Industrial Revolution: MySpace – The End Is Nigh

Oh MySpace. I don’t think I need to delve into your sad story because it’s a familiar tale. Even if you don’t know the details of the rise and fall of the Internet’s first smash hit social media site, you still know the story”assuming you studied ancient Rome in grade school or have watched literally any rock bio-pic film ever made. Humble beginnings, spectacular rise, crucial missteps, steep decline, public shame, optional drug overdose, likely death.

The ending is yet to be determined, of course, but demise seems inevitable. The prescient 24/7 Wall St. blog has released their yearly Ten Brands That Will Disappear list for 2012, and while the inclusion of such stalwarts as Sears and Kellogg’s Corn Pops might surprise many, the appearance of MySpace is no shock. But it is the first official time-of-death call, and it’s from an observer with a pretty good track record of predicting these things (for example, the disappearance of both T-Mobile and Blockbuster). Their summary is concise and worth excerpting in full:

MySpace, once the world’s largest social network, died a long time ago. It will get buried soon. News Corp (NYSE: NWS) bought MySpace and its parent in 2005 for $580 million which was considered inexpensive at the time based on the web property’s size. MySpace held the top spot among social networks based on visitors from mid-2006 until mid-2008 according to several online research services. It was overtaken by Facebook at that point. Facebook has 700 million members worldwide now and recently passed Yahoo! (NASDAQ: YHOO) as the largest website for display advertising based on revenue. News Corp was able to get an exclusive advertising deal worth $900 million shortly after it bought the property, but that was its sales high-water mark. Its audience is currently estimated to be less that 20 million visitors in the US. Why did MySpace fall so far behind Facebook? No one knows for certain. It may be that Facebook had more attractive features for people who wanted to share their identities online. It may have been that it appealed to a younger audience which tends to spend more time online. News Corp announced in February that it would sell MySpace. There were no serious bids. Rumors surfaced recently that a buyer may take the website for $100 million. The brand is worth little if anything. A buyer is likely to kill the name and fold the subscriber base into another brand. News Corp has hinted it will close MySpace if it does not find a buyer.

Indeed, just one buyer remains a possibility at present, and that is the Chairman and CEO of Activision, Bobby Kotick, who heads an investor group interested in having a stake in the company, rather than purchasing it in full (theoretically, News Corp would retain 20%). Word is that even if this investment somehow goes through, it ain’t gonna be for no $100 million. [Late-breaking update: Sure enough, News Corp. has reportedly made a deal to MySpace for $35 million to Specific Media. News Corp. is expected to retain a 5% stake.]


What happened to MySpace? It really is hard to say. The first thing that springs to mind is the lack of a communal space (Facebook’s Wall) that allowed users to really feel connected to their friends. Then came the deluge of users and spammers, who were eagerly accepted as friends in order to raise that number. In that way, MySpace was a learning environment, which informed our later behavior on Facebook. We knew, by then, to be more selective, and that the number of friends you had really didn’t matter at all. Without MySpace, all those mistakes would have occurred on Facebook, which would now resemble the gaudy wasteland of MySpace (damn you, layout wizards!).

For many of us, MySpace was attractive as a music discovery site. But unfortunately the music on MySpace sounded like shit, due to their standard low-bit-rate streaming MP3s. When MySpace began to accept that they had lost the social media game to Facebook, they tried to re-focus on just music. But they had blown their credibility on that front, and many other, less tainted and cluttered sites had filled any void left by Facebook’s (initial) lack of interest in catering to music fans (Soundcloud and Bandcamp being the current leaders). The once-hyped MySpace Records has foundered and this year laid-off at least half of its staff, though is still apparently functioning as an A&R operation in partnership with Interscope Records.

The thing is, efforts like MySpace start up and close down all the time. The world gets what they want out of it, learns from it and evolves. The only reason it’s still a matter of interest is because of MySpace’s former ubiquity. It really was the first social media site to pervade the public conscious. It was also the first time artists saw the web as more than just a secondary marketing tool, opening up a world of direct fan engagement. In these ways it was a success. But for the music business, this is yet another object lesson that you need to stay ahead of the game, predicting what’s next, rather than trying to cash in on what’s already working by cobbling it together with your business model. And just like with social media, the deluge hampered the ability of quality artists to connect with willing fans. No one is certain what will happen next and how this latter situation might resolve. But here at OurStage, fan-driven music discovery”where the community evaluates and puts the good stuff up top”is our bet.

