Google Inc. (NASDAQ:GOOG) is challenging Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN) by selling music. Google spent the last several weeks preparing deals with the four major music labels: Sony Music Entertainment, Warner Music, EMI, and Universal Music Group. The new Google service is expected to be called Google Audio.
When Google Audio launches, I wouldn’t be surprised if YouTube changes their default music purchase promotion to their own service. Currently when watching music videos on YouTube, there is a link to buy the song on iTunes or Amazon.com.
I don’t expect Google to do very well in this service because iTunes has already monopolized the music download market. iTunes is the number one music retailer in the world, even beating Wal-Mart. Google attempted to challenge iTunes by selling videos through Google Video, but it did not have much of a business impact.
“Veoh has shown that when it did acquire knowledge of allegedly infringing material — whether from DMCA notices, informal notices, or other means — it expeditiously removed such material, and UMG has failed to rebut that showing,” stated a court order by the U.S. District Court for the Central District of California. The Court made a ruling against Universal Music Group for its 2007 lawsuit against Veoh Networks Inc. Whenever Veoh received a DMCA takedown notie, they quickly reacted and removed the material.
UMG failed to show an appropriate rebuttal of Veoh’s proactive removal of copyrighted material. Universal said that the ruling was “wrong” and that they plan to appeal. “The balance between copyright holders and technology that Congress sought in enacting the DMCA has been upended by this decision,” stated Universal Music. The Veoh vs. Universal Music lawsuit was closely watched by media companies because Viacom has a pending lawsuit against Google over copyright material being uploaded on YouTube.
Dmitry Shapiro, the founder of Veoh said that the lawsuit was costly and dragged on for two years. Veoh has venture funding from Goldman Sachs, Time Warner, Spark Capital, Intel, etc.
Veoh raised about $70 million in total funding and is not profitable as of yet, but they expected to be by the second quarter of 2010. Veoh is exploring the possibilities of either selling themselves or raising additional investment.
Vevo is a music video website that is a joint venture between Universal Music, Sony Music and YouTube. According to sources with paidContent, the company is out seeking funding based on a $300 milion valuation. Vevo CEO Rio Caraeff has been travelling across the country to meet with potential investors in order to get the project off the ground.
Vevo will be based on of New York City and Los Angeles. The company has been hiring engineers over the last several months. As of right now, it is unclear whether EMI and Warner will join the venture. As for Warner Music, CEO Edgar Bronfman has spoken against the idea publicly.
I would not be surprised if other labels jump on the opportunity to work with Vevo in the near future. Hulu has proven to the world that web video could replace television just like it could do with music television. Vevo can be followed on Twitter.com/Vevo.
Chris Stephenson is a marketing executive for the Microsoft Zune. Stephenson has decided to leave the company in order to take a position with Universal Music Group according to a source with The Wall Street Journal.
It is rumored that Stephenson will be joining as the chief marketing officer at Universal’s Interscope Geffen A&M Records. Stephenson will be reporting to Jimmy Iovine.
Iovine is often credit for passing Eminem’s demo tape to Dr. Dre. Iovine also co-produced the movie 8 Mile. Before Iovine started Interscope, he was an engineer for John Lennon and Bruce Springsteen. Iovine also produced albums for Tom Petty, Patti Smith, U2 and Dire Straits.
Stephenson said that he was looking forward to returning to the entertainment industry. Before working at Microsoft, Stephenson was an executive at MTV. Stephenson joined Microsoft around 2006 to help market the Zune.
The Zune has been struggling to compete against the Apple iPod. And Stephenson’s departure comes at a time where Microsoft is close to shipping the Zune HD. The Zune HD is expected to arrive on shelves on September 15.
Stephenson often times compared the iPod to Mount Rainier in Seattle. The snow-covered mountain is just as difficult to climb as it is for Microsoft to compete with the iPod market share.
DJ Shadow has made an agreement with Universal Music Group to sell his whole digital and physical catalog through his website. Through this deal DJ Shadow will be able to maintain artist independence and Universal Music Group will be able to keep their artist happy.
“Obviously, there are plenty of artists with digital-download stores, but Universal has never done this before,” stated DJ Shadow. DJ Shadow is also known as Josh Davis. “The store is basically a break-even proposition. But I want to take care of people from the moment they click on the site to the moment they leave. And now if you are a major-label artist, you can do it, too. We have all the contracts in place.”
The DJ Shadow website will be redesigned and will have major content updates. There will be two new sections called “Guide to Collect DJ Shadow” and “DJ Shadow Handmade Series.” DJ Shadow is also going to be featured in the DJ Hero game.
In April Universal and YouTube announced that they are teaming up on a music video website project coined Vevo. Today Sony Music Entertainment joined the Vevo venture. Vevo will be launching later this year.
Between Universal and Sony, they represent artists such as Alicia Keys, Eminem, AC/DC, Lady Gaga, Akon, The Killers, The Black Eyed Peas, etc. Warner Music and EMI have not yet planned on signing to Vevo yet. Vevo will have music videos and possibly reality shows.
