Wow! How MySpace grew to over 1,400 employees, no one knows? Maybe that’s the worldwide number. Regardless, the company, which was acquired by News Corp a few years ago for what was then thought as a steak, is trying to streamline operations and get back to the “start-up” mentality that helped to fuel it’s growth. This blogger highly doubts putting senior executives from companies like AOL and Viacom in charge of anything at MySpace resembles anything close to stealth mode.

Remember, most of these guys and gals have never, ever worked at a start-up. If they have, they are far removed from those experiences and can now sit back and collect six figure salaries to try to stem the exodus to other social media sites, which have been chipping away at their lead. How would they know what start-up even feels like? Nice to want to be something your not, especially in the face of competition from Facebook, whose “Pages” are quietly becoming the new port of call for many recording artists–many of whom have tired of paying someone a couple of grand for a tricked out MySpace page, when what they really need are simple artist tools to aggregate an audience, then promote and share their events. Can you say Going.com or event EventBrite?

To me, MySpace is an entertainment destination. Certainly a necessity for artists, actors, comedians, photographers and other media-centric folk, but Facebook has overtaken the service in terms of functionality and usability as a true social network. For example, the other day, I was looking for a Twitter app for my MySpace page. First, trying to figure out where the application directory is was confusing. Once in the director, I entered Twitter into the search box. The search returned the same application home page twice. It wasn’t until the third time that I found a couple of hits on a Twitter app. I quickly learned that whoever are developing these apps on the Open Social platform are not as sophisticated as Facebook developers. The “iTwitter” app I selected required me to unblock my status on Twitter, in order for it to feed my Twitter data into the app on my MySpace profile page. And, I learned that I couldn’t move the app up or down the page, as Facebook allows, when you’re logged in to your profile.

In comparison, I’ve been Twittering to my Facebook without an issue since the first Twitter app was created. Enuff said. And, with TweetDeck, I have the functionality of both. Where is MySpace in making a relationship with TweetDeck? With anyone for that matter? This is what happens. Control, control, and more control. Once social media companies are snapped up by larger concernes, they lose their mojo. While some argue that Facebook is stupid for not taking the money, I argue that they have a smart plan to be the best at what they do. If you focus on what you’re good at and you don’t sell out (can anyone say Google?), then you will win in the public markets in the end. MySpace now has lost the opportunity to go public. Facebook–if it goes public–will be Google-esque in their command of the social media marketplace. I’ll admit I could have learned a thing or two from that strategy with Netmix back in the day. Fortunately, I have a second chance. Most people don’t get a second chance.

Needless to say, MySpace is light years behind Facebook now in functionality and usability. Where Facebook is almost a perfect (is anything every really perfect?) social media interface and Twitter makes social networking simple, MySpace lags far, far behind. MySpace CEO Owen Van Natta is correct in saying that MySpace is a bloated company. If they can’t get their app search correct, which is one of the simplest of concepts, how do they expect to compete against the next generation? They have a lot of ground to cover, that’s for sure.

Check the Gawker post or read the story at NYTimes.com.

Speaking of closures, I just found out from a friend who worked at Ticketmaster owned and operated, Echo Music, that the company is jettisoning over 200 artists with hosted web sites from division and merges the company with it’s L.A.-based Entertainment division. May artists have been left in the lurch, scrambling to build new web sites or redirect their domains to their MySpace pages. We think Echo Music made a huge mistake being acquired by Ticketmaster. This is what happens when you look for the big payday. You can be out of a job in less time than it takes for a scalper to score 100 front row seats to a Miley Cyrus concert. For more on the Echo Music shutdown, check the String Theory Media blog. They’ve got the in-depth scoop.

– by Tony Zeoli

Tue, Jun 30, 2009
Fordham University (Lincoln Center)
New York, NY
7:00 p.m.

NARIP’s Art of the Music Deal series continues, this time with top music attorneys duking out a 360 deal. Join this special program and mock negotiation with special guest speakers M. JAMES COOPERMAN, Esq., COO & EVP Business and Legal Affairs of
Wind-Up Entertainment and DINA LaPOLT, Esq. of LaPolt Law.

