Hey boys and girls! It's been crazy hectic since Friday when my girl Missy and I took off to Boston for the weekend to visit the family and see my brother's new baby (pictured here). We didn't do any clubbing, just visited friends and family. So, there's no big news to report on the Boston front. While I was away, I received the usual bombardment of press releases, Google News reports and other music-oriented musings, which I will parse for you below. Here goes...

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This year's 6th annual Digital Music Forum expands to a two-day session February 28th and March 1 in New York City. On the 28th, Digital Media Wire, organizers of this important, must attend conference host the Mobile Leadership Summit. The Digital Music Forum takes place on March 1.

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According to a Reuter’s news report, Sacramento, California-based Digital Music Group’s hopes to catapult into the digital music market took an unexpected turn today. Shares of the company, priced for its IPO at $9.75, took a plunge at the opening of trading to as low as $8.36 a share. Shares of the offering closed at $9.25 after raising about $38 Million to fund the company’s ongoing operations.

The company buys back catalog and out-of-print recordings by a variety of artists across genres to digitize them and then sell them through online music services, including Apple’s iTune’s store.

The company had originally priced the shares around $8, but thought it could get between $9 and 11. It stands to reason that if they’d kept the original price, the stock may have held steady if investors believed that the company was worth the earlier asking price. By raising the price, the company inadvertently may be leading the market to believe that the digital music landscape continues to be an unsettled one and the risk is greater than the return.
At the end of the day, the fact that a pure digital music play went out to market to raise $38 Million in an IPO does speak to a willingness of investors to accept digital music in its current form as inevitable and a worthwhile investment, despite the various technological and legal restrictions, while entrenching digital content plays into the minds of Wall Street analysts as a viable way to sell music and other digital media and make a profit.

Apple iTunes approximatley 500 Million downloads, the Google rumors about Napster and Real Networks 1.2 Million paid subscribers has shown the market that there is a business around the sale of digital content. This IPO confirms it, even though it wasn’t a blockbuster. Companies watching will be tweaking their business plans and readying themselves for the same path soon enough.

Web 2.0 is upon us and I hope we all learned something over the past 5 years.

Google Denies Napster Takeover

Reuters reports on a New York Post article citing un-named sources identifying subscription muisc service, Napster, as a potential takeover target for Google, who are currently in the process of rolling out a music search tool. Google denied the report, sening Napster’s shares down and dissolving almost 60% of the recent gains made by the stock.

The conjecture is that Google had been strongly considering a partnership with Napster as it rolls out it’s music search tool. A recent Bear Stearns report pegged Google as most likely to start a music service within the next 3 to 6 months, possibly fueling speculation about a Google/Napster alliance.

A Google spokeswoman denied the report while Napster did not comment.

Mark Farina at Cielo

New York’s favorite little club that could, Cielo, brings Mark Farina to the decks on Thursday, February 2 for a 5 hour set.

Magnum PR Salutes Tommy Sunshine in 2006

From a Magnum PR press release, a list of upcoming releases for everyone’s favorite techno/electro/house DJ, Tommy Sunshine. (Don’t quote me on the genres, not sure what he wants to be recognized for spinning nowadays.)

2006 is Tommie’s year of releases, first is Systematic Sessions Vol. 2 – Tommie
Sunshine & Marc Romboy, releasing in late Apr/May 06 on German label Systematic
Recordings. Following soon after is his Ultra Records release, the yet unnamed
compilation featuring all his own remixes due out before Summer ‘06. Tommie has been
using his talented ear and skill at chiming in a new sound for years to remix the likes
of The Killers, Elvis Presley, Louis the XIV, now we can add to this already hefty list, his
latest remixes of Gang Of Four, Fallout Boy, and My Robot Friend for 2005. Remixes already
completed in ‘06 are The Shiny Toy Guns, Panic! At the Disco and his most recent, The Sounds.

Ultra Music Festival Announces Additions to their WMC Line-up

On Saturday, March 25, 2006 at Bicentennial Park in downtown Miami, Hot Hot Heat, Paul van Dyk, Hard-Fi, Carl Cox, Perry Farrell, Danny Tenaglia, Richie Hawtin, Mauro Picotto, Armand van Helden, DJ Hell, BT, Benny Benassi, Nic Fanciulli, Meat Katie, Grooverider and Donald Glaude join the the lineup for festival, which is in its 8th year, and is now a sanctioned WMC event.
Previously announced are headliners, The Prodigy, Paul Oakenfold (live) and Erick Morillo. Official sponsors for this year’s event include MySpace.com, Pioneer Pro DJ, AOL Music and Music Choice.
Get tix at ultramusicfestival.com

Today, I'll be attending Digital Media Wire's 3rd annual Digital Commerce Summit, which will be held at the Proshansky Auditorium of the Graduate Center at City University of New York (CUNY). The address is 365 Fifth Avenue.

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I clocked a good article through my Google News feed written by Reuter’s Sue Zeidler on the impact of the Internet and Mobile communications on music marketing and promotion in today’s changing commercial music landscape.

