Steve Jobs Words To Feature in Apple Antitrust Case

Apple’s Dominance of the digital music market has declined as the market shifts to streaming on demand. As Apple attempts to win back lost ground with its recently acquired Beats music streaming services and embed the enabling app in its latest update to the iOS operating system used on iPhones and iPads, it once again faces many questions in court over its previous iTunes software practices within the digital music market.

The current Californian case, brought by Melanie Wilson and Marianna Rosen, is seeking $350 million and under its class action status, it is estimated that the lawsuit could award damages to as many as 8 million people who purchased an iPod between September 12, 2006, and March 31, 2009. The case has evolved significantly since the original 2005 filing and now alleges  Apple made a series of software updates to iTunes which were specifically designed to shut out competing music stores' ability to load their songs onto iPods.

The case centres around Apple’s use of its Fair Play DRM (Digital Rights Management) software and claims that by restricting ITunes tracks to iPods and others’ tracks from iPods, Apple forced buyers to use iPods instead of rival devices between 2006 and 2009. It is claimed that this in turn artificially inflated the price of iPods and resulted in harming consumers in the process.

Now a video of and emails by the late Steve Jobs are even being used in court as evidence against Apple.

Bonny Sweeney, the lead plaintiffs' lawyer stated that, "Apple made those changes to its software after top executives at Apple learned that competitors had figured out a way to have their songs played on the iPod." He also claims that the updates, "did not make the iPod faster, improve sound quality, did not make the iPod sleeker or smaller or cooler," but "prevented customers who had legally purchased songs from Apple's competitors from playing those songs on their iPod."

Apple counter stating that iPod prices were not set with reference to its rivals and that in 2006, rivals such as RealPlayer had less than 3% of the online music market and had little influence on their pricing. 

Apple's iTunes store sold DRM encoded music track which not only prevented unauthorised copying but also could not be played on competing devices such as Microsoft's Zune and that songs from rival online stores could not be played on Apple’s iPods. The code that would go so far as to force users to reset their iPods if they were loaded with unauthorized MP3 files, wiping the devices clean. The code was removed from iTunes in 2009 and now music and other licensed media purchased from other companies can now be played on Apple devices.

It’s interesting to note that there are many who would suggest that the DRM ‘walled gardens’ within the ebook market have many similarities and in some cases also support hardware offers and although they are subtly different defining what is right and wrong may be hard.

Google to Redefine Music with 'Music Key'?

Today more and more kids watch music than listen to it. YouTube has turned music from being a one dimensional experience into a multi-dimensional one. What was once only available as audio produced in a studio now can have many renditions with video and stills from live concerts. The depth and range of music on YouTube is staggering as is the hits many renditions receive and have given for free.

Google is starting a YouTube ‘Music Key’ subscription service enabling users to stream ad-free music videos for offline use and for a £9.99 it also provides membership to their sister music download service Google Play All Access. This gives Google a significant advantage over its audio only rivals.

The way that the music industry is currently structured around just three labels gives Google equal terms to that of its audio only rivals and now enables them to move at speed to offer depth and breadth on as ‘much as you can eat’ basis. Taylor Swift and The Beatles may be able to act independently of the big three and cut their own deals but it’s still about range and Google have just redefined range and offer.

When you bought records you owned them and they often sat proudly on your shelves saying who you were. Today we don’t own music but listen and watch it on demand and it’s the social networks who help to define our tastes. The likes of Spotify will have to think hard as today all we have to switch is a monthly subscription and we still have access to discover and play everything. Would you buy yesterday’s offer when for the same outlay you can take it to another level? 

Hear, See and Speak - No Used eBooks?

How do industry bodies and major players respond to new entrants who offer something different? Do they go out to squash them in order to maintain the status quo? Do they attempt to reign them in and restrict their influence and impact? Do they invest in them and work with them to create new channels, new markets and new revenues? Some believe that many stick their head in the dark and wish them to go away?

This last week we have all read the Amazon Press Release over their ongoing battles with Hachette and one of the most relevant statements came right at the beginning in their reflections of the current consumer offer.  