[Ed. Note: You can read MySpace CEO Mike Jones’ letter to the staff regarding this week’s sale to Specific Media here.]

Industrial Revolution: Warner Brat'ya

Warner Music Group was sold to Russian-American billionaire Len Blavatnik earlier this month for some bootleg Beatles tapes and black-market blue jeans. But seriously, it went for $3.3 BILLION.

How on earth could a record company be valued so highly in this tenuous market, you ask? Warner is, of course, a long-running and highly respected major label (all things being relative). But even that prestige is not enough to explain such a high premium. Indeed, the failing business of selling records is the reason a company like Warner was up for sale in the first place. Still, there are other aspects of Warner that make it so desirable an asset.

Firstly, Warner Music has a highly lucrative publishing arm, Warner/Chappell, with a catalog boasting an incredible array of works by legendary figures from the Gershwins to Van Morrison to Michael Jackson and Madonna. It remains to be seen whether Warner/Chappell is assessed higher as an asset or a commodity to be auctioned off. There is no doubt that these catalogs will continue to steadily generate revenue for the foreseeable future, with little need for business maintenance or risk-taking.

Secondly, Warner (specifically former owner and still CEO Edgar Bronfman, Jr.) and its new owner, Len Blavatnik’s Access Industries, have already been talking loudly about their awareness that the record industry has changed, and that they must change with it. Though Bronfman is said to have acted conservatively in relation to expansion into digital media, recent rhetoric indicates that a shift in direction, perhaps as radical as abandoning physical music formats, could be imminent.

Thirdly, Warner Music is the perfect vehicle for future ventures and acquisitions. Even prior to this sale, it had been speculated that the next item on the auction block would be the troubled, but almost equally respected EMI, which itself has a rich history and valuable publishing catalog, but is in receivership to CitiBank. For anyone looking to become a power player in the music industry, Warner and EMI could be the ultimate one-two punch.

Which brings us to a very likely and familiar fourth reason, which should be considered in combination with any/all of the above, for Warner’s price tag: vanity. Blavatnik made his fortune in oil. The Bronfman family made theirs in whisky (Seagram’s). There is almost certainly a love of the game involved for men like these, and a prime directive to continue making money, but it’s difficult to discount the notion that they were both drawn into the music business for the glamour and the high profile. Blavatnik has previously displayed a similar penchant in ventures into film distribution and fashion. Warner Music, and a potential EMI merger, could turn him from a super-rich but generally unknown businessman into the most powerful man in the music business. Also, still super, super-rich.


Also, wine coolers.

Industrial Revolution: Kickstarter Fatigue

The artist funding platform Kickstarter is estimated to have injected $13 million into what is being called the new music economy over the span of the two years since the site’s launch.

Kickstarter is based on a fairly recent economic model called micro-financing, whereby would-be entrepreneurs who otherwise lack access to capital are funded in small increments by a number of investors, who make a relatively low-risk investment. With Kickstarter, the recipients are artists, including musicians, filmmakers, and others, who offer various concrete rewards to investors, rather than a percentage of profit. An artist might offer memorabilia or merchandise related to the project at hand in proportion to the level of the pledge. The highest donations rarely exceed the low thousands of dollars and are more often in the $300 and under range.

That Kickstarter has fostered so much commerce exchange to the benefit of DIY artists speaks to the popularity of the model and reflects the development of this new music economy, which works outside of traditional suppliers of capital. Kickstarter’s initial success owes much to the novelty of applying a micro-finance model to musicians”fans saw a way they could become directly involved in the creative productions of artists they knew and/or liked.

As good and unique ideas tend to go, many more artists latched on and began using the platform to fund their own projects. Kickstarter, from a sociological standpoint, had tipped. But in terms of what it can do for musicians, Kickstarter’s moment of cultural pervasion has now become over-saturation. What was at first an obscure, invite-only avenue to make an art project into reality has lost the novelty factor, and is now in fact open to anyone who wishes to use it, whether they have a unique project or they’re another indie band just trying to scrape together enough dough to duplicate some CDs. Kickstarter has become little more than a too-familiar dot on the Facebook wall, easily dismissed. How many of your friend’s bands do you really like enough to want to help, especially when they can’t offer much beyond an advance copy of the album? And the backlash from those targeted has already begun, with public laments of being pitched by artists no more broke than they are.

