Music, Sound Effects, Tech News, and More — The AudioMicro Blog

We’ve been hearing a lot about the downtrodden online music streaming services like imeem, the struggling MySpace Music, or the not-even-launched American Spotify.  So what’s happened to Pandora, one of the original services, whose goal is to “play only the music you’ll love”?  In the midst of all this financial and licensing trouble for streaming services, Pandora’s actually gaining ground, and has had its first profitable quarter ever last year.  How are they doing this?

First, a bit about Pandora.  Their Music Genome Project is an intensive analysis of songs: their team of musician-analysts listen to each song, study its details – each song takes about 30 minutes to fully listen and record these unique (and numerous – they’ll record up to 400 different details in one song) attributes.   You enter in the name of a song or artist, and Pandora generates a list of songs with similar attributes.  With about 100 years of music to choose from, and the ability to create 100 different stations personalized to you.  Pandora has taken its meticulous analysis and has doubled its subscription base to 40 million users, according to CNN.

They’ve made deals that have expanded their reach, including one with Apple, have sought out more higher-paying advertisers, and have brought in $50 million in revenue.   Their iPhone app allows listeners to use the service anywhere, anytime, which appeals to both those who already use and those who want to increase the options for mobile listening.  They add about 35,000 iPhone subscribers everyday.  Says Tim Westergren, Pandora’s founder, “Access is our holy grail.”

One problem that all online music streaming sites face is licensing fees.  This crippled imeem, Lala, and other sites, and has threatened to sink Pandora in the past as well.  Westergren has called royalty fees an “albatross.”   The albatross grows heavier as Pandora gets more popular.  $30 million of their $50 million in revenue went to royalty payments.  You can almost here the meter ticking every hour, can’t you?

Pandora finally got a break last year, when they reached an agreement with royalty collector, SoundExchange, to lower their fees.  Westergren says, “The silver lining of our battle over royalties is that [the music industry] came to know our business, and they’re getting to understand that we’re good for them.  Like terrestrial radio, we’re fundamentally a promotional device for music…but we’re an enormous, targeted promotional machine.”

Sonal Gandhi, Forrester Research music media analyst says, “Pandora now has a sustainable business model,” something which other streaming sites lack.  “It was quite a struggle at the beginning when royalties were very high and when they were reluctant to place ads on their site.  They realized they had to do more to make money, and now they’re getting the hang of it.”  And even with those occasional ads, Forrester finds that Pandora users aren’t leaving the site.  A good bit of news in the music streaming world.

More Music News From Around the Web Today . . .

Camper Van Beethoven Asks Fans For $7,000 To Sponsor SXSW Trip

Liars Music Video: Scissor

Caribou – “Odessa” Video

Jay Electronica Live @ The Jazz Cafe in London

Posted in: Pandora, streaming music services

This week was an interesting one in the world of copyright infringement, takedown notices, and websites that choose to “do what they want” when it comes to record label material.  Early in the week, we learned that MySpace had removed Project Playlist widgets from all MySpace profiles that contained the popular music playlist compiler.  At the time, it was presumed that Facebook might not remove the Project Playlist application from and would attempt to stand up to the record labels and defend the startup.  However, just a few days later, Facebook caved in under pressure of litigation from the labels, and removed the Project Playlist service as well.   Of particular importance to all this is to note the just one day prior to being removed from Faceboook, Project Playlist was able to secure a deal with Sony BMG which allows music from the label giant to legally be used in the service.  

Project playlist is gaining popularity and all of this bad press is undoubtedly fantastic exposure for the service.  If they are unable to close deals with WMG, EMI, and UMG, will the service be able to survive with only Sony on board?  The labels are clearly in control here, and the fate of this startup hangs in their hands.

The popularity of the service seems natural – it allows users to listen to music on demand, for free.  Advertisements are used to support the service; however, the effectiveness of music advertisements is a huge question mark, leading advertisers to demand a greatly reduced CPM.  While listening to the music, users are typically performing other activities other than starting at the ads.  Web users can have different tabs and windowns open, or altogether not be using their computer monitor whatsoever.

The music industry is undergoing a major change and it’s quite clear the the model of 2008 and 2009 is free, yet ad supported music.  Is this a perfect solution?  Will it lead to increased revenues for the labels?  Will it be enough to compensate for the decline in CD sales?  Eventually, they will get it right and the musical advertisement may be a great step in the right direction.  So long as you do not mind staring at Fruit of the Loom ads while you jam out to Queen, the ad supported model will be able to deliver your on demand music needs.  So who will win this space? MySpace Music, Project Playlist, Pandora, LastFM, or another service?

Posted in: Facebook, LastFM, MySpace, MySpace Music, Pandora, Project Playlist, Sony BMG, Sound Effects, stock music, stockmusic

AudioMicro presently pays 50% of all cash received back to it’s artists on a monthly basis.  For comparison purposes, we will list the royalty percentages and payout patterns for various other types of music licensing:

1. For iTunes like downloads from digital music stores – including iTunes, Amazon, eMusic, Walmart, etc. the artist typically receives a 10% royalty.  But wait a minute, this 10% comes from the net amount received by the record label.  Record labels typically receive around 70 to 60 cents from each 99 cent download, thereby leaving the artists with only 7 to 6 cents per iTunes sales.  
2. For ring tones, artists typically receives 10% of the amount received by the record label.  For instance, if a ring tone costs $1, the record label will received around 50 cents and the artist will receive around 5 cents.  For a standard recording contract, the artist typically nets 10% of what the record label receives. 
3. For Audio streaming services like Pandora, and Project Playlist, as well as video streaming services where advertisements are displayed along with the music streaming, the amount that gets paid to the artist is still in negotiation, and not yet set.  In short, the artist can expect to also receive 10% of the net revenues received by their record label, for their pro-rated portion of the streams.  The interesting thing to note in regards to music streaming services and satellite radio (Sirius and XM being the largest) is that the record label and the artist are paid by a government sponsored entity known as Sound Exchange.  In contrast to traditional radio, the royalties are paid not to composers and publishers but to the performers (artsts) and the copyright holders (typically the record label).

Posted in: audio micro, Free Sound Effects, Open Source, Pandora, Project Playlist, Sound Exchange