YOU TUBE AND VSOCIAL CREATING NEW PARADIGM

More Homemade Music Videos Bubble on YouTube

User-generated music videos continue to pop up on destinations like YouTube and Google, raising the ire of the recording industry and publishers. Amateur performers often use masters as the backdrop to recorded lip-syncing sessions, and rightholders are alleging that the resulting videos are being disseminated without the proper rights clearances. The videos can certainly reach a substantial audience. The latest example features a young woman singing alongside "Maneater" by Hall & Oates – a submission that quickly became one of YouTube's most viewed pieces with over 200,000 views over a two day period. Meanwhile, users have reportedly begun receiving takedown letters for their amateur dalliances, part of a growing face-off.

Some believe the homemade pieces serve a promotional purpose, encouraging the purchase of the music depicted in the video. Perhaps bolstering this argument, two of the three Google Ads displayed next to the YouTube "Maneater" video are for ringtone services. Others might argue that user-generated pieces compete with, and degrade the sale of, legitimate music videos that are available for purchase through services like iTunes. Whether YouTube videos cannibalize the market for the original videos is a debatable point, especially considering the homemade nature and unique artistic qualities of the user-generated content. Often, YouTube videos do not even employ any component of the original videos. What's more, amateur videos might arguably be "non-commercial" in nature, though destinations like YouTube monetize third-party content with advertisements. Of course, rights holders may have a stronger case for infringement when it comes to the use of masters and underlying songs without permission.

INTERNET CHOICE SLOWLY DESTROYING OLD MEDIA TV

July 16, 2006 -- SUN VALLEY, Idaho - The world's richest man was a no-show, but as always No. 2 showed up.

"There's one area it's never changed and it never will - there's Herb [Allen] and there's Warren Buffett," said former Disney boss Michael Eisner, apparently conferring immortality on Buffett, the world's second-richest man, with a net worth of $44 billion.

The joke goes that Buffett, a longtime guest of investment bank Allen & Co.'s annual retreat here, loves attending so much because it's a free vacation; Allen & Co. foots the bill for the four-day conference - from meals to rooms to fly-fishing guides to dispatching private jets to pick up invitees - at an estimated cost of $10 million.

Bill Gates (No. 1, of course) wanted to be here but got the dates mixed up and had a previous engagement.

While Buffett is a mainstay, the guest list for the elite confab - to which an invite is coveted in the media and entertainment world - shifts each year, depending on who's up and who's down.

For example, Harvey Weinstein wasn't invited last year after using Goldman Sachs instead of Allen & Co. to raise money for his new film company. This year, after much last-minute behind-the-scenes pleading - his name didn't appear on the original guest list - he was admitted.

During the week, Weinstein and BET founder Bob Johnson announced a $175 million film deal, but as of Thursday night, according to a source, Johnson was still holding discussions with hedge fund and private-equity investors to firm up financing.

For pure business star power, perhaps nothing can match Allen's annual get-together in the Idaho mountains: At one table in the Sun Valley Lodge bar Thursday evening sat Yahoo! founder Jerry Yang, Paramount chief Brad Grey, News Corp. President Peter Chernin, DreamWorks Animation boss Jeffrey Katzenberg, Sony executive Rob Wiesenthal and Weinstein. At one point, Time Warner chief Dick Parsons ambled by, as did Google CEO Eric Schmidt.

The conference is ultra-secretive, and the press is barred from the official events - the effect being an enhanced allure for the conference, even if the press has covered it for years.

While some times call for secrecy, other times call for openness. So instead of ducking into a conference room, CBS boss Les Moonves and YouTube founder Chad Hurley held a one-hour meeting about a wide-ranging partnership between the two companies within earshot of several reporters.

The most buzzed-about presentation was Friday morning's session in which Eisner interviewed News Corp. Chairman Rupert Murdoch, IAC's Barry Diller and Sony's Howard Stringer.