Also joining the panel is Lisa Van Zuidam – Chief Financial Officer & Chief Operating Officer,
Tenth Street Entertainment and The Eleven Seven Music Group.

Get more details and register now at www.narip.com

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WMC 2009 Blogging, Podcasting and RSS Panelists

The Blogging, Podcasting and RSS panel at WMC 2009 focused on the various ways to get out the message through blogging, podcasting and RSS. Although BPM.FM and Play.FM are more streaming services than podcast outlests, the point was that Dance music radio has moved online and is where many people are accessing their favorite mix shows and artists.

The conversation turned to the new Flip video recorder, which is, for some, equivalent to the iPod for music. It’s a nifty $150 device ($200 for more storage) that has a built-in USB output, which means not having to worry about carrying around a USB cable. And, it syncs your video direct to YouTube for instant web channel publishing. The company was recently acquired by Cisco.

Flip Video (Photo courtesty of Pure Digital)

We also covered the power of Wordpress and it’s over 2,500 3rd party supported plug-ins, which enhances the power of the popular Open Source to a full blown CMS, if that’s what you need.

From left to right: panel moderator Laura Betterly (Yada Yada Marketing), Stuart Miller (Smart Move Music), Jamie Peterson (BPM.fm), Diego Sanchez (DMSR.com), Tony Zeoli (Netmix.com) and Thomas Buchstaetter (Play.fm).

Here’s a short clip of New York’s Dance music leader, Pulse 87.7 Program Director, Joel Salkowitz, discussing how the station came about, his role in it, and the recent action by Arbitron to add stations in the 87.7 range to their regular books. Other panelists included Vic Latino from Long Island, New York pop station, Party 105.5; Mike Spinella, Director of Industry Relations at AOL Music; and Skyy from Sirus Satellite Radio.

Nielsen SoundScan, the entertainment industry’s data information system that tracks point-of-purchase sales of recorded music product, Nielsen BDS, the music industry’s leading music performance monitoring service, and Nielsen RingScan, which tracks mobile ringtone purchases, have announced their 2008 U.S. year-end sales and performance monitoring data for the 52-week period December 31, 2007 through December 28, 2008.

2008 Year End Factoids:

* Music purchases in 2008 reached 1.5 Billion, marking the fourth consecutive year music sales have exceeded 1 billion; 1.4 billion (2007) vs. 1.2 billion (2006) vs. 1 billion (2005).
* Music sales exceeded 65 million in the final week of 2008, representing the biggest sales week in the history of Nielsen SoundScan. The previous record was Christmas week 2007 with 58.4 million music purchases.
* Overall Album sales (including Albums and Track Equivalent Album sales) declined 8.5% compared to 2007.
* Total Album sales declined 14% compared to 2007.
* Metallica’s “Death Magnetic” is the best selling Internet album for the year with 144,000 sales.
* During 2008, more Vinyl Albums were purchased (1.88 million) than any other year in the history of Nielsen SoundScan. The previous record was in 2000, with 1.5 million LP album sales.
* Note that more than 2 out of every 3 vinyl albums were purchased at an independent music store during the year.

Digital Factoids:
* Digital Track sales break the 1 BILLION sales mark for the first time with more than 1,070,000 digital track sales. The previous record was 844 million digital track purchases during 2007; an increase of 27% over 2007.
* Digital Album sales reached an all-time high with more than 65 million sales in 2008; up from 50 million in 2007; an increase of 32% over the previous year.
* Note that digital album sales account for 15% of total album sales compared to 10% in 2007 and 5.5% in 2006.
* In the final reporting week of 2008 the following digital sales records were broken:
* Digital Track sales surpassed 47.7 million. The previous sales record was 42.9 million, week of 12/23 -12/30/07.
* Digital Album sales this week broke the two million mark for the first time with sales of 2.4 million sales; breaking the previous record of 1.9 million (12/30/07).
* The top 200 digital songs for the week posted an all-time high with 13.6 million sales; breaking the previous record of 11.9 million during the last week of 2007.
* The first time that the Top 5 digital songs (combining all versions of the same song) sold more than 300,000 downloads in a week with Lady Gaga’s “Just Dance” selling 419,000. The record for most downloads for a digital song in one week continues to be Flo Rida’s “Low” with sales of 467,000 set during the last week of 2007.
* 2008 is the first time a digital song broke the 3 million sales mark in a single year. There were 2 songs that achieved this milestone; Leona Lewis’ “Bleeding Love” and Lil Wayne’s “Lollipop;” with sales of 3.4 and 3.2 million respectively.
* In 2008, there are 19 different digital songs with sales that exceeded 2 million compared to 9 in 2007.
* 71 Digital Songs exceed the 1 million sales mark for the year compared to 41 digital songs in 2007, 22 in 2006, and only 2 digital songs in 2005.
* Rihanna is the biggest selling digital artist in 2008 with nearly 10 million track sales compared to Fergie in 2007 who had 7.5 million track sales.
* There are more than 450,000 different physical albums that sold at least one copy over the Internet during 2008 compared to 390,000 in 2007.

