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Napster vs AllOfMP3

Check out this graph from Alexa - it shows traffic to AllofMP3.com vs that to Napster.com. It seems AllofMP3 has stole the lead from Napster.

AllOfMP3 is the semi-legitimate music download service based in Moscow which uses a quirk of Russian law to be able to offer entire album downloads for forty cents. Unable to advertise overseas (it would be sued in an instant) its growth has come through word of mouth.

It's faced pressure from the industry in the past but so far they've been unsuccessful in stopping the site offering tracks.

It seems its doing an amazing trade. Probably because its offering a service that consumers actually want - cheap, easy to use and no restrictions on tracks. Compare that download services in the UK and US.

What does the French DRM law mean for iTunes?

BBC News updates on the French DRM laws that are being considered there (read the story). Basically proprietary DRM wouldn't be allowed. iPods would have to play Windows Media files. Creative players would play iTunes downloads.

Now there's a lot of ifs and buts here. The law needs to get passed and it needs to be enforced. Any potential action here is still a long way off.

But what happens when it does get passed? Would iTunes pull out of the French market? Would Creative owners be able to listen to tracks they'd downloaded from iTunes?

It could mean the technology firms get together and design a universal DRM format which all the labels sign up to. But getting agreement in the industry has always been difficult. And for Apple the use of DRM isn't really about selling tracks, it's about selling iPods.

Or Apple could release a version of iTunes for the French market which allows customers to play their tracks on any media player. But working with a variety of different formats could prove difficult and in these days of a global internet could see the less-restrictive verion of iTunes being used from anywhere in the world.

Or iTunes could just walk away. Leave the French market. It's unlikely Apple will choose to do this - France is a reasonably sized market both for downloads and the iPod. Initially Apple is probably going to find some way to challenge the laws or find some DRM compromise.

But what if they did walk away? The arrival of legitimate download services saw some people move from the filesharing networks to the commercial services. Would the commercial services leaving the market see the reverse?

It's going to be interesting to see the outcome of the French DRM laws if they get passed. France is perhaps the first country to think about DRM from the consumer perspective and it'll be interesting to see how the industry reacts.

The Start of Video Downloads

There are rumours circulating that Amazon are planning to launch a video download service later this year. It's great news for the movie industry if this is true but we saw late last year that Netflix was having problems licensing content from the movie studios so we'll need to see if Amazon hits the same wall.

The problem the movie industry faces is that technology isn't standing still. A few years back they weren't suffering from illegal downloading like the music industry. Internet connections will still relatively slow so it took way too long to download.

That's changed. It takes a few hours to download a TV show and that's why we saw downloads of illegal video content overtake music downloads last year.

They also need to rethink region encoding as its a key driver for piracy in Europe. With movies released months later in Europe it provides more of a reason for people download. Same with TV shows. Why would people wait for the new series of a TV show when they can download it a couple of hours after it's been shown in the US?

Giving people a legitimate source of music through the download services was a big step in reducing illegal downloads. They've still got a lot of work to do and they're getting a lot wrong but they're on the right track.

Let's hope the movie industry wakes up to the need for similar video download services to kickstart the download market for movies and TV shows.

I just don't get this

Yesterday's LA Times carries the story that Sirius is having problems staying on top filesharing of the Howard Stern show. Stern moved to the $12.95 a month satellite service last year and the move lead to a huge increase in subscribers.

What I don't get is why Sirius is taking such a heavy handed approach to copies on the internet which often turn up a few hours after the show has been broadcast.

You've got huge demand there. Stick a copy on the web after the show has been broadcast. You could even charge a couple of dollars a month for an immediate download of the show in high quality as soon as the show has finished. It'd save fans hunting around the web and networks for downloads.

Considering his show is downloaded nearly as much as The Simpsons it shouldn't be difficult to get a couple of million subscribers a month paying to download. Hit that level and you've paid for Stern's $500 million contract. The money you then bring in from subscriptions to the satellite service is profit.

The biggest driver for filesharing is not price. It's access to content and ease of use. If your service does not offer what fans want, easily they'll download from the filesharing networks.

Locking your content away, missing opportunities and suing potential customers is not a longterm business model.

Filesharing going away.....

The IFPI, the big music industry body released research which says legal download surpass illegal downloads.

Our research at the same time says the opposite. As does that of p2p research company, BigChampagne.

DRM vs Consumers

I had a chance to speak at the MusicTank DRM event on Wednesday night. The keynote was by Richard Gooch, a Deputy Director at the IFPI, the international music body which looks out for the record companies. The discussion was focused on protecting intellectual property versus the consumer's right to play their music on various devices.