Eisner got a chuckle from the audience - recounted Hearst Magazines chief Cathie Black - when he remarked that "all roads lead to John Malone," a reference to the Liberty Media chief in attendance who has big stakes in IAC and News Corp.

Black noted there were fewer business presentations and more sessions on highbrow topics such as healthcare, religion, energy - even landmines.

Malone was later overheard discussing his pending acquisition of the Atlanta Braves from Time Warner, while eBay boss Meg Whitman and Google founders Larry Page and Sergey Brin - whose companies have an uneasy rivalry - ate lunch nearby.

Meanwhile, while the weather was sunny, the moods of many of the executives from the so-called "old media" firms was anything but. These execs spent much of their week courting the Internet firms and upstart tech companies such as YouTube.

"Everyone wants to get back into the Internet," said one executive in attendance.

"It's kind of a dour mood. Media stocks are in the toilet, DVD sales are down and movie attendance is down."

MUSIC EXECUTIVES CONTINUE TO MUMBLE AND FUMBLE

Mobile Executives Eye Free Alternatives, File-Sharing

Mobile assets like ringtones, ringback tones, and over-the-air (OTA) downloads are all on the rise, but just how threatening are free alternatives? "You can get any ringtone for free," commented Adam Sexton, vice president of marketing and product management at Groove Mobile, which powers OTA services for several carriers worldwide. But according to Sexton, the difficulty associated with grabbing free tones helps to explain the presence of a multi-billion dollar ringtone market. "It is incumbent on us to make it easy [to get paid assets] in the future," he said. Meanwhile, networks appear more-than-willing to entertain off-deck content, especially since it generates money with little effort. "All they do is let the transaction through, and they get a check," Sexton said, referring to carriers.

Sexton was part of larger panel of mobile executives gathered at WINMEC Forum 2006 at UCLA on Tuesday. Other topics included mobile-based file-sharing, which could transform wireless entertainment consumption in future generations. But will mobile networks ever resemble the file-sharing environments found online? "Carriers are interested in what the impact is on security for the end user," said Braxton Woodham, chief technology officer at InfoSpace Mobile. According to Woodham, mobile-based viruses are just creeping into the picture, drawing a predictably protective response from operators. That means that carriers are uninterested in having content flowing onto their networks without proper filters or control. "That is the one of the barriers that exists today," commented Woodham.

EURO PEEING...MOBILE LOSSES CACULATED AT 4.5 BILLION!!

Mobile Piracy Grows, European Losses Pegged at $4.5 Billion

As mobile entertainment sales explode, a piracy problem is also emerging. Reports of mobile-based piracy have mostly been emanating from areas like Southeast Asia, and data has remained scattered overall. Now, Frost & Sullivan has attempted to quantify the issue in Europe, and recently pegged the problem at 3.5 billion euros annually ($4.5 billion at current exchange rates). The recently-released report estimated that over 80 percent of media content found on phones has been transferred without payment, either through side-loading, Bluetooth transfer, memory cards, or fraudulent off-deck services.

The report has already drawn a reaction from industry consortium Mobile Entertainment Forum (MEF). "With the mobile industry attracting global media giants like EMI and Warner Studios, it is vital that illegal file transfer is eradicated to ensure that mobile entertainment reaches its full potential," the group said in a release. Meanwhile, the Frost & Sullivan report pointed to the fraudulent use of MMS or premium SMS, which can be used to deliver content while temporarily switching off the network to avoid billing. MEF recommended the implementation of an open and interoperable mobile DRM solution to curb the issue.

FOX TELEVISION CAVES IN AND SIGNS DEAL WITH APPLE DEVIL

Fox Television Brokers iTunes Distribution Deal

Fox Entertainment Group became the latest major television network to broker a distribution deal with iTunes, part of a larger sea-change within the television industry. A number of top shows are now available for download within iTunes, including "24," "Prison Break," and FX Network shows like "The Shield". Older shows like "Buffy the Vampire Slayer" and "Lost in Space" are also part of the action. The move by Fox, which is owned by News Corp., follows similar deals involving Disney/ABC, NBC, and CBS.