Best Seller Factoids:
* Lil Wayne’s Tha Carter III is the biggest selling album of the year with 2.8 million sales.
* Taylor Swift is the biggest selling solo artist, with sales greater than 4.0 million albums and AC/DC is the biggest selling group in 2008 with sales of 3.4 million.
* Taylor Swift stands at the top of the list, marking the 2nd time in the last three years that a country artist is the top selling artist for the year. Rascal Flatts was the biggest selling artist in 2006 with 5 million sales. Josh Groban took the honors last year (2007) with 4.8 million sales.
* Taylor Swift’s Fearless and her self-titled album finished the year at #3 and #6 respectively with sales of 2.1 and 1.5 million. This is the first time in the history of Nielsen SoundScan one artist had two different albums in the Top 10 on the year end album chart

Holiday SeasonFactoids: (last 6 weeks of year).
* Overall Album sales during the 2008 holiday season were down 19% compared to 2007, with sales of just over 80 million.
* Album sales during the holiday season accounted for 19% of all album sales for the year.
* Digital Album sales during the holiday season experienced significant growth over 2007 with an increase of 37% to 9.9 million sales.

Strata Factoids:
* Album sales at Non-Traditional music outlets (digital, internet, mail order, venue, non-traditional retailers) hit an all-time high in 2008 with sales breaking the 100 million mark for the first time. Non-Traditional is the only strata that experienced album growth over the previous year; with an increase of 15% over 2007.
* Non-traditional outlets account for nearly 25% of all album sales, compared to 18% in 2007, 12% in 2006, 9% in 2005 and 5% in 2004 (4% in 2003).
* Digital services account for 65% of the Non-Traditional album sales.
* The last two weeks of the year produced the two biggest album sales weeks for Non-Traditional outlets; 3.3 and 3.2 million sales.
* The percentage of album sales at mass merchants declined for the second straight year after experiencing year over year growth from 2002 � 2006. In 2008, 37% of all albums purchased were at a Mass Merchant outlet compared to 40% in 2007, 41% in 2006, 40% in 2005.
* Chain music stores account for 33% of all album sales in 2008; compared to 36% in 2007; 41% in 2006, 45% in 2005 and 48% in 2004.
* Album sales at Independent music stores account for 7% of all album sales; up 1 point from a year ago (6% in 2007 and 2006, 7% in 2005 and 9% in 2004).

A little bird flew in and told us the possible cause for Beatport to suddently abandon their affiliate marketing program, while leaving many sites in the lurch with broken links and no answers.

The little bird surmised that Beatport’s affiliate program was costing them more dollars in fraudulent transactions than they were making in revenues. How does something like this happen? Let us explain.

User A sets up a blog on a hosted blog network, like Blogger.com, complete with Google Adsense links, which in time will become a secondary revenue stream in this scam. We’ll get to that later. Once the blog is set up, User A contacts LinkShare, which operates affiliate programs for hundreds of web sites, including Beatport’s now defunct program.

User A registers for the program. After the LinkShare registration is completed and User A is accepted into the affiliate network, User A then generates affiliate links to each weeks Beatport Top 10 and posts them on the Blogger blog with the Google Adsense program.

