Off-The-Shelf Online Music Stores

jpkunst writes "The Chicago Sun-Times and C|Net news.com report about a new product from Loudeye Digital Media Solutions and Microsoft: pre-fab online music stores for companies who want to join the digital music goldrush. I wonder when this bubble is going to burst."

Comments

what bubble?

[silicongodcom]

when will what bubble burst? best i can remember is that apple's barely making any money at all off the actual music sales, let alone all the companies following

Re:what bubble?

[FooAtWFU]

that's the point. Best I can remember is that most of the dot-coms weren't really making ANY money off anything.

Re:what bubble?

[Anonymous Coward]

No, but Apple has made money off the 4 million iPod's they've sold. It's like giving away condiments with your burger and fries - if you don't offer them, people may go somewhere else.

Re:what bubble?

[sagarsanghani]

True, Apple makes about 5 cents a song from itunes. So even selling 25million songs is not a lot of money. However- iTunes is the big trojan horse for selling iPods. And that is why Apple has had its best year -EVER!

Re:what bubble?

[the uNF cola]

Big difference is, apple can afford to do this. As apple has said, they want to make money for other devices that are promoted by the tunes-store.

And it's true, it is a bubble. Most fell down -- emusic and a few others tried to do what iTunes is doing now. Now napster 2 and all these other ones are coming out. Eventually, they'll all go away except for a few successful ones.

The same thing happened with housing, a bubble of people buying off of cheap loans on expensive houses, and now there are a lot of people declaring bancruptcy (s?).

Same thing happened in the .com era.

Re:what bubble?

[sagarsanghani]

Thats not pure profit. Once you factor in operating costs, marketing etc it goes even lower. Also compared to what they make off the iPod that is nothing.

Re:what bubble?

[BobTheLawyer]

Absolutely. How many mult-billion dollar companies bother to develop revenue streams generating income in the single figure millions? It's simply not worth the management time and development costs. Large organisations don't, as a rule, do small things efficiently.

Re:what bubble?

[TrippTDF]

This is a lot like a little mini-bubble. The big problem is that so many people are hoping on this bandwagon, consumers are not going to know where to turn. Apple will probably come out on top of the pile, as they have the recognition and the coolness factor at the moment. However, consumers stand to become very, very confused in the fray. I for one can't keep track of who has a music service and who does not anymore. Consumers will get overwhelmed by the choice. Hell, the more companies that come out to play. the better it could be for Apple as more and more people turn to the popularity/ease of the store. Still, there is not a lot of profit there. Again, thanks to the RIAA eating a chunk of the money that Apple is taking in. And I suppose that's the real reason it will fail if it does- the RIAA still taking too much of the money to make it feasible. Unless you are trying to push another product, online music sales are going to be a tough business to enter.

Re:what bubble?

[fastidious edward]

Not a lot of money... Apple had revenues of USD5.74bn and profits of USD1.60bn last financial year. USD0.00125bn doesn't scratch much.

Re:what bubble?

[dema]

Yes, and as with the use of a trojan horse as a virus or at Troy the attack was a suprise. In this case, Steve Jobs and Apple openly say that the reason for iTMS is to sell iPods.

Re:what bubble?

[Frymaster]

which is why it's going to burst. apple makes money in the long run off hardware sales, but all the "me toos" showing up won't have that second revenue stream - hence failure.

of course, near-certain doom isn't never enough to stop thousands of get-rich-quickers, people with a low common-sense-to-money ratio and general greedheads from fighting over the steering wheel fo this bandwagon. it's gonna be ugly.

apple created a whole new business model. microsoft will turn it into a bubble... sigh.

Re:what bubble?

[MikeMo]

Best year ever? Even better than the year they had $12BN in revenue (1994)? Based on what?

Re:what bubble?

[Dechah]

But surely all of these ventures need financing. And surely the financiers, after getting burnt badly in the dotcom bust of 2000 will be a lot more stringent in their lending criteria for these sorts of vendors. I could not imagine anyone getting very far in a venture capitalist's office these days with just a winning smile and a flaky idea about how selling songs over the web is going to make zillions. you would be escorted out of the building by baseball bat wielding security guards.

Re:what bubble?

