January 11, 2006

A Look At Why Apple Leads Digital Media Today [5:17 pm]

And why the 99-cent song is so key: Why Apple is Winning the Digital Media War [pdf]

Apple’s secret sauce is the soothing consistency and reliability of its service. Apple sells songs for 99 cents, videos for $1.99, and ensures that all these songs, podcasts, TV shows and short films work on its own stylish line of iPods. One day, consumers might rebel against the copyright restrictions Apple places on its digital files and the lack of variety in its line of media players. For now, they simply love how seamlessly Apple’s media ecosystem works.

Last week, I got a glimpse of Apple’s competition—which is pretty much everyone else in high-tech. At Las Vegas’s sprawling, chaotic four day Consumer Electronics Show (CES), giants like Microsoft and Intel, Google and Yahoo, Samsung and Sony, the Starz movie service and phone firms Verizon and Sprint, all announced their own digital media initiatives. The conclusion: every media store will work a little differently, prices and plans will be wildly inconsistent and not everyone’s technology will be compatible.

[...] “The content producers are in charge” Page said of his new media store. It’s their material, so there’s nothing inherently wrong with Google’s principle. But I wonder whether mainstream consumers will fork over their money in a store with a complex set of rules for each purchase.

Underlying all these initiatives is the widespread belief that Apple’s model is too simple. “This is still a moment of great experimentation,” Adam Klein, the executive vice president at music label EMI, told me at CES. “We are hearing from consumers that one size does not fit all with every single thing we sell them.”

That’s undoubtedly true. And perhaps one of these days, the average consumer will understand how to navigate this new realm of digital media—how to get one company’s file formats to work on an another’s portable device, and whether one TV show is worth four bucks while another is only worth two. But as for the realities of early 2006, I think we’re all still too young and clueless when it comes to living this new digital lifestyle. We just don’t want to let go of Apple’s hand.

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Revenue Models in Music [4:39 pm]

Korn Sells a Stake in Itself

When the hard-rock band Korn hits the road in the coming weeks to promote its new album, it will be performing not simply a string of gigs but a running experiment in music-industry finance.

Today Korn is expected to announce an unorthodox deal with the nation’s biggest concert promoter that advances the band’s strategy of turning itself into an investment vehicle and redefining how the revenue pie is split in the music business.

Under the terms of the arrangement, Live Nation Inc. will share far more than is typical for a promoter, which normally receives a cut of the band’s box-office sales but little else. Instead, the company is paying roughly $3 million for an estimated 6 percent stake in the band’s box office, licensing, publishing, merchandise and CD revenue for its recently released album, “See You on the Other Side,” and its next album, music industry executives involved in the deal say. Live Nation will also be the exclusive promoter of Korn’s concerts in the United States.

[...] The deal reflects a new twist on relationships that generally involve only two players. Music acts sign contracts with record labels to distribute their CD’s; the acts strike separate deals with concert promoters to market their live performances. The labels and promoters historically have not shared in each other’s earnings, but under Korn’s arrangement with Live Nation - and an earlier all-encompassing pact that the band struck with the music giant EMI Group - the money will flow into one shared pot. The three-way partnership is the latest example of how the various players in the music business are scrambling to keep pace with a shifting market.

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