Using a stolen credit card number, User A clicks on his/her own affiliate links on the blog to purchase the Top 10 tracks from Beatport, generating affiliate revenue, which is then distribued back to User A through LinkShare. $2000 in transactions might mean about $57 in revenue to User A, funnelled back through LinkShare.

Because Beatport takes the transaction and then pays labels their share, once the transaction is disputed by the card issuer, Beatport has already paid the label and has to fight it out with the credit card company. Of course, the label is not going to return the money and it’s on Beatport to have to deal with it.

The more fraudulent transactions happen through the LinkShare program, the less inclined credit card companies are to work with Beatport for sending them an large amount of questionable purchases. As a business, Beatport can’t operate without credit cards. They are beholden to the card companies, who probably threatened to shut them off if they weren’t able to reduce the number of fraudulent transactions.

Under potential pressure from the card issuers and losing money by paying out affiliate revenue for fraudulent purposes to labels, Beatport was forced to abruptly cancel the affiliate program with no notice.

Now how does Google’s Adsense play into this? User A not only posts the affiliate links to the blog, but also a zip (compressed) file containing each week’s Top 10 tracks on Beatport for anyone to come and download. Of couse, this drives traffic to the blog and potential clicks on Google’s Adsense links, which become another revenue stream for User A.

Although Beatport might complain to Blogger about this practice, Blogger is under no obligation to take down illegal content unless served a take down notice by the copyright holder (generally the label or producer).

Since Beatport only sells the music and are not the rightful copyright owners of the tracks posted to the blog, their hands are tied. Many fledgling dance music labels that subsist on Beatport may not have access to attorneys for a variety of reasons. Blogger.com then goes unchallenged on many occasions, because they are not served with take-down notices.

Google, who owns Blogger, operates the Adsense program. In essence, as User A posts illegal content to Blogger, Google makes money from clicks on their Adense links against that illegally posted content. Nice work, if you can get it.

Now that we understand the dynamics, maybe we were a bit hard on Beatport in our original post. No one wants to see Beatport lose money or be the victim of fraud. That doesn’t benefit the industry that is now being supported through sales on Beatport. That being said, could they have been a bit more sensitive to their partners? Sure. We think they were losing money and needed to shut it down so abruptly, that they really couldn’t notify anyone in advance.

If we were too hard on you Beatport, we apologize. But, we’d at least like some acknowledgment of how much we’ve promoted the service, instead of just being but off with little explanation. A little massaging of your friends goes a long way in terms of good will.

– by Tony Z

After attending the Virgin Mobile Festival a few weeks ago, I swung through Atlantic City on the way back to NYC for the 2008 DJ Times Expo. Organizer and DJ Times Editor, Jim Tremayne threw me on a panel at the last minute to speak on alternative business models and careers for DJs and what they should be thinking about for long term success.

Just a few years ago, the Expo was filled with CD turntables. How times have changed. This year, the Expo was loaded with digital DJ products. From software to controllers and DVD VJ decks, the transition to digital is in full swing. Even the remix services, X-Mix and Promo Only, are promoting digital downloads through private, subscription only stores, which will be launched soon.

We loved the Hercules RMX digital controller, show above. The key features are the jog wheels and ability to interact with your audio library. We also were really excited Numark’s NS7 Motorized Computer DJ System with Audio/IO. A very sleek looking product with real vinyl emulators, this is could very well be the digital controller to watch. Numark collaborated with Rane to create a product that syncs easily with Serato. Sending signals over USB, Numark claims the resolution is double that of midi.

The Hercules controller was being promoted in conjunction with Virtual DJ, a similar product to Traktor Scratch and Rane’s Serato, available for both PC and Mac for U.S. $299 after discount from their web site.

[Show as slideshow]

[View with PicLens]

12►

Buy Products from JR.com:

Hercules RMX

– Tony Zeoli

Peter Kafka on Tech Ticker

Everyone seems to have an opinion on what ails the music industry. In this Yahoo! Finance Tech Ticker video interview, Silicon Insider managing editor, Peter Kafka proposes that labels drop supporting new music and focus on their valuable catalogs. Doing so would leave the door open to independent labels to figure out how to sell music in a digital era.

