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Growth predicted in mobile music despite recession

Valerie | 29 May 2009, 09:01

Despite the music industry facing challenging times, new research has revealed that the mobile music sector is flourishing.

A new report published by Jupiter Research is projecting modest growth worldwide in mobile music over the next five years. The report estimates that end user-generated revenue from mobile music will rise to $14.6 billion in 2013 from $11 billion in 2008, with full-song downloads and streaming services driving much of the growth rather than the limited-use, premium-priced ringtones that have dominated until now.

According to mobile music report author Dr Windsor Holden:

“While some of the more traditional music services – most notably polyphonic ringtones and realtones – are in decline across many markets, we’re now seeing a surge in the adoption of more sophisticated offerings. Recent positive developments, such as Apple announcing that iPhone customers can use the 3G network to download full-tracks, will offer a further stimulus to growth.”

However, the report also found that music services launched using an ad-funded model may face a decline in revenues of up to 50 per cent, as a result of the global fall in advertising budgets.

Spotify recently unveiled its new mobile music playlist service, enabling people to select and play music from the Spotify site on their Google Android phone, the T-Mobile G1 mobile, illustrating that consumers are increasingly demanding the same kinds of services on their mobiles that they receive on their PCS.

A Spotify spokesperson told The Telegraph:

“It’s no secret that mobile is something we want to develop in the future - it’s the most requested feature from our users. We’re excited about platforms such as the iPhone and other devices as they enable third-party developers such as ourselves to develop interesting functionality. It’s good for the mobile industry in general if it becomes more open and we see people use mobile services a lot more.”

Despite the good news the report also noted that “confusing user interfaces, incomplete network coverage, and cost of data services remain significant hurdles to consumer adoption of mobile music”, suggesting perhaps that there is still some way to go before the mobile music model reaches the eminence of its PC counterpart.

Online ad start-up takes on Google with open source model

Valerie | 27 May 2009, 10:29

An online advertising firm start-up is hoping to take on the likes of Google, Microsoft and Yahoo after announcing this week that it had raised $10 million in a third round of financing, reflecting increasing market optimism that online advertising will return to higher growth.

OpenX, based in Pasadena, California, and run by British-born former Yahoo!  executive Tim Cadogan, offers advertising software and tools to thousands of online publishers. It currently oversees an advertising network that receives more than 7.5 billion impressions each month, putting it on a par with Google subsidiary DoubleClick in terms of volume.

The Washington Post points out that the extra financing is coming from a new investor which is increasingly rare in these troubled times . DAG Ventures, the European venture capital group best known for investing in Skype led the round with existing investors Accel Partners, Index Ventures, Mangrove Capital , First Round Capital and the recently appointed new Chief Digital Officer of News Corp. Jonathan Miller participating.

The company has experienced rapid growth despite the sudden slowdown in online advertising brought on by the recession and has raised $20.5 million in two rounds of funding so far.

According to Cadogan, the company’s success is down to its business model - OpenX offers its open source software for free to most users, but charges high-end clients and offers support services to companies and individuals who use it. The fund raising will, Cadogan believes, aid OpenX’s expansion and follows the launch of its new advertising exchange, which is expected to transform its revenues and help it capitalise on the thousands of companies currently using its service for free.

In addition, Cadogan points out the market potential in ad sales for smaller, independent publishers. Its recently launched OpenX Market is positioned as a mid-market platform that is simpler than Google’s DoubleClick Advertising Exchange and Yahoo ’s RightMedia Exchange and has already attracted more than 3,000 active users in the six weeks since its launch.

Nick Pianim, managing director, DAG Ventures told the Times:

“OpenX is demonstrating that combining a unique business model with a widely adopted open-source product can provide the basis for a company of significant scale.”

New business models leading a quiet revolution

Valerie | 26 May 2009, 07:05

Major record labels are under more pressure than ever to prove their worth - this was the finding of a recent mock court held at the Great Escape festival in Brighton in which record labels were put on trial. With record sales in long-term decline, and the pace of technological change advancing, the music industry is increasingly seeing the emergence of new business models challenging the status quo.

Following the infamous decision by Radiohead to ask fans to decide the value of their music, the “old and new media clash in cyberspace”, and issues around copyright have become hotly contested debates and are now the subject of Chicago Tribune music critic Greg Kot’s new book Ripped: How the Wired Generation Revolutionised Music .

“Ripped” tells the story of a new grassroots music industry, created by the laptop generation, with the fans and bands in charge, which according to a New York Times book review, contends that peer-to-peer file sharing and CD burning has empowered music consumers, while providing musicians with more “opportunities to be heard”.

Earlier this week, new internet start-up OOiZiT.com secured a six figure investment for a social network dedicated to exposing new UK music artists and is planning to introduce a number of innovative new sales and promotional tools designed to help music artists tap into the music industry, without the reliance of A&R representatives spotting them. But speculation of the imminent death of the record label is perhaps premature.

