Ringtones Industry Peaking?

FT: (sub. req.) This story in FT makes some major errors in coming to the conclusion that the days of ringtones are over. Though it is true that the explosive growth rate will slow down, the fact that margins for aggregators are declining doesn't mean the heydays for the industry are over. The heydays for aggregators certainly are. There's a big difference, something the article ignores.
But anyway, some rather anecdotal evidence that European consumers are giving up on buying as many ringtones as they did earlier.
Again, a rather important industry trend lost in a lazy story.

Napster's Future

Chicago Tribune: (reg. req.) A good overview story on the current incarnation of Napster. And it is not that good: When Napster releases Q2 results Wednesday, it is expected to have added 25,000 subscribers, a sharp deceleration from the 86,000 full-paying ones added in the previous quarter. Excluding seasonal university clients, Napster has about 381,000 full-paying subscribers.
Analysts expect Q2 revenues to total $20 million. But nearly $16 million of that goes directly to the record companies as royalties. All told, Napster is likely to have burned through $27 million, $20 million of that for marketing. With $132 million in cash at the end of March, and going through about $27 million a quarter, Napster has roughly until late 2006 to significantly improve its operating margins or risk imploding.

Ad Execs Rethink Music

Reuters: U.S. advertisers and their agencies are becoming talent scouts, music producers, programmers and promoters to reach the consumers who tune out from the world around them with iPods and other music players, eschewing ad-heavy radio.
Broadcasters are also reaching out to the iPod fan base. Radio Disney, part of Walt Disney Co., said last week it would sell downloads of songs on its playlist via iTunes, connecting its brand more closely to singers popular with kids.

HP To Stop Selling Apple iPods

WSJ: So much for the high-profile deal announced at CES last year... H-P to stop reselling Apple's popular iPod portable music player, as it doesn't fit with its company's current digital media strategy.
CNET: We do remain committed to our digital-entertainment strategy," said HP spokesman. "We decided that reselling the iPod does not fit within that strategy."
As WSJ story says, the deal between the two companies was originally viewed as a major step for both companies, but the breakdown of the partnership isn't likely to be a big loss for either side. HP on average accounted for only about 5% of iPod sales, which totaled about 6.2 million of the devices, worth more than $1.1 billion in revenue, for Apple last quarter. H-P plans to continue distributing copies of Apple's iTunes music software on H-P computers.
On interesting part though: as part of the original contract, H-P cannot sell a competitive digital music player from another company or begin development of its own player until August of next year.
Related:
-- H-P, Apple Unveil Music Alliance
-- HP To Finally Release Own-Branded iPods; Integrates iTunes In Media Box

Internet Killed The Video Star

There's been a plethora of books published in the last year all dealing with the future of the music business, but DEMO's CEO and founder Andre' Gray's six chapter manifesto reads as smooth as butter and is perhaps the most succinct. The Internet Killed The Video Star is brutally honest and brilliantly insightful and as a whole, painfully underscores the new reality that "the future of the music does not belong to the major labels...It belongs to the true independents..." Gray reveals many private inside elements of the industry and exactly why independent musicians are poised to equally prosper from the digital age and globalization..."As a result of the creative freedom enjoyed by the emancipation of musicians and the instant global distribution allowed by the digital music revolution, the best and most diverse music this world has ever heard is yet to come and the major labels are in serious jeopardy."

Some Friday Headlines

Music Biz Needs Fresh Ideas - Jupitermedia's DRM Strategies Conference was held in NYC this week and had several interesting panels...Here's one overview from Red Herring...

Mix & Burn Selects SyncCast Technology to Advance CD-Burning Music Kiosk - Heating up the competitive space for Burn-A-Song and the kiosk CD/portable player market, the integration of SyncCast's DRM with Mix & Burn's Kiosk promises to enhance the retail download experience by providing the consumer extensive catalogs of music content from both major and independent labels...

Olive Introduces Symphony Wireless Digital Music Center - "The wide acceptance of digital music has spurred the availability of solutions that allow users to enjoy music away from the PC.", said Oliver Bergmann, Ph.D., Chief Executive Officer and President of Olive Media Products, Inc. "However, the quality limitations of lossy audio formats and problematic integration of convergence technology have made those solutions unacceptable for music aficionados. Olive enters the market from the perspective of a true audiophile, eliminating the PC experience entirely."

Senate Committee Hearing

p2pnet: Here's a great example of our hard earned tax dollars at work...Yesterday, the full Senate Committee on Commerce, Science & Transportation held a hearing in D.C. on the potential effects of the MGM v. Grokster ruling to impede technological investment and innovation...I applaud their efforts to examine future industry options so quickly after the decision and I hope everyone present now has a better understanding of each other's point of view...(I also found it interesting that they're using Real Networks technology for their streaming playback, which is pretty hip, but unfortunately, I had no luck accessing the video as of this morning...Perhaps they're still editing out the stuff they don't want us to hear?)