Then again, if things continue the way they are, major labels will end up getting dropped from the stock exchanges anyway, once their stock drops below a buck for a few quarters. Once that happens, they could feasibly take themselves private and go back to the way things used to be. Cultivating artists instead of churning out pop crap to see if it sticks to the wall.

On the other side, Sony Music Entertainment, the new entity born out of BMG’s desire to extract itself from the music business, may know something we don’t. Or, they may be doing exactly what Kafka thinks is going to happen, control the masters of all those hits over the last 50 + years and/or simply control the music in a convergence strategy tied to their original video content.

We’ll keep watching and waiting for the music giants to figure it all out, while the digital era continues to chip away at their profits.

Burnlounge almost got away with one of the best scams in digital music history. I called it here on Netmix and was ostracized by people like Hazel Zoletta from Tommy Boy, who sang the virtues of Burnlounge, while tens of thousands of people gave up their hard-earned dollars to a bunch of people who had been investigated for pyramid-type operations before.

One of my best friends (who shall remain nameless) threatened to never talk to me again over my calling Burnlouge out for what they truly were, one of the biggest online music scam’s since digital music was invented. Both she and Hazel were mad that I said “B and C” level” executives were at the first Burnlounge New York meeting, which took place in the lounge under Coffee Shop in Union Square.

I still stand by that statement, as I didn’t see Diddy, Lyor or Clive there. And if I was there, then I was calling myself a “B” or “C” level executive anyway. Of course, in their furor, they couldn’t see the forest from the trees.

So, what happened to Burnlounge? Well, the FTC shut them down. The URL is finito! Gone. Poof! Digital Music News reports that the FTC has settled with a former Burnlounge promoter, Scott Elliot, who agreed to pay $20,000 of a $117,000 judgment against him. We hear it’s about all he could afford.

Of course, we’ve never again heard from Burnlounge Barry in our comments section. Who is Burnlounge Barry? He was a Burnlounge operator who found our blog and carried on a running argument with me about the sanctity of Burnlounge. He was adamant that Burnlounge was the wave of the future…yada…yada. That Burnlounge would revolutionize the music industry. Where is Barry now?  Nowhere to be found now. He’s probably on to the next big scam. We wish him the best of luck and look forward to the day that he’s locked up like the rest of them.

read more | digg story

“In an Oriental-themed, tricked-out parlor, Nicholas, his friends and a bevy of prostitutes would party and have sex for days – abusing cocaine, laughing gas and other drugs, as music from such chart-toppers as Led Zeppelin and Phil Collins played.” — from the New York Post

During the Web 1.0 heyday, the founders of Polyverse, the company that had acquired Netmix and then spent our investment money on a half-a-million dollar Randalls Island rave that lost over a quarter of our funding, introduced me to this guy and Kenji Kato, his assistant.

They ended up partying with him well into the night, while I was taking care of Netmix business. They thought Nicholas might invest in the company, as he was keenly interested in youth culture Internet plays, having funded a youth-driven startup in Denver. While Nicholas was in town, they ended up partying at Lotus and a few other spots, taking a break in between to meet with me and some of my staff at the time.

Although I was excited to meet with the billionaire, I was still very cautious and direct, knowing that the Polyverse folks were playing the party game, while I was trying to grow a business. When Nicholas asked me if I was ready to work 24-hours a day, I said I’d work 26, just to see Netmix grow .

It turned out that Henry Nicholas wasn’t much feeling the partners in Polyverse. Despite his partying ways, he could see through them, as I did while constantly battling with them to do the right thing. Unfortunately, I was stuck with them.

In August of 2000, I caught one of our sales people doing cocaine with a client in a hotel room at the MGM Grand during the DJ Times Expo in Atlantic City. I wanted her fired, but I was told by the Polyverse folks after a series of personnel meetings that “this is the way business is done” in the advertising world. Needless to say, that girl didn’t sell one piece of advertising for the company while taking in a $90K salary in all the time she worked there. Although they didn’t fire her, she was persona non grata in the Netmix offices and I forced them to move her to another location. That memory of her is forever etched in my mind. If that’s how you want to be remembered in this world, more power to you.