Apple now carries a catalog of 90 downloadable television shows, each of which is available for $1.99. Specific channels involved in the deal include Fox, FX, Speed, Fuel TV, and 20th Century Fox Television, which collectively contributed 16 series. The content, available on Tuesday, is part of a gradual move towards multi-platform delivery by the major networks, which includes web- and mobile-based, on-demand delivery. "As this partnership demonstrates, we’re committed to delivering our content to consumers in as many ways as possible," said Peter Levinsohn, president of Fox Digital Media.

XM RADIO SUED IN CLASS ACTION BY INVESTORS

XM Satellite Radio Faces Investor Class Action Lawsuits

XM Satellite Radio is now being targeted by an investor class action lawsuit. Specifically, the suit alleges that XM misled its investors about its fourth quarter marketing and per-subscriber acquisition costs, which were increasing rapidly during the period. The satellite radio leader was pushing to meet a goal of six million subscribers by year-end, which required a ramped-up promotional campaign according to the complaint. That was part of a spending pattern that led to the resignation of board member Robert J. Pierce, Jr., who pointed to a "significant chance of a crisis on the horizon".

Shares of XMSR dropped significantly following the resignation. "On February 15, 2006, XM's common stock price closed at $25.25," the complaint notes. "With the disclosure on February 16, 2006, XM's common stock, on abnormally heavy trading volume fell 13 percent to close at $21.96 on February 17, 2006." The plaintiffs also claim that XM president and CEO Huge Panero sold 99 percent of his shares in the company on December 6th, 2005, a claim that XM has denied. Participating law firms include Brodsky & Smith LLC, Cohen Milstein, Hausfeld & Toll PLLC, the Law Offices of Charles J. Piven, and Schatz & Nobel, and the Law Offices Bernard M. Gross, PC.

MORE INFO ON CHEAP TRICK / ALLMAN BROS VS. SONY

The topic was the lawsuit filed by his band and the Allman Brothers on April 27, 2006 against Sony BMG. The complaint alleges that the Sony Music division is underpaying artists on income derived from digital music distribution. The issue is whether downloads of digital singles and albums are a “sale” or a “license.” This distinction is significant because under the standard recording agreement artists receive 50% of income from “licenses” after a small deduction for the mechanical royalty payable to owners of the underlying songs. But if the same transaction is deemed to be a “sale” the royalty is equal to the artist’s royalty rate and the artist’s royalty rate for record sales is generally only 10% to 15% of retail. In addition, there are a slew of deductions that apply to record sales including a packaging deduction, “Net Sales” deduction, and in many cases an “Audiophile” deduction of up to 50%.

The complaint alleges that the bands should be getting over 30 cents for every 99 cent download. For each 99 cent download the labels currently receive 70 cents. After the labels pay a small mechanical royalty to the music publishers, in excess of 60 cents remains in their hands. The plaintiffs maintain that the artists should get half of that amount. But instead, the complaint alleges, Sony treats downloads as record sales even though the label does not sell anything to the digital download services including iTunes. Rather, the complaint alleges, Sony is “licensing” their masters, including those by Cheap Trick and the Allman Brothers, to download services in exchange for a royalty of 70 cents. Due to the fact that Sony treats each download as a sale, instead of a license, the following deductions apply: 20% packaging (even though there is actually no packaging involved in digital transmission), 15% “Net Sales” deduction (which originally protected labels from paying on broken records although there is no “breakage” on digital services) and a 50% “Audiophile” deduction (originally created to compensate the labels for the cost of developing new technology). On top of all these deductions, the lower royalty rate is applied instead of the 50% licensing formula. The result is that the artist is credited with only several cents for each 99 cent download.

This lawsuit is significant because, as everyone knows by now, digital music income is growing dramatically while CD sales continue to decline. Last year, according to RIAA, income from digital sales of singles in the U.S. alone was $366 million, a 163% increase from the year before, and sales of digital albums were $135 million, an increase of 198%.

