Business Matters: Napster Co-Founder Sean Parker Now Believes In Record Industry
Business Matters: Napster Co-Founder Sean Parker Now Believes In Record Industry

Now He Tells Us: Sean Parker Believes In The Record Industry
-- Sean Parker, co-founder of Napster and investor in music service Spotify, believes the record industry is "on the verge of being fixed." Parker made the comment Wednesday at the e-G8 conference in Paris.

That's a pretty bold statement for a guy who helped usher in the downfall of record industry revenue as well as the chaos that is Internet piracy. He was part of an investment group led by Ron Burkle and Doug Teitelbaum that failed to acquire Warner Music Group (Access Industries had the winning bid).

Why does Parker see light at the end of the tunnel? He believes there is potential behind the change in how recorded music is experienced and monetized. When monetization shifts from acquisition (downloading) to experience (streaming), consumer spending will also shift, according to Parker's thinking. And when rights owners are paid according to listening, not purchasing, revenue shifts from newer to older music.

"I think that there is a pretty dramatic change in the way music is monetized that is on the cusp of happening," he explained. "Back catalogues of record labels are going to become extremely valuable." Speaking about the listening trends seen at Spotify, Parker said "it's the back catalogue that is driving the consumption."

Indeed, Spotify's top 50 albums contains many titles with older songs. "The Essential Michael Jackson" is #26, Fleetwood Mac's "Rumours" is #39, "100 Hits of the '80s" is #41, "The Essential Journey" is #45, Foo Fighters' "Greatest Hits" is #46 and U2's "U218 Singles" is #49. (Adele's "21" is the only catalog album in the top 50 purchased albums in the U.S., according to Nielsen SoundScan.) The top 50 tracks are all recent releases, but that doesn't mean Spotify users aren't listening to a lot of old songs.

But this line of thinking brings up an important question: If new business models shift value to older titles, would they then not shift value away from newer titles? After all, subscription models are more of a zero-sum game than purchase models. The more times "Don't Stop Believing" is played, the less money is paid out to a newer song. Unless consumers start spending more time and more money on recorded music, the end result should be a wash. And besides, one has to figure the biggest labels and most powerful artists will figure out a way to grab their fair share of streaming revenue.

It's worth noting that consumers are already acquiring plenty of catalog titles from download stores. Through May 22, catalog sales represent 47% of album sales and 60% of track sales in 2011.

Since labels already generate so much revenue from catalog sales, the future value of a music company's catalog may already be priced into their valuations. Maybe "the traditional music companies are undervalued," as Parker argues. But what we do know is that Access Industries, not Parker/Burkle/Teitelbaum, won the bid for Warner. Maybe Parker couldn't get his sunny assessment of Warner's catalog reflected in the investment group's bid. In any case, it appears Access has some faith in the value of music catalogs, too.
(Financial Times)


Only Four Out of Five Dentists iTunes Tracks Get Played

-- The average iTunes library has 5,409 tracks, but only 4,195 of them (19%) have been played, according to Music WithMe. That's the statistic inside a post at the company's blog humorously titled, "4,195 Reasons You're Wasting Your Time With Google Music."

How did Music WithMe get this number? The Louisville, Kentucky-based company (part of ParkVu) has an Android app that allows users to wirelessly sync their iTunes collection to their Android device. Google Music does the same thing, but Music WithMe puts it emphasis on sharing through Facebook and Twitter.

This statistic kind of fits in with Sean Parker's argument that users of streaming services tend to favor older titles. If only four out of five tracks in an iTunes library gets played, that akin to a person buying or ripping an album and listening to his/her two favorite songs. It also implies people aren't using the shuffle function much while playing music on iTunes. Instead, it implies people are taking a few tracks from each album and putting them in playlists.
( Music WithMe)

Last.FM: Transcending Its Three-Guys-From-Hoxton Design
-- Last.fm will get a redesign in an effort to make it a more mainstream service. "I have just hired eight new people to really begin work on redesigning the site and making the bits of the service which really matter come to the surface," VP of product Matthew Hawn told The Telegraph.

The company was founded in 2002 and was acquired by CBS for $280 million in 2007. "Last.fm was initially designed by three guys in Hoxton [east London] and they created it for who they were and types of people they mixed with" explained Hawn. "We now need to focus on making the service more mainstream and plugged into people's other music experiences and social networks."
( The Telegraph)

Tennessee: Amazon.com's Tax Haven
-- A bill that would have forced Amazon to collect sales taxes once it opened fulfillment centers in Tennessee has been shelved until 2012. The ecommerce giant will open fulfillment centers in the southeastern part of the state and has plans to open additional fulfillment centers in Knoxville and Nashville. On the same day Tennessee lawmakers delayed the bill, Amazon said it would proceed with plans to open a fulfillment center in South Carolina after lawmakers in that state passed a bill declaring the company would not have to pay sales taxes in the state.

A Memphis Commercial Appeal editorial acknowledged the need to shore up budget deficits but doesn't think Amazon can avoid sales taxes for long. "As important as the jobs may be to Southeast Tennessee or anywhere else, there must be a compelling reason for a government to treat a commercial enterprise more favorably than its competitors. The case for special treatment for Amazon is not strong."
( Knoxnews.com)