Musicalias Presentation


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A brief presentation of with a point of vue on the evolution of the recorded music business.

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Musicalias Presentation

  1. 1. How music may (really) benefit from the Internet (at last!) Creative commons license 1
  2. 2. Contents Part I: Musicalias in a few words  What 3  Purpose 4  How it works 7 Part II: “raison-d’être”  Market overview 11  Focus: fan-funded music 18 Part III: more details on the project  Our positioning 24  Examples of participant offers 27  Project status and next steps 28  Appendix 29 Creative commons license 2
  3. 3. What Artists and labels, Musicalias has for vocation to help you value and monetize creative projects towards music-lovers, audiophiles, fans … This website was conceived so as to enable you to: 1- emphasize your specificities 2- let ‘autonomy’ be the rule of thumb 3- build tailor made offers Creative commons license 3
  4. 4. Purpose 1- emphasize your specificities  The shop provides you with a dedicated page for each label, artist and work that contain detailed information and is accessible by various criteria beyond the musical labeling  On the forum along with special categories for labels and artists, you can announce gigs in your own calendar (RSS enabled) and easily create full-featured blogs and picture galleries We can also create a special extension with:  only your products  URL such as  custom brand design also applied to your sections on the forum. Creative commons license 4
  5. 5. Purpose 2- let ‘autonomy’ be the rule of thumb  You can manage your shop pages* as well as your community (animation, moderation, polls...) on the forum  You freely set up the retail prices, send orders and invoices for which we receive payments from the Buyers. *subject to verification by Musicalias. Creative commons license 5
  6. 6. Purpose 3- build tailor made offers  Based on access to private forums and downloadable material, these offers can be presented as: − Exclusive complements to a CD, DVD, mp3 album − Advance orders for new recording or live event projects − Access to online fan clubs − …  In an environment where standard musical products have a decreasing perceived value, tailor made offers are a key element of our positioning: more details in the following slides Creative commons license 6
  7. 7. How it works (1 of 3) A marketplace with a high-end positioning  Participation is free, easy and without a tie  Musicalias keeps a 15% commission on each product sold*  Creative works are listed upon artistic criteria not upon their selling potential - turnover, quantity...  If artists and labels lack time, they may let ‘Editors’ such as writers, critics and bloggers manage their contents on their behalf. Editors receive either fixed amounts or commissions. *maximum commissions, to be determined on an individual basis for advance orders, according to the characteristics of each project. Creative commons license 7
  8. 8. How it works (2 of 3) How to receive monies  Through your personal account you can consult on-going orders in real time and sales history  Within the first five business days of each month Musicalias pays the sales of the previous month (minus our commissions) via bank transfer or Paypal (your choice)  A minimum amount is required for monthly payments − 50 euros with a bank account − 30 euros with a Paypal account − a semi-annual regularisation is done whatever the amount. Creative commons license 8
  9. 9. How it works (3 of 3) Participants scheme Propose, make Artists available Physical & digital products Labels Buy, pre- Digital & ‘real world’ services order Distributors (tailor-made offers) Fans, music-lovers, audiophiles… Writers Create Editorial content Read, comment Bloggers Webzines Sends payments & Order commissions Selects Suggests, controls Musicalias Creative commons license 9
  10. 10. Contents Part I: Musicalias in a few words  What 3  Purpose 4  How it works 7 Part II: “raison-d’être”  Market overview 11  Focus: fan-funded music 18 Part III: more details on the project  Our positioning 24  Examples of participant offers 27  Project status and next steps 28  Appendix 29 Creative commons license 10
  11. 11. The market (1 of 7) Recorded music market worldwide:  From $41bn (1999) to $30bn (2007, IFPI) − CD sales: uninterrupted downfall since 2000 (music DVD down since 2005) − Digital sales: $3bn in 2007, a consistent growth which does not compensate physical sales losses  Blockbusters have been suffering the most − US #1 weekly best sellers are frequently below 100,000 units, against several hundred thousand a few years ago − French “Disque d'Or” (golden disc) threshold was lowered to 75,000 unit against 100,000 Creative commons license 11
  12. 12. The market (2 of 7) The market is back to 1996 level  Sales in brick and mortar outlets have been shrinking but CD sales via websites are mostly stable (slight increase in the US, slight decrease in France in 2006, Nielsen Soundscan)  More choice & lower inventory costs become a key advantage. Evolution en valeur US$ sales evolution (USD) Recorded music des musiques enregistrées 16 14 12 10 Etats-Unis United States 8 Japan Japon United Royaume-Uni 6 Kingdom Allemagne Germany 4 France France 2 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Creative commons license 12
