Raja Jasti’s Blog - Renaissance Thinking

Techcrunch reports that music store Amie Street bought streaming service Songza few months ago.

For months, popular music store Amie Street has kept a deal it forged with Songza, a media streaming service, under wraps. But this tweet (and a fair amount of research on our part) has uncovered the news: Amie Street acquired Songza back in October 2008, and planned to keep the deal under wraps until they were ready to announce whatever it is they have in store for the product.

Amie Street co-founders Elias Roman and Joshua Boltuch confirm that the acquisition definitely took place, and Songza co-founder Scott Robbin has since become part of the 20-headed team based in New York. Songza’s other co-founder, Aza Raskin, had earlier left to join Mozilla.

Expect to see more consolidation in the web music space. It is a really difficult time for web music startups that are getting squeezed from both sides by the gllomy ad market and high licensing fees being demanded by the labels.

Music coalition wants to rewrite the rules of music business.

The Future of Music Coalition has released a set of principles that it hopes will govern the distribution of revenues from new models of music sales. The big labels are unlikely to be amused by its ideas.

As revenues from sales of traditional media have plunged, the music business has been looking for alternate ways of making money from its products, including a variety of subscription services, ad-supported streams, and blanket licenses. The focus of these efforts has largely been on how to ensure that revenue gets collected by the industry in general instead of disappearing into the black hole of piracy, but there’s a related issue that doesn’t receive as much attention: how that money gets distributed once it’s collected. In an attempt to highlight this issue, the Future of Music Coalition has released a set of principles for the compensation of musicians. Although the document focuses on money from new distribution models, it reads much more like an effort to rewrite the rules of the entire business.

FT has a nice article on the double squeeze that web music companies are facing from falling ad market and label licensing fees.

Tumbling advertising revenues are laying waste to another wave of internet entrepreneurs as they struggle to satisfy promises of free music to users and cash flows to the labels that own the copyright.

Two popular services that allowed free listening, although not downloads, while providing a share of advertising money to record labels, have been forced to close down in recent weeks.

SpiralFrog shut down on March 19 after borrowing millions from private investors, while Ruckus, another free service aimed at college students, pulled the plug in early February.

Larger rivals are struggling too, raising questions about advertising-supported businesses and leading some to blame the record labels for demanding millions of dollars in advance royalties, investment stakes or both as hedges in case their split of the advertising revenue comes up short.

Michael Bebel, who ran Ruckus says: “The labels have to understand that the ad market in this space is still developing,”.

“This means that they need to be happy with a revenue-share model that is not all that significant in terms of per-play.”

Even YouTube, the video-sharing site owned by Google, lost its deal for free use of songs from Warner Music in exchange for sharing advertising revenues.

The label felt it was getting too little cash and that YouTube was not doing enough to convert listeners into buyers.

This double whammy is going to have a major shakeout in the industry. Labels want to make sure the digital revenues compensate the loss from traditional CD sales without paying heed to the advertising and economic realities. This is short sighted because it will kill innovation and delay the creation of digital ecosystem required for the music industry to succefully adapt to the digital media world. This is the key to their survival. Today the small guys may be the one that die, but tomorrow it will be their turn.