YouTube will handle the back-end of Vevo and the music labels will provide the music videos. The President of Vevo will most likely be Universal Music executive Rio Caraeffas.
Google Inc. (NASDAQ:GOOG) subsidiary YouTube and Universal Music Group are planning to launch a music video website together in order to increase both of their revenues. The Universal Music channel on YouTube is already one of the most subscribed to on the video website. The combined website will be called Vevo.
This deal is a major boost for YouTube because the video website is getting pressured to find additional revenue streams and is taking a lot of flack for not being able to pay fees for the rights to use their music and music videos.
Vevo will be wholly owned by Universal and it will feature higher quality videos than what is seen on YouTube itself. “The rationale is to help make Vevo a place that brands feel more comfortable,” stated Rio Caraeff, EVP of Universal’s eLabs division.
Universal hopes that Vevo will be comparable to Hulu. Vevo will syndicate videos through their platform called Vevo Music Network. Universal is planning to partner with EMI and Sony Music Group who have already renewed their contracts with YouTube. Partnering with Warner Music Group will be slightly more challenging because they have not been able to make a deal with YouTube in the past.
Mark and Jeff Bass are producers based out of Detroit that helped Eminem produce some of his tracks. They own a company called F.B.T. Productions and they decided to sue Universal Music Group and Aftermath Records, the record label founded by Dr. Dre. F.B.T. believes that they were owed more money from digital download sales. They argued that digital album sales are different froms ales of traditional CDs. However a judge ruled in favor of Universal Music.
F.B.T. wanted to have digital sales made on Apple iTunes be treated under a master recording deal between Universal and Apple. After that F.B.T. would have split the profits with Universal 50-50 and then provide part of that 50% to Eminem directly. However the record label is currently paying F.B.T. and Eminem 12% of sales which is the same rate agreed for the sale of physical albums.
Universal Music Group and YouTube are close to a final agreement on partnering to create a Hulu-like music video website. The service is currently code-named Vevo. If the deal goes through, Vevo would become the largest music oriented website on the web. A final deal may not be reached for several weeks.
Universal’s music videos have been viewed 3.5 billion times. Doug Morris, CEO and Chairman of Universal spearheaded the YouTube partnership campaign. This video website would give Universal a bit more leverage in setting up a revenue sharing agreement with YouTube. Sony, Warner Music, and EMI have also been approached regarding the new potential music video website.
Eminem’s publishing company F.B.T. Productions will finally be appearing in court against Universal Music Group over digital music royalties. The trial will feature witnesses such as Universal Music Group head Jimmy Iovine and Apple CEO Steve Jobs via video. F.B.T. Productions is seeking additional royalties from purchases made through digital music services like iTunes. Eminem himself isn’t expected to appear in court.
Eminem sued Universal based on how much the record company was taking away in digital royalties. If P.B.T. wins the case, it could significantly impact how much the record labels make from online music sales. This past summer, fellow Detroit native artist Kid Rock decided to have his music removed from iTunes because the record labels were already taking away too much money even after iTunes takes their cut.
Eminem’s record company is seeking about $1.3 million to settle the lawsuit. The main defendant in this case is Aftermath Records, the label founded by Eminem’s friend and mentor Dr. Dre. One of Eminem’s singles from his upcoming album broke a digital download record. Eminem’s “Crack a Bottle” featured Dr. Dre and Eminem and had about 418,000 download sales in the first week.
ARTISTdirect, Inc. is a Santa Monica, Calif.-based music news website. Recently, ARTISTdirect signed two deals that revolves around music lyrics. EMI Music Publishing and Universal Music Publishing Group will allow ARTISTdirect to add the lyrics to over 1 million songs. The financial details of the deal were undisclosed.
“EMI has the publishing rights to some of the greatest, most beloved songs ever written and performed and we are truly delighted to be able to share them with our community,” stated Dimitri Villard, the Interim CEO of ARTISTdirect. “In the past, music fans have had to rely on user generated lyrics posted on the Internet that were often inaccurate or incomplete; this partnership helps create one of the largest repositories for official lyrics as written by the songwriters.”
This move competes directly with Gracenote, a subsidiary of Sony. Gracenote provides the lyrics through 80 music publishers, including EMI and Universal. Another competitor of ARTISTdirect is OHHLA.com.
Ashley D. MacIsaac is taking an unorthodox approach to signing a record deal. The bankrupt 33 year old, Canadian-born, fiddle-playing man has decided to put 50% of his future earnings for sale on eBay Inc. (NASDAQ:EBAY) at a starting price of $1.5 million Canadian dollars.
MacIsaac danced to Celtic music on Late Night With Conan O’Brien in 1997. On that same taping, MacIsaac exposed himself when kicking up while wearing a kilt. “I’m 33, I have at least a good 40 years of earning power ahead of me and I think it’s (C$1.5 million) a reasonable starting point,” stated MacIsaac during a phone interview with Reuters.
