Category Archives: Music 2.0

Facebook Becomes a Competitor and Complement to iTunes as MP3s are Sold for Credits via Pages

Well now, artists and labels have been looking for ways to make money via the numerous fans that ‘Like’ their pages on Facebook, could this be the one that really kicks this trend? As they say – iTunes and Amazon take note: musicians are now selling MP3s directly from their Facebook Pages. Electronic music producer and DJ David Guetta this week added a tab application to his Facebook Page that allows him to sell MP3s for Facebook Credits. The Nothing But The Beat app, developed by French marketing agency KRDS, allows users who’ve Liked Guetta’s Page to listen to previews of tracks, publish audio clips of songs to the news feed and the walls of friends, make payments, and initiate downloads.

The enhanced and retention viral features, ability for artists set their own download prices, and the fact that Facebook and iTunes take an equal 30% cut of sales could make Facebook Page tab apps an increasingly popular digital distribution channel for musicians.

Facebook has emerged as a digital media store this year, allowing third-party developers to use its Credits payment system to offer an alternative purchase point to iTunes and Amazon for film rentals, pay-per-view video streams, and now music. Facebook isn’t officially pushing this use of Credits, but may offer a first-party MP3 store or payment portal to streaming services such as Spotify, Mog, and Rdio as part of its anticipated Music Dashboard that’s expected to launch later this month at the f8 developer conference.

David Guetta now has the 39th most popular Facebook Page according to PageData, collecting 23.6 million Facebook fans despite not being a household name. He’s accomplished this by being a savvy early adopter of music technologies, using creative tab apps and partnerships with developers such as MXP4 to frequently reach our fastest growing Pages charts.

Guetta’s app prices MP3s at 19 Credits, or $1.90 apiece, making them 1.47 times more expensive than on iTunes. The app may therefore be designed to attract impulse buys and those looking for convenience rather than savvy music shoppers. However, any artist could develop a similar app and sell tracks for equal or cheaper than other popular music services in order to draw customers to where they have a higher lifetime value.

Facebook Offers Musicians Better Retention and Virality

With artists increasingly driving their fans to their Facebook Pages that offer strong retention and marketing capabilities, offering MP3 sales from the same presence could be lucrative. Otherwise, musicians must force users to open the iTunes desktop software or direct them offsite to Amazon or other webstores before they can execute purchases. The friction of these extra clicks and load times cause some users to drop off, diminishing sales that might have been completed if users didn’t have to leave Facebook.

Virality and retention is also much better on Facebook than on other music stores. By hosting MP3 sales apps on their Pages, musicians can gain the opportunity to market to users in the future, especially if they require users to Like their Page to access the app. iTunes only allows users to subscribe to updates about an artist through its failed Ping social network, and Amazon doesn’t offer any long-term retention mechanic.

By using Facebook’s social plugins and stream publishing capabilities, developers can let listeners share albums, tracks, and artists to the news feed with a single click, while iTunes and Amazon require multiple clicks, sometimes through hidden drop-down menus. When users click the Like or Send button on a song through a Facebook app such as Guetta’s, friends can play an audio preview of the track straight from the news feed. iTunes and Amazon’s song shares don’t offer in-line play so users must click through to the desktop app or site to hear a song recommended by a friend.

Since iTunes and Amazon downloads are served from the servers of those services, artists can’t offer free or deeply discounted downloads without approval. On Facebook, though, artists serve downloads from their own servers and don’t need Facebook’s approval for anything. The social network simply gets its 30% cut of any Facebook Credits purchases, so artists can offer free or cheap downloads as loss leaders to win over new fans.

The enormous number of credit cards numbers iTunes and Amazon have collected and their roles as go-to digital media buying destinations means artists aren’t likely to sell exclusively on Facebook. Instead, they’ll add the site as another distribution channel alongside other digital stores, their own websites, and physical retail stores.

Sales on Facebook could cut into those on iTunes and Amazon, though, while creating a new revenue stream for the social network. Established online music stores will need to consider improving their retention and virality mechanics to give artists better access to their customers and improved lead generation through rich media sharing. Otherwise, they could see digital music sale market share slowly slip to Facebook.


Music Startups Received $24.3 Million In August…

Let September begin! According to our latest tallies, investors delivered a plump $24.3 million to music startups in August.  That represents a major jump over July totals of $14.5 million, itself considered quite healthy.

Overall, year-to-date funding now stands at a bullish $437.3 million, a figure that looks poised to cross the half-billion-mark in the coming months.

Clearly, there’s a lot of money in play, bubble be damned.  The August purse included an impressive, $16 million second round for RootMusic (just announced), and an $8 million injection for networked stereo and media hardware manufacturer Roku (which is probably stretching the ‘startup’ definition a bit).