Artist funding sites like Kickstarter are still of great use, both for filmmakers and artists with unique projects and for musicians of a certain level, who have already-engaged fans eager to be part of the process. The average unknown band who, in the early days of Kickstarter, could really benefit from such an interesting and unknown platform, are now spinning their wheels, struggling to meet their pre-set goal. (If users fail to meet a minimum amount of pledges, they don’t get anything”this is a motivating factor to investors.)

Let's Make A Deal!

For Kickstarter, this means that this segment of users will surely level off. The question is whether they can focus on building other segments up so that non-band projects become part of their brand identity”art, originality, and success, as opposed to the stigma of countless bands all trying to achieve the same goal from, and this is key, the same audience. Kickstarter works in the long-term only when projects cross-pollinate and users fund several of them in small amounts. A look at the Kickstarter front page at press time indicates such awareness, with featured projects such as a TV series, an X-Files-inspired musical, boutique mustard distribution, comic books, photography¦ there isn’t a single featured musical project. Meanwhile, the organization faces competition from similar sites, like Slicethepie, Sellaband and PledgeMusic. The latter offers an additional charity component, and the former two are both devoted strictly to music projects.

I'll take just the puppet, please.

Unless artists have something truly valuable to offer, or are speaking to a dedicated fan-base, they’d best think hard before launching a Kickstarter campaign. All this is not to say that it can’t be done successfully, but bands must be aware of the environment in which requests for pledges will be received, know their limitations, be creative, target carefully and work hard. OurStage is doing its part by highlighting some artists doing just that in our Kickstart OurHeart feature.


Industrial Revolution: Audio Files For Audiophiles

Woah. Death came to two digital music pioneers within just a couple of days of each other. Max Matthews, widely considered the father of computerized music, died on April 21st. Two days later, the inventor of the compact disc, Sony’s Norio Ohga, also passed away.

In 1957, Matthews, then working for Bell Labs, wrote a program called Music, which played back synthesized sounds according to the user’s input. His work is the foundation upon which all subsequent computer music, including his own additional innovations, have been built.

Ohga, who led Sony’s immense growth as president from 1982 through 1995, pushed for the development of the media-revolutionizing compact disc. In addition to determining the size of the disc, the classical music lover and former aspiring opera singer famously mandated the CD’s 75-minute running time so that it would fit the entirety of Beethoven’s Symphony No. 9. Ah, when music fans were in charge¦

Max Matthews

Digital music evolved greatly in the intervening years and beyond. Matthews’ initial forays inspired more the actual creation of synthesizer music, rather than the development of digital formats. It wasn’t until 1975 that Betamax developed high-fidelity digital audio to their compact video cartridges (ultimately falling to the competing VHS format, which quickly caught up to Beta’s audio quality). 1978 similarly saw an audio development married to a video format in the Laserdisc, the first optical disc storage format available commercially, which offered unparalleled audio quality in terms of home video. However, due to the high cost of discs and players alike, along with its inconvenient size (about that of a vinyl LP, but heavier), the Laserdisc never truly caught on.

Norio Ohga

But both of these developments were important steps in the evolution of digital music. The Laserdisc is essentially a giant CD and led directly to the game-changing success of that smaller format, first made available in 1982 by Norio Ogha’s Sony. The CD itself inspired further innovations”the High Definition CD and MiniDisc are obviously direct descendants, and Digital Audio Tape (DAT) owes more to the CD than the compact cassette.

Then around 1988, Apple Inc. introduced the Audio Interchange File Format (AIFF), a non-compressed digital file that could store pieces of audio for personal use. AIFF is still widely used today by audio professionals, along with the Waveform Audio File Format (WAV) and Digidesign’s Sound Designer II (SDII). While there have been additional improvement in tangible formats (DVD, DualDisc, Blu-ray), the real leap forward was in 1993, when the MPEG Audio Layer III (MP3) successfully compressed audio files into a manageable size without rendering the sound quality so low as to be an unfaithful or unlistenable reproduction.