[shamino0]

... to the point where you can walk into Best Buy and go up to a terminal and burn yourself a CD of whatever you want ...

It will be interesting to see if this ever happens again.

It was tried in the past. A system called Personics was once available for this. You'd go into your local Sam Goody store and browse through songs at a listening station, writing down track numbers for whatever you wanted. Then you'd give the list to a clerk, who would quickly make a cassette with your mix. Tapes were pretty inexpensive - about $10 for an 8-song tape, IIRC.

I thought it was a great idea. I made several such tapes. But it obviously was not a financial success, since it's gone and there is no successor taking its place.

Re:what bubble?

[nelsonal]

When you have to divide it by 362 million shares, and the only number most investors will ever look at is EPS. Keep in mind that's probably pre-tax so it goes to ~$850,000. However if apple made about $50 million pre-tax selling iPods (not too unimaginable given $230 million in revenue since iTMS launched) that isn't a bad return on their investment.

Re:what bubble?

[Doc Ruby]

How do you distinguish between a bubble and business development? Bizdev has a working biz model, with product/services delivered to customers, whose revenue exceeds costs, to produce profit. Fast growth can be a boom, or even a goldrush, which might be followed by a bust if not sustainable. Bubbles are seen in equity speculation, where profits are not related to equity price. Speculation bubbles inevitably burst, with a shakeout seeing some survivors when the market is sustainable, or a totally collapsed market when it's not.

The music download bubble burst a long time ago, when Napster got popped by the traditional businesses. Now we're seeing another goldrush, driven by cheaper technology, and Apple's iPod/iTunes marketing. The equity market is still in disarray, but this time it's being led by profits, which are scaling. Products like LoudEye do reflect a possible incipient goldrush, but since music downloading both increases efficiency of the music consumption market, while removing limits to scale, there's not necessarily a bust lurking just over the next ridge.

We are likely seeing a rational entertainment business develop, now that it's been squeezed out of the slippery hands in Hollywood, into the firmer grip of Silicon Valley. Time to sell shovels!

Burst...

[swordboy]

It'll burst when someone creates a non-RIAA internet radio station / distribution hub. Unsigned artists submit their music to the site, a group of public moderators give the music good/bad karma and the good stuff gets streamed to millions of PCs. Users can download the stuff that they like with a simple click and yet another simple click burns it to CD or moves it to the player.

Re:Burst...

[McAddress]

until artists start making decent music. the business is going nowhere.

Re:Burst...

[wo1verin3]

Great until some troll mods up Celine Dion and Bryan Adams... :(

Re:Burst...

[_LFTL_]

While it's definitely not the perfect solution, and lacks alot of the features you've cited, iRATE is a nice "distribution hub" that basically gathers links from free music sites, points your client to the site, and then allows you to moderate to your tastes. I've definitely found some music I like that I never would have heard on through normal outlets.

LFTL

Re:Burst...

[LetterJ]

This is like saying that there aren't any painters producing any good paintings. Just because you're trying to buy paintings at garage sales and WalMart doesn't mean that no one is painting great art, just that those places don't have any decent art.

In almost any style, there are innovative, original musicians making music. For instance, one of my favorite styles is acoustic/roots rock. PasteMusic has a bunch of free MP3s and an Internet <a href="http://www.pastemusic.com/radio/">radio station</a> of their music. In the last 3 months, I've found several artists through them and bought 8 new CD's. Out of those 8, I'd only heard of 1 of the artists before hearing them through Paste. These are not the artists that your local gas station has at the checkout or carried by Target, WalMart or BestBuy. They're also not ultra-rare imports or obscure techno. It's straightforward music, made domestically (for me in the US) that just happens to not be distributed as widely as the popular stuff.

I haven't bought a CD in the top 40 (or top anything measurable) in several years, but I do buy CD's regularly. Just get off the damn music freeway and see the rest of the music countryside.

Bubble-Bursting....

[Tsali]

"I wonder when this bubble is going to burst."

I'm predicting 2004, second quarter.

Of course, I'm a software developer, so I don't know squat.

The important element: WMA

[burgburgburg]

LoudEye does all the work, Microsoft gets check after check for licensing WMA technology and their monopoly is extended once again. Oh, and their highly restrictive DMA grasps tighter at the throats of users around the world.