And, this is what the full-year calculation looks like (drop a comment if you want to play around with the source xls.)


Social Gaming Roundup: Acquisitions, Game Updates, Zynga Japan, & More

Zynga Japan Shuts Down FarmVille & Treasure Isle — According to a post from Dr. Serkan Toto, and via Game Watch, Zynga Japanis sunsetting down both FarmVille (Farmvillage) and Treasure Isle (Treasure Island) on Japan’s social network, Mixi. Each title was earning around 114,000 and 21,000 users each.

EA Uses Debt to Pay for PopCap — EA states that it will use $550 million in convertible debt to finance part of its recent PopCap purchase. As noted by VentureBeat, this is likely to allow for greater financial flexibility when it comes to making further acquisitions.

Ubisoft Buys Owlient — Core games developer Ubisoft has purchased web games developer Owlient. The acquisition is part of Ubisoft’s strategy to expand its games onto the web, social networks, and mobile spaces.

BrandEngageSponsorPay Launches BrandEngage to Drive Engagement & Monetization — Social advertising platform SponsorPay released a new product called BrandEngage this week. The service allows social game and app developers to enhance user engagement and monetization in their titles by integrating cost-per-engagement campaigns on Facebook and other social networks.

Kontagent Expands Analytics Platform — Earlier this week, Kontagent expanded its social analytics platform beyond games and apps on the Facebook platform with kSuite. Now, game developers for both the web and mobile platforms will be able utilize demographic data based on location, age groups, gender, engagement, and so on in real time.

Round of Funding Raised for deal united — The payments company behind PAY.BY.SHOPPING, deal united, has announced the ending of a Series B financing round led by Tengelmann E-Commerce Beteiligungs GmbH. Also participating were Bertelsmann Digital Media Investments, KFW Bankengruppe, High-Tech Gründerfonds, and Venture Incubator. Though the exact amount raised was not noted, the proceeds are stated to be used for expanding global brand awareness.

Bopler GamesEMI Signs Deal With Social Games Publisher MXP4 — Major record label EMI has signed a deal with social games publisher MXP4 says the Guardian. Through the deal, EMI will provide music from various artists to sell within MXP4′s Bopler Games app on Facebook. Sixty seconds of songs will be free, but Facebook Credits will be required to purchase full access.

Sometrics Releases Virtual Currency Infographic — Sometrics has released an infographic regarding its virtual currency services. According to the data, the majority of virtual currency purchases they’ve seen since has derived from the MMOG at 43 percent, followed by casual and social games at 35 percent. Additionally, credit cards make up the primary payment method at 53 percent with the most active spending day being Friday.

[Launch] Kabam Releases New Dragons of Atlantis Content — Social developer Kabam has announced the release of new content for its Facebook title, Dragon’s of Atlantis. High level players will now be able to further upgrade their Fortress with new looks and abilities as well as be able to gain access to a new combat class, the Fire Dragon.

Cow Clicker Runs Amusing Campaign — Facebook application Cow Clicker is running an amusing promotion to “Save The Pigs” by clicking cows in their game. Poking fun at Angry Birds, the app provides an amusingly written “open letter” detailing the entire predicament.


Music games boomed in 2010 but 2011 could be much shakier

Music-related games saw an increase of 13.7% in sales last year to generate over £100m at retail, but wider forces could compromise its growth potential for this year.

Figures given to the BPI from GfK’s Chart Track reveal that platforms such as the Nintendo Wii, drove a large amount of sales (up 123% for the platform itself) in the gaming sector. The findings demonstrate that motion-based titles such as the Just Dance franchise were key to the market over the past year, arguably taking up the slack from the decline in peripheral-based titles such as Guitar Hero and Rock Band.

The uptake of PlayStation’s Move and Xbox 360’s Kinect motion-sensor technology are also, alongside Wii, helping create a new category of music-based gaming.

BPI chief executive Geoff Taylor said as labels diversified their revenue streams, licensing music into games titles had become a core part of digital business.

“Music is no longer a mere background feature in music games but a driving force behind their development and popularity. Motion-sensing has breathed new life into music games on consoles and record companies are finding new ways of engaging with fans through mobile and social gaming platforms,” he noted.

While the market performed well in 2010, events at the end of the year and the start of 2011 suggested the console gaming business was running out of rail.

And although there are a few marquee acts which are predicted to dominate this category in 2011, such as Ubisoft’s Blacked Eyes Peas Experience and the Glee-branded Music In Motion, the real boom is happening in social gaming, as Zynga’s IPO – which could value it at $1bn (£0.62bn) – illustrates all too obviously.

