July 28, 2006

July 19, 2006

July 17, 2006

"We don't see the kids anymore," said Thom Spennato, who owns Sound Track, a cozy store on busy Seventh Avenue in Park Slope, Brooklyn. "That 12-to-15-year-old market, that's what's missing the last couple of years."

Without that generation of buyers, the future looks bleak. "My landlord asked me if I wanted another 10-year lease, and I said no," Mr. Spennato said. "I have four years left, then I'm out."

Since late 2003, about 900 independent record stores have closed nationwide, leaving about 2,700, according to the Almighty Institute of Music Retail, a marketing research company in Studio City, Calif. In 2004, Tower Records, one of the nation's largest chains, filed for bankruptcy protection.

July 14, 2006

July 10, 2006

As the durability of music is thus not homogeneous and depends on the consumers' preferences, market segmentation is likely to occur. We showed that renting is more likely to attract young consumers due to their taste for novelties. However, in this market segment, renting firms compete with both radio and pirate channels, and the relative lack of financial resources of the consumers in this segment means that they are more likely to choose the two latter rather than renting firms. On the other hand, we showed that, as selling firms are more likely to be chosen by more mature consumers, the direct impact of piracy is lower. More particularly, we demonstrated that the main competitor of selling firms is, in fact, the traditional Audio-CD market. Our analysis shows that, on the contrary to renting firms that face an intense competition from their main competitors -- the pirate channels, online firms selling music have some strong advantages over the Audio-CD market and are expected to gain a significant market share from the firms supplying Audio-CD.

In a nutshell, Microsoft will focus on one of Apple's clear vulnerabilities: the relative inability of iTunes and iPod users to discover new music. Sure, you can share iMixes, but most iTunes users for the most part log on to buy songs they already know they want to buy.

The new Microsoft service, and the marketing to back it up, will likely focus on community-oriented capabilities--specifically, the ability for users to wirelessly "see" each others playlists and get a certain number of "free" streams of songs they want to check out. In other words, the WiFi capabilities won't be focused only on letting people satisfy the immediate, urgent immediate need to log on to some wireless digital music service--something that hasn't taken off, despite efforts of carriers such as Verizon and Sprint. Rather, the wireless capability will seek to exploit the most powerful "recommendation engines" around: your friends.

July 07, 2006

To attract current iPod users Microsoft is going to let you download for free any songs you've already bought from the iTunes Music Store. They'll actually scan iTunes for purchased tracks and then automatically add those to your account. Microsoft will still have to pay the rights-holders for the songs, but they believe it'll be worth it to acquire converts to their new player.

Microsoft has the cash to do it. And it seems like the only possible way they'll be able to pry people loose from iTunes.

As a shareholder, I'm nervous about it. Xbox is a (qualified) success, but anybody going up against Apple in product design could get stomped, and MSFT's strength is definitely not product design.

July 05, 2006

Q: What is the difference between Apple's iTunes store, and competing services like Rhapsody and Napster 2.0? Does one carry more music?

A: Apple's iTunes store claims to have more than three million songs licensed from the major labels and from independents. Rhapsody and Napster claim more than two million songs, and Yahoo Music Unlimited claims more than one million. So, iTunes has by far the most music. In addition, iTunes has a strong selection of videos, including 150 television series, plus tens of thousands of audio books and podcasts. Its competitors are much weaker in these non-music categories. Most have nothing at all besides music.

The main difference lies in how the services work. iTunes works like a physical record store: you buy songs or albums, paying separately for each. Songs are 99 cents each, albums are usually $9.99, and videos are typically $1.99. Apple is reportedly negotiating to sell full-length movies as well.

Rhapsody, Napster and Yahoo work on a subscription model: you pay a monthly fee, and can download an unlimited number of songs. For Rhapsody and Napster, the fee is $10 a month if you want only to store and play music on a computer, or $15 a month if you also want to play your music on a portable player. Yahoo charges less -- $6.99 a month for a PC-only plan and $11.99 a month for a portable plan.

The upside of Apple's approach is that, once you buy a song, you own it. It never expires. You can burn it to CD an unlimited number of times, and transfer it to an unlimited number of iPods. The downside is that, to fill an iPod with, say, 5,000 purchased songs, you'd have to spend $5,000.

With the subscription plans, you can fill a portable player for just a monthly fee. But there's a huge downside: you don't own the music, you merely rent it. If you stop making your monthly payments, all the songs you downloaded over the years will suddenly expire and become inert and unplayable on your computer and on your portable player. Also, rental songs usually can't be burned to CD and can only be copied to a limited number of portable players. In order to burn the tunes to CD, you generally must first buy them for an individual price, just as you do on iTunes.

There is one exception. A service called eMusic sells its songs in the open MP3 format, without encryption or copy-protection. Thus, these songs will play on iPods and all other portable music players. But eMusic doesn't carry the catalogs of the major labels. It has a much smaller selection than iTunes does.