It turned out to be a lot more balanced panel than I was expecting and both sides were represented but at the end very little progress had been made. The IFPI guy still loved DRM, the consumer folks still said it stood on consumer's toes.

There was a lot of discussion about consumers voting with their feet if they disliked the DRM mechanisms a download service applied. But it's just not like that. Our music industry research shows that consumers are twice as likely to download illegally when they hit a problem with DRM.

There's also a perception from the pro-DRM side that those who download illegally don't want to pay for music. That's simply not true. You'll always find that for some people any price is too expensive but most music fans want an easy to use service with tracks they want and without the risks of viruses and legal action they can face on the illegal networks.

And that's what they can't always find at the minute. Why can't I use my Creative Zen with iTunes? Why can't I use my iPod with Napster? Why can't I burn that track to a CD for my car? These are problems that people face every day with the legitimate download services and you're still paying a similar price that you'd pay for a CD. And you're paying a lot more compared to an unrestricted version from a filesharing network. A few small improvements to the download services will attract more users back from the filesharing networks than any amount of legal action ever will.

Consumer Taste Sharing

Came across an interesting but unusally titled paper from Harvard on the subject of consumer to consumer recommendations in the online music business. This is essentially things like online playlist sharing and other community style recommendation technology.

They predict that within four years 25% of online music transactions will be driven by consumer recommendation technology.

Our research shows that with stores like Amazon are already driving 26% of their sales through technology based recommendation systems. Download our free music sales paper

A Tale of Two Games

Imagine these two games.

The first a violent mix of car chases, guns and mafia. Launched with a massive TV campaign, huge press coverage and a storm of controversy.

The second, a game where you get to run a farm with horses. No advertising budget, probably zero media attention and absolutely uncontroversial.

Both launched just over six months ago. Which do you think sells more?

It's the second one.

The games in question GTA:San Andreas the PC version and Pippa Funnell's Stud Farm both launched  within a month of each other last year. GTA: San Andreas had a huge advertising campaign and created a lot of controversy over adult content which can only have helped boost its sales. Pippa Funnell's Stud Farm had none of this.

Yet over on Amazon, Stud Farm has a sales rank of 137 compared to GTA's rank of 953. (Think of sales rank as the top 1000 list, the lower the number the more you're selling). And because we know the long tail isn't a linear thing we can guess that Stud Farm is currently outselling GTA by at least a factor of seven.

What's driving this? Amazon recommendations. Amazon has found the niche market for Stud Farm and is selling a huge number. What's happening on the stores that don't use recommendations technology? I'd be suprised if they'd sold anywhere near the amount Amazon has.

I'm not suggesting for one moment that over the past year GTA:SA was outsold by a game where you get to remove stones from horses hooves. GTA:SA is a multi-platform title and had an incredible advertising budget. There's no question that it's sold a huge number of questions. But right now it's loosing out to a game about horses.

And it's interesting that recommendations technology allows you to achieve a comparable success for a game with next to zero advertising budget and based around purchasing saddles.

iPod owners more honest

We released our research today that shows out of all the owners of digital music players it's iPod owners who are the most honest. With the iPod having nearly half the music player market we thought it'd be cool to compare your iPodder to your average music fan. What was the result?

Well, they're substantially less likely to download using filesharing software with only 7% of iPod people downloading illegally compared to 25% on average. And they're more likely to be buying CDs with your everyday iPodder buying 2.3 albums a month compared to the average of 1.8.

Why is this? Well Apple fanatics would likely argue that the zen-like experience of Apple technology puts them in a spiritually balanced place which allows them more empathy with struggling artists and I certainly can't disprove this but I'd argue that it's down to Apple reaching a more mainstream audience.

Everybody knows the iPod. Nearly everybody has one. And that skews the userbase more towards a mainstream user and away from your average gadget fan. Your aunt who got an iPod doesn't know how to download and even if she did would she be likely to try it?

Other things that stood out was that iPods are pretty evenly split between male and female owners and that only half of them are regular users of the iTunes store.

The report is free - download it here

Welcome

Welcome to this new blog. I reckon pretty soon it's going to be a legal requirement to have a blog so I thought I'd better get the ball rolling.

In it I'll be looking at the business of ecommerce. How web retailers go about the process of making a sale from bookstores to music downloads. And what motivates consumers to buy product A or Product B. Why do they walk away from making that purchase?  What motivates them to use that download service? What's going to make them more likely to stick around at an online store? Oh and we'll probably hit some other stuff too.