I'm looking forward to it.

Re:The important element: WMA

[Havokmon]

Oh, and their highly restrictive DMA grasps tighter at the throats of users around the world.

The tighter you squeeze, the more users will slip through your fingers...

Re:The important element: WMA

[3Suns]

It's not the DRM (I think you meant this instead of Direct Memory Access) that's the problem. If copyright owners want to restrict how their property is distributed, fine. The problem is that the DRM is not an open standard, and people who don't have Media Player 9 on Windows are forced to choose between breaking the law or being left with nothing to listen to. If, that is, this becomes a trend.

Me too

[nizo]

I wonder when this bubble is going to burst.

Yeah who would ever want to buy music online. Oh wait a minute...

Easy

[CrazyTalk]

The bubble will burst when everyone realizes that they are not making any money from this (just like the old dot coms). It is well documented, for example, that Apple makes little to no profit off of iTunes; all the profit comes from sales of iPods.

Woohoo!

[Quasar1999]

Now for the love of god, someone buy an iTunes Music store and start selling me the music in Canada!

The question becomes

[smaug195]

When will there be a player that supports all these music services. The iPod supports iTunes, theres a napster player that supports napster, I'm not even sure about the WMA's. I think iTunes will remain the dominant store just on virtue of iPod sales alone.

Remember the dotcom?

[Sir Pallas]

Perhaps, like the dotcom boom, the Internet music "boom" will actually be a whimper. Apples seems to be the only group that has thus far broken the sound barrier. Microsoft is just playing the catch-up game that they accuse others of playing.

What?

[Anonymous Coward]

Ok, someone please explain to me why anyone would want to have a cloned music store? What value is added? What are the licensees bringing to the table?

Re:What?

[Lev13than]

Ok, someone please explain to me why anyone would want to have a cloned music store? What value is added? What are the licensees bringing to the table?

Customer segmentation. If your website is devoted to, say, West Coast Christian hiphop-jazz fusion and you already attract fan traffic to your site, you can gain an addition revenue stream by offering a wide selection of West Coast Christian hiphop-jazz fusion music. Since you can offer this without any investment in infrastructure, it's money in the bank. The provider is happy becuase they don't need to spend much to get you up and running, so they can increase sales through an aggregator model of boutique stores.

Re:What?

[Lord_Dweomer]

"Customer segmentation. If your website is devoted to, say, West Coast Christian hiphop-jazz fusion and you already attract fan traffic to your site, you can gain an addition revenue stream by offering a wide selection of West Coast Christian hiphop-jazz fusion music. Since you can offer this without any investment in infrastructure, it's money in the bank. The provider is happy becuase they don't need to spend much to get you up and running, so they can increase sales through an aggregator model of boutique stores."

You hit the nail on the head. I predict we will be seeing a lot of specialty services popping up very VERY soon. What I'm wondering though is if I want to use this service with multiple sites, will I have to download new software for each separate site? Or will it just be a front end, and load each sites music catalogue when I need it?

Also, I think this sort of thing would be great for local/college radio stations that play a lot of local bands and such. Imagine a radio station where you can listen to the new local music, then hop on their service and purchase it right away. Does anybody know of any free services that currently do this? Where you can listen to a net radio station, and if you like a song, click a button and it downloads instantly?

this is bs

[pavs]

most of the online music stores suck anyway, why do we need more prefab music stores that will all sell the same junk anyway. Just because you can build it and put it up faster doesn't mean it's any better.

Yeah, reminds me of the good old days.

[aclarke]

At the company I used to work for we built a prefab online CD sales store in 1999. I think our client got around 60 clients running the site before they went belly up. It was a fun project - all the sites were run off a single data/code base with a syndicated industry information populating templates so each site had the same content but looked completely different.

But back to business ideas: it seems the first wave was taking an existing idea (music stores) and putting "internet" in front of it. Now the idea is taking an existing "internet" idea (online music stores) and making it "digital" (digital online music store).

Go figure.

Re:Why would anyone want to pay for music?

[Anonymous Coward]

Yeah, next they'll try putting water in bottles, and expect THAT to sell!

