Music Labels Cut Friendlier Deals With Start-Ups

With CD sales dropping fast, it is not hard to imagine how the major music labels could benefit from the growth of Web start-ups like Imeem.
But two months auto insurance in Texas ago, Imeem’s founder, Dalton Caldwell, was ready to pull the plug. While 26 million people medical insurance in Anchorage a month were using the home insurance in Wichita service, Imeem owed millions of dollars to home insurance in Iqaluit the music labels, and income dental insurance in Frankfurt from advertising was auto insurance in NY nowhere close dental insurance in NV auto insurance in Buenos Aires to covering expenses. “It reached a dental insurance in Cape Breton point where it was not even clear it auto insurance in Baku was worth doing any more,” Mr. Caldwell said. Then the ground shifted. This month, Warner Music Group forgave Imeem’s debt, and both Warner and Universal Music agreed to relax the terms of their licensing deals with the site. That allowed Imeem to raise more money from investors and plan for a profitable future. Imeem’s amnesty auto insurance in Porto Alegre is one sign auto insurance in Curitiba that a new accommodation car insurance in Cape Breton is being medical insurance in Canton forged between Web music start-ups and the home insurance in Oregon companies on which they are almost wholly dependent, the dental insurance in Stamford major music labels. The recording industry is considering an medical insurance in Saskatoon home insurance in Germany all-digital future in which home insurance in Yokohama it needs popular Web services like Imeem, car insurance in Shanghai both dental insurance in Scottsdale as home insurance in New Haven sources dental insurance in Newark of revenue and as supplements to older channels of promotion like radio and MTV. As a result, music labels are now striking more favorable car insurance in Latvia terms with Web companies, and the start-ups have come to realize they cannot rely on Web ads to support themselves. For example, dental insurance in Manitoba as part of its dental insurance in Belgium new plan, Imeem dental insurance in Whistler will try to push users into buying more T-shirts and concert tickets, and will soon add its own MP3 download store similar to iTunes, sharing revenue with the labels. It is not yet clear whether any of auto insurance in Virginia Beach this is enough to produce sustainable online businesses medical insurance in Texas — or medical insurance in Thunder Bay even to help mitigate the chronic pain of the music industry. But it is offering some hope. “We are trying car insurance in San Bernardino to figure out how to restructure partnerships and develop a healthier ecosystem where entrepreneurs can continue to innovate,” said Michael Nash, executive vice president for digital strategy at Warner Music. medical insurance in Portugal “Entrepreneurs are also realizing they need to spend as much energy on their auto insurance in Akron business model as they do on technological innovation.” The changes stem from an unavoidable and unpleasant reality facing car insurance in Quebec dental insurance in St. Paul the music business: the economics of offering music free car insurance in New Brunswick on medical insurance in Massachusetts the medical insurance in Ottawa Web do not work. Companies like Imeem, striving to create an alternative to Apple’s dominant iTunes medical insurance in Iqaluit car insurance in Milan Store, signed complex deals with the labels that required them to pay large upfront fees and car insurance in Romania then small royalties — typically a penny or less — each time a song was played online. Advertising recouped only a fraction of that medical insurance in Grand Rapids considerable dental insurance in MA expense. As a result, the online music landscape is littered with medical insurance in Hartford the wreckage of failed or troubled music start-ups. SpiralFrog, a free music car insurance in Rio de Janeiro download car insurance in HI service supported by advertising, went out of business in March, citing financial difficulties. And music executives have roundly expressed disappointment with the money trickling in from MySpace Music, their joint venture with the News Corporation, which started auto insurance in Kansas last year and car insurance in Atlanta was talked about car insurance in Flint as a savior for the music business. For many digital music auto insurance in Yonkers entrepreneurs, there is new hope that music labels will now give them room to experiment and perhaps succeed. Last fall, car insurance in California Lala, a Silicon home insurance in Sarasota medical insurance in Phnom Penh Valley medical insurance in Abbotsford start-up, introduced a car insurance in Mexico City distinctive service that lets people listen to home insurance in South Dakota medical insurance in Harrisburg a song once at no charge. Then it costs 10 cents to stream that song repeatedly on the Web and up to 99 cents to download it. Lala executives credit dental insurance in AK the labels’ cooperation in the unusual licensing car insurance in ME arrangement and say they are selling hundreds car insurance in Cairo of thousands of songs a month. In April, medical insurance in Poland the mobile phone operator car insurance in Sao Paulo Vodafone medical insurance in San Bernardino introduced a music service in Spain that gives subscribers unlimited access to a broad catalog of songs dental insurance in Tehran on home insurance in Goiania car insurance in Wyoming their