Restrained by Arcane Copyright Law, De La Soul Frees the Music

Screen Shot 2014-02-19 at 6.01.16 PMDe La Soul faced a problem. None of the band’s revolutionary records were available in digital form. Sure you could still buy the CDs, if you cared to, but you couldn’t buy them on iTunes store or stream them anywhere. In this day and age if you’re not on Spotify or Beats, you might as well be invisible. The group has a new record this year, so having their music available everywhere is important for exposure.

So they decided to give it all away. Yep, last Friday the band gave out the music from its own website. That’s great for fans. But it might be a pathetic comment on our current state of copyright.

What made De La Soul so great was that the group used tons of samples in its music. Great for art, but each of those samples have to be licensed. It’s a pretty time-consuming process and Warner Music Group, which owns the rights to the old Tommy Boy Records, wasn’t particularly motivated to clear all the samples, so the band took matters into their own hands.

Tommy Boy founder Tommy Silverman suggested on Twitter that we should create a statutory rate for samples in the copyright law reform that is being considered by the Patent and Copyright Office. That way any artist could sample any work and the original artist would get a compensated for the work. Pretty great, right?

“It’s never gonna happen,” an executive with extensive knowledge of the copyright told me when I asked about the issue. “Is it a lot of work and kind of a pain to get a sample licensed? Absolutely. But it can get done? Yes.” As long as there’s a precedent of samples getting cleared, the copyright office isn’t going to be motivated to create blanket business terms for samples. Also, there are a growing number of voices who are against compulsory licenses for samples, such as Aerosmith lead singer Steven Tyler, who wants to retain control to who gets to remix their music.

The bigger problem for De La Soul and many acts from the ’80s and ’90s was that the bands just went ahead and sampled whatever they wanted and released the record. Once a record is in the marketplace, the sampler artist has no power of negotiation and has to take whatever deal is offered. The most famous example was The Verve’s Bittersweet Symphony which sampled an orchestral version of the Rolling Stone’s song “Last Time.” While the Verve did have a license with the creator of the orchestral version, they didn’t have a deal with the holder of the original recording, which was a big hit at the time. “We were told it was going to be a 50/50 split, and then they saw how well the record was doing,” Verve Bassist Simon Jones told the Toronto Star. “They rung up and said we want 100 percent or take it out of the shops, you don’t have much choice.”

De La Soul’s current troubles stem from whatever settlements the band made with the rights holders for the samples during the CD era didn’t include digital products (since they didn’t exist back then.) So now someone will have to go back and clear all the samples again. Since hip hop has been around 30 years or so, a cottage industry of clearing samples has risen up. But obviously that will cost money, and potentially a lot of it. I’m sure Warner did the math and the costs of clearing all the samples outweighed the potential of digital sales.  ‘Yeah, no thanks. Why don’t you guys do it?’ De La Soul probably did the same math and said, “aww, let’s just give it away.” Eliot Van Buskirk mentioned in his story that everyone and their mother wrote an article about them giving it away, so it was great publicity for the group.

So the band loses sales, and just as importantly, the customer loses. We clearly need copyright reform, as the laws were written for a different era. What that means has yet to be defined. And it’s eating away at the value proposition to the digital customer. Tracks disappear from all the streaming services for rights problems every day. Some days tens of thousands of tracks disappear from the service for all kinds of reasons. Sometimes it’s legitimate. Other times it’s for arcane reasons. Sample-heavy hip hop bears the brunt of these problems. Many times several tracks on an album will not be available for playback. And anything that loses its rights and is in a customer’s playlists? Well those go away, too.

As you can understand, this problem bedevils customers. Support forums are filled with these types of understandable complaints, from customers who don’t blame outdated copyright laws, nor the labels that decide it’s not worth the effort to clear the rights. They blame the services. Rightfully so. Fixing rights issue remains one of the diciest, costliest and least understood problems streaming services face.

Compulsory Background Reading De La Soul Makes Music Free in Copyright End Run

Rethink Music: A Compulsory Sampling License

Billboard: Steven Tyler Against Compulsory Remix Licenses

US Copyright Office: Copyright Policy, Creativity, and Innovation in the Digital Age

Independent Lens: Copyright Criminals (documentary)

Missed Connections: Why Technologists and Music Execs Must Partner to Win

@jmaples | Friday, February 14

Near the end of Marc Geiger’s amazing sermon at the European music conference MIDEM he made a comment about the differences between technologists and music industry execs face.