Music marketing gets a digital tune-up reports on the record industry’s shift to market and promote artists to new media outlets, web sites and mobile communications companies that host music files, run promotions and want access to exclusive content such as MySpace.com, PureVolume.com (not mentioned but important nonetheless), Cingular, Sprint and Verizon Wireless among others.

Now that the Internet has been accepted by Madison Avenue and Wall Street as a mass-medium of communication and a successful marketplace, the music inudstry’s advertising and marketing dollars are being reduced (not cut) at traditional media, such as radio, where they were spending untold millions in an attempt to get airplay and priority placement on radio, towards the Internet and mobile devices to catch music fans where they are spending an increasing amount of their time.

The article quotes Even Harrison from Clear Channel, Craig Kallman at Atlantic Records, Adam Klein from EMI and Dave Beasing from Jacobs Media.

I was invited by a friend to New York City’s Coffee Shop Lounge, where about 150 “b” and “c-level” independent music industry executives, djs, artists, performers, songwriters and ancillary music hanger-ons from all walks of the industry gathered to listen to a pitch from New York’s most recent “Music 2.0” (an acronym describing the post-crash Internet music economy) start-up, BurnLounge.com.

The company launched a multi-level, viral marketing campaign to have designated sponsors (otherwise known as “music moguls” according to their literature) sign-up partner’s interested in hosting a downloadable music store on their own web sites using BurnLounge.com’s music download store package.

A flashy, slickly produced, techno-laden infomercial was shown mid-way through the get together on the bar’s flat-panel tv’s, giving the crowd a generic look at how one can get involved in “making money” (as one of the principals emphasized in a follow-up speech) by selling music downloads as a registered partner in BurnLounge’s affiliate program. From the video, I learned about the three distinct tiers an affiliate partner can sign-up for; the Music Fan, The Affiliate and The Music Mogul.

The first tier, Music Fan, is for the general consumer or music fan who wants to feature tracks of his/her fav artists by embedding links to specific titles from BurnLounge’s catalog on their personal web page. The more tracks sold, the more points earned for redemption on BurnLounge.com’s site for prizes distributed as products or downloads.

The second tier, the Affiliate, is a program that turns downloads into cash. Targeted to small and medium sized web sites, BurnLounge will license their technology (basically a fully-functional download store with complete backend and transaction technology) for a richer user experience. Take this package and share a percentage of your download revenues with BurnLounge.

The third tier, Music Mogul, has a chief sponsor (or “mogul”) signing up a number of other web-based partners to create their own mini-network of sites. The Music Mogul manages those relationships, benefitting by taking a commission of sales of all tracks on his/her own download store as well as a percentage of all transactions within the mini-network of sites he/she is credited with signing into the program.

I admire BurnLounge.com for coming up with a way to spread their brand and using web services to generate sales with this multi-level marketing strategy, however, there are a few kinks in the armor if anyone thinks they’re going to make millions tomorrow from music downloads.

Mom and Pop are up against a formidable array of legacy download providers who currently have a tight strangelhold on the market and benefit from preferential treatment because of their size, traffic and revenue generating capability.

Take into consideration the folowing:

Today, Reuter’s reported from MIDEM, the world’s largest music industry conference going taking place this week in Cannes, France, that with over 355 digital download stores in existence, many music industry executives are talking about the bubble bursting, afterwhich industry consolodation takesplace.

The article reported Napster is stating over $100 Million in cash reserves and 500,000 registered subscribers paying $9.95 a month. Not bad work if you can get it. One web site generates all those subscription fees! And, people said that would “never happen!” Well…it’s happening!

Real Networks claims 1.2 Million subs to its Superpass and Music store subscription service. Today, I cancelled my account because I can’t play Real files on an iPod, and frankly, I’m not interested in listening to radio content from sub-saharan Africa. I guess there are many people who need or want that kind of programming. More power to’em, I say! I love Real. I even own stock in Real, but until interoperability takes place, I’m on the sidelines for now.
The iTunes store, benefitting from Apple’s powerful marketing muscle and convergent digital lifestyle strategy, have to date sold over 500 Million downloads and almost 40 Million iPods. Remember, iPods can only play AAC and MP3 format. Sales of digital media players that play all other formats, including Sony’s A-Trac, Microsoft’s Windows Media and Real Networks Real Media lag far behind.

You cannot purchase songs from Burnlounge, unless they were in .mp3 format, to play on an iPod. It’s common knowledge that Apple will not license their proprietary AAC encoding format to other companies as they protect their idea by maintaining their market share and dominance. This single fact slices your potential download market in half or even more! No one at the event said anything about that. All they said is, “you can make money too.”
In addition, consider this:

BurnLounge.com license their tracks from LoudEye, a digital distributor. The company charges a (according to the biz dev person I spoke with on the phone two weeks ago) $100,000 upfront payment to help a client launch an online store using their technology with an additional $10,000 a month licensing fee to keep it running and have access to their music database.
The woman I spoke to broke down the commission structure for me. First, the label take is about $0.70 cents per download. Then, LoudEye takes between, I think she said, $0.12 to $0.18 cents a transaction, depending on the deal you broker with them.

