Business Matters is a daily column that offers insight, analysis and opinion on the day's news.
-- Cyber Monday sales “appear strong,” according to the Wall Street Journal. Analysts think sales could grow 6% to $900 million. The forecast is based on the strength of Black Friday, a good indicator of online sales the following Monday. Last year, however, the biggest online shopping day of the year was December 9, a date closer to the deadline for shipments to arrive in time for Christmas. (Wall Street Journal)
-- Most reports of Spotify's conversion rate - the percent of users who upgrade to the paid, premium version of the music service - is in the 4% to 6% range. On Sunday, The Guardian claimed "music industry sources" put the conversion rate in "some markets" at 12%. That implies two things: Spotify's conversion rates vary by market, and Spotify will have varying financial success according to its ability to secure premium members in a market. Based upon figures obtained by The Register, Spotify had roughly a 4% conversion rate in the UK as of June 2009. (The Guardian)
-- Don Tapscott, the man who coined the term "digital economy," calls Britain's Digital Economy Bill "fundamentally flawed." His suggestion is for a streaming music service that subscribers can access from any device. Sounds like a sensible reaction to piracy (if one conveniently ignores the fact that many people prefer downloads over streams). But Tapscott suggests the government "help the recording industry" figure out how to arrive at this new market-based solution, and he argues such a rich service would cause piracy to "vanish." To say piracy would completely disappear is, to put it lightly, a stretch. Also debatable is the need for government intervention in the creation of the service. The argument is clearly a statement on the role of government in addressing piracy. If government intervention would result in a service so great it would wipe out piracy, then tough anti-piracy laws would not be necessary. But by that logic, if the government-aided service falls short of wiping out piracy, government would still need to address piracy the way it knows best: passing and enforcing laws. (Don Tapscott, via Michael Geist)
-- Apple has opened iTunes LP and Extras to developers by posting documents with templates, best practices, a development guide and instructions for asset delivery. (The Unofficial Apple Weblog)
-- File sharing is good for all artists - if you incorrectly interpret a graph at the Times Online. The graph shows UK music industry figures (sourced from BPI and PRS for Music) for 2004 through 2008. The lines representing recorded music slope downward while live revenue to both promoters and artists slope upward - especially the line for artists. One could interpret the graph to mean artists (in general) are making more money period since live revenue is the top category. But that interpretation ignores the realities of superstar-driven ticket prices over the last decade or so. Live music is a winner-take-all market. The value is concentrated at the top. Once an artist becomes a huge success on the road, he/she can command ticket prices well above the rates charged by sub-superstar artists. In the middle of the pack, ticket prices do not have the same flexibility. This trend has emerged over the last twenty-plus years, according to the academic paper "Rockonomics: The Economics of Popular Music" by Princeton's Marie Connolly and Alan B. Krueger.
"In 1982, the top 1% of artists took in 26% of concert revenue; in 2003 that figure was 56%. By contrast, the top 1% of income tax filers in the U.S. garnered "just"14.6% of adjusted gross income in 1998 (see Piketty and Saez, 2003). The top 5% of revenue generators took in 62% of concert revenue in 1982 and 84% in 2003. Surely, this is a market where superstars receive the lion's share of the income."