“Companies that are leading the music revolution don’t even know about the music industry. I can tell you Sergey Brin didn’t grow up in the music industry. Neither did Steve Jobs…even Daniel Ek. They didn’t come up knowing what we all know. We have to educate them. And when they think ‘theory’ we get mad at them. They think about it from the user perspective.  We think about it from an artist and industry perspective. There’s a big disconnect.”

This remains a big problem in the digital music world. Artists, music industry executives and technologists have been wary of each other’s motives. It’s been uncomfortable, and from time to time it can be downright contentious. I’m sure that music executives can reel off a greatest hits of outlandish and ridiculous asks from techies who just don’t understand how the music business works. And I have participated in some ‘colorful’ conversations about shortsighted label terms that only slowed down critically important progress.

Can’t we get along: After Spotify signed Metallica to the service, Sean Parker, Lars Ullrich and Daniel Ek were all buddies.

So I couldn’t agree more with Marc’s points, but it’s a two-way street. Both sides need to come together. What both the startups are trying to pull off (create new platforms of music consumption) and what the industry is in the middle of (rebuilding revenue from a product that no longer works) is hard. It will take both sides sitting down and understanding each other’s issues, motives and problems if we are going to deliver Marc’s vision.

It’s very easy to get caught up in what the other side is doing wrong. What the music industry doesn’t always understand is that to find out what are the great products, we need to experiment. You never know what’s going to take off and quickly building products, iterating as quickly as possible to ‘fail fast’ requires more flexibility than what has traditionally been granted. What technologists need to understand is that music is just not a commodity to be packaged in a cool app. The music industry may have its faults and limitations, but it is still the best in the world at discovering and shaping great artists and understanding what is going to connect with the music fan.

Building Great Customer Experiences

One area where both sides have been fairly unsuccessful is delivering what the music fan really wants in an experience. The industry might know the demand for artists and styles, but they sure couldn’t figure out how to deliver it. Let’s face it, none of the music formats have been really great, which is why we keep replacing them every decade or so. And asking your customers to replace their albums with 8-tracks, cassettes and then CDs while consistently upping the price has proven to be a horrible way to engender customer satisfaction. Part of why Napster hit its popularity in the first place was that there was such a bad taste in music fans’ mouths about having to spend so much money to only get the one song they liked on the radio.

The first few generations of products have felt more like technical solutions designed by people who write code instead focusing on solving hard problems for the customer. Technologists have also fallen way short in their relationship with artists and management. I’ve heard stories of artists seeing demos of tools designed for them without the technology firms even talking to a single working artist or manager about what was needed. The techies started by trying to solve their own business problem instead of artists. Big problem.

To start we need to get both parties together in a room. We need more events like Cash Music Summits that bring both technologists and artists together to discuss some of the thorniest problems and greatest opportunities facing the industry today. It’s a good start, but technologists need to do more than just talk. Getting artists involved in tasks like ideation, product definition, value propositions and even the customer lifecycle would go a long ways towards engendering goodwill and building a strong partnership. After all, if they’re great at making music, they might great at making music products. It bears mentioning that Beats Music’s chief creative officer is Trent Reznor.

Teamwork Rules

So what would working together look like? Well, a good example is the deal Twitter’s Head of Music Bob Moczydlowsky put together with Lyor Cohen’s new label, 300 Entertainment. Bob told Billboard Twitter will provide access to data that will help 300 decide who to sign to the label, a skill known as Artist & Repertoire. It used to be the A&R dude would spent 350 nights a year seeing potential acts to sign. But now data has become an important part of the job (along with going to see lots of music). Twitter understands that they don’t do A&R. But they know that they have amazing data that will help companies like 300. So Twitter partners with someone who really knows A&R and works with the company to provide solutions. Sounds like a pretty happy arrangement.

I have spent hours describing in detail to more than a few tech execs why they shouldn’t get into A&R. It’s a amazingly specialized skill set that very few people at any streaming company know anything about. It’s also ridiculously expensive and the ROI doesn’t pencil out until you invest for years, and even then I couldn’t say with any certainty that it would return anything. Most likely they’d waste a ton of time and money and lose the focus on their mission, which was to build a killer music experience. In a thin margin business where you’re getting squeezed by aggressive suppliers and distributors, it becomes very tempting to try to ‘move up the value chain.’ But that’s a mistake.

Playing Your Position

It’s like playing on a really great baseball team. Everyone needs to play their position.  It doesn’t mean we can’t call out the shortstop for a lack of effort or tell the centerfielder they need better skills. That kind of feedback just makes everyone better. But if we understand our roles and respect what massively talented pros can bring to the table, we could build the all-star team that will be necessary to build Marc’s $100 billion behemoth.