One of the most interesting aspects of the case is that it is a class action and any Sony artist with a contract pre-dating 2002 is invited to join. Dave Frey said we can expect other artists to join in the suit soon, and some of them may be household names. If you would like to learn more about this case, go to www.myrealbroadcast.com, and click on The Future of the Music Business.

APPLE KO'S THE BEATLES

Apple Computer won its courtroom battle against the Beatles on Monday when a judge ruled the company's iTunes Music Store did not infringe on the trademark of Apple Corps, which represents the band's interests.

In a trial which included the playing of disco hit "Le Freak" in London's High Court, Apple Corps argued the computer company had violated a 1991 trademark agreement by moving into the music business.

Apple Computer, which has sold millions of iPods and more than a billion song downloads, held that iTunes was primarily a data transmission service and permitted by the agreement.

The Beatles are high-profile holdouts from Internet music services like iTunes, but it emerged during the trial that Apple Corps is preparing the band's catalog to be sold online for the first time, according to a submission by Neil Aspinall, managing director of Apple Corps and a former Beatles road manager.

"We are glad to put this disagreement behind us," Apple Chief Executive Steve Jobs said. "We have always loved the Beatles, and hopefully we can now work together to get them on the iTunes Music Store."

A spokeswoman for Apple Corps said that no decision had been made on when the Beatles' songs would be available to purchase online.

Apple Corps -- owned by Paul McCartney, Ringo Starr, John Lennon's widow Yoko Ono and the estate of George Harrison -- has fought several courtroom battles with Apple Computer over their competing fruit-shaped logos.

A 1991 out-of-court settlement, which included a $26 million payment by Apple Computer, set out areas in which each party would have exclusive use of their respective logos.

"I find no breach of the trademark agreement has been demonstrated," Mr Justice Mann said in his judgment on Monday. "The action therefore fails."

"I think the use of the apple logo is a fair and reasonable use of the mark in connection with the service," Mann said, referring to a central argument of Apple Corps over the use of the Apple Computer logo within the iTunes Music Store.

Apple Corps said it would appeal the decision. Apple Computer was awarded court costs.

SHAKE IT UP DIGITAL BABY..BEATLES TWIST AND DOWNLOAD ON THE WAY

The Beatles are preparing to sell their songs online after years of refusing to take part in the Internet music boom, according to testimony given by the head of their record company.

Neil Aspinall, a former Beatles road manager and managing director of Apple Corps, was a witness in the company's trademark lawsuit against Apple Computer.

He said that the company was digitally remastering the entire Beatles catalog, which would pave the way for selling the songs online.

"I think it would be wrong to offer downloads of the old masters when I am making new masters," he said in a written statement submitted to the High Court in London earlier this month.

"It would be better to wait and try to do them both simultaneously so that you then get the publicity of the new masters and the downloading, rather than just doing it ad hoc."

A spokeswoman for Apple Corps confirmed Aspinall's statement, and said that the company is preparing to make the Beatles catalog available through online music services.

"There's no firm date on any of this at the moment. There are a lot of projects that Apple are working on at the moment," she said on Thursday.
In other news:

The Beatles have been high-profile holdouts from the booming online music sector, which saw sales triple to $1.1 billion in 2005.

Apple Corps, owned by Beatles Paul McCartney, Ringo Starr, John Lennon's widow Yoko Ono and the estate of George Harrison, have accused Apple Computer of violating a 1991 agreement by using the Apple name and logo to sell music downloads through its market-leading iTunes Music Store.

The trial ended on April 6, with a decision from the judge due after Easter.

FEDS LIKE TO RE-WRITE LAWS: THIS TIME COPYRIGHT LAWS

The PERFORM Act
Earlier this week, details emerged on the PERFORM Act backed by Senators Feinstein, Frist and Graham...
[Regulatory, Trade Associations]

Earlier this week, details emerged of the PERFORM Act backed by Senators Feinstein, Frist and Graham that attempts to ensure platform equality for the distribution of music by ensuring royalty rate parity and content protection. The Senate Judiciary Committee had a number of people testify on the matter including Edgar Bronfman, Anita Baker, Gary Parsons (Chairman of XM) and Mark Lam, the CEO of Live365.