  13. 13. The market (3 of 7) An uncertain future Piracy remains massive  More than a billion files freely swapped over p2p networks each month (Big Champagne, 2007), with so many other means available (audioblogs, pirate sites, file transfer tools...).  The ratio of unlicensed tracks downloaded to legal tracks sold is about 20 to 1.  Its real impact is still discussed, but is most likely consistent (free being a tough competitor for paid content).  Despite all efforts, the very nature of the Internet (decentralized architecture) and the constant growth of bandwidth will make it hard to reduce piracy consistently. Creative commons license 13
  14. 14. The market (4 of 7) Physical goods  An overcrowded market where competition focuses almost exclusively on price.  This is especially true on marketplaces with an overwhelming number of price propositions for the same product.  Main question is: how low will this segment fall?  A few specialists have developed successful businesses thanks to well-conceived interfaces and rich editorial information.  Both of the following have also entered the digital game (distribution + retail) − CD Baby, first independent music retailer in the US with more than $70 million paid directly to 220,000+ artists − Abeille Musique, one of the most (if not the most) innovative distributors in France, recently launched “music & lifestyle” website (digital sales + advertising) Creative commons license 14
  15. 15. The market (5 of 7) Digital goods and services  Several models, hundreds of websites, most of them struggling for critical mass.  A la carte downloads (online + mobile channels) − Estimated $2.9 billion in 2007 (IFPI), a low-margin (5 to 10%) business which has not proved its viability yet for retailers besides the ultra-dominator iTunes − An unrealistic monetization of all songs swapped over p2p networks (about 12 bn/year) at $0.99/track would barely compensate the market losses so far  Paid subscriptions (downloads or streams on-demand) show a slow growth curve − Rhapsody + Napster = less than 3 M US subscribers − Even with an optimistic total of 10 M subscribers worldwide, the global revenue would not exceed $2 bn/year. “Just recently, MTV merged its Urge offering with RealNetworks' Rhapsody. And Yahoo Music announced that it would farm its Unlimited offering to RealNetworks in February.” (Digital Music News, 04 2008) Creative commons license 15
  16. 16. The market (6 of 7) Digital for free, sponsored by advertising  A possibly smart way to compete with piracy, surrounded by questions on how to reach an audience large enough to cover high licensing costs.  This is either − The radio model extended to on-demand streaming (Deezer, Jiwamusic…) − Free downloads with or without “Digital Rights Management” (We7, Qtrax, Spiralfrog…)  For which revenue prospect? − Social networks advertising revenues = $1 bn in 2007 (e-Marketer) >> even with a dramatic increase of those revenues and a consistent part for music, this will not be enough − Total Internet advertising revenues = $21 bn in 2007 (IAB estimate) >> a 10% fraction for music would still be too small. Creative commons license 16
  17. 17. The market (7 of 7) A simple equation  An addition of all those sources of revenue is unlikely to bring the market back to its former level. − Recorded music market: a $11bn fall between 1999 and 2007 − Physical goods: bottom unknown in spite of stable online sales until now − Digital goods & services: total market size of $3bn in 2007, $6bn in 2011? − Ad-sponsored digital: $2 to 3bn in 2011?  Two outcomes: − Revenge of the small vs. the industry − A place for real new paradigms. Notes: − Although we had this market overview in mind for quite a long time, we would like to thank Scott Cohen (The Orchard), Philippe Astor (journalist), Sylvie Krstulovic and Borey Sok (consultants and bloggers) for this helpful article − We disagree with the article’s conclusion but consider the following slides would apply even if a global license was set as suggested… Creative commons license 17
  18. 18. Fan-funded music (1 of 5) The newest trend  Be a producer:,,… − Invest real money on an artist − Once a certain threshold is reached, the artist can record an album − Producers benefit from various bonuses and will then receive part of the sales revenues  Take part in a project:, Marillion, Jill Sobule... − Between patronage & advance orders − Fans get access to the creative process: VIP access to recording sessions, credit listing on the CD, limited editions... For which potential? Creative commons license 18
  19. 19. Fan-funded music (2 of 5) As of today this trend cannot be easily quantified  Be a producer − A few websites enjoyed nice media coverage. The potential return on investment is a good incentive for fans combined with the excitation of making the right bet. 21 projects produced by Sellaband so far. − However the ROI remains uncertain for most of the projects. This may lead to fans weariness. As of today artists have little perspective beyond the first production. Most websites lack editorial content. The fiscal context for producers is unclear.  Take part in a project − As far as we know, apart from individual artists only one website truly explores this way: Artistshare, “allowing fans to finance artist projects in exchange for access to the artist’s creative process”. A few dozen projects appeared to be successfully launched. − Many artists & labels try and involve fans directly, however reaching a break even point to cover more than production and printing costs remains tricky − Among others, two recent examples to be noticed: Marillion & Jill Sobule. Creative commons license 19