Not much of a bubble

[arrogance]

but there are some e-commerce enterprises making money: Yahoo and EBay, for example.

Maybe the creation of new services will level off once the traditional music distribution system is eliminated or rationalized.

Where's the msPod?

[mh_tang]

This quote says is all. "Loudeye Digital Music Store, which uses Microsoft's Windows Media 9 series digital media platform..."

Given the alternatives (mp3 on Kazaa, aac on the iPod) already out there, who is really going to choose to buy their music in .wma format?? I just don't see this really taking off with public. It's a case of too little too late, and trying to copy the iTMS model without really offering anything compelling.

If you want to really be inspired, read this article from Rolling Stone where they interviewed Steve Jobs, who knows how to do this the right way...

And then there's Microsoft. What happens to Apple when they build an iTunes-clone into the Windows desktop?
I think Amazon does pretty well [against Microsoft]. Microsoft hasn't really been able to compete with them -- maybe not wanted to. EBay does pretty well; Google's done pretty well. Actually, AOL's done pretty well -- contrary to a lot of the things people say about them. So there are a lot of examples of people offering services, Internet-based services, that have done quite well. And Apple's in a pretty interesting position. Because, as you may know, almost every song and CD is made on a Mac -- it's recorded on a Mac; it's mixed on a Mac. The artwork's done on a Mac. Almost every artist I've met has an iPod, and most of the music execs now have iPods. And one of the reasons Apple was able to do what we did was because we are perceived by the music industry as the most creative technology company. And now we've created this music store, which I think is nontrivial to copy. I mean, to say that Microsoft can just decide to copy it, and copy it in six months -- that's a big statement. It may not be so easy.

Re:Where's the msPod?

[billtom]

Given the alternatives (mp3 on Kazaa, aac on the iPod) already out there, who is really going to choose to buy their music in .wma format??

Well, non-/. people generally simply don't care about the format. All they care about is: does it play on my stuff (computer and portable) and is the DRM not too restrictive (and is the price right, of course). Really, they *just don't care* about the format.

So Windows users will use a WMA encoded service over the copyright infringing P2P services if they value their time (ie. not having to filter through all the bad/incorrect encodings to find the good one) and don't mind spending money.

And Windows users will use a WMA encoded service over iTMS if they don't use an iPod as their portable device (because very little else supports AAC and the average user doesn't want to do the burn to CD and re-encode as mp3 trick).

There is no spo^H^H^Hbubble

[Unregistered]

Apple will be the only online music store to survive. Apple makes no profit, so nobody can compete on price points and make a profit. If you charge more people will go to apple instead. Either way, you go bankrupt while apple sells iPods.

btw, i use iTunes for the 1st time today, so it's not 25,000,001 songs downloaded.

But Record companies DO PROFIT

[jetkust]

Maybe Apple doesn't make any money on their music store. But the record companies basically get a free distribution system and extra profit at no expense. Money IS being made from this.

The bubble will burst

[An Onerous Coward]

When Wal-Mart decided to open their own online music service, I started getting skittish. Now I'm positive the whole thing will collapse when any of the following entities announce the creation of their own online music store:

* K-Mart
* Home Depot
* The Municipal Government of Topeka, Kansas
* Richard Stallman
* The Fifth Circuit Court of Appeals
* Satan
* Hormel Foods
* Gary Coleman
* Rick and Linda's Bait Shop and Outboard Motor Repair (Jump of I-75 at exit 215B, then head north seven miles to the lake. Can't miss it.)

If you see any of these, it's time to sell short.

Re:Why would anyone want to pay for music?

[AKnightCowboy]

amen! why pay for gas either? the prices are heinous! just drive off after pumping. And what about food? Why dont we just get it for free by leaving before they give the check? What has this world come to? what has happened to our god given right to free stuff that others work hard to make?

Another person confusing copyright infringement and theft. *sigh*. If I take your gas and don't pay for it, you don't have the gas to sell to another customer. If I create gas out of thin air that is completely identical to your gas for my own use, you still have your gas to sell and nobody is missing anything. Sharing is GOOD. For Pete's sake, the only people that are against sharing are fscked up RIAA lapdogs who must've been the ones running home to mommy when other kids asked to play with their toys. Selfish pricks.

