1. B.R.I.C.: There is a world of innovation beyond the usual suspects. BRIC, an acronym for Brazil, Russia, India and China will step up its drive in innovating brand new digital music services. Unlike most Western & developed nations, BRIC services are not sheltered under copyrights/IPR. In many cases, the BRIC nations have understood and embraced the “pirate culture”. This might surprise a few, but in countries traditionally known for Copycats/Clones, their services often include a few more tricks (to combat the supposed figure of 98% pirate nations). Is this the coming out year for BRIC services?
2. Business models: No one is totally absolved from the current financial tsunami, and with many Sugar Daddies (e.g. Vcs, PEs, Angels, IPOs etc) now out of the frameworks, it is time to go back to the basics – Building a sustainable profitable service business. This might sound cliché, but there are plenty Web 2.0 services with no visible or possible monetization model. Scale & amass users first, think about monetization later will not hold in today’s climate.
3. Innovation & Copyrights: These 2 are intimately related and will increasingly act as a double edged sword. This is also related to point 1., and why we see greater innovation to occur in the B.R.I.C., innovation protected by a loose IPR system and under the gazing eyes of executives in large copyright owners in the Western developed nations (thanks to the language barrier).
4. Experience: As a trend, we will all be continuing to push the boundary of digital experience. Learnings and exporting service experiences from the traditional brick & mortar sector helped established the digital service platform in the last 10 years. The time is ripe now to tackle concerns in the digital realm.

Critics of the music industries have accused many record labels and publishers of recognizing too late the value of digital.  The problem, however, is not only finding the right way to step into the digital arena, but in defining what music is nowadays.

What caught my attention was:

Are you concerned that if economic conditions get tougher and the ad market tightens up, that you’ll feel forced to sell?

Rose: Digg has 25 million people a month coming to the Web site. We’re not going anywhere. We have very strong financials, we have a very clear path to profitability, we have a small team. We’re 50 employees.

That’s Morse code for “We are not profitable now”.

Markus Frind, CEO of Plentyoffish.com, who is famous for raking in millions on the back of Google Adsense, one known official full-time employee and maybe 2 hours of work per week, recently blogged about his rough estimate on the running operational cost for Digg to be around USD$ 420k per month. Markus was also highlighted that Digg is nothing more than a collection of links to news stories that are indexed by Google – i.e. not as bandwidth intensive as media serving sites.

This got me worrying.

Digg teamed up with Microsoft in Advertising in 2H2007. The combined factor of an exclusive provider of display and contextual advertising deal with the timing when Microsoft was desperately searching for partners to extend their advertising empire means Digg probably got a great deal (Yes, I am speculating here). If under those circumstances, Digg is still on a very clear path to profitability, are advertising-only-supported web businesses sustainable?

What about sites like MuSMo who are expected to be rather bandwidth intensive? Are we doomed?

Or worse, what about sites such as Last.fm who are shouldering the burden of not just the high bandwidth cost but also the content licensing cost? Or are such sites, in general attractive acquisitions for mega companies such as CBS who can fund these projects under loss-leadership.

And content providers, do you really care? On the recent blog entry of David Porter who guess-timated the new internet radio royalty to be around 78% – David showed that the math doesn’t add up. Maybe content providers really do not need these internet radio sites…

My take, I sure do not want to be in a non-profitable non-sustainable business. But is it irrational of me especially when clearly, the new 2.0 mantra is to scale first monetize later? Can the mister who runs the Ad-supported-music blog point us all to an example of a well run, i.e. in profit, ad-supported music site – yes, it has to combine the twin evil of intensive bandwidth usage and licensed content?

The reasons detailed including an unsustainable business model, terms by the record labels and difficulties in financing.

I would, however, be very interested in how Ezmo deals with their wind down especially to Ezmo-fans who have taken the time and effort to upload their music content.

It is great to see that Ezmo endorses Anywhere.fm and Mediamaster, but why not MP3Tunes?

