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In an era where music companies are still battling to enforce DRM measures to protect ailing profits, some of the world’s biggest music stars are leaving them behind to embrace new revenue models.

This, from today’s Sunday Times…

HIP-HOP star Jay-Z has always seemed as interested in business as music. From a poor start in a tough Brooklyn neighbourhood, Jay-Z has lived the rapper’s dream, making millions and boasting about it all the way. His hits include Get This Money, I Love the Dough and More Money, More Cash, More Hoes.

Unlike many of his contemporaries, however, making cash seems to interest him more than spending it. The rapper, real name Shawn Carter, even “retired” from music in 2003 to spend more time with his money.

When Bill Gates wanted a hip-hop star for his spoof retirement video, Jay-Z, long-time partner of pop diva Beyoncé, was the natural choice.

Now Carter has cut one of the biggest deals in music history. It’s a deal that, depending on who you talk to, either points the way to a new model for the struggling music industry or highlights what a savvy player Jay-Z is, while spelling disaster for the company that signed it.

American concert promoter Live Nation hit the headlines last October when it signed a $120m (£60m) deal with Madonna. The pop queen dumped Warner Music, her long-time label, to do the deal, in a move that for some underlined the eroding power of the music industry’s big players.

Music has never been more present in people’s lives or more easily available, but the shift to digital sales has so far proved less profitable than the industry’s last successful business model - promoting an artist by any means it can to make money from CDs.

CD sales remain a profitable business, but as they decline, artists, music labels and concert promoters are all looking past them at alternative revenue sources, from T-shirt and ticket sales to ringtones and licensing songs for use in video games.

“The paradigm in the music business has shifted and as an artist and a businesswoman, I have to move with that shift,” Madonna said in a statement when she signed her deal. Other stars were listening.

Now Jay-Z - 10 years her junior - has dropped Def Jam, the label where he was once president, for a $150m deal with Live Nation.

The company signed a reported $100m deal with Irish rockers U2 last month to handle the band’s merchandising, digital and branding rights, and is also said to be in talks with The Rolling Stones, presently working out their contract at Britain’s EMI.

Like Madonna before him, in straight record sales Jay-Z, 38, is not the force he once was. American Gangster, his last album, sold about 1m copies in America compared with 3m copies of 2003’s The Black Album, but he has also found new artists and pursued other business ventures, such as a clothing line, Rocawear, which he sold last year for $204m, sports investments and a chain of nightclubs. Forbes magazine’s last annual list of “Hip-Hop Cash Kings” ranked Jay-Z first with estimated earnings of $34m in 2006.

The Live Nation deal, which is yet to be formally announced, is a “360degree” deal that will give the concert promoter a financial position in virtually every aspect of the rapper’s career. Jay-Z is expected to get a $25m payment upfront, $10m in advances for each of three albums, $25m towards concert performances and $20m for the publishing rights that he owns. He will also get $25m in overheads to run his side projects with $25m more available to finance acquisitions or investments. He and Live Nation will split any profits 50/50.

Many music executives were dismissive of Live Nation’s move. They pointed out that the major labels were all now doing “360degree” deals and said it was well known that Jay-Z had unsuccessfully touted this same deal to most of the big labels.

“This isn’t a new model,” said one. “It’s ‘let’s take ageing artists past their prime and overpay them’ - that’s a very old business model.”

He said he doubted if they would make back the $10m advances on his new albums and that Jay-Z was not a touring artist of Madonna’s calibre.

Live Nation has a ticket sales deal with Ticketmaster but that expires this year.

David Joyce, analyst for Miller Tabak, said the company was “circling the wagons” by building a roster of big-name artists to help it see off competition when it goes it alone. He said the traditional music-industry players were increasingly looking for a slice of Live Nation’s action. Cherry-picking top acts for top prices is one way to see off that competition.

Music executives said the real test of Jay-Z and Madonna’s deals will come when they have new albums to release. Unlike the record labels, Live Nation is not set up to get CDs into stores or digital music onto iTunes and will probably have to sign up a label to do the release.

Original article is here

Attributor, who helps media companies protect their content, has raised $12 million in Series C funding. The company uses what it describes as “fingerprinting algorithms” to crawl the Web and identify when and where a publisher’s articles, images, or videos are being used, and if they are being used with proper licensing permissions.

In addition to protecting copyright content from malicious use, part of Attributor’s pitch is that by through better management, publishers can increase ad revenue, get more inbound links, and improve their search engine rankings. So far, Attributor has signed up several top media companies, including CondeNet, The Associated Press, and Reuters.