Today’s Teamwork Links

Dave Allen: Can Streaming Music Services Create a Bigger Recorded Music Industry?

CNet: EMI Wants CEO’s Assets

BillboardTwitter’s Head of Music On What The 300 Deal Really Means

RhizomeDo Artists and Technologists Create The Same Way

The GuardianThom Yorke Calls Spotify ‘The Last Desperate Fart of a Dying Corpse’

The GuardianDavid Byrne: ‘The internet will suck all creative content out of the world’

Follow On

Marc Geiger

Bob Moz

Dave Allen

Cash Music

Jesse Von Doom

Maggie Vail

Game of Thrones

HBO GO Bends (But Doesn’t Break) The TV Bundle

Game of Thrones
Keeping up with the Starks, Lannisters and Targaryens is easy with HBOGO. Which is good for you and HBO too.

In Time Warner’s recent earnings it was reported that HBO saw continued growth of subscriber numbers and CEO Jeff Bewkes commented that he didn’t see any reason to change the company’s primary revenue model of bundling the service with pay television providers. Many were disappointed, as they would like HBO to be freed of the tyranny of the bundle, so that they could subscribe directly to the service.

I don’t think people really understand the money at stake here.

Allowing customers to buy the app directly would seriously cripple the bundle model and deprive Time Warner of a revenue source that has been sterling for the company. But the company was smart enough to understand the usage trends and built the HBO GO app for smart televisions, tablets and phones. I’m sure they were hearing strong demand from their subscribers on the subject.

As Jenna Wortham reported last April, there’s a workaround to get the service. Share the account. That’s right, more than one person can watch HBO GO at the same time, as long as they have a legit username and password. So your  friend can slip you the credentials, and voila! All the Game Of Thrones you want. Jenna talked to an HBO exec who mentioned he didn’t think it sharing accounts was a problem (for the record: it’s illegal to share credentials in many states and violates the end user agreement that governs the app).

From my experience at Rhapsody, content owners are extremely worried about shared accounts. The working theory is the dorm floor problem: one person subscribers and everyone on the dorm floor uses it. How much this goes on is questionable. What isn’t questionable is that customers hate one account, one stream. We could only allow for a single stream on all of our products, regardless of what the customer paid.

Stream Finder

Here’s what I think is going on. HBO knows what’s happening with multiple streams on an account. And they don’t care. In fact they are using it as a rear-guard defense for the day when the bundle goes belly up. Because they’ve produced most of the content on the app (it’s easy to forget the company started by offering second run movies and not the producer of must-see series), Because they’ve produced so many of their own series, HBO has much more latitude with what they can do with the catalog. So while other competitors may have to limit access due to licensing agreements, HBO allows some sharing (I hit a roadblock after starting three streams). It leads to fewer customer problems, but might it also be building their next generation of subscribers?

HBO is probably just as worried as any other content creator that one day the Comcasts or DirecTVs of the world won’t be able to send them a bankload of cash for their series and movies, as people cut the cord. It’s also clear that there is unmet demand for people who just want to pay for the service. But probably not enough to make up the innumerable Brinks trucks of money carriers provide. Until that day, HBO is being lenient because they want everyone to get addicted to using the app so that they can’t live without it. And the day they pull the trigger on direct to consumer sales for something like $30 a month, those people will sign up faster than you can say, “Red Wedding.”

Which brings me to an advantage that can’t be understated: the water cooler effect (which could also go by its other the name–Twitter). The more people who watch a show, the more they are going to talk about it. And the more people talk about it, the more buzz the show creates, making it required viewing. So by being looser with streaming rules HBO is building stronger social buzz around the show. I don’t have data to support it, but the Game Of Thrones (don’t tell me, i’m still behind) last couple shows in the previous season seemed to be so much bigger than it had in the past, which led me to think that more than their subscriber base watched it. Could that have been the HBO GO effect?

Maybe we should think of HBO GO as really cool club. As long you know the one person who can get past the bouncer, you’re all good.

More Single Stream Fun

NYT ($$$): No TV? No Subscription? No Problem

GigaOm: Time Warner Next to Embrace Cheap HBO Bundle

WSJ ($$$): HBO More Profitable Than Netflix But Slower Growing

Engadget: Time Warner Making Bank On HBO

Forbes: Is It Time For HBO to Sell Direct To Consumers

SocialBakers: How Game Of Thrones Conquered Social

Smart People to Follow On The Topic

Jenna Wortham

Robert Tercek

Jason Hirschorn

David Carr

Om Malik


How To Lose A Customer Forever

It’s a good deal for the new customer. But not so much for the current subscriber.