If you need to use cocaine to sell a product, then in my eyes, you’re not that much of a sales person. Once you get known as the drug provider, that reflects on everyone in the company, undeservedly tarnishing the reputations of the company’s other employees and forever damaging your organization’s reputation.

The Henry Nicholas Jr. story just goes to show that the crazy days of Web 1.0, where the money to fuel the parties seemed endless, was a time of extraordinary mismanagement, greed and self destruction. Anything goes, but then you had nothing to show for it. Fortunately for me, I never transferred the Netmix domain to Polyverse. They broke the purchase and sale agreement, and I still own the brand that I cultivated.

I, unfortunately, chose the wrong path. I could have opted to go with an angel investor in the Philadelphia area that had backed a successful world music concert series, but we decided that it might be better to work with the Polyverse folks, given their ties to companies like SonicNet, MTV and others. It was probably my biggest mistake and one that taught me a very valuable lesson.

I’m certainly glad that Henry Nicholas decided not to fund us. Seeing his very public downfall reminds me that you can have all the money in the world, but it doesn’t matter if you end up in a $66,000 a month rehab facility, your personal assistant is suing you for being your personal drug courier and all your former employees think you’re ass. The money doesn’t matter when you have no friends.

I always turn to this one quote from a David Halberstam book, “The Breaks of the Game,” which reads: “Fame is a vapor, popularity an accident and money takes wings. The only thing that endures, is character.”

Now that I know what Henry Nicholas Jr. is really all about, he’s just another two-bit hustler like the rest of them. I’ve totally lost the ounce of respect I had for him for achieving so much. If you lose $4 Billion in personal net worth, although you still have $2 Billion, it isn’t all that impressive to me. Henry Nicholas III could have been the next Steve Jobs or Bill Gates, but those guys aren’t in rehab and he is. Pretty pathetic if you ask me. Certainly glad I don’t have to deal with him every day. I’d rather run Netmix as the hobby that it now is, then be around spoiled billionaires who’s self-defeating ego turns the entire world against them.

I know too many people who’s lives have been tarnished by extreme drug use. I’m certainly glad mine is not one of them.

read more (New York Post story) | digg story

If you’re like me and are immersed in social networking and Web 2.0, then you should know what Twitter is. For those of you who don’t, I’ll try to explain it in as simple terms as possible.

Twitter allows you to “micro-blog.” That is, to create a profile on Twitter.com and the constantly feed it with your current thoughts in 140 characters or less. There are no photos, no video–it’s simply just a running text feed of your current status. Sort of like your Facebook feed, but you can port your Twitter status updates into Facebook and other social networks, while you can’t yet do the reverse with your MySpace or Facebook status updates.

With Twitter, you can follow people’s feeds and they can follow yours. I’m following a few hundred digerati, DJs and music industry professionals and have reached over 1,000 posts. Twitter has become such a phenomenon, that the site has had difficulty as of late staying online. The criticism is that they built the site using Ruby On Rails server technology, which is said to not scale as efficiently as other technologies available. Nevertheless, Twitter just raised a $15 Million round of funding and that should quiet the critics and hopefully smooth out their operations.

What’s great about Twitter is that people from all over the world are already jumping on the bandwagon, typing in the minutiae of their lives. My girlfriend, Missy, thinks Twitter is useless. That is, until a blogger in Egypt twittered that he’d been unfairly arrested. The “twitterspehere” the blogger operates in quickly came to his rescue. That changed Missy’s mind (for now). That is, until she sees me post something about her…lol.

Anyway, the point of the story. Yes…I’m getting to the point here, is that the user @aztrovoi contacted me through Twitter–all the way from Mexico. Who knew I had fans in Mexico!

Why the “@” symbol? Twitter uses the “@” symbol to allow sending direct messages to folks. So, if you want to post and address your post to me so that I see it in my “Replies” box, just put the “@” symbol in front of my user name: djtonyz. The message will go to both community and me.

The power of Web 2.0 is amazing. So many of my friends and colleagues are now following my updates through Twitter, Facebook, MySpace, LinkedIn and many other networks I’m part of. This gives me the ability to communicate what’s happening in my world everyday, and helps all my contacts stay up on my status.