The company has now raised more than $20 million to-date, with its last round coming in December, 2006.

This is from Mashable here

DI> A misbegotten idea - See Cory Doctorow’s comments at the end of the article. Cory is a renowned specialist in this field, commentator, and a law professor at Harvard (I think Harvard).

Via BBC yesterday
Anti file-sharing laws considered
The UK government could legislate to crack down on illegal file-sharers, a senior politician has told the BBC’s iPM programme. Lord Triesman, the parliamentary Under Secretary for Innovation, Universities and Skills, said intellectual property theft would not be tolerated.

“If we can’t get voluntary arrangements we will legislate,” he said.

The comments could prove controversial with privacy advocates and internet service providers. Lord Triesman called on internet service providers to take a “more activist role” in the problem of illegal file-sharing.

Data banks
There are ongoing talks between internet service providers and the music industry and these are, said Lord Triesman, “progressing more promisingly than people might have thought six months ago”.

“For the most part I think there are going to be successful voluntary schemes between the creative industries and ISPs. Our preferred position is that we shouldn’t have to regulate,” he said.

He admitted that the technology necessary to track illegal file sharing would mean that “it is quite possible to know where it is happening and who it is happening with”. While he said that the government had no interest in “hounding 14-year-olds who shared music”, it was intent on tracking down those who made multiple copies for profit. “Where people have registered music as an intellectual property I believe we will be able to match data banks of that music to music going out and being exchanged on the net,” he said.

“We have some simple choices to make. If creative artists can’t earn a living as a result of the work they produce, then we will kill off creative artists and that would be a tragedy.”

DI> its the same old story, legislation to try to stop technology changing teh existing business model, it just won’t work, if people can find a way around it they will. What is needed is the music industry to embrace the new business model and find enw creative ways to monetize it. As some are indeed doing.

Mere conduit
The debate centre around peer-to-peer (P2P) technology, applications that allow internet users to exchange files with each other directly or through a mediating server. Computer users with the same type of P2P application can connect to each other and directly access files from one another’s hard drives. Some people are using peer-to-peer applications to copy or distribute files including copyrighted material such as music, films and software without paying royalties. People who do this may be infringing the Copyright, Designs and Patents Act 1988.

There have been various crack-downs on such applications. Most recently the UK-run members-only site OiNK was shut down and several properties in the UK and Holland were raided.

‘Misbegotten idea’
The Internet Service Providers Association has always maintained that it cannot be held responsible for illegal peer-to-peer traffic because it is “merely a conduit” of such material. “ISPA does not support abuses of copyright and intellectual property theft,” said an ISPA spokesman.

DI> Its not quite as simple as that, and most people I have spoken to don’t know the full details of the issue.

He said: “However, ISPs cannot monitor or record the type of information passed over their network. ISPs are no more able to inspect and filter every single packet passing across their network than the Post Office is able to open every envelope.” “ISPs deal with many more packets of data each day than postal services and data protection legislation actually prevents ISPs from looking at the content of the packets sent,” he added.

The British Phonographic Industry was pleased at the government’s tough line.
“We greatly welcome the government reiterating its view that ISPs should work with us to tackle the problem of internet piracy, or else face legislation,” said Geoff Taylor, chief executive of the BPI.

“ISPs operate the pathways to digital music consumers. Through our talks with the ISP community we are hopeful that together we can arrive at voluntary co-operative agreements that work to the benefit of the whole digital marketplace,” he added.

Cory Doctorow
The iPM programme also spoke to renowned blogger Cory Doctorow who described the idea as “misbegotten”. “It represents the opinion of someone who doesn’t understand technology very well, and hasn’t really thought through the implications of what he’s promising. You’d be hard pressed to find anyone who’s an actual computer scientist involved in digital signal processing who believes that you can accurately identify copyrighted works with any kind of reliability in a variety of situations,” he said.

He believed the idea would createa “giant toxic pool of personally idenitifying private information” that ISPs would not be able to keep secret. “You will dismantle the fundamentals of the democratic state, which is to be free in your person, your mind and your conversation from scrutiny and surveillance. So this is a really misbegotten idea,” he told iPM.

YouTube, the Google Inc video-sharing site has said that it has begun public testing of a long-awaited video-matching database in its latest bid to ward off lawsuits over video piracy.

