Apple Music Store April 29, 2003Posted by David Card in Digital Home & Personal Tech.
Yes, it’s most definitely a store, not a music service.
You know I’m a True Believer. I have a Cube. I bought a Newton once. I bought my iPod the second day it was available. I ran the OS X beta as my main OS for a year. I want to like the Apple Music Store.
The good points: they got the price points and DRM right. There are some restrictions on burning (10 burns of a given playlist, but it’s easy to cheat), and the restrictions are not particularly well-marketed to a casual consumer. But they’re not very restrictive. Singles – which are somewhat better merchandised than albums – are $0.99 and a lot of albums are under $10. See some of our research on consumer resistance to tethered downloads and pricing in this Jupiter report .
Selection’s not bad, but it’s not superb. My punk/80s/Britrock/50sjazz/girlpop tastes produced, when I searched, tracks from 25 artists and no tracks from 23. Most artists had a bunch of tracks but incomplete albums. (And no real discography to help.) 49 Miles Davis albums, but only 3 complete. No Kind of Blue. 20 Sinatra; 7 complete. Some Paul Desmond, Dave Brubeck. No Stones, 1 oddball Beatles, no Zep, Madonna, Britney, Queen, Sleater Kinney, White Stripes. Lots of Lou Reed, some Bowie, plenty of Siouxsie, some Cure, Split Enz, Clash. All the digital catalogs are hit and miss, though. Apple’s doing at least as well as most.
The store is a clean, well-lit place, but it’s kind of empty. It does not lend itself to browsing or exploration, unless you think desktop file managers are a whimsical and fun experience. Minimal merchandising: staff picks, most downloaded, those who bought this also liked that, but that’s it. No liner notes, let alone reviews. No fan reviews, playlists. Nothing quirky. U2’s artist page (1 paragraph, 1 video, 1 photo, 3 exclusive tracks) looked just like Sheryl Crow’s.
Apple feels like a hardware company this week, not a retailer or media company.
Jupiter has been writing about the convergence of retail and programming since at least 2000. See this report .
Digital music services are increasingly blending radio, download, and original programming. So far, Apple’s got a weekly newsletter. When Jupiter asked about editorial and merchandising staff, Apple was coy, even defensive. It dropped a broad hint about online radio. It faces severe disadvantages in competing with AOL, Real, Yahoo, and MSN, let alone Amazon.
It’s not just the platform issue this time, although that’s an issue. This is a store, for goodness’ sake, that you can’t access without a Mac. Most people won’t be able to use it at work. It’s also the first broadband-only store since Boo. (A music clip rebuffered 7 times for me on a good dial-up connection.) Apple says the store will support Windows by the end of the year; I’d guess via MusicMatch rather than a real iTunes port or Web-based approach.
And it’s a store that’s integrated with a music jukebox, rather than the browser. (The integration’s not perfect, either – you can’t encode to the new codec without a new version of QuickTime.) That’s a very interesting angle. I have argued with Real for years about browsers vs. media players. Now I’ve got a new angle to pay attention to. I’m not convinced yet, but I’ll be watching.
AOL Time Warner 1Q03 Tidbits April 23, 2003Posted by David Card in Uncategorized.
I’ll summarize some of the highlights of the Time Warner earnings call. I will focus on media industry impact issues, not debt reduction or converting EBITDA to free cash flow, etc.
– No silver bullet strategy for AOL, because there isn’t one. It’s all about execution.
– Seemingly no answer to online ad malaise, though new bookings are growing in the teens. (The drag from old deals still dominates.) Minimal progress on cross-media sales. Paid search helps, but not enough yet to offset former pop-up revenues.
– Broadband strategy is the correct one, but also no way to swing for the fences. Just incremental movement. I think BYOA is overpriced and a little difficult to position against pure content offerings like RealOne and Yahoo Platinum. But MSN is in the same position. I do think existing AOL users will see value in BYOA, but they’d see more if it were $9.95, and bundled in games or music.
The details are here: earnings release
Time Warner Overall
– Qly revenue up 6%
– Subscriptions up 10% (driven by cable and, surprisingly, AOL)
– Ads down 5% (driven down by AOL, Cable; magazines and broadcast were up)
– Content (flimed entertainment, HBO, music) up 11%
– Revenue down 4%, operating income up 11%
– Reaffirmed guidance. Expects AOL will generate $1B in free cash in 03, and that figure should remain stable for the next few years. Strategy: continue to stabilize the business in 03, grow in 04. Expects revenue flat in 03.