A key objective is lower e-book prices. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. With an e-book, there's no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market -- e-books cannot be resold as used books. E-books can be and should be less expensive.

The somewhat throwaway line that caught our attention was that, ‘there is no secondary market ebooks cannot be resold as used books.’ With the revelations earlier this year about Amazon’s used ebook patent, we know that it has had its eye on this opportunity, but that the first sale doctrine is maybe a battle too far today. But used ebooks are almost certainly to happen and the change will be either driven by consumer demand or other start-ups who are prepared to push the envelope. It took the likes of Waterstones, Dillons and others some three years from starting to discount in 1991, to the collapse of the Net Book Agreement in 1994. It took years of patient lobbying for the B&Q and other large UK retailers to open up Sunday trading. It took years to change UK licencing laws. Things change in time and they change in favour of public demand.

Last month a judge for the District Court of Amsterdam ruled that Dutch used ebook reseller, Tom Kabinet can continue to operate while it is being sued in court by the Dutch Trade Publishers Association. Tom Kabinet enables users to resell DRM free and digital watermarked ebooks.

The Tom Kabinet site takes a 10% commission on all ebooks sold and have offered to pay a 5% royalty on all sales to authors for each ebook sold on their marketplace.

However, Tom Kabinet like the used l digital music service ReDigi are also up against EU legislators and a strong lobby. Although ReDigi is still in operation today, and have been awarded a patent earlier this year for their marketplace platform they have had to adapt their service in light of losing legal battles.

When Napster first threatened the music production business, the industry fought back through the courts and set out to shut down the new file sharers. The propaganda PR and lobby machines were wound up and the sound bites and messages broadcast. The political lobbing started as the industry  set out to shut down the new file sharers before they could establish themselves. The problem was Napster was free and consumers made it go viral.

The music industry won its battle with Napster, but then had others to deal with who had watched the Napster battle and learned new tactics. Although the music business kept winning they also kept losing and by the time they tried to get the Napster brand under their umbrella it was too late and the stable door was wide open.

The music streamers came next. First there was Spiral Frog who failed to deliver, but they were followed by Spotify and Pandora who did. The big music producers had learned some lessons and bought into the service but also tried to tame it and minimise the risk to their model. However they failed to understand that the threat wasn’t free, nor was it sharing, but it was about the whole ownership ethos that they had profited from for decades. The streaming services asked why you needed to buy when you could access on demand, from anywhere at anytime. Spotify with its 24 million users, of which 6 million are subscribers and the other services started to redefined ownership and how we paid for and listened to music.

It’s amazing how long the music industry took to include downloads into its charts and that they have only just opened the door to include streamed music. Today 228 million downloads happen across the various services every week in the UK and that is up from 142 million in 2013 and 67 million in 2012 (Official Charts Company). The maths of how many tracks on average people download a week, is not hard to calculate and is significant. Some 41.5% of singles are streamed and 12% of the current top ten are streamed. The UK alone has delivered a staggering 18.5 billion streams and in 2013 overall market revenues from streaming pasted the $1 billion mark for the first time. Interestingly, while streaming has experienced explosive growth the overall revenues of the global music market have only increased by a mere 4.3% (IFPY and Spotify).

We wonder how long it will be before they fully recognise the impact YouTube has made and that some suggest that more kids now watch their music today than listen to it. Interestingly, the success of streaming is negating the demand for used digital sales and in a market where growth is clearly in a new ownership model enabling secondary sales makes sense and will generate further income for artists.

Change will happen and denying used digital media a second life and sale will increasingly be seen as wrong and an untenable position by the people that matter the consumers. Denying a second income opportunity also impact creators at a time when their own first sale income is increasingly not meeting their expectations and the pool is being shared with even more fish.

Unlike music, ebook consumption is relatively low and prices relatively high and this will reduce some of the appeal of on demand ebook subscription services. The book market will remain a mixed economy for the foreseeable future with physical, digital, see through and subscription offers.  Perhaps it time that publishers work with new stat-ups to create and support a thought through and complimentary used ebook market and not wait for the collapse of the restrictions they have today and the chance that the result may not be favourable. 