Re:Remember Netscape?

[Unoti]

Yeah, but Microsoft plays a pretty mean game of catch-up.

Witness: the internet. Back in the day, Microsoft was promoting MSN as a non-internet alternative. TCP/IP wasn't even in Windows. Once they saw that the networking was going IP, they played catch-up pretty well.

Witness: Internet Explorer. Netscape was dominating the browser market for a long time. When Internet Explorer came out, it was terrible technologically. Microsoft was playing catch-up. It seemed ridiculous for Microsoft, this upstart in the internet world, to try to take on Netscape. Netscape had a huge lead.

naturally

[geekoid]

the person who gets rich during the Gold ruch isn't the miners, it's the guy selling shovels.

Re:Why would anyone want to pay for music?

[Gr33nNight]

But I WILL NOT share my girlfriend. You can copy her all you want though.

OH YOUR GOD!!!

[SweetAndSourJesus]

If you see a story you don't like, ignore it. Don't come here and tell us that you don't like it. We don't care.

You really need to relax if a slashdot story is making you whip out the exclamation points like that. It's not the end of the world, calm down.

Fine, I understand if it's interesting to many people. But on the front page every day?!?

Yes, for the reasons you stated.

When will the bubble burst...

[Anonymous Coward]

"I wonder when this bubble is going to burst."

When people buy all the old music they want, and they can't sustain on sales of crap-rock, crap-hop and crap-rock.

I've got an even better idea...

[twofidyKidd]

Why don't I just form a company, sign a bunch of bands to produce lots of content, and then just give it away for free!?!

Anybody care to buy stock now?

Caveat Emptor

[LoD at MIT]

One caution, especially for those considering using this service. Loudeye are the guys who screwed the pooch for the MIT LAMP system by selling material that they did not have the right to actually sell.

Quick backstory: MIT bought MP3s on hard drives from Loudeye to broadcast over MIT cable channels, which they have an ASCAP liscense for. Before the purchase, MIT asked Loudeye to verify that they could in fact sell MIT the music for this purpose. Loudeye indicated that they had the rights.

Of course, they day the system launched, the RIAA sat up and began complaining that Loudeye actually had no such rights.

Yeah. The lesson here? Always save the receipts...

Music section?

[freeweed]

Slashdot editors, can we please have a music section?

Isn't that what the little icon of a gramaphone stands for? The one right up top of the page there?

Attack of the Clones

[violet16]

This is very similar to a story a few days ago about Destra Music, the first online music retailer in Australia. Destra turns out to not really be a retailer: when you visit their site, it asks you to select from 9 familiar bricks n' mortar retailers. Then you're taken to that retailer's "store," which is identical to the other 8 retailers' stores except for the logo and theme colours. That is, instead of a single ITMS or Amazon-style store, we have 9 cloned, prefab stores.

What benefit does this hold for the consumer? The only one I can think of is that people who have particularly warm fuzzy feelings about one of these retailers can choose them over the others.

The real reason behind it, I suspect, is channel management. The record industry doesn't want to upset the retailers, so they're helping them remain at the cyber-storefront -- even though the retailers have no expertise (or real interest) in online sales, and nothing to offer of any benefit besides a logo.

The Destra Music site is awful -- it looks like a 16-year-old kid whipped it up in his lunch break. And it will probably stay awful, because none of these 9 retailers have any incentive to improve it -- why bother, when your competitors are using the same software?

Prefabricated music stores might work out well for LoudEye, just like Cisco did pretty well out of the tech bubble. But the consumer doesn't need a proliferation of near-identical stores.

Too bad...

[dgulbran]

I was hoping "Off the Shelf" meant something different... I'm sure that the RIAA would have a cow with this, but I'd love it...

A store that stocked CDs and the MP3 versions of the albums... I buy the "CD" on-line and get instant MP3s of the album I now *own*. Then they can slow boat the CD to me any ol' way... instant gratification, I have the CD that I wanted anyway, I don't have to rip it when I get it, and I get instant gratification.

Re:Why would anyone want to pay for music?

