is claiming that the iPhone/iPod touch is the biggest threat ever to games publishers. I’m confident games publishers won’t follow the same path as the music industry and have started to embrace “digital distribution” across platforms, game portals, consoles and mobile. But is everything coming up roses? A couple of recent reports indicate that sales and revenues are down in the music games category.

Music Ally has put together a slide deck covering 10 Trends in Music Games that is worth taking a look at. And Kukapp is a great site to keep tabs on the hottest and best selling iPhone apps.

Other interesting music apps released or planned for release include:

Cadence App — An iPhone app for workouts that automatically creates a playlists beats per minute (BPM). No more fumbling around for that right set of songs to get you through a workout!

ZooZbeat — A feature-rich mobile application for creative music creation on the go. Allows users to download and recreate tracks from major label artists. Fans want to interact and be part of the creative process. I would highly recommend you check out Suzanne Lainson’s blog and catch her on Twitter because she hits upon this topic quite often.

MocoSpace teams with Nellymoser for mobile music app — Mobile social network MocoSpace announced an agreement with turnkey content and services solutions provider Nellymoser to launch MocoSpace Music, a new application enabling consumers to discover new releases and featured acts, view artist photo slideshows and video interviews, search for nearby live shows and purchase ringtones.

We are the Panel — A group of “tastemakers” are asked to pick two albums each week that they review and offer a full music stream delivered to an iPhone app. ($2.99). Will apps like this be part of the future of music journalism?

A few other interesting tidbits this month:

Playdar Can Save Music Services Cash, Enable P2P Streaming — A small piece of open-source software has flown under the radar but looks to be very interesting and possibly contentious if this gains traction and impacts music license revenue streams. Playdar can detect when someone is streaming a song they have on their computer or home network and play it from anywhere. This would reduce license fees owed to the labels. What if this can be done across the network and different listeners? Are we closer to realizing the Celestial Jukebox which has been talked about for almost ten years?

Midem Net Labs will be showcasing 15 new music startups to be judged by some of the digital music biggest trailblazers and innovators at Midem in January 2010.  They have already announced the first five startups: GoMix, Radionomy, Kickstarter, Thesixtyone and Pops Worldwide. Want to participate? You have until November 6th to apply. Looking forward to see who the remaining startups will be and what innovative products/services they have up their sleeves.

PiracyPayback — Anyone who has pirated copyrighted material and feeling any remorse can now “donate” to help ease the guilt. They don’t name who is running the site and claim the money goes to “to beneficiaries who work with or represent artists and other professionals impacted by digital media piracy.”

New Business Models and how musicians, labels and songwriters are compensated – The Future of Music Coalition has posted a great set of presentations/spreadsheets aimed directly at musicians.

Reality will not match unreasonable expectations

Let me tie-up this month’s recap with a few thoughts of my own. Looking at the number of companies already in service, and those coming on stream shortly, consumers face confusing and conflicting choices. They will be faced with the difficult decision of choosing the right service and in the face of unprecedented choice, may not make any choice at all.

In a fragmented online music world where niches have started to develop, how many people will want to pay for any music if they can snack for “free” from each of the various online music sites to satisfy their music consumption? Building the technology is the easy part. There also appears to be more of a willingness to negotiate more reasonable license deals between start-ups and labels but the biggest challenge will be changing behaviors and mindset. Will consumer step-up and open their wallets because they find these services compelling and offer value that can’t be found elsewhere?

Having said that, we are experiencing a period of experimentation as the music industry and music startups try to work through new revenue and service models that may one day be viable and sustainable. We are all witnessing and experiencing a massive and tumultuous shift from pre-web music economics to web-native music economics.The important consideration is acknowledging that expectations have to be tempered. It is easy to be dismissive (I’ll be first to accuse myself of that) but now that the gates have opened, problems are being solved, innovative ideas are being worked in a collaborative fashion outside the walls of a closed garden.  As companies scramble to find a set of valuable products and services that will hopefully benefit all participants (labels, artists, technologists, fans), let’s look at all this disruptive change from a positive perspective. Entering this business is not for the faint of heart. The digital music highway is littered with causalities.  Innovators need to be encouraged and rewarded. Music as culture needs to be celebrated.

Looking forward to seeing what next month’s digital music business brings our way!

Gabriel Nijmeh is a software business analyst, passionate music lover and guitar player. He currently advises a couple of music startups, including Mediazoic, a real-time social DJ platform and co-founded the Toronto edition of OpenMusicMedia which brings people together to openly discuss the intersection of digital music, media and culture.

I just wanted to take a moment to say how much I appreciate you, the readers of Creative Deconstruction. It’s encouraging to see so many artists, fans and music pros recognizing the unprecedented opportunities we have in the music business today.

When I started this site a few months ago it was my goal to create a place where new ideas could be discussed and independent music could be celebrated. There are still quite a few features and services that are yet to be implemented, and I am always looking for feedback on what you would like to see more (or less) of. So please – make use of the comments section at the bottom of each article. Share your ideas and voice your questions and concerns. I try my best to respond to each comment. I won’t have all the answers of course, but there’s likely someone out there who does.

There are also several other ways to connect with me and the rest of the budding Creative Deconstruction community so that we can all get to know each other better. You can find me on Twitter as @refeup where I’ll point you to many other people and services that you’re likely be interested in, and join our new Facebook community where you can post comments, music, videos, etc. You can also subscribe to our RSS feed or via Email to stay up to date with new articles as they are published.

Please feel free to send me an email using the form on the Contacts page. I like emails. Submit interesting stories or tell me about creative or unique business strategies you have implemented - especially if you got the idea here. I’m always looking for good case studies, whether they resulted in success or failure.

Thanks again for reading and for your comments. I look forward to seeing the Creative Deconstruction community grow and getting the chance to get to know each of you better in the coming months.

- refe

There have been rumors floating around the web for several days now that MySpace was about to cut hundreds of jobs. Today it looks like those rumors were very accurate – about 480 employees are expected to be out of work by the end of the day. The news comes only a couple of weeks after Facebook surpassed MySpace in unique visitors for the month of May.

According to the press release, they are cutting staff in order to return to a “start-up culture.” This is interesting, since MySpace parent company, News Corp, just fired the social network’s original founders about two months ago. I don’t mean to add insult to injury, but I think the writing is on the wall for MySpace. Michael Arrington of TechCrunch has been keeping close tabs on the company’s troubles and estimates that another 300 jobs will be cut by the end of the year.

Here’s the press release:

MYSPACE REDUCES STAFF BY NEARLY 30%

Return to Start-Up Culture a Focus for Company Moving Forward

LOS ANGELES—June 16, 2009—As part of a plan to restructure itself into a more innovative, efficient, and entrepreneurial business, MySpace announced today that it will reduce its staff by nearly 30%. This restructuring plan crosses all U.S. divisions of the company and lowers the total number of domestic staff at MySpace to 1,000 employees.

“Simply put, our staffing levels were bloated and hindered our ability to be an efficient and nimble team-oriented company,” said MySpace Chief Executive Officer Owen Van Natta. “I understand that these changes are painful for many. They are also necessary for the long-term health and culture of MySpace. Our intent is to return to an environment of innovation that is centered on our user and our product.”

“MySpace grew too big considering the realities of today’s marketplace,” said Jonathan Miller, News Corporation’s CEO of Digital Media and Chief Digital Officer. “I believe this restructuring will help MySpace operate much more effectively both structurally and financially moving forward. I am confident in MySpace’s next phase under the leadership of Owen and his team.”