The world’s largest online video-sharing site said the YouTube Video Identification technology is a database that stores reference files of original video content and associated ownership rights and compares it to any video YouTube users attempt to upload.

“We will be doing complete file scans,” YouTube Product Manager David King told reporters on a conference call to discuss the expanded video ID test. “A movie studio can give us a three-hour movie and we will scan it in its entirety.”

YouTube had previously said it had begun a private test of the video-identification technology with nine media companies, including several movie studios. It has named only Walt Disney Co and Time Warner Inc as joining the test.

YouTube has come under fire from several traditional media companies that say it has dragged its heels in offering reliable ways to identify video clips uploaded by regular users without permission. In March, Viacom Inc filed one of several suits against YouTube, seeking $1 billion in damages.

Asked by a reporter whether Viacom was taking part in the test while continuing to pursue its federal suit against Google and YouTube, officials of YouTube reiterated that they only had permission to talk about partners Disney and Time Warner.

“Any other discussions have been under NDA (Non-Disclosure Agreement) and I can’t confirm who we have been talking to,” YouTube Chief Counsel Zahavah Levine told reporters. An NDA is a legally binding agreement not to disclose company secrets

Viacom’s General Counsel Mike Fricklas said of YouTube’s move to begin public test of the technology: “We’re delighted that Google appears to be stepping up to its responsibility and ending the practice of profiting from infringement.”

YouTube’s attorney said the new technology goes beyond what the company is required to do by law to protect copyrights and that its efforts to help copyright holders had no bearing on the lawsuits against it.

The YouTube Video Identification technology is proprietary to Google, officials said. YouTube already works with a private company, Audible Magic, to offer audio-identification tools to detect unlawful uses of music inside YouTube videos.

This was the latest in a series of moves YouTube has made to ward off widespread piracy of popular video programming and help copyright holders protect their programs.

YouTube has also adopted a technology that identifies exact duplicates of video files, a 10-minute limit on video clips users can upload to the site and an automated process for media owners to notify it of pirated videos.

Levine said her company would consider making its database available to other online video sites instead of keeping the data that media owners provide to itself, a move that would eliminate the need for media content owners to work with different copyright protection systems on dozens of Web video sites.

“We are building this with the idea of opening it up and making it more general over time,” she said of the potential to allow third-party video sites to check its reference database.

MTV Networks-owner Viacom has charged the company with “massive intentional copyright infringement” after demanding the removal of clips of its popular shows “The Colbert Report” and “The Daily Show with Jon Stewart.”
via http://www.ciol.com/

While YouTube is pioneering its own technology, others have been experimenting with similar technology from players like Web Sheriff, Gracenote , Vobile, and Audible Magic.

UPDATE - this via Engadget…

YouTube unveiled YouTube Video Identification, a system designed to prevent copyrighted videos from making their way onto the site without the consent of the owner. Rather cunningly, YouTube requires that content owners send in a master copy of all their copyrighted content — y’know, so they can cross reference it against uploads (nothing to do with Google’s aim of indexing everything, ever … no.) Any data that matches the reference data can be deleted automatically, but only if the content owner says so. According to YouTube chief counsel Zahavah Levine, there will be a way for content owners to set it up so YouTube can scan content on other servers — removing the requirement for a master copy to be uploaded to YouTube — although Levine said that method “would be more difficult.” For who, Google, or the TV and movie studios?

The Inevitable March of Recorded Music Towards Free
from TechCrunch by Michael Arrington
(Techcrunch article is here)

2007 is turning out to be a terrible year for the music industry. Or rather, a terrible year for the the music labels.

The DRM walls are crumbling. Music CD sales continue to plummet rather alarmingly. Artists like Prince and Nine Inch Nails are flouting their labels and either giving music away or telling their fans to steal it. Another blow earlier this week: Radiohead, which is no longer controlled by their label, Capitol Records, put their new digital album on sale on the Internet for whatever price people want to pay for it.

The economics of recorded music are fairly simple. Marginal production costs are zero: Like software, it doesn’t cost anything to produce another digital copy that is just as good as the original as soon as the first copy exists, and anyone can create those copies (meaning there is perfect competition and zero barriers to entry). Unless effective legal (copyright), technical (DRM) or other artificial impediments to production can be created, simple economic theory dictates that the price of music, like its marginal cost, must also fall to zero as more “competitors” (in this case, listeners who copy) enter the market. The evidence is unmistakable already. In April 2007 the benchmark price for a DRM-free song was $1.29. Today it is $0.89, a drop of 31% in just six months.

