Musicalias Presentation

musicalias.com

How music may (really) benefit from the Internet (at last!)

Creative commons license
1

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
2

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

3

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 http://mylabel.musicalias.com

custom brand design also applied to your sections on the forum.
4

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.

5

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
6

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.

7


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.
8

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

9

Contents


What 3

Purpose 4

How it works 7


Market overview 11



Our positioning 24



Appendix 29
10

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

11

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

12

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.

13

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 qobuz.com “music & lifestyle” website
(digital sales + advertising) Creative commons license 14

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)
15

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.

16

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
http://www.zdnet.fr/blogs/2008/02/06/mes-carnets-du-midem-2008-5-hommage-a-deux-catalyseurs-franc-tireurs
− We disagree with the article’s conclusion but consider the following slides would apply even if a global license was
set as suggested…
17

Fan-funded music (1 of 5)
The newest trend


Be a producer: sellaband.com,
slicethepie.com, mymajorcompany.com…
− 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: artistshare.com, 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?

18

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.

19

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 marillion.com)

20

Jill Sobule


In mid-January of 2008, Sobule launched a website, jillsnextrecord.com,
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 jillsnextrecord.com)

21

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’).

22

Contents


What 3

Purpose 4

How it works 7


Market overview 11



Our positioning 24



Appendix 29
23

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.

24


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).

25

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: Last.fm, Deezer, SpiralFrog…

Valuation of
specificities &
offers

26

Examples of participant offers


A first example is available on: http://www.musicalias.com/album/al-dente_80.htm

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.
27

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).

28

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.

29

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