In fact, I believe the digital music collection management is becoming chaotic. How? With music collection now accessible over multiple devices e.g. iPod, home computer, work computer, and mobile, we are forced to constantly transfer music files over multiple devices depending on use. And don’t get me started on the organization of my music collection or ensuring that the IDv3 tags are in proper order.

This is why my interest at the recent Digital Music Forum East spiked my interest, especially with the half hour interview between digital music consultant Jim Griffin of OneHouse, and co-founder of Pho List and founder of MP3Tunes, Michael Robertson. For notes on the half hour interview, Eliot covers it well at the Listening Post from Wired.com. Kim also covers the Debate Over Digital Lockers well at the Washingtonpost.com.

With the flow of new releases of MP3Tunes releasing Pandora-like features, it seems MP3Tunes are looking to solve both the issues of digital music collection management and your music listening experience. I will not dwell with the EMI lawsuits, but MP3Tunes does bring out a valuable proposition – a digital locker of your digital music collection.

Yet, I cannot help but wonder if Music 2.0 is all about creating social music discovery websites, when are we going to refocus our attention on MUSIC?! How we interact with digital music? How we engage with digital music? Or are we happy to settle using technology to modernize (not revolutionize) our music experience?

The timing of the stunt was carefully timed to promote Prince’s 21 shows at London’s O2 Arena, a venue with a capacity of 20,000. With 15 shows sold out within the first hour of sale, and if the remaining 6 follow suit, the concert series will gross almost GBP15 Million. And that’s before merchandizing is factored in. Not bad for an artist accused for ‘devaluing music’ by the music industry.

A now-dismantling recording industry is fueling innovation inclusion deals like these. Sure, the population is bigger than ever, disposable cash is enormous, and the appetite for fresh music is reaching all-time highs. However, the stampede that characterized the record-store-of-old has now vanished, and demand for 14-song CDs is eroding rapidly. Meanwhile, distribution and promotional outlets have diversified and splintered, and that makes the game trickier than ever- for both big name and developing artists. Today’s game: more opportunity, yes, but how to reach the decentralized masses?

Prince’s latest unconventional sales approach succeeded by acknowledging that copies, not songs, are just about worthless in today’s digital age. The longer an album is on sale, the more likely it is that people can find somewhere to make a copy from a friend’s CD or a stranger’s shared-files folder. When copies approach worthlessness, only the original has value, and that’s what Prince sold to the Mail on Sunday: the right to be Patient Zero in the copying game. In a sense, music distribution is about time.

With a sponsorship deal here and an exclusive show there, worldwide television appearances and music given away, Prince has remade himself as a 21st-century pop star. As recording companies bemoan a crumbling market, Prince is demonstrating that charisma and the willingness to go out and perform are still bankable. He doesn’t have to go multi-platinum – he’s multi-platform.

With the undisputed expert of digital music in China, Terry, at the helm of this set up, Music 2.0 hopes to

• stir an independent dialog on of the current scenario within IFPI’s “most concerned” country,
• help shed some light on this side of the world to the international community and vice versa.

Mr Allen Guo of Yobo.com is interviewed for the first edition of Music 2.0. In a country lauded by many that long tail does not exist China, Yobo undertook a challenging task to ‘educate’ the musical palette of China. Read on!

• The pace of transformation of the digital music industry is breathtaking;
• Digital music business continues to grow;
• This is a $2 billion industry;
• Almost 500 legitimate online music services across the globe.

Globally, IFPI estimates there were almost 800 million single tracks download in 2006 from over 498 online music services in over 40 countries. This represents a growth of 89% since 2005. This pales in comparison with an estimated 20 billion pirated tracks downloaded in the same period.

On closer inspection, the lion share of the market is held within the U.S., U.K. and Germany with 83% of the single tracks downloaded in 2006. There are also currently 320 online music services in Europe ALONE, holding almost 65% of the global represented online music services.

Japan viewed by many as a success case study of mobile music with over 95% downloaded digital music via mobile. I can only guess the revenue impact is minimal.