The company has managed to tap into a demographic which would never have previously considered themselves gamers, using Facebook to reach hundreds of millions of users.

However, the problem here, and it will become an increasingly larger one for labels and publishers as social gaming scoops up more and more users who will never engage with console games, is that music is pushed too far the side.

FarmVille dominates the genre and Zynga’s other major titles are primarily music-free. It did partner with Lady GaGa around her recent album launch, unlocking tracks and promotions during the campaign, however research by AllThingsDigital found the impact was fleeting – with user figures spiking around track unlocks but falling back when there was no activity on the site.

MXP4 has also recently moved into this area with its Bopler range of titles – and although these are all built on music, it remains to be seen what market and revenue impact they will have.

There have been moves by labels, notably EMI and Universal, to use social gaming to reach new audiences but they have tended to be used as marketing channels rather than adding in a commercial element to the equation.

This is the fundamental problem facing the sector; as social games piggyback on social networks, there is an inherent assumption from the users that – just like the social networks they use – they should be free at the point of entry.

There are monetisation routes of course, through options like virtual goods which even track and merchandise sales. But margins are becoming tight as organisations such as Facebook adapt their usage terms to insist that games developers go through the Facebook Credits payment system and hand over a 30% commissio.

Console gaming and its new motion-based future, spells good news for a handful of mega acts with enough fans for a developer to spend two years and millions of dollars building games around them.

And, for the rest of the acts, social gaming will grow in importance. But those hoping for a financial windfall for such titles will have a long wait ahead of them.

2010’s Top Ten titles in the UK (title/format/publisher):

1. Just Dance – Wii (Ubisoft)

2. Just Dance 2 – Wii (Ubisoft)

3. Michael Jackson: The Experience – Wii (Ubisoft)

4. Dance on Broadway – Wii (Ubisoft)

5. Dance Central – 360 (Microsoft)

6. The X Factor – Wii (Koch Media)

7. Guitar Hero: Warriors of Rock – 360 (Activision Blizzard)

8. We Sing: Encore – Wii (Nordic Games)

9. We Sing – Wii (Nordic Games)

10. Grease: The Official Video Game – Wii (505 Games)


Why Blanket Digital Licenses for Publishing is Necessary: a Developer’s Perspective

Some interesting perspectives from Tuhin Roy of MXP4:

Social games and apps on Facebook are the most recent miracle of the Internet, coming from nowhere three years ago to generate a projected $4 billion in revenue this year. Companies such as Zynga, Playfish and Crowdstar have grown with the phenomenon and become experts in producing massively popular and addictive games.  Titles like Cityville, Mafiawars, Pet Society and Restaurant City have all become multi-million dollar business.

Music has been totally absent as a category.

Working with the team at Paris-based social music games developer MXP4 last year, we started to research why music-which seems such a perfect fit for the social space-had not taken part in the social games phenomenon. The answer that quickly became clear was that social game developers had looked into what is involved in acquiring music licenses and had run screaming. With lots of fertile territory left unworked, it didn’t make sense for these guys to dive into the thicket of rights issues involved, or to work through the complex license negotiations that would be involved in an entirely new model for the music industry.

With our backgrounds in music, we were less intimidated although we understood that huge complexities would be involved. On top of all the other issues faced by digital music services like iTunes or Spotify, we understood that social music games would be harder to license because they implicate synchronization rights. This meant that in large part we would not benefit from the work the music industry has done over the last ten years to clarify and simplify licensing for straight forward digital download and streaming services. We decided to dive in anyway.

We faced two major challenges. First, we would be negotiating deals that involved payments made in virtual currencies for virtual goods that included the right to access music. Beyond the obvious questions of how fairly to split revenue, the social game setting required us to work with labels and publishers to define entirely new methods of calculating and reporting royalties.

Second, and more problematic, is the fact that unlike digital mechanical reproduction rights or non-interactive streaming, there are no statutory or bulk licensing mechanisms for synchronization rights. For historical reasons, artists and writers almost universally have the right to approve on a case-by-case basis sync licenses that their labels and publishers want to issue.

As a result, once the hard work of agreeing on a deal with a label group or publisher is done, the fun of clearing songs on a track-by-track basis begins.

Just to identify what might be “clearable” and thus which tracks to request, has required us to build a proprietary multi-million line database of publishing rights using multiple sources.  Once we have identified a track that we think we may be able to clear through our deals, we work with the clearance teams at labels and publishers to put requests into the relevant artists and writers. Oftentimes, we need to reach out to the artists and writers representatives directly to get them up to speed on what we are doing.

And all of that is multiplied by the number of writers, publishers, artists and labels on a particular track-which these days can be a lot given the popularity of collaborations and sample licenses. One particular David Guetta track, for example, has 14 publishers.