P2P networks just exacerbate the problem (or opportunity) further, giving people a way to speed up the process of creating free copies almost to the point of being ridiculous. Today, a billion or so songs are downloaded monthly via BitTorrent, mostly illegally.

Eventually, unless governments are willing to take drastic measures to protect the industry (such as a mandatory music tax), economic theory will win out and the price of music will fall towards zero.

When the industry finally capitulates and realizes that they can no longer charge a meaningful amount of money for digital recorded music, a lot of good things can happen.

First, other revenue sources can and will be exploited, particularly live music, merchandise and limited edition physical copies of music. The signs are already there - the live music industry is booming this year, and Radiohead is releasing a special edition box set of their new album for £40.00 simultaneous to the release of their “free” digital album.

Second, artists and labels will stop thinking of digital music as a source of revenue and start thinking about it as a way to market their real products. Users will be encouraged (even paid, as radio stations are today) to download, listen to and share music. Passionate users who download music from the Internet and share it with others will become the most important customers, not targets for ridiculous lawsuits.

The price of music will likely not fall in the near term to absolutely zero. Charging any price at all requires the use of credit cards and their minimum fees of $0.20 or more per transaction, for example. And services like iTunes and Amazon can continue to charge something for quality of service. With P2P networks you don’t really know what you are getting until you download it. It could, for example, be a virus. Or a poor quality copy. Many users will be willing to pay to avoid those hassles. But as long as BitTorrent exists, or simple music search engines like Skreemr allow users to find and download virtually any song in seconds, they won’t be able to charge much.

Update: There are some blog responses to this post that are, inevitably, complaining about fairness. Arguing against basic economics makes about as much sense as arguing against gravity. Zero marginal cost + competition (anyone can create a copy of a song) results in a zero price, unless government creates artificial barriers to a free market.

—-
See also my other DRM-related posts here, here, and here

EMI has released George Harrison’s solo catalog online, with an initial offering of 9 albums, and the rest to follow next year. Some of the albums available now include “All Things Must Pass,” “Thirty Three & 1/3,” “George Harrison” and “Somewhere In England.” With this release, all four Beatles’ solo catalogs are now available digitally.

This is the first time Harrison’s solo albums will be made available in digital format on a worldwide scale. You can purchase Harrison’s albums from any online retailer that sells EMI content, including iTunes, Amazon and Wal-Mart. As with most EMI content, Harrison’s albums will be DRM-free.

While EMI has decided to go the DRM-free route with its music, there’s still the lingering court case its Capitol Records has won against Jammie Thomas, which she has appealed. There is also a growing number of artists that are encouraging the free distribution and file-sharing for their content, with hopes of making up the cash with peripherals and concerts.

via Mashable

See also my other DRM-related posts here, here, here, and here

Imeem Partners with Sony BMG to Legally Stream Music
from Mashable! by Adam Ostrow

Imeem, the service that offers a widget for sharing your music playlist, has reached a deal with Sony BMG to legally offer their music to users. In exchange for allowing Imeem users stream Sony BMG music in their widgets, the record label will get a cut of the advertising revenue. Imeem previously signed a similar deal with Warner Music, after the record company first tried to sue them.

Additionally, the company is reportedly in talks with Universal Music Group and EMI Group about similar content deals.

from Mashable! by Adam Ostrow

After months of hearing about Universal Music Group’s displeasure, DivX yesterday filed a preemptive federal lawsuit of its own that asks a judge to exorcise the “specter of litigation” currently haunting DivX.

At issue is DivX’s Stage6 video hosting service, which is a bit like YouTube but requires the DivX codec instead of Flash. According to a copy of the complaint seen by Ars, Universal has told DivX that the site is “knowingly involved in the infringement of UMG’s copyrighted materials, and exploits that widespread infringement for its own commercial gain.” In response, DivX points out the obvious: it complies with the DMCA and Universal has an easy method to request the takedown of any music video that infringes its copyrights.

According to DivX, Universal has been not interested in supplying actual DMCA takedown notices and instead “has chosen to posture and threaten DivX in the hopes of extracting an unwarranted windfall.”