I haven't followed this matter very closely but I think attempts to level the playing field for various radio platforms is a good thing. I've not been against the idea of paying a fair royalty rate to artists (both songwriters and performers), but rather paying vastly different rates for the use of the same music as is currently the case with terrestrial radio broadcasters not paying anything to sound recording owners, satellite radio companies paying mid to high single digital percentage of revenue, and internet radio companies paying up to 33% of revenue, and yet internet radio companies have to heed the song complement restrictions of the DMCA unlike others. It seems that the PERFORM Act would not bring terrestrial broadcast into parity, although at least bringing the digital radio services into parity would be a great start.

The Act would also mandate content protections for digital radio companies. This could result in webcasters needing to stream in a protected in a DRM'd format. I haven't read the actual Act so can't comment too broadly on this except to say that Congress should be very careful in legislating content protection and of unintended consequences.


There's a good overview on the bill from Sen. Feinstein's office.

[Note: The views above reflect my personal views and not that of any company or association that I may nor or have been affiliated with]

Chili Peppers new album leaked to LIMEWIRE....HA HA!!!!!!

Red Hot Chili Peppers Album Leaked Ahead of Release Date

Ahead of a Tuesday release date, the latest Red Hot Chili Peppers album has now been leaked onto the internet. The double-disc, 28-song project began circulating earlier this week, prompting bassist Flea to issue an angry blog. A quick search on LimeWire revealed multiple copies of songs from the album, including dozens of zip files for the entire release. "Yes, it is stealing from us, and that is lame," Flea said. "We worked so hard, and so thoughtfully, all of us, for so long." Additionally, Flea pointed to a degraded copy of the album, though the downloads do not appear to have compromised sound quality.

The source of the leak is uncertain, though it could be traceable. Pre-releases often contain watermarking protections, especially advance copies distributed to the press and other tastemakers. A detection could result in fines and imprisonment, though the band and Warner Bros. Records will have to carefully balance enforcement with overall image. Also, in terms of release dates, the group is now in a sticky situation ahead of a Tuesday drop date. The timing makes a quickened release almost impossible at this point, and the band will probably suffer decreased sales as a result.

LUV MACHINE POSTING RECORD PAID DOWNLOAD NUMBER AT ITUNES

LUV MACHINE POSTING RECORD PAID DOWNLOAD NUMBER AT ITUNES and other web song stores.


OMG...

Thank you. This paid download stuff is really working. Worldwide we are posting record numbers.

We don't need the big record companies. We are a big record company.

Da Web is Da Bomb.


Thank you again.

Robert

LUV MACHINE & BLUESPAWN TELEVISION NEAR 1.5 MILLION VIEWS

ehhh.Canadian Artists to Record Companies F-U over Downloads

Top Canadian Artists Band Together, Oppose Label Tactics

Canada is known for its frigid climate, though relationships between local artists, labels, and publishers have also become icy. On Wednesday, a group of top Canadian artists, songwriters and producers made a bold statement against major record labels and publishers, part of a growing rift in the region. The new coalition, known as the Canadian Music Creators Coalition, includes heavyweight artists Avril Lavigne, Barenaked Ladies, Sarah McLachlan, and Sum 41. As part of its announcement, the Coalition railed against file-sharing lawsuits against individuals, as well as the use of copy-protection technologies. The declaration, made in Montreal, was designed to coincide with the World Intellectual Property Day.

The break is a substantial one, and could fundamentally alter the Canadian music business moving forward. "Until now, a group of multinational record labels has done most of the talking about what Canadian artists need out of copyright," a release from the Coalition stated. "Record companies and music publishers are not our enemies, but lets be clear: lobbyists for major labels are looking out for their shareholders, and seldom speak for Canadian artists." The Coalition characterized lawsuits against individual downloaders as "destructive and hypocritical," criticized the use of DRM as "risky and counterproductive," and encouraged the Canadian government to place greater focus on Canadian artists. The move follows a similar break in the ranks involving major Canadian management firm Nettwerk Music Group, which recently created a high-profile rift with the RIAA.