So the challenges are clearly huge, although we are working hard to develop internal systems and procedures with our label and publisher partners to “scale up” the effort. The publishing industry is also starting to look at more comprehensive solutions. The NMPA’s recent call for a one-stop shop for synchronization and other rights is recognition that the music industry is losing out on potentially significant opportunities to make money in the world of gaming and beyond.

Unfortunately, given the historical requirement that artists and writers approve sync licenses individually it’s hard to see how such a one-stop shop can be set up quickly. Essentially, the publishing industry would have to replicate the process that we have been going through with MXP4. They would need to get buy-in from a large group of publishers and then would likely have to get individual writers to opt-in to the mechanism. It’s a huge task, but we would love to see it succeed.

In the meantime, we will continue to work through the process with our partners as we look to put the music business into social gaming.

(Tuhin Roy is Chief Strategy Officer of MXP4, the developer of Bopler Games, a Facebook application that enables users to play multiple music games across a large catalog of music. Tuhin practiced corporate and intellectual property law at Perkins Coie LLP in Menlo Park, California, founded and ran the Digital Rights Agency, co-founded Echo Networks and served on the board of directors of the Digital Media Association.  Tuhin also advises a number of digital media start-ups and is on the investment advisory board of Pink, an early stage investment fund.)


TinyCo Launches $5 Million Fund To Finance Games From Third-Party Developers

TinyCo, the mobile gaming company Andreessen Horowitz backed in an $18 million round, is launching a $5 million fund to finance iOS and Android titles from third-party developers. Called the TinyFund, the program provides up to $500,000 per title along with marketing, development and business assistance.

TinyCo says it’s not looking to take revenue share from developers and instead says it’s launching the fund to grow its network of games. It also says that developers maintain ownership of their intellectual property. Growing a network of titles would presumably help TinyCo distribute its own in-house games more easily. This is key, especially in an era where incentivized installs — a once reliable and inexpensive way to acquire users — are on their way out on iOS.

On the one hand, it’s not uncommon for many of the larger developers to mix work produced in-house with games that are published on behalf of smaller studios. Glu Mobile regularly creates their own titles while publishing titles from other firms; it secured two deals earlier this quarter to work with author James Frey’s publishing company and Blammo Games, for example. Gamevil’s hit Air Penguin was originally developed by a six-person South Korean studio called Enterfly. This is just a way to mitigate the risks inherent to a hits-driven business.

Yet at the same time, from the perspective of the venture-backed social gaming world, this is more unusual as the largest companies like Zynga have cherry-picked their winners by buying small studios outright instead of merely financing their titles.

TinyCo recently launched two casual sim titles Tiny Nightclub and Tiny Zoo and two other major older titles, Tiny Chef and Tap Resort. It says it has seen more than 20 million downloads across its portfolio.

Live Nation: The Average Fan Goes to Just 1.5 Shows a Year…

This seems bad as I went to three gigs in the past 6 months, so that makes me NOT Mr.Average I guess? Either we need to get out there more and listen to live music or find a virtual space to create a band and perform?

It seems like such a low number, yet the same rough estimate keeps surfacing. “The consumer goes to one-and-a-half shows a year,” Live Nation CEO Michael Rapino told investors in Boston last week.

It sounds familiar.  Earlier this month, Songkick founder Ian Hogarth pegged the number at just one show a year.  And this is typically a special event, not a casual night out.  “They get incredibly excited about it,” Hogarth told an audience at SF MusicTech Summit.

But why not two, three, or four times that average?  Rapino pointed to some serious, structural misses – or, opportunities depending on the perspective.  “As we know, 40 percent of tickets are unsold, and 50 percent of consumers said ‘I didn’t know about the show or I would have gone.'”

But pricing could be the bigger culprit.  On that note, Rapino pointed to a serious pricing problem last year, one that considerably cooled attendance.  “Historically, the business has always talked about being recession-proof, and we learned last year that’s maybe not true anymore,” Rapino admitted. “But the consumer will come if you price it right, even when the economy is stressed.  Last year, they didn’t price it right.”

So, shave prices across the board?  Exactly. Rapino pointed to Prince as a prime example of a quick-footed response.  Instead of going the nosebleed route, Prince charged a $25 all-in ticket price, and recently filled seats for 21 nights at the LA Forum.  “We definitely know from last year that consumers will pull back from some of those casual shows or higher-priced tickets in these times,” Rapino observed.  “But coming out of 2010, if you’re a smart manager or agent, you’ve seen what happened last year.  And you’ve probably thought really hard about how you’re going to price the ticket – and how you’re going to make sure you’re not the poster child on the canceled show.”