Where Now For Music?

When we all look into the same house through different windows it should not be a surprise that we may all see different things. It’s the same house just different perspectives.

Pricewaterhouse Coopers have just issued a report predicting a 1% annual growth for the US-based music industry through to 2017.  That may put a smile back on the music executives, who are ready to slit their wrist and could only see terminal decline. It may disappoint those optimists who believe that music has turned the corner and would have expected a significant upturn. However, for many it confirms that the traditional music industry after 100 years of stellar growth is now seriously flat lining.

Before we all jump in to defend our own viewpoint, we have to accept that the music industry is going through dramatic change in formats, channels, culture, and how consumers listen, store and pay for music. It would be somewhat foolish to predict the outcome in such turmoil. Who will survive and even what the market may look like in the next decade is open to many prespectives, interests and even down to the extent that the current culture will change.

Today, digital sales may be increasing, but the value of the units sold is dropping. Digital sales may still be in their infancy, but are now under serious threat as Apple’s favour nation starts to faulter, the challenge to resell digital has only just begun and the demand streamed and subscription services is only starting to redefine ownership. Even the relatively new swing from album to singles, which was driven by the likes of iTunes, may not be as clear cut as once predicted and the single versus the album debate is ongoing for many. All this without the introduction of Neil Young’s Pono service which may not happen, but is bound to be followed by others who are wanting better quality than MP3.

If we look at through Pricewaterhouse Coopers’ revenue window we see a flat business.

Pricewaterhouse Coopers predict grow in 2013, but based exactly on what?  Physical sales are falling and not being compensated by digital sales and even the return of vinyl can only be seen as niche. Kids are increasingly now turning to YouTube to watch and listen and even if these licences were revisited they would never bring back the glory days. We see from the recent Apple iRadio negotiations that although the streaming business appears to be sound it will not feed all the production mouths that have been built up over the good days.

If we look through another Pricewaterhouse Coopers’ window that shows the comparative revenues generated by digital as opposed to physical we see a sick physical patient and a digitally challenged one.

  

When we look at live revenues the Pricewaterhouse Coopers’ perspective is more bullish and predicts a 3% growth to some $30.9 million by 2017.  They state that this will "more than offset the continued decline in recorded music revenues." The question they fail to answer is whether this money and growth will be owned by the traditional gang of three majors, or now migrate to others such as Live Nation?

The question also exists about the division between publisher revenues and recorded revenues and how that split will grow as streaming services grow.

It’s easy to look at music and see a sector that is struggling to compensate and balance the loss of traditional physical sales revenues with the emerging digital ones but it’s harder to see how music will generate the same revenues it once did. It’s the same house but today even the foundations are changing!

iRadio to iTunes

Apple broke the album mold and introduced us to not back to singles but tracks. It priced these at a point that was attractive and tied it t their iPod, iPhone, iMac, iPad and the rest is history. Now they plan to introduce iRadio to the family and hope to cash in on the move to music on demand.

So how will they fair against the established communities such as Pandora, Google’ ‘All Access’ and Spotify. Will they be able to lure customers away from subscription based services to what is reported to be an advertising paid model? Will consumers accept free with ads even if it links seamlessly to iTunes to buy?

The challenges Apple face in trying to close down on this low margin high volume business is not just consumers and attracting advertisers but also convincing the music producers and publishers that another low margin licence service will work for them. They already have disparity between existing revenue models and Apple are unlikely to want to pay the going rate for their licences. It is rumoured that Apple has signed a deal with the Warner and Universal for their music rights but has still to complete on the latter’s publishing rights. It has still to close a deal with Sony with a few days to go to their launch of the service. All deals are based on Apple paying a fee for the music rights and a separate fee for the publishing rights on music streamed. The interesting aspect is the ratio of the number of times an individual will play the same tune versus the cost to purchase. The user doesn’t care and may play a track 50 times but the meter is running and everyone else will be watching. In Apple’s case they have to either pull in the necessary advertising revenues or sales through iTunes to cover the royalties. But why would a user buy a track when they have unfettered access to play it for free?