FAILING MAJOR RECORD COMPANIES CONSIDER MERGING SINKING SHIP

Chatter Bubbles Again on EMI, Warner Music Merger Possibilities

Will EMI and Warner Music ever walk the aisle together? Veteran executives have seen chatter bubble repeatedly on the possibility, while European regulators have presented a roadblock in the past. Sparking the latest round of speculation, a recent report in the London-based Sunday Times pointed to "preliminary talks" that will "resume in earnest within months". Meanwhile, insiders have pointed to some more advanced preparations, and stock market activity could be reflecting the rumor. The merger would reduce the total number of major labels to just three.

Now, the discussion has turned towards what a possible deal might look like. Most recently, Merrill Lynch analyst Jessica Reif Cohen predicted that any tie-up would be a "merger of equals," and questioned the ability of executives at either company to "cede control". Cohen pointed to significant costs savings for both companies, but had trouble envisioning an all-out acquisition. "An acquisition by either company at a significant premium would likely result in a significant dilution of equity value for current shareholders," the analyst noted.

LUV MACHINE'S POPULARITY GROWS WORLD WIDE 15,000 DOWNLOADS

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CHEAP TRICK AND ALLMAN BROTHERS SUING SONY BMG FOR MORE $$$

Artist Compensation Issues Attract Bigger Focus

Digital music formats are gaining steam every day, but are artists getting a fair piece of the action? A recent class action lawsuit involving Cheap Trick, The Allman Brothers, and Sony BMG has placed the issue front-and-center, and more executives are now discussing the matter. Grabbing headlines is the all-powerful, 99-cent price point on stores like Apple, but that is less important for artists. "The way the deals are made, so far, the artist is getting about 2.5 cents [on a 99-cent download]," said top manager Bill Leopold, speaking at a Musexpo symposium in Los Angeles on Tuesday. Another executive concurred, pointing to payouts of "less than a nickel". Meanwhile, moderator Ted Cohen, a top digital executive at EMI, pointed to an internal mandate to phase out antiquated deductions in favor of more accurate cost descriptions.

The accounting may seem low, though artists now have more distribution options, including direct-to-consumer, website-based models. That empowerment could ultimately create a variable pricing landscape, according to Music.com president Ralph Cavallaro. "Variable price points will come on their own," Cavallaro said, despite the continuation of the 99-cent, iTunes Music Store price point. Meanwhile, executives also discussed advertising-based models, which include online video destinations like Yahoo Music and the freshly-launched Napster.com. Still, the cloud of compensation hovers over those plays, and entertainment and new media lawyer Paul Menes questioned whether advertising-based revenues are actually trickling down to artists. Regardless, Yahoo Music vice president and general manager David Goldberg pointed to a massive, untapped revenue pool from advertiser-supported terrestrial radio, if royalties on sound recordings are ever paid. "The annual revenue would be $600-700 million a year more than the combined operating income of all of the major labels," Goldberg asserted.

ATTN: DOWN 4 THE COUNT "APPLE ITUNES VS. MAJOR LABELS"

After months of rhetoric, the majors are now walking away empty-handed from their renegotiations with Apple. A 99-cent, uniform price point will prevail - not just on the iTunes Music Store, but also on other stores like Napster, who take their pricing cues from Apple. So what happened? The result is actually not that surprising, especially considering the power dynamics at hand. Apple held all of the cards in this one, both in terms of the underlying business fundamentals and the pre-game press battle. But now that the negotiation round is over, labels can shift their resources to more lucrative digital growth areas.