Laserdisc: its the FUTURE!

The MP3, in tandem with Internet technology, has obviously led to file sharing, and the myriad of opportunities and problems that ensued have forever altered the music industry. While no one can dispute the usefulness of the MP3, it is lamentable that it is quickly becoming the standard for audio consumption. You don’t have to be an audiophile to hear the difference between compressed and un-compressed music.

All this begs the question of what’s next for digital audio? Will consumers demand higher quality? Will lossy MP3s be the standard for decades to come? Or will the demand to fit more information in less space extend a tolerance for even a lower-quality format (or lower bit-rate MP3s)? It would be nice if, as professional music recording technology and fidelity standards continue to improve, consumers rightly clamor for an improvement in fidelity, either via format or, more likely, via technology that can handle more lossless files, like WAV and AIFF, in less space. Some people won’t have an interest in improving the sound of their music beyond what MP3s can provide. As their iPod is able to hold more information, they are more likely to see this as an opportunity to fit more MP3s. But some will certainly trade off better quality for at least the same song capacity.

A good sign is Apple’s development of the Apple Lossless format (ALE or ALAC, denoted by the .m4a extension), which is now in use for iTunes, both in converting CDs and for music purchases. This is still proprietary, though, and is not easily shared, especially onto PC and Windows-based computers. Certainly, more innovations are to come, and hopefully ones that support higher quality audio. Hopefully music lovers in the mold of Max Matthews and Norio Ogha are on the case. R.I.P., gentlemen.

Industrial Revolution: Revaluing Music

Unlike some of the more desperate record company execs, indie artists today are not clinging to the fading music revenue models of the past. Instead of mourning the loss of record sales, these musicians are rethinking the value of their music, pioneering new methods of conveying their artistic output to listeners while still receiving something of value in return.

Many artists find that selling their music direct to fans, via their own Web sites and utilizing the variety of commerce tools available on the web, can make up for the decrease in overall sales. Many such commerce tools are highly user-friendly and in the end take only a very small piece of the revenue pie, relative to retail stores like iTunes and longtime artist favorites like CD Baby. The artist, then, receives the lion’s share of the price paid by the fan.

In addition, buying music direct from the band makes a difference from the perspective of the fan. The perception by the latter that they are giving money to an artist that they like and want to support, rather than to a company (retail or record”even if the artist has a label that obviously receives a share), personalizes the music attainment experience and breaks down the growing cognitive barrier to paying for music at all.

Other artists are experimenting with new ways of seeing a return for their recorded output. Many observers wonder how vinyl sales could possibly be growing while music sales are generally way down, but the answer is that it is expressly because of the de-valuation of common CDs and MP3s that vinyl has found new worth. The rarity of vinyl (though growing at a very healthy clip, vinyl still comprises a minute fraction of music sales), along with the relative opulence of the packaging, the (arguably) higher-fidelity and the retro-chic factor, have made vinyl LPs seem worth shelling out for to music consumers otherwise reluctant to pay for the ubiquitous compact disc or completely intangible MP3 file. The increasingly common practice of making a digital download part of the package has boosted this value immensely. Very recently, many artists have taken this concept and run with it, releasing unique versions of their albums on that near-extinct portable favorite, the cassette.

Have you heard their new tape?

It’s not only indie bands getting in on the action. Radiohead, as previously discussed in this column, is always trying something different, from the pay-what-you-like model of 2007’s In Rainbows to the newspaper album version of this year’s The King of Limbs. And when you’re The Flaming Lips, what else is left to do but release your music on a flash drive, buried in a life-sized human skull made entirely of gummy?

Damien Hirst's favorite new album.

Still other artists try to add value to the more pedestrian CDs and MP3s by bundling them with non-music merchandise, like t-shirts and posters. In effect, neither the music nor the merch is the primary product. Only together do they appear to comprise something worth buying. Sometimes even that doesn’t whet the appetite of the fan, who steadfastly refuses to pay for something they feel is and/or should be available for free. There is a way, however, that clever artists can still see something in exchange for their music. Money, after all, isn’t everything. In a recent experiment, David Byrne and Brian Eno released their record Everything That Happens Will Happen Today in exchange for just the listener’s email address, via the Topspin platform, a young company which exists to seek additional answers regarding the new way of doing things in music. Email addresses are extremely valuable, both practically and theoretically, in ways not even developed yet. Direct access to music fans via email is a way to cut through the sound and fury of Internet and media bombardment.