I’ve been a strong advocate of satellite television and have been a subscriber for over a decade. And to that end I’ve been extremely loyal to my provider, DirecTV. I’ve had the service in three different residences. I paid for the highest tier of service just to get everything–no need to mess around with the budget tier only to find out I don’t have NBC Sports Network when the Tour de France comes around. I subscribed to MLB Extra Innings package just so I could have it on my TV to watch the Cubs every day I can stomach it (which, I know, questions my sanity).  I have put up with an excruciatingly slow guide experience as compared to cable. But how did I know last November when I finally converted to HD after holding out for years that it was sowing the seeds to destroy our relationship.

When I moved this time in December, I was bummed to find out we don’t have access to the southern sky, which means no satellite. I called up DirecTV and told the customer service rep regrettably I had to quit for now, but I would come back when I could. So I was kind of surprised when the rep said there might be an early termination fee (ETF). Does an 11-year subscriber sound like someone who’s terminating early?

Fortunately I was relieved when the rep said that the ETF was waived since the HD receiver I added last year was replacing a box. All I had to do was to return the receiver to DirecTV in a shipping container the company would send me and we’d be set. Since I left my receiver at my old place, I asked the rep to send it to my friend who now lives there. The rep said sure, no problem and we we were set.

Until I got my final invoice.

Instead of a check for a partial month of service, I got a bill. It seems that I did have to pay the early termination fee, and unlike a cellphone company ETF’s that get smaller every month of the contract, I had to pay the whole $200. By the way, when I ordered the new receiver, the rep didn’t say I was signing up for a long-term commitment with DirecTV. Oh yeah, and I had to pay $199 for the privilege to lease, not buy, the receiver. And since the rep didn’t address the return boxes to the new occupant, they were forwarded to my new place in Seattle, meaning I got it nearly two weeks after the company mailed it. So DirecTV also tacked on another $150 for not returning the box within their seven day rule.

In all, DirecTV believes I should pay $549 for upgrading my receiver. Oh yeah, and since I’ve upgraded that receiver, I’ve paid $2300 in fees for the DirecTV service, which I still think is great.

So this is DirecTV customer service. Call up and ask for a new HD receiver, don’t get informed of a contract. Call up to cancel the service, not informed of ETF fees. DirecTV screws up sending shipping materials, pay $150. And DirecTV consistently scores high in JD Power and Associates Best TV Service Provider ratings. If DirecTV is a good service, what must be going on at a crappy service like Time Warner? Do they send thugs out to beat up their customers?

Okay, I know this is just my personal customer service rant, but there is a business and technology issue here. Subscription services love that customer have skin in the game. In music we were happy that customers would download tracks, make playlists and share with friends. It meant a majority of customer weren’t going anywhere anytime soon. And we’re invested in many of the same ways with television. I was recently trying to sell the value of DirecTV (pre ETF-GATE) to a friend who was moving to a new place. He couldn’t even consider it. His partner had all her shows from her service on her DVR and she wasn’t about to change. “It’s the third rail of our relationship.” I get it.

But in some industries, like cable and cellphones, the value of the new outweighs the old. Just for kicks, I went to the DirecTV site and as a new customer, I’d get a state of the art HD DVR for free and I’d receive half off programming for the first year in a two year commitment. For the $549 they want me to pay for the ETF boondoggle, I could get a nine months of service. DirecTV is in a war with cable and Dish to win subscribers. So acquiring a new customer is prioritized over making current ones happy. The company obviously figures that they have their hooks into their current customers really deeply, either from the product, equipment or just good ole inertia. After all, who wants to deal with customer care unless extremely motivated.

This is a massive mistake. Acquiring a customer is really hard and costly. Keeping a current customer happy is much more economical and leads to much higher satisfaction of the entire base. You can abuse your customers as much as you care to when a company holds quasi-utility status, where the options are limited. But the explosion of choices in media has meant that people can cobble together their own experience outside of traditional options for entertainment. A combination of YouTube, Netflix, Hulu and a host of other services is starting to fray the bundle pay televisions have had for a long time. The war for the customer is getting much more challenging every day. Here’s a few of guidelines for retaining customers.