Sure, it’s a lot of work constantly managing your online life. But, the means justifies the end! As I begin to build my off line DJ career again, all these tools have become necessary to promote and market oneself. You have to take advantage of them, because that’s where the people are.

In Should Music Startups Give Equity to Copyright Holders?, Wired’s music industry blogger, Eliot Van Buskirk, shines a light on the often implemented but rarely discussed trend of Internet music start-ups ceding equity in exchange for the right to exploit rights holders music copyrights.

I agree with Van Buskirk’s assessment on how something like this would work. He writes:

“Why go through the heartache? This lengthy, complicated process is scary for startups, clumsy for copyright holders, and tends to leave indie bands and labels out of the equation.”

Of course, there’s always someone willing to offer up a new idea as to how start-ups might be able to achieve their objectives without having to pay royalties while building their businesses. Van Buskirk discusses this option, saying:

“Will Page, chief economist for the MCPS-PRS Alliance (a U.K. royalty-collection group), and David Touve, a Ph.D. student at Vanderbilt and former Lycos/Sony/AOL employee, have proposed a novel solution (.pdf) to the problem: a music license specifically designed for startups that would give copyright holders an equity stake in the businesses.”

I caught this discussion on the Pho List, of which I am a long-time member. The Pho List is a digital music industry list-serve. What’s a list-serve? It’s a Web 1.0 era technology based on group communication by email. A person may send an email to the main list and everyone on the list receives it. If one person responds to the list address, all list members receive the reply, and so on.

Proper list etiquette dictates that one should ask other list members if it’s alright to post their responses to a blog. In this case, I haven’t haven’t done that, but I will do so in future. I’ve also gone to the trouble of deleting email addresses in my replies for privacy reasons.

In the meantime, I will start to post my comments to the list here. It’ll probably be a bit difficult to follow if I’m not posting other responses to the subject matter. My responses without context may seem a bit hard to follow, but rest assured, I’ll try my best to briefly give a synopsis of the discussion, so that you’ll be able to follow.
Here are two of my responses to the discussion about whether start-ups should give equity to copyright holders in exchange for the right to exploit their content.

from Tony Zeoli <djtonyz@netmix.com> to Fred W <address_deleted@gmail.com> cc address_deleted@pennydistribution.com, Pho List<address_deleted@onehouse.com> date Sat, May 24, 2008 at 10:57 PM subject Re: Pho: The Record Industry Innovation Prize mailed-by gmail.com

hide details 10:57 PM (2 hours ago)

Reply

This is nothing new and its already happening, especially at UMG. They have an investment arm that takes a look at fledgling start-ups. I’ve gone through this process personally. It’s not that simple. UMG, or any label for that matter, has to believe that the business is going to be viable to invest the time and energy into doing the deals. Record labels can’t just let anyone and everyone use their catalogs, because there have to be some controls in place.

According to the writer, the record labels should set up some kind of independent entity where new start-ups can register. The problem with that is who decides amongst the labels who gets the right to exploit my catalog? Each major label has a competing philosophy. And, if I’m the start-up and most of my success comes from two out of the four majors, why should I give equal equity to all four, when only 2 our of the 4 should be rewarded for giving me content that grows my business.

Also, if I’m the business development executive at UMG (or any label for that matter), I’m definitely going to keep a watchful eye on how the companies catalog is being exploited. Remember, the artists control their image, not the label (although it seems so). And if an artist finds out that he or she is being misrepresented or improperly exploited on a 3rd party web site, all kinds of problems can ensue.

I went through this at StarStyle.com with Gwen Stefani’s management, because Interscope simply didn’t notify Jim Guerinot that we were working on a co-promotion with Gwen’s brand Lamb, which was in conjunction with Interscope’s Strategic Marketing. Someone in business affairs at Interscope didn’t realize that we had a deal with UMG or that we’d gotten approval from the SM department. Instead of checking on the rights, that person went straight to management, they complained and we were subsequently asked to take down the video and the promotion. Because we were so small, we had to oblige lest we cause problems and word spread throughout UMG that we weren’t “doing the right thing.” All this, even though we had a deal with UMG corporate and we got approval from Strategic Marketing. It’s all highly political. And in fairness, if I were Jim Guerinot, I would have done the same thing.