Both companies believe that the other one wants an “unwarranted windfall,” and it looks like a judge will now step in and settle the matter. According to DivX, it has complied with every legitimate DMCA takedown request that it has received, and it goes even further than the law requires by using file hashes to block repeated uploads of the infringing content. Assuming this is true, Universal would not seem to have a case, which may be why the company has not yet brought an infringement lawsuit against DivX.

via ars technica

The policy of the Recording Industry Association of America (RIAA) to sue users caught downloading music illegally has done nothing to slow the trade of copyrighted music on peer-to-peer networks, according to the Electronic Frontier Foundation (EFF).

Here is a short excerpt from the report:

The music industry initially responded to P2P file sharing as they have always responded to disruptive innovations: they loosed the lawyers on the innovators, in hopes of smothering the technology in its infancy. Beginning with the December 1999 lawsuit against Napster, the recording industry sued major P2P technology companies one after the other: Scour, Aimster, AudioGalaxy, Morpheus, Grokster, Kazaa, and iMesh.5 This despite the fact that these same technologies were also being used for non-infringing purposes, including sharing of authorized songs, live concert recordings, public domain works, movie trailers, and video games.

The legal attacks on P2P technologies were initially successful in the courts.6 But as it was winning the legal battles, the recording industry was losing the war. After Napster was shut down, new networks quickly appeared. Napster was replaced by Aimster and AudioGalaxy, which were then in turn supplanted by Morpheus and Kazaa, which were in turn eclipsed by eDonkey and Bit Torrent. The number of file sharers, as well as the number of P2P software applications, just kept growing, despite the recording industry’s early courtroom victories. More recently, music fans have been turning to new so-called “darknet” solutions, such as swapping iPods, burning CD-Rs, and modifying Apple’s iTunes software to permit direct downloading.

“The lawsuit campaign has enriched only lawyers, rather than compensating artists for file sharing,” the EFF declared in a 25-page report (PDF). “One thing has become clear: suing music fans is no answer to the peer-to-peer dilemma.”

The EFF claims that traffic on peer-to-peer file-sharing services has ballooned since the RIAA began suing individual users, from 3.3 million monthly users in August 2003 to more than 8.8 million by June 2005.

The recording industry trade group is also singling out a small group of copyright violators and saddling them with unnecessarily steep financial penalties, the EFF lamented.

“There is no question that the RIAA’s lawsuit campaign is unfairly singling out a few people for a disproportionate amount of punishment,” reads the report.
“Tens of millions of Americans continue to use peer-to-peer file sharing software and other new technologies to share music, yet the RIAA has randomly singled out only a few for retribution through lawsuits.”

Instead of pursuing action against individual users, the EFF recommended that the RIAA and its members should adopt policies to bring customers back to purchasing music.

David Ingram> or perhaps seek out and adopt new business models which are aligned to the new generation of consumers’ behaviors

Lowering music prices and abandoning digital rights management technology would provide a far better incentive for users to purchase legitimate copies of music, the group suggested.

“If the recording industry is serious about luring music fans away from peer-to-peer networks and other methods of sharing, it should focus on dangling a tastier carrot, rather than swatting more individuals with the lawsuit stick, ” said the report.

via: VNU net

YouTube has secured an agreement with the UK societies that collect royalties for 50,000 composers, songwriters and publishers to legitimise the use of recorded music on Google’s popular video-sharing website.

The agreement to license 10m pieces of music to YouTube – in return for a flat fee which has not been disclosed – is the first of its kind, said Steve Porter, chief executive of the MCPS-PRS Alliance.

“This is the first fully formed agreement,” he said, although some US collecting societies had reached interim arrangements with YouTube.

The agreement marks another milestone in YouTube’s attempts to win over owners of media content, who have expressed alarm at the amount of material available on the site that is either pirated or that generates no revenue for the companies that created it.

YouTube is to pay a blanket fee to the MCPS-PRS Alliance, exactly as many radio and television broadcasters do, for music to be used in its partners’ professional sites and in amateurs’ videos. The alliance will decide about how to distribute the revenues to its members based on an estimate of what music has been played on the site.

Andrew Shaw, the alliance’s managing director for broadcast and online, said it would work with YouTube to implement technology to improve the monitoring of which pieces of music are played. While it was impossible to monitor the millions of videos available on the site, they would concentrate on the top 5 or 10 per cent that attract the highest audience, he said.

“The long-tail is not worth calculating,” he added.

Mr Porter said the high rates of internet access and online video usage in the UK were among the reasons that YouTube had struck the deal with MCPS-PRS first, but forecast that it could become a model for ag­reements in other territories. Composers and performers have been eager to gain revenues from new services such as YouTube, however small, to help compensate them for the income they have lost from declining CD sales.