Create a lifestyle turnstile: A couple years ago a product manager at Netflix told me they weren’t acquiring any new US customers, but instead they were just signing up former customers. He found that customers came and left the service for a variety of reasons, mainly due to seasonality. Companies need to consider what is going on with the customers life. Perhaps they just can’t afford your service that month, or maybe they’re going on long vacation. Companies should think of their services as a turnstile that allows the customer to join and quit at will.  I would suggest making it as easy to quit as it is to sign up for the service.

Carrots Work Better Than Sticks: I don’t have the data to know if Early Termination Fees actually work in keeping customers around. But I know what they’re very good at: terminating any good will you have with a customer. I sorta get the reasoning for cellphone companies to charge you a fee for leaving early, as they are deeply discounting the cost of the phone. But it’s so unclear why you are paying what you are paying. I’m sure it’s clear how I feel about the DirecTV ETF. It seems like that one was strictly designed to stick it to someone leaving. I would suggest customer pleasing offers (free month of service or upgrades on equipment) make more sense than using a lock and chain on your customer.

Set them free: Look, everyone wants to save the leaving customer. Keeping a customer by giving them a better offer is always a great way to tease out what the customer complaint really is about. Maybe it’s the cost. Maybe it’s the value proposition. Maybe they just need a break. What really gets me is when you get multiple save attempts at saving the customer. It’s is really aggravating and can leave a bad taste in a leaving customer’s mouth.

More Topical Linkage

NYT ($$$): More Cracks in the TV Business Model

Businessweek: Netflix, Hulu and the New Definition of Reruns

Bloomberg TV: T-Mobile Moving Whole Industry Off Contracts

HuffPo: The Secret Magic Behind Netflix Customer Service

WSJ ($$$): Amazon Considering Pay TV Service

FT (reg required)US Cable Musters Forces to Meet Upheaval

The EconomistThinking Outside the Set Top Box

How Streaming Music Continues to Fail Artists

Streaming services could get fans as close to their favorite artists as they get at SXSW.
Streaming services could get fans as close to their favorite artists as they get at SXSW. That’s Alabama Shakes in 2012.

Perhaps it’s the news cycle, the launch of the next-big-thing or just simply boredom with the topic, but it sure seems like we’ve forgotten the meme of artists getting ripped off by music startups.

Nearly all last year this was a huge topic with artist like Thom Yorke and David Lowery menacing pitchforks at Spotify and Pandora. One of the major problems with the streaming services is they can’t have a frank and honest conversation about how much they pay for their content.  Because of their confidentiality agreements, they are bound to not discuss the financials of their deals with major labels. I’m sure it’s frustrating for Daniel Ek to pay out a billion dollars for the rights to music only to hear David Byrne call Spotify evil.

In December Spotify posted an extensive site that breaks down everything from the formula used to determine payments to specifically how artists are compensated. While the site lays it all out nicely, it kinda buries the real message to artists. The unsaid message goes something like, ‘We paid out a crapload of money for the music. But we don’t pay you directly. We pay the label, so go talk to them.’ Also it shows how future growth will make those moderate sized payments grow to gargantuan numbers, which you need to squint really hard to see.

Fair enough. At least when you consider music playback. But I don’t consider that enough and neither should artists. You see, streaming services really should be vibrant active communities of fans who love their favorite artists. But today, they most definitely are not. They are primarily flat, with stale boilerplate content and the charm of a filing cabinet. Even the recently launched Beats Music had nearly the same execution of artist pages as all the other services, (although I have seen some screenshots of a nice implementation of Topspin’s artist commerce in the app, so I’m assuming that the features will roll out soon).

What streaming services must do is find a way to authentically connect fans to the artists they love. And they should provide ways for the artist to directly speak to fans on their platforms. It’s one of the trickier problems for artists today. Fans are listening everywhere from Pandora to Spotify to Soundcloud to iTunes. But unless the fan reaches out directly through social channels or the artist’s website, they won’t know what the artist is up to. And if they’re not paying attention, a fan can miss it on those channels too.

Let’s take a “use case” as we say in product development. Let’s say I happen to be walking through Billy Reid on Bond Street and I ask the well-coiffed dude behind the counter what was that beguiling song emanating from the speakers. “Oh, that’s Lord Huron. Great band.” I pull out my smart phone, download it using my favorite streaming service and dig into it for the next week. But when I finally get around to checking out the band’s Facebook page for concert dates, sure enough they played in Seattle two nights before. Fail!