  20. 20. Fan-funded music (3 of 5) Marillion  According to the band’s management, about 12,000 fans have pre-ordered Marillion’s next album  The deluxe 2 CD edition could be reserved for £29,99 since October 2007.  An order placed before March 1st ensured fans to have their name added to the album’s credits.  They also became eligible for various prize draws such as « Perform on the album, appear in the artwork, watch a gig from the stage, a phone call from the band »…  More than 470,000 euros were collected, thanks to an active online fan base of about 90,000. (details available on Creative commons license 20
  21. 21. Fan-funded music (4 of 5) Jill Sobule  In mid-January of 2008, Sobule launched a website,, which sought to raise $75,000 through fan donations in order to produce, manufacture, distribute and promote an upcoming studio album.  In exchange for their donations, Sobule offered her patrons an assortment of gifts with values commensurate with the amount of the donation. These gifts range from a free download of the album when it's released ($10) to the opportunity to attend a recording session and sing on the record ($10,000).  On March 8, 2008, 53 days after the public launch of the site, Sobule reached her target through donations from over 500 people in 44 U.S. States and eleven foreign countries. (text by Wikipedia, details available on Creative commons license 21
  22. 22. Fan-funded music (5 of 5) A transition from retail to service?  Those few examples remind us that in the entertainment sector, demand is driven by the offer. When a sensible offer is built and reaches the appropriate target, a brand new demand can be created.  The Internet should enable most artists and labels to build a new kind of offer with a high perceived value.  This is a shift from a retail model to a service model, where ‘easy access’ ‘personalization’ and ‘qualified information’ are key (as part of the ‘knowledge economy’). Creative commons license 22
  23. 23. Contents Part I: Musicalias in a few words  What 3  Purpose 4  How it works 7 Part II: “raison-d’être”  Market overview 11  Focus: fan-funded music 18 Part III: more details on the project  Our positioning 24  Examples of participant offers 27  Project status and next steps 28  Appendix 29 Creative commons license 23
  24. 24. Our positioning (1 of 3) Musicalias principles  Help the “fan-funded” trend to be of benefit to those without a large fan base or not likely to reap $30-50k on Sellaband-like websites. >> the investment goal is freely set by the project's owner  Fans are not invited to buy parts of a project but their contributions are praised and rewarded >> thanks to a privileged insight into the artists work and/or rare/pre- release stuff  Provide artists/labels with a structured environment >> easily build a multi-level offer to be sold to an audience beyond their best fans. Creative commons license 24
  25. 25. Our positioning (2 of 3) We also think that  Like ad-funded websites, this new model will work as a complement to ‘traditional’ retail (physical & digital), at least for the next few years  Labels and distributors have an important role to play in setting up the right offers (a highly fragmented market needs intermediaries)  This is not only about recording projects, funds may also be raised for live events  The concept may also work well with corporate sponsorships (e.g. a company buys brand display on a project and/or a bulk of products/services for its customers). Creative commons license 25
  26. 26. Our positioning (3 of 3) Market scheme Potential audience Artist / label’s website Specialized websites Artistshare, Tuneyourworld (?), Musicalias… Mass-market platforms Social networks: Myspace, Facebook, Bebo… Retail: Amazon, iTunes… Subscriptions: Rhapsody, Napster Ad-sponsored:, Deezer, SpiralFrog… Valuation of specificities & offers Creative commons license 26
  27. 27. Examples of participant offers  A first example is available on: More offers will be created as soon as possible.  Let’s notice that they should − Be adapted to the artist’s reach and audience typology in terms of content and price point − Find the right balance between the value for money (business) and participants’ willingness to help the artist / label (cultural interest, affection).  Obviously they will also vary according to the music genre, typically: − Jazz: unreleased material, audio commentaries, access to mastering session − Metal: tablatures, backstage passes, limited edition merchandise − Songwriting: exclusive e-book with lyrics and liner notes, theme songs written for fans, home concerts − Classical: access to rehearsals, VIP concert passes, artist / conductor interviews.  Best experiences may be shared by artists and labels. Creative commons license 27
  28. 28. Project status and next steps  Version 1 was launched end of April 2008.  Next steps for the coming months: − Extend the catalogue with as many advance orders & exclusive offers as possible (in specific music genres) − Execute first step of communication plan (promotion towards targeted music communities + press releases) − Launch v2 by September 2008 with new community features and improved back-office for Editors & Merchants (especially stats and sales reports). Creative commons license 28
  29. 29. Appendix Jill Sobule’s “Tote Board” Level # Total Friend ($5) 8 $42 Unpolished Rock ($10) 65 $671 Polished Rock ($25) 144 $3,668 Pewter ($50) 175 $8,938 Copper ($100) 90 $9,038 Bronze ($200) 17 $3,400 Silver ($250) 23 $5,750 Gold ($500) 24 $12,050 Platinum ($1,000) 9 $9,000 Emerald ($2,500) 2 $5,000 Diamond ($5,000) 3 $15,000 Plutonium ($10,000) 1 $10,000 TOTAL 561 $82,557 The number of levels, their value and total amount sought shall be adapted to each project. Creative commons license 29