Artists like Gwen Stefani command heavy upfront minimum guarantees to exploit their image beyond what the record label can or can’t control. So if I was running a promotion with Gwen Stefani through the label’s Strategic Marketing department, because I didn’t clear it with management, it becomes problematic.

So, although the intent is admirable, the execution is more difficult than one would think. Once you do the deal with the label, you’re on your own to deal with the individual artists both through the label and through management. The politics of this is extremely volatile and needs to be handled with extreme care.

–
Best regards,

Tony Zeoli, Founder
Netmix Media
• Web 2.0 Design & Product Development
• Digital Strategy & Online Marketing

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m: 917 705 4700
e: tonyzeoli@netmixmedia.com
w: netmixmedia.com

Blog: http://www.netmix.com
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from Tony Zeoli <djtonyz@netmix.com> to John Mitchell <address_deleted@interactionlaw.com> cc Fred W <address_delted@gmail.com>, address_delted@pennydistribution.com, Pho List <address_delted@onehouse.com> date Sat, May 24, 2008 at 11:52 PM subject Re: Pho: The Record Industry Innovation Prize mailed-by gmail.com

hide details 11:52 PM (1 hour ago)

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We’ve all heard the complaints about it being “messed up,” but if I’ve got 100 start-ups trying to engage my company to do business, the right decision has to be made about which companies I believe will grow help grow the value of my catalog, for that’s my bread and butter. I see your point, where you say “king makers,” but we have to remember that labels invest millions of dollars (both wisely and unwisely), have thousands of employees who’s livelihood depends on future success, and who have the right to profit from the commercial exploitation of a product (music) they’ve invested in.

If I’m a label, I need to make sure that anyone who comes to the party can execute against the strategy collectively set internally, and that each independent entity is on board with that strategy. If I just list the pricing and let anyone come to the party, control is lost. I’ve worked for and run music-centric businesses and have been on both sides of the equation. As I get older, wiser and infinitely more knowledgeable about how to run a business, control is crucial. No one yells at Apple for their tight control of the iPod ecosystem, but everyone gets pissy with a major label for not allowing other companies to come to the party. I’m sure that Belkin pays a pretty penny for the right to exploit their after-market products to Apple. You never hear about that, you only hear when people (like me…lol) complain that a label won’t do business. In corporate America, you have to exploit your products while keeping control of the image you want out there.

I’ll give you another example of control. I know that Beatport is actually turning down new labels with few releases who want to market themselves through the site, because they want the perception to be that they’ve got the best underground dance and urban music. That is a form of control. They are gatekeeping the new jacks who need distribution to sell their products. Now, what if that music doesn’t really sell? Many of Beatport’s users would be turned off by the overpopulation of sucky music on the site. So, some sort of control is necessary.

For anyone reading this, I am not getting into the debate of whether artists should or shouldn’t get their just rewards. This is absolutely NOT about that. The point I’m simply making is that if you are a business, you have the right to control your distribution and reach so that you can shape the message to the market. That is business 101. If I’m a singer songwriter, I don’t want to be on a head bangers ball web site. If I’m hip hop, don’t put me on a gay dance music site. So, control goes both ways. The artist want to control their image just as the labels wants to control their distribution. That’s not “messed up,” it’s simply good business.

Tony Z.

Music Industry Downfall, Part II: The Rise of Social Streaming Written by Alex Patriquin (contact – e-mail) — May 12th, 2008 | If any industry has felt the brunt of the internet as a disruptive technology, it’s the music industry, which has been dealt a heavy blow by the onset of digital music distribution.

According to Compete’s measurements, the majority of activity for online music are free streaming music services. A distant second is legal downloads, then subscriptions followed by P2P downloading.

read more | digg story

Amit Gindha from the New Tech Meetup Group in NYC sent this to me today. I was surprised to see myself on camera at the Web 2.0 Expo. Didn’t think I’d make the cut.