In any of the examples discussed here, the running theme is getting direct-to-fan involvement and cutting out the middleman. Let’s face it, cassettes won’t ever come back and Radiohead already ditched pay-what-you-like and probably won’t be doing another newspaper album. But these are all important steps in boiling down the exceptional opportunity provided by the web to kill off the old and often artist-suffocating music business model.

Industrial Revolution: "Grey's Anatomy" Killed The Radio Star

It’s official. TV is the new radio. Television is now the primary medium through which casual and even passive listeners with a general interest in music stand the greatest chance of discovering new music and artists.

Whether through serial dramas, sitcoms, commercials, or reality programming, television is absolutely soaking up hip indie rock bands and singer-songwriters as well as unsigned and often unknown artists. Sometimes it lends them cache “ a coolness factor that comes from being associated with something that sounds new. In the case of some higher-profile bands, like the ubiquitous Black Keys, this can cost them a chunk of change. Subaru and HBO, among others, are shelling out to feature the fresh-retro sound of a band like the Black Keys, which appeals to both young, in-the-know music fans and to an older generation who are so excited to hear something familiar-yet-new that they jump online (or, depending how old they are, to¦the record store) to find the genesis of this sound. Other times, and this is best case for the television show or advertiser, they spend relatively little on an unknown song from a licensor’s roster that either sounds fresh or sounds like another act they can’t afford or don’t want to pay for.

They wouldn't spray paint it if it weren't true.

In both cases, it’s a win-win. The unknown artists get the kind of instant and national exposure that they wouldn’t get even if the biggest commercial radio station in their town started playing them. And the TV shows are getting these artists cheap, so they’re cramming more music into their shows AND often giving them a credit somewhere during or after the show. The bigger acts, meanwhile, are benefiting by getting bigger “ in the course of six studio albums, the Black Keys have only in the last year or so, with an increase in song licensing, jumped out of a comfortable cult status and into the consciousness of people who are neither savvy toward new music discovery nor particularly interested in getting savvy. Even if they really like good music, they know they don’t need to work that hard to find it. Just wait for the new iPod commercial, do a Google search, and, boom, you’ve discovered The Submarines. Bands, likewise, no longer have to pander, as in years past, to the corporate powers-that-be at major commercial radio. If you have that one song that perfectly captures the ennui that apparently comes standard with having a medical degree, you might get yourself on an episode of Grey’s Anatomy”ladies and gentlemen, The Fray (whose success on that show’s soundtrack has led to more and more such opportunities, many of which the band reports turning down for fear of overexposure).

And bands no longer grapple with the concept of selling-out. Television has always needed music, but bands used to be reluctant to accept offers to have their music synced with a commercial or any images they don’t control. Now, that wall has come down. For bands, getting on television is not only an acceptable way to distribute your music, but an enviable achievement. A band with a song on MTV’s The Real World will remind their friends and fans on Facebook to tune in, posting it as they would a good review. And they see instant results. YouTube views hit the thousands literally overnight even after a brief clip on such a high-profile show. And the next check from iTunes or CDBaby might be a nice surprise.

There are still quality commercial radio stations out there but, over the last ten years, many have become stale and afraid to take chances on untested music. Some major commercial stations began testing alt-rock hits from the mid-90s on listeners, finding that they liked them”they still liked them” and so they put Stone Temple Pilots back into heavy rotation, fifteen years later, rather than risk valuable airtime on a relatively unknown artist.

Well, it’s their loss and the beneficiaries are the TV shows and the artists. The world would be a slightly better place if commercial radio were more adventurous and compelling, but in the meantime, at least there is a new and effective outlet for bands. Television has a broader reach and a more engaged audience to pitch to. Unlike radio listeners, people watching TV aren’t driving or reading or playing with their kids. They’re watching TV, so shut up, dammit, I’m trying to Shazam the song in this Target commercial.