My service knows I like the band, since I’ve played it incessantly for the past few days. And since I have the app downloaded it also knows where the hell I am. So why can’t it suck in all the concert dates and let me know that I’m about to miss the band in a super small venue (The Crocodile in this case)? And maybe I couldn’t get to the Crocodile, but I should be able to buy a poster or a tee shirt, right? Maybe I want to connect directly to their @lordhuron and read all their updates while I listen. And why can’t it look at all the other verified @artist tags that Lord Huron is following to give me a list of bands that I might like?

Let’s keep in mind, my use case is of an, um, older demographic. There’s a whole generation of fans who crave direct connections with artists and their needs have yet to be defined. There is so much discovery work that needs to be done to figure out what those products and offerings should be. We’re just getting started on what the best product will look like and what people will need.

Services need to shift the way they are thinking about artist engagement. It’s not just a place where fans listen to music. It should be a place that unites the information and offers from artists to create a unified solution for the fan and also be a platform for artists to market directly to the fans that care most about them.

The bad PR streaming receives right now is because they haven’t scaled enough to make up the revenue difference in flagging physical and digital sales, and these services are hot so they become the punching bag. But the services do have the superfan, the ones that live and die for the artist. They might still buy all the band’s CDs. They make it a priority to see the band when they roll through town. They might even buy a $1500 ticket to take a cruise or travel long distances to see a festival.

Solving this problem should be one of the top priorities for every service out there. Until the day that happens, we’ll be talking about the micropayments for plays and waiting for scale. I’m sure this is discussed at every service, as we used to talk about it all the time. There have been a few early initiatives, like Spotify’s integration of Topspin commerce into their desktop applications or Rhapsody linking Bandpage’s Experiences within their apps, it hasn’t been focused on mobile and personal, which are the two key ingredients for the fan to take action. Addressing those valuable modes will power increased engagement and, hopefully, revenue.

Trust me, I know all too well the jammed up product roadmaps that services must juggle. There multiple competing projects all the most urgent priority. But completing this work will go a long ways toward changing the conversation and building new value for both artists and streaming services.

Links for the Obsessive

The GuardianWhy David Byrne Is Wrong About Spotify

MediumWhat Streaming Music Can Be

WSJ (Requires $$$): An Ode To Joyous Streaming

Hypebot: The Barriers of Music of Music Listening: Past And Present

Viacom BlogMTV’s Music to the M Power

Post-cociousDavid Byrne Tells Streaming Services To Get Off His Lawn

Ellen DeGeneres

The Beats Formula For Streaming Music’s Happy Ending

Close your eyes. Good. Now let me ask you to imagine something. A product that has every song ever recorded, available for you on the devices you use everyday wherever you are, regardless if it’s at home, work, the gym or even places where you don’t have a connection, like the subway or on an airplane. Sounds pretty sweet, right? Any song you can think of, available at your fingertips.

At its crux, that is the promise and marketing pitch for every all-you-can-eat music service that has come out in the past decade. It’s a pretty cool product. And lots of consumers gave it a shot. Only problem is nobody wanted it.

Okay, okay, I’m being a little provocative. When I say ‘nobody’ what I mean is only the most hardcore music nerds—those people who obsess over their playlists and the perfect collection—were willing to pony up the $10 a month. Certainly not the number of people who’ve signed up for other access products, like Netflix or Hulu, or even other music products, like the satellite radio giant Sirius/XM.

Which made it kinda strange when Jimmy Iovine and Dr. Dre’s Beats By Dre headphone juggernaut bought the failing MOG subscription service and planned to relaunch it. Great, just what the industry needed. Another subscription service. But they had another idea.

Jimmy and Dre, along with Chief Creative Officer Trent Reznor, decided that the streaming services had it all wrong. Nobody wants 20 million songs. Music fans want 20 awesome songs for what they were doing in a particular moment. They want them picked and sequenced by someone who knows lots about music. And the company thought that most of all, they want the stamp of approval from a music legend. Like someone who produced one of the greatest rock records. Or an artist/producer who redefined music. Or the lead singer of one of the most innovative bands of all time.

In a nutshell, that’s the Beats Music product. Music designed for the way you listen brought to you by music people you trust. And while the product launched two weeks ago falls well short of delivering those lofty goals, the positioning is so different than the zillion or so other companies now crowding into the space that it might work. Maybe. If Jimmy and Dre can market it like they did headphones.