The challenge for the music business is grappling with the clear migration from purchase to subscription or ad based licence deals. The music business has a track record of poor transition to new models and technology and only recently has started to see the new shoots of a digital recovery, but this has been on the purchase model which may not prevail as more become switch on to on-demand streamed services.

The challenge to Apple is that they are not leading this market and are coming relatively late to the party. They believe that the tie to iTunes will work in their favour but other will argue that it will further heighten the difference between owning all one’s library of music and merely playing it when you want to at a lower operational cost. 

Spotify App Approved for iPhone!

In a move many wished would happen but half expected not to happen Apple has approved the Spotify iPhone application.

We previously showed a video of the iphone app. and now wait with baited breath as it potentially starts to change music as we once consumed it and hope that it isn't a false call like the recent Android app.

The app is free on the app store but the user to have a premium Spotify subscription, which costs £10. It now has the opportunity to change the way we all listen to music on what is the largest digital music platform Apple.

For anyone who has been living on another planet this years the Swedish music streaming service offers a comprehensive, free library of millions of songs. The user selects their playlist and the music plays. Tonight we were listening to the brand new Neil Young Archive volume 1 and earlier today we had Antony and the Johnsons in the back ground as we worked.

Spotifty is different in that it actually questions the old ownership library rules and plays on demand. The model shifts from pay on consumption to one that is or subscription driven, giving the user choice free with ads or subscription without. The app on the iPhone even will stores the playlist so users can listen offline.

The service was launched last year and has more than two million users in the UK, and more than six million across Europe, with the US in its sights.Universal Music in Sweden claim that Spotify already generate it more revenue than iTunes.

Spotify is also ready to launch mobile phones running Google's Android software.

Roll over Beethoven!

Wolfgang's Vault: Streamed music With a Difference

When we spoke to a musical friend Tim Hardy in Sedona, Arizona and mentioned we had just been looking at Spotify and enjoying the streamed music, he suggested www.wolfgangsvault.com. Today we experienced that and were suitably impressed.

Wolfgang's Vault owns one of the world's largest collections of original concert posters; hundreds of rock, political, sports and comedy posters all for sale in mint condition, and many are signed by the headline performer or the graphic artist. These like the promotional and backstage memorabilia, passes , concert tickets, tee shirts, books, magazines date back as far as the 60s and will appeal to many memories of the rock heydays. Read record reviews and in-depth articles about the greatest performers of yesterday and today in their Crawdaddy magazine going back to the sixies and now an online webzine. There are also many concert recordings available and streamed for free within the vault. You will find thousands of legendary live recordings with hundreds available for download and the Vault is also available as a free app on iPhone.


The list of streamed music free to listen to includes live tracks from concerts by the likes John Lennon live at Maddison Square Garden in ’72, or legends at the Fillmore such as the Grateful Dead in ’66, Jimi Hendrix in ’68, Led zeppelin in 69, or Derek and the Dominoes in ’70, or David Bowie at Montreal in ’83, U2 in ’83, right up to the White Stripes today. The list is vast and provides something for everyone.

Where did all this come from? Wolfgang was Bill Graham , a music entrepreneur who commissioned works of art to promote his shows and he overprinted and preserved the exceptional art, photography and recordings that came from these shows. For over 30 years, his company accumulated and stored this material in newly minted condition. The vast majority of material in Wolfgang's Vault comes from the original archives of 'Bill Graham Presents'and music and concert reviews.

So why do we report about it here and does it have any relevance to today’s digital explosion? We believe that it demonstrates that its digital content often needs context to provide a rounded experience. If we look today's musicians they are now signing up to Live Nation and controlling the concert and merchandising and Biil Graham understood this back in the 60s. Wolfgang’s Vault will stream rare concerts for free and sell merchandise and memorabilia today. It was George Martin, who when asked in the 60s where the value was, said ‘the album was the menu and the concert the meal’.

Thanks Tim