– Dial-up business will continue to decline but “there are enough levers to pull to maintain profit margins” by cutting marketing expenses, network costs, customer service. Drove down costs faster than expected this Q, partly in marketing. Shifted something less than $30m in marketing expenses around 8.0 Plus from Q1 to Q2 because they launched it a little late.
– Europe on track to be profitable next year. UK is now.
– 289K decline in US subscribers vs Q4, but subscription revenues up 11%, due to Europe, currency, and broadband. Decline due to: a) mature US market b) churn rate up a little, though mostly due to stiffer “termination policies,” c) people watching war on TV lowered usual new user adds, d) migration to broadband.
– Euro subs down 63K, mostly due to Germany.
– 4.5M of 26.2M subscriptions are trial/retention (ie free). That is 17% of AOL total, and that 17% is down a hair from 18% a year ago.
– 16.5M pay for unlimited usage; 3.2M are ltd/OEM. The 80/20 unltd/ltd split is consistent with last year. Detail is here: AOL subscriber details
– Testing opportunity for Compuserve as a “value” access business (ie low-priced). “In the past, our strategy has been to try to migrate Compuserve users up to the $23.90 product….but it may be a business in its own right.”
BYOA, Broadband, Paid Content
– BYOA subs exceeded broadband bundles, though no detail. Expects BYOA will be bigger than bundled broadband for years to come, primarily due to a) national marketing for BYOA b) easier to market BYOA to installed base that is moving to broadband. Comcast bundling deal won’t really start till after June; Comcast is still selecting which systems to offer AOL on.
– Claims 2-3 million music downloads a day – they were not specific, but that figure must include tethered as well as burnable (current MusicNet offering maxes at 10 burnable/month in the top tier).
– Believes they will not incur high production costs for broadband content. Believes can spend conservatively on adding interactivity features to re-purposed filmed entertainment & music. Doesn’t expect to incur notable additional rights costs, either. I wonder.
– In reply to the question, When will you charge for IM?, the non-answer was “We’re looking for more ways to monetize that.”
– Ad revenues down 42%, $178M from old contracts gone
– Over half of ad revenues were from current sales, rather than from old deals. Current deals usually <12 months in duration. – Google paid search revenues strong.
– Expects ad revenues will be down 35-45% in 03, consistent with previous guidance. Revenue from newly booked business should be up double digits in 03.
– Cable is "a great business" with strong revenue growth for years to come via new services.
– 36% of base is digital, 15% uses broadband data services; believes those are industry-leading numbers
– VOD and SVOD are fully deployed; 1/2 million SVOD customers
– DVR in 15 systems; sign-up rate above expectations; "closing in on 100K deployed" (seems very high to Jupiter)
– Admits to DVR or not to DVR is a big debate within the company. Time Warner Cable DVRs don’t allow users to share programs they’ve saved via the Internet, nor do they have ad skipping buttons. "Consumers want them…We’re in the business of providing consumers what they want…we acknowledge there are issues." Monthly pricing ranges from $4.95 to $9.95 across the system.
– 65K HD settops deployed (also seems a little high)
– DVD sales are so good "we’ve effectively eliminated our reliance on Blockbuster." Yeah, right.
– Cable ad revenues a little light due to a) fewer new cable nets doing promotions b) less inter-company ad, otherwise would have been mid-teens growth.
– TW’s cable nets’ "subscription" revenues (ie royalties paid by MSOs) are typically 2x ad revenues. Cancellation rate was 4% in Q1 compared to 6% a year ago. Ad bookings up 20% vs a year ago.
– The WB ad revenue is up 27%.
– Time Inc. 10% ad growth; across the board except for business and finance mags. People, InStyle, Southern Living particularly strong.
– Time Life direct marketing struggling
– Interesting comment: People magazine has 35M readers, the number one TV show CSI has 26M viewers — "as broadcast TV audience declines…publishing returns to its role as the mass medium.”
– Warner Music revenues down 3%.
– Acknowledges minimal progress on cross-media advertising deals.
No Shock n Awe April 15, 2003Posted by David Card in Uncategorized.
NEW YORK — Sony Corp. (SNE) said Tuesday it will withdraw its application with the U.S. patent office to register “shock and awe” – a catch phrase used by the U.S. forces in their initial air campaign in Iraq – as title for a PlayStation video game, Kyodo News reported.
In a statement released jointly with its U.S. subsidiary Sony Computer Entertainment Inc., Sony said the application was based on “inappropriate judgment, Kyodo reported.