Bluffing is one thing, but actual negotiating power is another. And in the end, Apple had the power to resist virtually any demand that the labels were making. Forget about diplomacy, that was never really part of this process. Actually, the opposite of diplomacy an ego battle was a stronger component in the negotiation. Blame it on the labels, who started talking tough in the media in a botched attempt to squeeze Jobs. Or blame Steve Jobs himself, who has been non-conciliatory and absolutely uninterested in getting muscled. Either way, the result was a hard-line stance from Apple, and a total flinch by the majors.

Looking through the business lens of Apple, any other result would be foolish. Apple is ultra-protective of its consumer, and that approach has resulted in rich dividends. The major labels, on the other hand, have a highly contentious and acrimonious relationship with many music fans and artists. Sure, generalizations can be dangerous, though the characterizations are not too far off. And why would Apple want to take cues from the labels, who have alienated a large number of buyers while stumbling in the digital transition? Jobs feels strongly that a uniform price point is the path towards customer satisfaction, and nothing is going to disrupt the sacred iPod+iTunes cow. Certainly not the labels, especially following waves of consumer adulation and affirmation for the Apple digital strategy.

In fact, it seems that Jobs would rather remove the entire major label catalog than play ball with a variable pricing plan. Why? From a business perspective, dropping major label content would have little effect on the bottom line, and Jobs would protect his vision of simplicity and elegance. Most fans rip their CDs, or file-share, and few are relying on Apple as their sole source of music content. But beyond that, Jobs easily massaged the press to get an upper hand, deftly using the baggage that already surrounds major labels. If majors pulled their catalog, Jobs could simply blame the greedy labels once again, and focus his store on up-and-coming, independent content. Major label artists would probably defect to gain positioning, as they did in Japan, and the well-imaged Apple music revolution would continue.

But egos aside, this is actually a very good development for the labels. The reason is that the iTunes Music Store is not helping major labels forge an economic recovery, and therefore it shouldnt be draining precious resources. One billion a-la-carte downloads may excite the press, but cherry-picked singles are not a formula for financial success. Look at label earnings reports, and a story of recovery is being crafted. But the underlying fundamentals are hard to gauge, especially amidst heavy cost-cutting. More than likely, the situation is worsening as CDs drag year-after-year. EMI and Warner Music were talking to each other for a reason, and this is a business that has yet to find a veritable path towards digital prosperity.

So what happens next? The 99-cent download will continue, but labels will be forced to shift their resources elsewhere. Forget about blustery panel discussions that excoriated Steve Jobs. That game is over, and more attention can be diverted towards emerging mobile platforms, advertising-supported models, and creative ways to tap older buyers. Plenty of other partners want to play ball, and the labels have access to endless superstar exclusives to bolster competing models. Sure, this was an ego bruise, but imaging should be a backseat consideration when issues of survival are at hand.

WHY CAN'T RAP ARTISTS SELL TICKETS FOR LIVE SHOWS?

The Rap Factor: What Makes This Genre Tick?

Hip-hop remains an incredibly strong genre, decades after its first superstars appeared in the 80s. That has boosted emerging digital formats, especially ringtones, which are dominated by rappers like Dem Franchize Boyz and T-Pain. Rock-centric executives often sneer at the genre, but what makes this format tick? "For young kids that are growing up rebellious, what they love about hip-hop is that it's actually real," said American Idol judge Randy Jackson during a Monday chat at MusEXPO, moderated by Larry King. "It's not some rock band posing," Jackson continued. Jason Flom, chairman and CEO of Virgin Records US, pointed to the presence of colorful personalities among rappers and hip-hop artists. "The stars have all been on the rap side, and that is one of the reasons why urban music has enjoyed so much growth," he said.

Interestingly, rap acts are notoriously weak on the road, potentially because of safety issues. "That is one of the big issues in the live business," said Michael Rapino, CEO of Live Nation. "Seven of the top ten singles are urban/hip-hop, and I dont think combined they could sell an arena out," he said. Wary parents are one reason for the paltry attendance. "Its one thing to send your 14-year old to see Britney Spears, its quite another thing to send them down to Oakland to see 50 Cent and The Game. Its certainly not safe, and its not insurable," Rapino noted, while pointing to low receipts on the 50 Cent tour. As a result, most hip-hop fans rarely see their favorite artists live, though that has had very little effect on the overall strength of the genre.