[GospelHead821]

Neither analogy is good, but yours is worse. If you create gasoline out of thin air, your new gasoline is just as good as the old gasoline. They're the same stuff. Now, if you'd like to commit to the idea that all new music is identical to old music (please, no boy band/Britney Spears comments), then perhaps this argument holds. However, the reason that music is valuable isn't because it is scarce, which is why gasoline is valuable, but because it is new, unusual, different. If it were cliche and uninnovative, it wouldn't be worthwhile music. Now, what are scarce are sources of worthwhile music. If you decide that music isn't worth paying for since, after all, it can be reproduced for free, then you'll lose the interest of those sources of music. They'll go do something else that puts food on the table, instead. So, to answer the question, I want to pay for music, since I enjoy having something new to listen to, every once in a while.

Re:Why would anyone want to pay for music?

[Anonymous Coward]

Stop acting like you have a girlfriend. This is slashdot - we all know the truth.

Why isn't MS going at it directly?

[YouHaveSnail]

It seems strange that Microsoft is trying to "help" other companies produce online music stores, rather than starting its own. They've never really been afraid to compete, particularly when they have a strong hand to play. So what's the up side of this for Microsoft? Does it help them mitigate their risk in a new market? Is it that they figure that lots of music stores are going to pop up one way or another, and they want a piece of all of 'em? Are they trying to keep a low profile to avoid more antitrust litigation?

In short, why has Microsoft decided to share this pie rather than take the whole thing?

Re:Why isn't MS going at it directly?

[nicodaemos]

Because as others have already noted, the guys selling picks and shovels are the ones who make money during gold rushes.

Secondly, Microsoft is trying to seed the world with their proprietary wma format - that's the first wave of the assault. The second wave comes when/if their formats are the default - they then launch their music service that seamlessly works with your pc, pda and phone.

You see, first it was their operating system that helped sell applications. Then their OS helped sell PDA's and phones (well not really phones, but let's pretend for a minute). Now that their OS is under assault, their thinking is that their media format may become the common denominator.

WMA may become the driver to sell their OS, pda's, phones, etc.

Re:Why isn't MS going at it directly?

[iso]

They're helping because they want to push WMA to as many services as possible. They don't care who wins, just as long as the winner is using their DRM.

Also, Microsoft has never been a company that jumps into an emerging market. Their behaviour is down to a science:

1) wait for an emerging market to mature and for the major players to drift up to the top
2) offer to buy the largest player at slightly less than they're worth
3) if they refuse, put hundreds of millions of dollars into developing a competing service or product.

They did it with browsers, game consoles, webmail, you name it. Microsoft will do what they do best -- sit back and wait and then throw their money at the best bet. They call this "innovation."

Repo Business

[JM Apocalypse]

Yes, it's going to be a golden age for the repo business. One which shall never end.

Or even better...

[xixax]

Let's start a company where we get bands to sign up to giant loans at extortionate rates that we then spend on their behalf by deliberately choosing really crap distribution models that involve shipping slivers of acrylic all over the world. If anyone comes up with a parallel path for musicians, we'll use our artists money to lobby, sue and legislate them out of existence.

Xix.

Clever Marketing Dominance Idea

[goombah99]

THis is really clever on microsofts part. Already their on-message press releases about iTuns have always crytically emphasized that users want flexibility. This of course never made any sense since WMA is not more flexible that AAC.

But soon they will be able to say there are 9785+ competing online music stores selling WMA music versus just one place to get your AAC music. This will make a good sound bite. Even though all these are just MS shell companies and as soon as the profit is there MS will bring them into the fold. In the meantime everyone else gets to bear the risks, spend themarketing dollars. MS just collects checks.

Serious Answer

[jasonditz]

"I wonder when this bubble is going to burst."

Wait until Time Magazine runs an article saying what a great idea it is to start your own online music service... the bubble will have burst a couple weeks prior to that.

Re:what bubble? - um - no Apple makes more

[Ralph Spoilsport]

True, Apple makes about 5 cents a song from itunes.

Ummmm, no. IIRC, Apple makes 40 cents. The record company makes 60, and out of that 60, 5 goes to the rights holder / musician.

HW

another music model to look at...

[muletaper]

livephish.com has supposedly been profitable from day one. another site with a similiar model has recently emerged -- www.digitalsoundboard.net three hours of FLAC for $13. wonder when their bubble will burst.