In the same report, Eric Nicoli, CEO of EMI Group was quoted with “In this internet age, the consumer is using music content more than ever before – whether that’s play listing, podcasting, personalizing, sharing, downloading, or just simply enjoying it.” This was followed with a comment that acknowledges that “Consumers are changing the way they discover, access, and listen to music.”

With digital music experience strongly centered in the U.S., U.K. and Germany, are the characteristics of music fans across the globe similar? e.g. Brazil versus China versus India? Because business models shown so far across the globe seems similar especially how online music services are presented!

The same way how Japan, Korea and China rate ringback tones, is it experiencing the similar high adoption rate in Europe and the US?

By April 2006, RIAA’s initiative was aimed on university computer networks or aiming towards a whole new generation of music fans. Once upon a time, college students used to be the music industry’s best customers. Sounds like a great marketing ploy, suing your best customer.

I remember when CD-RW drives first appeared, the RIAA was lobbying for vendors of CD-RW drives to conduct background checks and require a 3 day waiting period before the drive can be sold. The RIAA President Hilary Rosen liken CD-RW to be “a dangerous weapon when it falls into the wrong hands” and goes on saying that “You wouldn’t sell a gun to a convicted felon”. I never knew the severity of my music listening habits could draw comparison to shooting a gun!

What’s next?

So what about authorized music services like Apple’s iTunes Music Store? iTunes announced in January 2007 that more than 2 billion songs, 50 million television episodes and over 1.3 million feature-length films have been purchased and downloaded from iTunes. This sounds very impressive until it is held up against 5 billion files that move across the Kazaa networks (ONLY) every month back in 2004. Not to mention, the lawsuits meant to educate us file sharers has only led to a growing audience where traffic on peer-to-peer networks has nearly doubled since 2002.

When will RIAA ever embrace Internet?

The article does provide an understandable warning – upload speed in Britain is pretty dismal (universal fact, I guess). If you’re backing up a whole PC, the first full upload will take a very long time. And with online storage, the monthly charges NEVER stop. Free services, especially, should be used with caution. Most will dump your data if you don’t use them for a couple of months. The beauty of the fine print most of us DO NOT READ!

This is especially worrying since most Internet businesses do not last the first 3 years – e.g. the switch from Friendster to MySpace – remember these ‘backup’ sites are asking us to entrust our valuable digital assets to them.

What IF, MuSMo take a leaf from the building societies in U.K., instead of relying on the common start up funding methods (i.e. friends, families, fools, bank loans, angel, and venture capitalist), MuSMo will gain $$$ from our users. MuSMo will not request for donations, but will reward our users with ownership. Stock options to motivate employees are well promoted in various companies, so aren’t we neglecting our most valuable asset? Our customers!?

More information will follow soon. Your comments will be appreciated, especially if there is a better alternative funding method. And NO, bootstrapping is not a funding method!

So, where do we find the cash? (We need to eat, find shelter, and clothe ourselves after all)

A good friend of mine and I had this discussion yesterday evening, and he was trying to convince me to use the irrational VC to fund MuSMo’s ongoing development and operation. And, he does have a point – just look at the irrational amount of money given out (granted it is not easy to get VC money). With ample amount of cash in hand, like many, MuSMo can start up, scale and continue to develop at an incredible pace. However, without a sustainable business model, we can only look for an exit strategy of TO SELL OUT (or FLIP), i.e. wait for Google, Yahoo, Microsoft etc to buy us out. (Let’s put aside the question of why these rich companies would like to buy a company who cannot yet monetize a sustainable revenue stream or make a decent profit for another day)

Is this a reason why not many exist after the 3 year mark? So what should MuSMo do? Any suggestions, or is the stunt by Democracy Player the way forward? Will subscription model be enough to cover the operation expenses? Should we concentrate on building large scale, before worrying about making a decent profit? YouTube might not take a lot of money to develop (the last figure I heard was $35,000) but it takes much much more to operate it!