AMERICAN IDOL TO SELL MP3s - DOES ANYONE CARE?

American Idol Prepares Performances Downloads

American Idol will soon offer digital downloads of show performances, adding yet-another revenue stream for Fox. The upcoming play, recently revealed by Variety, will include $0.99 audio downloads and $1.99 video downloads. Already, the americanidol.com destination offers show highlight streams, along with other content extras. The first downloads are projected to appear May 9th, and final licensing discussions are still underway, according to the report. Show producers are reportedly uninterested in offering entire shows for download, mainly because of clearance hurdles involving performed tracks. Revenues from the downloads will be shared between Fox, Fremantle and 19 Entertainment.

MAJOR LABEL WARNER CHANGES LOSING STRATEGY AGAIN

Warner Music Assists Digital Ambitions of Indie Retailers

Warner Music Group (WMG) has just delivered a digital assist to various independent music retailers, part of an initiative announced Monday. The effort, orchestrated through the WMG distribution and retail marketing division WEA Corp., will provide three independent coalitions with tools to create their own digital music storefronts. The Coalition of Independent Music Stores (CIMS), Association of Independent Media Stores (AIMS) and Music Monitor Network (MMN) are all on board, and Burbank, CA-based B3 Corp. will offer various backend services.

The services will enable participating retailers to smartly extend their physical footprints. For example, the WEA-delivered toolset will allow the stores to offer downloads from in-store performances and local artists, as well as coupon-based digital promotions. The stores will also be able to package digital albums with bonus content, including videos, interactive digital booklets, and bonus tracks, all in a single downloadable file. "Supporting the independent music community is part of our core strategy," said John Esposito, president and CEO of WEA. "We seek to eliminate barriers to entry for independents that want to participate in the digital music space."

Universal Warner EMI Sony ALL bow to NEW BOSS APPLE ITUNES

Apple Computer on Monday revealed it had renewed contracts with the four largest record companies to sell songs through its iTunes digital store at 99 cents each. The agreements came after months of bargaining, and were a defeat for music companies that had been pushing for a variable pricing model.

The music industry's big four - Universal, Warner Music , EMI and Sony BMG were not immediately available to comment.

Since iTunes' launch three years ago, Apple has charged US consumers 99 cents for each track a uniform price that Steve Jobs, its chief executive, favours because of its simplicity for consumers.

Edgar Bronfman, Warner's chief executive, and senior executives at EMI and Sony have in recent months supported variable pricing, which would allow them to charge more for new material from top artists. Universal has taken a more modest approach, suggesting that the market should be allowed to develop further before any adjustments are made.

The issue has occasionally become acrimonious, with Mr Jobs last year publicly labelling the industry "greedy". Apple and the music companies declined to comment on the current round of negotiations. However, several music executives privately acknowledge that they have little leverage over Mr Jobs.

ITunes accounts for about 80 per cent of the US digital music market at a time when the record companies are desperate to show shareholders they are replacing declining compact disc sales with new internet revenues. "The labels need Apple too much right now," one record executive said.

Online music sales surged 194 per cent last year to 352m units, according to Nielsen Soundscan, as overall album sales fell 3.9 per cent. Digital sales now account for about 5 per cent of the music majors' revenues.

The surge underlines the competing priorities for Apple and the music industry. While the record companies are seeking new ways to generate revenues, Apple generates the bulk of its music-related revenues from sales of iPod players.

Some record executives had speculated that the big labels might sign short-term contracts with Apple and revisit the issue later. The companies were also discussing issues such as anti-piracy controls and the possibility of greater interoperability between iTunes and other download services.

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SONY TEAMS UP WITH LUV MACHINE FOR MP3 DOWNLOAD SALES

SONY TEAMS UP WITH LUV MACHINE