“I’m not David Bowie, I’m not Madonna, I’m not Eminem, I’m Ashley MacIsaac, so to set a price at that (C$1.5 million), I thought, was fair market value,” added MacIsaac. Madonna made a similar deal worth over $100 million when she signed with Live Nation Inc. David Bowie also issued bonds of future royalties for his future hits as well.
The winning bidder will get half of the profits made from the Celtic singers music album sales, movies, DVDs, and other publications until MacIsaac retires. The first 10 albums created by MacIsaac was distributed through Universal Music Group.
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New Orleans Rapper and Hottest MC in the Game (MTV), Lil’ Wayne will be selling downloads of his new album, Tha Carter III to fans through his website, on social network pages, and his own blog with the Musicane widget. Musicane will offer fans the ability to buy the whole album or individual songs. The Musicane widget will also have previews of Lil’ Wayne’s music.Â
Musicane will also stream interviews and sell other products in the near future. MP3s bought through Musicane will be in 320 kbps and will be DRM-free. This means that the music will work on any MP3-supported digital portable music player including the iPod and the Zune.
“Lil Wayne is a natural fit to help further this movement not just because of his stature in the music world but more for his bold attitude toward change. He knows that the new model for the flow of music distribution is rooted in empowering the fans, not the traditional gate keepers that tend to slow everything down,” stated Musicane’s President/COO Vikramaditya Jain.Â
Lil’ Wayne fans will be able to embed the widget in their own blogs and will be able to pay directly through the widget. Fans that do this will be able to share revenue generated by the sales in their embedded widget.Â
Musicane was founded by Vikramaditya Jain and Sudhin Shahani in 2006 and Will.i.am of the Black-Eyed Peas is a partner in the company. Musicane has a deal with Universal Music Group that allows them to sell their entire catalogue of music in the MP3 form.
Singles on Tha Carter III includes Lollipop, A Milli, Got Money (featuring T-Pain), You Ain’t Got Nuthin (featuring Fabolous & Juelz Santana), and Mr. Carter (featuring Jay-Z).
Below is a screen shot of what the Musicane player looks like [note: the play button doesn't work because it's an image screen shot and not the actual widget]:
Universal Music Group represents some of the biggest names in various music genres. Some of their top selling artists include Janet Jackson, The Killers, Bon Jovi, Elton John, 2Pac, Jay-Z, Eminem, 50 Cent, The Pussycat Dolls, Luciano Pavarotti, and Kanye West. UMG is owned by French-company, Vivendi and made about €480 million ($660,576,000) in net income for the year of 2005.
Thousands of albums will be available DRM-free on artist websites, but the tracks on Apple iTunes will remain DRM. What does this mean? This essentially means that when a user purchases tracks on iTunes, the file format tends to be .MP4 rather than .MP3. And .MP4’s are known to play primarily on the Apple iPod and many other music players are known to be incompatible with .MP4 files.
“Clearly the handwriting is on the wall for DRM-protected content,” said Michael Gartenberg, a Jupiter Research analyst. “We are seeing more of the players fall as they recognize that it’s just a hassle for the consumer and doesn’t really help the piracy problem.”
Apple had no comment about the new initiative. Universal said that they are not including iTunes for now to test as a control group to see how piracy impact music sales. “There’s no doubt these guys are poking a stick at Apple,” added Gartenberg.
Universal Music tracks will be DRM-free from August 21st to January 31st. Will they see an increase in sales? We’ll find out at the end of the month.
Universal Music Group has announced that they bought equity in Loud.com. Loud.com is an urban music social network website which is a subsidiary of Vivendi, is based in Paris, and also works under the name, Battlerap.com. Vivendi also owns 20% of NBC Universal.
Loud.com is a place for upcoming hip-hop artists, freestylers, and producers to upload their samples and could potentially win prizes such as opening for the Wu-Tang Clan in Hawaii.
“Universal’s strategy is to become actively involved in all areas of media where our artists and our music are present,” mentioned the Vice Chairman and CFO of UMG, Nick Henny. “Loud.com has created an incredibly vibrant and growing online hip-hop community that features not only compelling user-generated content, but also the means for users to create their own music and compete for a record deal. Loud.com is quickly emerging as one of the leading new online ventures that successfully reaches the new generation of international and multicultural youth.”
Loud.com sells audio files of hip hop beats for 99 cents. Users can create blogs within the site and can search for profiles and add friends.
“We are delighted that UMG is joining the Loud.com family,” stated the co-founder/CEO of Loud.com, Joseph Safina. “When Steve Rifkind and I started Loud.com, our hope was to create a virtual home for hip-hop fans around the world. To our delight, it has quickly evolved into an online community, competition, A&R site and marketing company all rolled into one. With UMG now on board, we’ll be able to offer even more compelling services to our members.”
The amount UMG invested in Loud.com was undisclosed.
Universal Music Group has announced that they bought equity in Loud.com. Loud.com is an urban music social network website which is a subsidiary of Vivendi, is based in Paris, and also works under the name, Battlerap.com. Vivendi also owns 20% of NBC Universal.