Sony filed an application with the U.S. Patent and Trademark Office March 21, a day after the U.S. attacked Iraq.
Sony pulled off the application following criticism in some U.S. media that it tries to turn war into commercial profit, Kyodo said.
No Commentary Necessary April 14, 2003Posted by David Card in Uncategorized.
Sony applied for a trademark on the war in Iraq’s catchphrase, “shock and awe,” for use as the title of a video game, a day after U.S. allied forces marched into Iraq, according to a filing with the U.S. Patent and Trademark Office. It was unclear if Sony had any plans to make use of the name, and calls to Sony Computer Entertainment America were not answered Friday. Sony was not the only company hoping to profit from the label. The U.S. Patent and Trademark office has more than a dozen recent applications for uses of the phrase, including for fireworks, lingerie, baby toys, shampoo and consulting services.
Digital Public Broadcasting April 13, 2003Posted by David Card in Uncategorized.
I’m at a conference for Public Broadcasting radio and TV stations this weekend. The mood about public TV is a little grim: NPR audience is growing but PBS is shrinking a little, budgets are stressed as always, and digital conversion is expensive with no payoff. And it is always an eye-opener for me to talk with Public Broadcasters, since I mostly works with commercial clients. These guys have a Mission!
Some provocative ideas I’ve heard so far:
– Big decision: invest in stability or do (jointly funded) skunk works? See Technology 360 on Television Digital investment scenarios.
– KQED in SF is acting as a portal for local content in partnership with local arts, education, & communit groups. It’s also created a nice little piece of Web content it wants to syndicate. It sets you up for a poll on a controversial topic, then shows you the contrary opinion & encourages you to post. See You Decide on the KQED home page
– Jupiter has written about this before, but it’s becoming more worrisome for local stations if, especially if they try DTV multicast, their signals become “must convince” rather than “must carry” for cable or satellite providers. On the other hand, what if all local TV ends up either Clear Channel-style conglomeration or dual ownership with local newspapers? Is that an opportunity for the local Public Broadcaster? Doubly so with local digital advertising so slow to emerge?
Boo – #$%&-ing – Hoo April 11, 2003Posted by David Card in Uncategorized.
The Times Magazine details the travails of out-of-work, over-educated, white, former-yuppie, professionals. Commute to Nowhere
I have no sympathy for a clearly clueless former Rapp Digital “executive” who made $300K a year (excluding stock options, notes the Times). A good story well-told, in many ways, but who cares? This kind of thing makes me want to cry for the “liberal media.”
Note that the author “is writing a book about New York and baseball in the 70’s.” Lord, help us. There’s a reason why the Times Magazine is not a must-read anymore.
Apple Records Redux? April 11, 2003Posted by David Card in Uncategorized.
The LA Times reports Apple is looking at buying Universal Music. Regular readers will know I’m not a big fan of vertical integration; I’m more of a stick to your knitting kind of guy.
Horizontal integration – different genres or media, as opposed to content creation/distribution/audience aggregation, or platform/content – now that I like.
The only time media vertical platform/content integration has worked is for Nintendo and Sony Playstation, where it works extremely well. It might have worked for RCA in TV, but that was a razor/blade gimmick for hardware, not a synergy across two business models.
Contrast Playstation with anything Sony’s done in storage or playback or authoring equipment and movies/music. Sony’s successes are in spite of, rather than because of, platform/content integration. They couldn’t make Betamax work, or memory sticks or minidisks in the US. There’s no advantage for Sony Music vis a vis Walkman that I’ve ever noticed.
Most holding companies must let individual business units do what’s best for each business unit, as opposed to forcing false synergies. There is one thing Universal/Apple could do as a company that the two couldn’t do as partners. Partnership deals have to be win-win; company decisions don’t. If he so chose, Steve Jobs could make decisions that would favor one business at the expense of another. He could:
– Make Universal music available on iPods or some Apple digital service for free or at deep discounts
– Throw in free iPods with an inexpensive Universal music service
– Make Universal music available for free in proprietary Mac/iPod formats
Actually Measuring Media Markets April 2, 2003Posted by David Card in Uncategorized.
Amusing and thought provoking story in Slate on how classics can outsell bestsellers. The moral of the story: once you actually count things (Nielsen BookScan), and count them in a fashion that isn’t arbitrary (over the course of a year or years, rather than weeks), you discover hidden businesses. Jane Austen outsold a 7 year-old Grisham bestseller last year.
Penguin’s beefing up its marketing to try to corner the market on classics, since there are multiple imprints for any given public-domain title.