Slyck has an excellent post regarding the meeting...'With more questions than answers as a result of the ruling, its become apparent a third party may be able to shed light on the contestaable situation...And while the The Senate Committee has no jurisdictional authority, the meeting may prove useful as a foundation for upcoming legislation...Finding common ground between groups like RIAA/MPAA and P2P United/DCIA has been difficult in the past to say the least, but perhaps the recent Supreme Court decision may have given P2P developers just enough leverage to strike a licensing deal with the copyright industry...The ultimate goal of yesterday's meeting was for the Senate Committee to gauge the ramifications of the MGM vs. Grokster decision. Indeed if the Senate agrees with the testimony provided by P2P United and the DCIA, we could well be on our way to witnessing a licensing agreement between the two sides.'

The witness list included:
Adam Eisgrau - Executive Director, P2P United      
Gregory Kerber - CEO, Wurld Media, Inc.
Mark Heesen - President, National Venture Capital Assoc.
Dave Baker - Vice President Law & Public Policy, Earthlink
Mitch Bainwol - CEO, Recording Industry Association of America
Fritz Attaway - EVP, Motion Picture Industry of America

RIAA Adds To Its Anti-Piracy Campaign

FMQB: The RIAA issued another 765 lawsuits yesterday, ever determined in its quest to stem the tide of sharing music online. The groups position is that downloading without permission is ‘garden variety theft’ and it thinks these lawsuits will send strong messages to the users of certain P2P networks that their actions are illegal, they can be identified and the consequences are real...But I don't know...I still believe that most people want to do the right thing...surely there are better strategies to increase sales and educate the average consumer. Slyck reports that the total number of lawsuits now totals 12,326 individuals (most are Kazaa users)  and the total population of the file-sharing community reached approiximately 9 million users last month. So, the total P2P population actually doubled since 2003 – the same year the RIAA began suing alleged infringers...You tell me if this sounds like "real" progress for the RIAA...

RIAA President Cary Sherman stated, “Enforcing our rights against the businesses and individuals engaged in music theft is a critical component of our overall effort to discourage illegal downloading and encourage music fans to turn to legal services. We know that our education and enforcement efforts have made a real impact. With broadband penetration skyrocketing, use of legitimate services continues to surge, while the wildfire-like growth of illicit services has been arrested.” 

New Podcast Research Report

Adding to my post yesterday about the potential dangers of downloading Podcasts, here's a relatively new research report produced last May by The Diffusion Group called "Podcasting as an Extension of Portable Digital Media – Fact, Fiction, and Opportunity." 

"Podcasting uniquely serves the mushrooming portable music player market and has no competition.  All podcasting industry factors point to high growth over the next
several years for US portable digital music players, the storage of those players for music and podcast content, and music subscription services for content to fill the players with. TDG estimates there were under 1 million active podcasting users last year, which will grow to 5 million at the end of 2005, and 66 million in 2010."

Can Podcasts Infect Your Computer?

Not to make you panic or anything, but while reading a newsletter this morning I discovered from a Windows expert that playing a downloaded audio file or short video clip (i.e., Podcast) on your PC could actually infect your computer with a virus or spyware. I'd heard about this before, but never got any of the details...The truth is, some 'Podcatching' applications might be downloading executable files without your knowledge or consent. When run, these executables would play ordinary audio or video files. But, silently, they would install a Trojan horse that would run or download further adware or spyware slowing your machine down. So, despite all the rage and hoopla - podcasts threaten to become another automated way hackers can put viruses and spyware onto our computers if we're not more careful. To make podcasts safer, software developers must enforce a separation of code and data and Podcasts must not be allowed to run scripts on our computers or install executable files, etc.. (As far as I know, no reports of malicious podcasts have been reported yet, but it's not too late for developers to build in more safety into this exciting new technology. With a few simple steps, we can protect ourselves..)

The weak link in protecting users is generally not the podcatchers but the media players themselves. Windows Media Player, iTunes, Quicktime, RealNetworks, and WinAmp have all suffered from serious security holes in the past...As a result, podcatching applications might download "malformed" or hacked multimedia files and the files would appear normal, bearing a typical audio or video extension. But, when played back, these same files could exploit security weaknesses in our media players - especially if you haven't upgraded recently...Those weaknesses then could allow the hacked files to quietly install Trojans,  worms or worse... Your best protection against podcasts that are executable files is to get a podcatcher app that downloads only known multimedia file types. (For example, FeedStation limits its downloads to a list of expected extensions, such as .mp3 and .wmv. Therefore, users are protected by default against rogue files disguised as podcasts!)

These known media player weaknesses have allowed multimedia files to quietly install malware, while the user sees or hears only the expected video or audio clip. Millions of PC users have already been negatively affected by malicious media files that were downloaded manually. It's important to prevent podcasts from being able to automatically exploit media players in the same way...