Gary Bongiovanni, editor in chief of Pollstar, a trade publication covering the worldwide concert industry recently said:

“...there is a lot of experimentation going on. People are trying to figure out other products or things they can sell the public to monetise an artist’s career.“

Bongiovanni argues that record labels are turning to live music and developing new marketing models that allow fans to truly engage with their favourite bands. He said:

“Their real income stream is coming from touring, which makes the live show even more important.“

The Guardian reported that record labels such as Universal have taken this a step further by providing a “digital tour pass” that will provide backstage footage and other exclusive material from their favourite bands in what music bosses hope will be a marketing model that can be replicated by other bands to boost an industry in crisis over illegal filesharing.

Paul Brindley, from digital music analysts Music Ally agrees that digital innovations could provide a lifeline to the music industry:

“People might be able to get a track for free on a file-sharing site, but research shows that fans are still willing to pay money for exclusive content. It is a fact of life that the perceived value of music tracks has fallen, which means that increasingly labels are looking at the artists as a brand and trying to capture revenue on the back of that.”

Scribd rewards the creators with digital bookstore launch

Valerie | 21 May 2009, 07:08

A YouTube-like start-up is hoping to do for the book market what iTunes did for music singles. In a bid to stake a claim in the rapidly growing e-book market, document sharing service Scribd has launched a new service that lets publishers charge for their documents and keep 80 per cent of the revenue.

According to an article in the New York Times, using the new Scribd store, authors or publishers will be able to set their own price for their work and decide whether to encode their documents with DRM (Digital Rights Management) software that will prevent their texts from being downloaded or freely copied.

Visited by 60 million people a month, and with an audience which has almost doubled every six months, Scribd is currently one of the most popular document sharing sites allowing users to upload sample chapters of books, research reports, homework, recipes and other documents.  The opening of an online retail market for books and documents will be the first time that the two-year-old start-up has charged for the material posted on its site.

Digital news site DMW notes that by comparison, Amazon.com takes 70% of revenue from sales of works posted to its Kindle e-book store by writers, and also controls pricing.

Scibd co-founder Jared Friedman believes that the economics of the publishing industry are changing and the new service addresses piracy issues which the site has been accused of in the past by creating a database of published works to cross-reference against uploads.  He said:

“We wanted to get all the documents in the world in one place and we couldn’t do that if everything was free.

“We’re confident because of the early success of the Amazon Kindle because it shows that people really are willing to pay for great written content if it’s presented in a way that they like.”

The Scribd store will also support emerging talent and “give unpublished authors, or authors who are in a hurry, a well-trafficked Web forum on which to post their books, charge for them and see immediate results.”

EU proposal could stifle creativity in computer games

Valerie | 20 May 2009, 07:16

The computer games industry contributes more than £1 billion to Britain’s gross domestic product, more than the film industry.  However, potential new legislation from the EU calling for developers to provide a two year guarantee has called into question the future of games development, the BBC has reported.

Helen Kearns, a spokesperson for Commissioner Meglena Kuneva who is calling for the expansion of the EU Sales and Guarantees Directive explained the motivation behind the proposed legislation:

“The current status quo, where licensed products are exempt from EU law, is unsatisfactory.

“At present, retailers are not obliged to give a refund on a video game that has a bug or glitch that prevents a user completing a game. If the proposals become law, this could change as users would have the right “to get a product that works with fair commercial conditions”.

The proposed legislation has met with criticism across the software sector. Dr Richard Wilson, head of the video games developers’ association Tiga, said over regulation could stifle creativity and a balance between consumers and developers was needed.  The Business Software Alliance meanwhile has underlined that digital content is “contractually licensed to consumers and not sold” and therefore should “not be subject to the same liability as toasters”.

The issue of regulation also highlights another challenge in the sector, with the games industry recently lobbying the government for greater support through tax breaks. 

Earlier this week, an article in the Telegraph highlighted the need for greater investment in the video games industry. It argues that Britain is currently slipping from its third place position in the global video games industry (behind the US and Japan) as a result of fierce competition from France and Canada where there is considerable state support for games staff – which is also leading to a “brain drain” with developers being lured abroad.

MCV reported this week that the value of the UK games market is down 14 per cent year-on-year, due to the recession which saw a lack of major releases launched compared with the previous year. The rising prominence of Apple has also contributed to a dent in game developer mindshare, with much of the recent buzz in gaming about iPhone games.

The sector has previously seemed resistant to the economic pressures of the recession but innovation could be the answer – games are constantly expanding their borders this blog argues, as illustrated by the launch of the first on-demand gaming service by Onlive to much fanfare at the Game Developer Conference and more recently, the news that Ubisoft, the French games publishing giant is expanding its business into the movie special effects market.

The creative and regulatory structure for creative industries such as the games sector will be a key theme for the c&binet forum in October, when global business leaders and government will come together to agree on a MoU that will help secure its future prosperity.

Taiwan targets the creative industries

Nick | 19 May 2009, 08:16

Taiwan’s government has approved a strategy for the development of its creative industries and set a target of generating US$30 billion in economic activity by 2012.

The National Development Fund will provide NT$20 billion to establish a US$600 million venture capital fund and the government will provide direct investment worth US$820 million over four years. The money will be made available to support five key industries: television, film, music, digital content and crafts.

“The project is intended to generate more than 20 percent growth in media production value, create 200,000 jobs, triple overseas sales of media products, and stimulate local consumption of cultural and creative products and services,“ the CCA said.