You see Jimmy and Dre turned headphones—which used to be either a cheap commodity, or a high-end specialty item—into a must-have cultural icon that people would drop $300 without blinking an eye. Why? Not because of quality. Not only because of quality. There have always been high quality players and Beats By Dre headphones don’t always win the best headphone bakeoffs. It’s because everyone you look up to is wearing them. Like Super Bowl champions. And celebrities. And the hottest rappers. When they first launched, it had the stamp of approval of Dre. When he’s recording the next superstar, Beats were the headphones he used. And you could trust him.

So it’s that combination: a differentiated product with an imprimateur that consumers trust, and the marketing muscle to sell it to people who have never heard of Spotify, Rdio or Rhapsody. Beats Music says they’re going to get behind it in a big way. How big? Well, they started with a Super Bowl commercial featuring Ellen DeGeneres. But the company is promising to do much more. And they’ll have to if they want to have a lasting impression, because compared to headphones, marketing streaming services is a tough sell.

So will it work? Can Beats Music extend the Dre-pire and sell the value of streaming music where all the music nerds failed? Yes. If Beats can continue to improve the product so it delivers on the promise of ‘music so right it’s like magic.’ If they can make it effortless to subscribe by adding it to your cellphone bill for cheap. And if they can market it with the sheen and style of Beats By Dre, we will have the hit that the music industry so desperately craves.

More for the obsessively curious

Podcast: Can Beats Music Crack The Mainstream

Spin: Is Beats Music All Its Cracked Up To Be

NY Times: Algorithm For Your Personal Rhythm

Hollywood Reporter: Ellen DeGeneres Reveals Her Super Bowl Ad

NY Post: AT&T Delays Big Push as glitch hits Beats Music

Robinson Cano

Televised Sports Meets Its Moneyball Moment

Sadly, non-subscribers can only read the excerpt of Ken Auletta’s amazing piece on Netflix and the television industry in last week’s New Yorker. I’d suggest you get a copy to read all kinds of amazing tales from the company, including a juicy little story about sitting down with the rental giant Blockbuster in the year 2000. You can check out Auletta explaining why television is not totally screwed on Charlie Rose.

I’m not sure if I completely agree with Auletta’s assessment that television (cable in particular) may not suffer the fate of music or newspapers. There are several icebergs of problems just waiting to crash against its hull. Like the fact that folks who don’t watch one lick of sports end up paying a fair amount of their bill every month for the programming. And then there’s the bundle problem where most customers are forced to pay despite the fact that they never watch most stations.

Cable and networks have seen their opportunity to attract huge audiences and sell expensive advertising spots whittle down to just live sports programming. Sports leagues are now extracting huge fees for the rights, and networks and carriers pass on the costs to all their customers.

Now even teams are getting in on the action. Time Warner Cable recently signed a deal with the Dodgers that is expected to add $5 to the cable bills of their Los Angeles customers, regardless if they ever watch the NL West champs or not.

While the NFL has delivered the numbers for television (Sunday’s Super Bowl reached an astounding 111.5 million viewers, the most watched show ever televised), other sports may have more of a problem, leading to the belief that there’s a sports TV bubble that will someday soon to pop.

Robinson Cano
The Mariner’s huge contract with its regional sports network allowed the team to sign Robinson Cano to a $240 million deal, but will the money keep flowing?

Many baseball teams have followed the Dodgers’ lead and are attempting to build regional sports networks that will bilk cable and satellite operators for massive fees. Both the Seattle Mariners and Texas Rangers signed huge deals with their regional networks, giving those franchises massive spending ability.

But now the carriers are getting smarter. Wendy Thurm in FanGraphs wrote last summer that three Houston carriers are now refusing to pay the fees to show both the Comcast Sports Network Houston, which carries both the Astros and Rockets. DirecTV and AT&T are using advanced metrics to judge the value of the watching, and they’re finding these metrics wanting. Neither of the services offer CSN Houston, leading to 60 percent of the city without either teams on TV. CSN Houston is partially owned by the Astros and Rockets. When the Astros first signed the deal in 2010, it called for the team to be paid $80 million a year.  Thurm reports that the team only received $25 million because of revenue shortfalls.

Jeff Weber, president of content and advertising for AT&T told the Wall Street Journal “You start to think about not just viewership, but a broader phrase—viewership intensity.” So how long a TV set is tuned in and how many times in a seasons a household watches a sports team goes a long ways towards determining if it’s worth the price. Call it the Moneyball of Sports Television, where the data geeks drive business decisions.

There has been much hand-wringing in the past couple years about cord cutters–folks who just had enough and use Netflix, Hulu, iTunes and about 100 other services for all of their entertainment.  Moffett Research reported that pay television industry lost 360,000 from June 2012 and June 2013. It’s the first time there’s been a loss in pay television subscribers. Expect it to increase as costs continue to rise.

