Business Matters: Is the 'Tesco Model' Music Retail's Next Big Problem?
Business Matters: Is the 'Tesco Model' Music Retail's Next Big Problem?

Is the "Tesco Model" Music Retail's Next Big Problem?
-- U.K. grocery chain Tesco, a major player in CD sales, is pushing record labels to accept small, upfront payments and the remainder of the cost after the CD sold. Tesco would like to pay 50 pence (about .80 cents) for each CD and then pay the remainder at the time of sale. Such a system would replace the traditional wholesale payment paid (usually with 60 or 90 days dating) when the goods are purchased. Some label executives are said to be willing to test Tesco's plan.

The upside would be an ability to secure more shelf space -- or at least stop the erosion of shelf space dedicated to CDs. But there would be downsides, too. As a Financial Times report correctly notes, such a payment system would have a negative impact on labels' and distributors' cash flows. And labels would need to take a more active interest in Tesco's inventory management -- if they get paid when Tesco makes a sale, they need to know if and when Tesco has made a sale.

Could this happen in the U.S.? Certainly. While Tesco does not have a footprint in the U.S., the article says similar discussions have occurred in the U.S. with other retailers. That makes sense. Retailers have been tightening the shelf space dedicated to CDs. Labels have less bargaining power than in past years. The time is right for some kind of new arrangement that would keep CDs in stores longer.

( Financial Times)

QTrax's Wishful Thinking? Warner Music
-- -- Is something fishy going on at Qtrax? As Wayne Rosso writes at The Music Void, many Warner Music Group titles have been listed at a preview version of the free music download service Qtrax. Indeed, last week Billboard spotted titles by Led Zeppelin, Neil Young, Green Day and other Warner artists listed on the site. As of Monday those and other songs are listed but are unavailable for download.

Recall that Warner is the one major that has been outspoken against ad-supported music. "Free streaming services are clearly not net positive for the industry, and as far as Warner Music Group goes, will not be licensed," Chairman and CEO Edgar Bronfman Jr. said in February 2010. Two of the four majors - EMI and Sony Music - have signed deals with Spotify for the U.S. Some reports have claimed that Universal Music Group is close to completing a deal, although sources have told Billboard otherwise. The one company that has been not been mentioned in reports of near-finished licensing deals is Warner.

So something would indeed be fishy if Warner had actually licensed its music to Qtrax. It would look a bit peculiar if Warner would not do a deal with an ad-supported Spotify but would do a deal with an ad-supported Qtrax. Even though the two services have their differences in terms of product design and platforms, both are similar in that they offer free, ad-supported music. (Spotify also has paid subscriptions.)

But there's no evidence that Warner has a deal with Spotify. EMI is the only major known to have a deal with the service - an EMI spokesperson has confirmed this with Billboard. Given Qtrax's history of missteps, the existence of Warner listings at Qtrax is more likely to be part of another errant Qtrax launch.

( The Music Void)

Appetite for (Financial) Instruction: Duff McKagen Starts Money Management Firm
-- Duff McKagen (Velvet Revolver, Guns N' Roses) is starting a money management firm called Meridian Rock that will be headed by McKagen and Andy Bottomley, an investor who has an early stage venture capital firm. Meridian has won the backing of Peter Asher, a member of the '60s duo "Peter and Gordon" and producer of a number of James Taylor albums. McKagen and Bottomley are currently interviewing money managers.

Meridian's goal is to "educate rockers about their finances instead of pandering or lying to them," according to the article at CNNMoney. It will benefit from McKagen's industry knowledge and long road to knowledge of finance. After realizing that he did not understand Guns N' Roses' financials, he started taking finance courses at a community college in Santa Monica. He took more courses after moving to Seattle and eventually enrolled at Seattle University's Albers School of Business (he's one semester short of graduating). He has since advised people and spoken about money issues.

( CNNMoney.com)

Survey Says: Musicians Confused
-- Another online survey by digital distributor TuneCore offers interesting insight into the copyright knowledge of artists (and whoever else answered the survey). For example, 15% do not find value in registering their songs with the U.S. Copyright Office while 8% mistakenly thought their songs were registered upon the moment of creation. Ten percent do not believe artists should be paid when their songs are placed in TV or movies. Eleven percent of those surveyed believe people should be able to use any music to create a song if the sample is less than 15 seconds.

The survey also shows that people are fairly even split in how they think music should be released to the public. Twenty nine percent believe artists should release an album a year, 21% favor releasing an EP every few months, 20% favor the release of a single every month or so and 30% would opt for something else.

( TuneCore blog)


We7 For Offline Radio Listening

-- We7 has given Europe its first Internet radio station that caches songs for offline playing. Stations are populated with the help of data from Last.fm, The Filter and We7's own technology. The service is currently available for use by Android devices in the U.K. and Ireland. In the U.S., Slacker offers a caching feature for paying subscribers.

But the most important part of this story is that We7 is focusing on Internet radio rather than on-demand listening. As The Next Web article explains, We7 found that "consumers actually preferred less choice." And the content costs associated with Internet radio are much lower than on-demand services. If a service can target ads and deliver relevant songs in a way that attracts listeners, it can create a pretty good business.

Radio (whether it's online or broadcast) accounts for more listening time than on-demand listening. People like to "lean back" and just listen to music without the frequent engagement required by on-demand services.

( The Next Web)