phones for 16 dental insurance in Edmonton euros dental insurance in New Orleans ($22) a month. The songs home insurance in Switzerland can be auto insurance in Turin played home insurance in St. Louis on the phone or transferred to a dental insurance in Stuttgart computer. The medical insurance in AL service was home insurance in Baton Rouge possible only because the major music labels medical insurance in Miami altered the underlying economics of their licensing deals, said Rob medical insurance in Delaware Glaser, chief executive of RealNetworks, which is supplying the music service. “That medical insurance in Chicoutimi flexibility wasn’t there in 2008 anywhere dental insurance in NE in home insurance in Ontario the dental insurance in Philadelphia U.S. home insurance in St. Catharines and medical insurance in Louisville Europe,” he said. Napster, a pioneer in peer-to-peer music dental insurance in Seoul/Incheon sharing that became home insurance in Syracuse a paid music service dental insurance in Slovenia owned medical insurance in Yonkers car insurance in Donetsk by the retailer Best car insurance in Madison Buy, reduced medical insurance in Ontario its subscription rate to $5 from $12.95 a month car insurance in Lincoln auto insurance in McAllen last week as dental insurance in New York a result of new deals with dental insurance in Iqaluit the labels, according to Chris Gorog, Napster’s chief executive. Also last week, Pandora, the home insurance in Kelowna rapidly growing Web radio service, said it would increase the number of audio commercials on its free service and offer an ad-free version, Pandora One, for $36 a year. The founder, Tim Westergren, said he dental insurance in Barcelona expected the auto insurance in Antwerp company to reach profitability next year. “There auto insurance in Vermont was a generation auto insurance in Utah of Web companies that signed up for deals that auto insurance in Lyon didn’t make sense, and unfortunately they set a precedent,” Mr. dental insurance in Rio de Janeiro car insurance in Phnom Penh Westergren said. “Now that those deals turned out to be auto insurance in Rotterdam unsustainable, it made dental insurance in MT the labels realize that there was actually not hidden auto insurance in LA money they were missing out on. I auto insurance in Nevada think labels have a much better understanding of the economics of the business.” Another music start-up seeking to take advantage of the new environment, one that seems auto insurance in Austria to be collecting ardent fans and skeptics in equal numbers, is Spotify, based in Stockholm. The service, which car insurance in St Petersburg requires auto insurance in Katowice iTunes-like software that people download to their home insurance in Denmark PCs, offers millions of dental insurance in SC free medical insurance in Virginia songs, dental insurance in Charlotte supported by copious advertising and opportunities to buy merchandise, downloads and tickets. (A premium version, without ads, costs around $15 a month.) Spotify car insurance in Dallas plans to enter the American market car insurance in Lancaster later this year, and its founder, dental insurance in Baku Daniel medical insurance in Fayetteville Ek, says that the music labels have given medical insurance in Dusseldorf the start-up flexibility car insurance in Tacoma because they are attracted dental insurance in St Louis to a service that, with its unlimited free music, could convert illegal downloaders into monetizable consumers of music. “This is what has car insurance in Omaha been lacking for 10 years. The only way to beat home insurance in Taichung piracy is by home insurance in Kentucky actually creating a legal service that is auto insurance in Pittsburgh just dental insurance in Manila as good,” Mr. dental insurance in Las Vegas Ek medical insurance in Nagoya dental insurance in Vancouver said. Spotify will not discuss the details of its car insurance in Nagoya arrangements with the auto insurance in Barrie European divisions of the music companies, and many music car insurance in Grand Rapids entrepreneurs and observers dental insurance in Buenos Aires question home insurance in MD whether car insurance in San Diego Spotify — and other digital music start-ups, for auto insurance in Worcester that matter — can build enduring businesses. “Until we start auto insurance in Ireland seeing these guys living on their auto insurance in Henderson revenues, as opposed to their investment, we are not going to know how medical insurance in Tokyo effective their business models are,” said Mike McGuire, car insurance in VA an analyst at the research firm Gartner. ILike, a Seattle company that bills itself as a music medical insurance in Jasper discovery engine for users of medical insurance in Kinshasa social networks, has actually turned away from offering medical insurance in Spain free music online in recent months, and medical insurance in Taichung is instead focusing on helping bands forge connections with fans and developing tools like applications for the iPhone. Ali Partovi, iLike’s chief executive, is not sure home insurance in Campinas labels and start-ups have found complete harmony yet. “There is an ongoing tension medical insurance in Windsor between what consumers want and what music labels want,” Mr. Partovi said. “It’s hard to car insurance in North Dakota know what model will satisfy both, and what home insurance in AR will work over car insurance in NJ the long run.”

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