These two disruptive changes: the adoption of devices and video services and the rise of big data analysis is now finally starting to rationalize what the consumers have been telling us for years. Television is too expensive and consumers only want to pay for what they use. This seems like a fairly intuitive, simple lesson that technologists continue to address. The side benefit is that the bundle is starting to fray.

Read On

The Atlantic: Sports Could Save the TV Business-or Destroy It

NY Times: Rising TV Fees Mean All Viewers Pay to Keep Sports Fans Happy

Fan Graphs: Dodgers Could Be Last Team To Strike Gold With Local TV Deal

Wall Street Journal (subscription required): Cable Providers Revolt Over Sports Costs

Broken Bells To Streaming Fans: We’re Breaking Up

Broken Bells, the project of super producer Danger Mouse and Shins frontman James Mercer, released its second record today. You can go buy After The Disco on Amazon or iTunes. But if you’re one of the many people subscribing to a streaming music service like Spotify, Rdio, Rhapsody or the new entrant into the space, Beats Music, you are out of luck.

Ten bucks a month won't get you the new release by Broken Bells.
$10 a month won’t get you the new Broken Bells on Rdio.

You see the band (or their management) decided to ‘window’ the release, that is allow a time when only people in retail outlets have exclusive access to the record. Why do they do this? The reasons vary. But the prevailing one is that there’s a belief that subscription services are affecting retail sales of the releases. So they believe if fans can’t listen to it on Spotify and the likes, then the fans will be motivated to buy it and then everyone will be happy, right? Not so much.

You see, this infuriates customers of services. They’re paying real money for access to all the music. And when they can’t get a new release by an artist they love, those people at the services hear about it. And while some understand the intricacies of the windowing strategy, most don’t care and rightly so. ‘I subscribe to Rdio. I can’t play it on Rdio. F’ Rdio.’ Need proof of this: look at the Rdio ‘reviews’ on one of the most infamously windowed records, Taylor Swift’s Red

It’s my contention that windowing eats away at the value proposition of streaming music services. Customers sign up expecting that they can play anything released. When that doesn’t materialize the customer asked what the hell they’re exactly buying. Reactions to this problem range from mild irritation to quitting the service.

Let me also point out that the timing of Broken Bells windowing could not be worse. On Sunday Beats Music bought a Super Bowl ad featuring Ellen DeGeneres for their brand new subscription offering. The company is throwing down serious marketing dollars towards the launch. A bundle for a $15 family plan service with AT&T just started. If anyone deserves a pass on this inane business strategy, it is Beats Music.

Artists and management have a bunch of popular misconceptions about streaming services and releases. Let me try to debunk a few of them.

Streaming services are free and I don’t want to give my art away for free. 

While it’s true that Spotify and Rdio have sizable free audiences, Beats Music and Rhapsody are 100% paid customers. So why not hold the release back from the free services and only have it for paid customers of all services?

While I’m no fan of freemium services, the theory goes that every free customer is someone who may one day be so blown away by the experience and value that they’ll end up plunking down their credit card. Removing new releases eats into the value proposition for the service and makes a prospective customer question whether they should subscribe.

What’s the difference between a $10 subscription and a $10 CD?

Customers of streaming are worth a whole hell of alot more than $10. Some services report that their best customers have been with them over two years. That’s $240 in revenue over those two years. Sure some of these people used to be heavy purchasers and they’re getting great deal. But the idea is to build this product with such great value that you’ll grow a huge base of streaming customers who will be around forever. Since Broken Bells self titled released in March 2010 and now, I’ve spent $470 in subscription fees to have access to all the music. If I loved Broken Bells and bought both records, that would have been $20.

Hey, I’m just selling the record on iTunes. They can go buy it if they want to. 

Yeah, that’s true. But let’s be clear about the music consumer in the digital world. It’s a crappy experience. You could be a heavy iTunes downloader and it’s great. But from my years doing product research at Rhapsody, it’s clear that the customer is cobbling together an experience from several different services. Outside of iTunes or Amazon downloads, fans also use a bit of Pandora, maybe use a streaming service, some have a catalog of music. The reasons for this are all over the place, including that the experiences vary widely in ease of use and cost.

But when an artist or management decides to hold it back from streaming the message is clear: I don’t approve of the way you’ve chosen to listen to music. Please change your behavior.

And it might work. A few hardcore fans might go buy the record. Most won’t. Who gets most hurt by this?

The fan.