So, for arguments sake, let’s say it’s $0.15 cents. BurnLounge.com takes $0.05 cents per transaction when you sign up with them. So, between the labels, LoudEye and BurnLounge.com, the total take before you see any money is a grand total of $0.90 cents. I think there’s even another split of a few cents for the publisher, or something like that, but don’t quote me on it, because I’m not exactly sure. Maybe that comes out of the label slice. I’d have to research it a bit more to be exact.
If you’re an affiliate, you have to share that $0.10 cents with your “mogul,” leaving you with 5 or 6 cents on the dollar. Now, figure in your overhead, web maintenance, employees, marketing costs, etc…

You’re making a few pennies on the dollar. You’ll have to sell hundreds of thousands of downloads to make any kind of real money. After marketing and promotion costs and other costs of doing business, it just doesn’t make fiscal sense to open a BurnLounge store. I’d rather go out and find investors and compete on a level playing field, then give BurnLounge my money and have to work ten times as hard to make ten times less than I could if I were and independent download store owner.
The BurnLounge folk say one of their partners, a Hawaain-based lawyer, made $50,000 dollars in commissions last month. His store consists of hard to find Hawaiian music, as I’ve been told. And, we don’t know what the terms of his deal are. Does he own the actual music? Is the music he’s sold considered major label music or is it niche music that only he has the rights to?

If you’re one of those 140 in the room, you’re competing with everyone else in that same room by having those same million tracks from LoudEye. The only differentiation is how you want your store to be perceived. Content on the home page can be changed to feature music that may interest your target audience, but is that the point?

Oh, one thing I forgot to mention, BurnLounge.com’s start-up fee is $144.00 or so, plus a montly subscription fee of around $12. So you’ve got to sell a lot of downloads to make up that estimatged $360 for the year, before you even can think about turning a profit.

Again, I’m not saying it’s a bad idea. It can work for some people. If you’re a Music Mogul and you sign up 100 sites that are premium brands, and they use the technology effectively and market to their customers, you can stand to make that $50K a month in commissions.

It’s the slackers that will kill you. Sign 100 restaurants and lounges and hope that they upadate their music pages and promotional web sites on a timely basis. Make the sites an integrated experience with the brick and mortar operation and maybe you’ll see some traction, but when it comes to online production, it’s tedious work just like any other data entry job. Why do you think we’re outsourcing all this data entry work to India? Because American’s are too busy consuming to do that themselves.
Now remember, you’re competing against major players in the download world; Apple, Sony, Microsoft, Napster, AOL, Yahoo and maybe someday Google. You’re at a immediate disadvantage because the iPod only play AAC and MP3 formats for audio and .mpg and .mov for video.

Major label content downloaded through BurnLounge is encoded with a DRM using other formats that won’t play on an iPod. I’m sure there’s a crack somwhere, but at the end of the day, it’s all about access and portability, isn’t it?

If you’re sitting at home cracking proprietary files, that’s less time you have for the beach, running, work or doing whatever it is you love to do. There’s a reason why million’s have downloaded from the iTunes store–it’s called convenience.
Being a pioneer in the Internet music space, many of my friends from the dance music industry who were at the event asked me what I thought about the program. I told them out of the 150 or so people who showed last night, only 2 (besides the BurnLounge principals on hand) will make any real money. Everyone else will decide that it’s too hard and that no one told them they had to invest so much time, money, energy and passion into something that gave them pennies as a return on their investment.

As for Netmix, would I open open a store? Well, for me it would only be a value-add to my constantly evolving business plan to drive traffic. Kind of a loss leader, like Walmart selling DVD players for $25 and CD’s for $10.

I’m not going to start my own music store, so sure, I’d partner up with BurnLounge to see what happens. It’s a write-off for me if I don’t make my $360 back and maybe I can sell some of the tracks I feature in my mix-shows, who knows?

Do I plan on making money with it? Well, from the looks of the rev/share split, I’ll be on social security by the time I get my first real check. I mean, even though you see all these Google adsense ads on my site, not many people are clicking on them and I’m not really sure why. They’re not as relevant to my content as I’d like them to be, but it’s hard to manage that, unless advertisers came to me directly.
You’d think with about 30 to 50 visitors a day to this blog, I’d be making some money with Adsense and the Amazon program, but I’m not making anything that makes a difference…not yet anyway.

I tell people all the time. The Internet is not the holy grail. You still have to know and understand your customer, provide value and excellent service. That takes time, energy, commitment and possibly an investment of capital. It is what you put into it. I don’t post enough to get a mass audience and it’s slow going. In order to make any real money on the web, you gotta hustle. Just like everything else. Get rich quick schemes only make the ones who think of them rich, and everyone else is used for their brainpower and hard work.
Remember what they say, “if it seems to good to be true, it probably is.” But then again, they also say, “if you can’t beat’em, join’em!” Take your pick!

Here’s my Google ad below…I guess I’m joining them…lol.