Around the time we were preparing to launch the Fake Science Music Store back in 2005 one of our podcast listeners introduced me to Burnlounge. It was this new “service” that allowed you to set up a music store on your site using the Burnlounge technology and then you could sell music digitally from their large catalog. You paid a yearly fee in incremental packages and this gained you some mystery growth option and linked you into other people.

According to the FTC, BurnLounge recruited consumers through the Internet, telephone calls, and in-person meetings. The sales pitch represented that participants in BurnLounge were likely to make substantial income. BurnLounge recruited participants by selling them so-called “product packages,” ranging from $29.95 to $429.95 per year. More expensive packages purportedly provided participants with an increased ability to earn rewards through the BurnLounge compensation program.

The big push on the site (and the person that recommended it to me) was getting your friends to set up their own Burnlounge and then you get some kind of cut on their sales and then their peoples sales sales… it all seemed a little wonky. It also explained why the listener was so insistant on me joining Burnlounge and “we” would make a lot of money. It appears that the FTC also thought the idea was a little “wonky” and by wonky I mean straight up illegal:

On June 6, 2007, the FTC filed a complaint in the U.S. District Court for the Central District of California against BurnLounge, Inc. The complaint charges that BurnLounge sold opportunities to operate on-line digital music stores that was, in fact, an illegal pyramid scheme. The agency is seeking a permanent halt to the illegal pyramid practices as well as other illegal practices alleged in the complaint.

Want to the full scoop on the case then get it here: FTC Asks Court to Shut Down Illegal Pyramid Operation.

Over the weekend a recent stir has been created by at least 6 of eMusic’s label partners claiming dissatisfaction with the services pricing structure. What the labels want is more money per transaction:

After factoring in distribution costs and other expenses, some labels receive as little as 12 cents per song in profit, sources say — far less than the 60 cents to 65 cents per track received from iTunes.
– Indie labels plan to pull out of digital service

This is a big issue with the industry: how much money a label makes per transaction. What makes it even tougher is that more and more services are requiring a digital distributor to act as content managers for the services. This means is that even if a label wanted to interact directly with the sales outlet, they cannot and therefore must lose a percentage for the now required handling fee. We are recreating the old market very quickly and now labels are really starting to see the pinch.

Another issue that arises gets down to what will the market handle? Are people willing to continue to pay a high price (and foreseeable growing cost) for digital convenience. Some will without question pay $0.99 a song and think its a steal, others will pay the $1.20 for DRM free version simply for the fact that they don’t have to deal with a “wasteful” CD. There are others, like myself, that feel that digital freedom does not nor should not mean higher prices and that focusing on the business model that allows a balance for all parties is the answer. But is that even possible? Will the higher prices just convince people that getting music for free is the answer?

Elites TV is reporting that Napster and NTT DoCoMo has announced a partnership to allow DoCoMo iMode customers who are also member’s of Napster’s service to access music via their phones. Their new service called Over The Air (OTA) will be rolling out when the 904i phone is available in the market.

Napster’s new OTA subscription functionality will be available to DoCoMo’s customers as an extension of the Napster To Go service at no additional cost and will be available to both new and current Napster To Go customers.

This is an interesting twist to the mobile music market because up to this point only wireless providers have been offering singles sale services. The Cingular or Virgin offerings allow you to buy a song at an extreme premium that is then download and store it on your phone. With the new OTA, the song is streamed down as requested and then more then likely thrown away when done listening. With this functionality and the ability to create playlists on your PC, that you can access via the phone, you have in a sense an on demand XM radio that allows you to have unlimited access to music as you move around. Storage no longer becomes an issue only access to the network.

Of course, only Japan (and probably South Korea) has this kind of high bandwidth and full country network coverage for this technology to make sense. But as other carries get their networks fleshed out in other countries you can bet that this kind of service will become more prevalent.

Arik Hesseldahl of Business Week Online wrote a piece talking about how the EMI/Apple deal is going to up the anty for the current digital audio format war.

“Apple’s recent deal with EMI to sell DRM-free songs from the publisher’s catalog on iTunes may clinch the iPod’s AAC format as the industry standard”
– Apple Stokes a Digital Music Standards War by Arik Hesseldahl

In the author’s opinion the battle over format is between Apple’s choice of AAC and the Microsoft’s preferred WMV. He then states that the choice for Apple to release DRM-free AAC will force all the major players to consider AAC over WMV.

I agree that this will cause some change in the buying patterns of consumers because owners of non-iPod devices that support the AAC format will be able to purchase from iTunes store but a general migration to AAC? I don’t think so…

“Online music stores, like Napster, Yahoo Music, URGE, and all the others that sell WMA songs will be forced to consider jumping into the DRM-free AAC camp, and thus become ‘iPod compatible,’…”

Some of major players that Mr. Hesseldahl refers to such as Rapsodiy, Yahoo! and Napster have a subscription model that requires DRM. Without DRM their business model fails… how can you have unlimited downloads if you can’t turn off the music when the people stop paying.

Right there AAC is out because the only AAC DRM is FairPlay which Apple doesn’t want to share. This is the reason why WMV is the preferred format; Microsoft is the only major player that allows licensing (even if it has “expensive licensing terms”) of a digital format with full DRM services that many personal media players (PMP) support.

Now, if Apple licensed FairPlay at the same time they announced the EMI deal I would fully agree with Mr. Hesseldahl that the”format war” is changing. But, Apple did not do so and this makes the piece way off because he does not cover or delve into the reason why WMV was picked in the first place. Yes its interesting that Apple is releasing DRM-free AAC, yes its going to make a lot of waves but its not going to get these companies to change formats, they would need to change models and that is a WAY more important change and a hell of a lot less likely right now.

ps Mr Hesseldahl: eMuisc is not the only player to sell MP3s without DRM… seriously, you bag on a guy that mis-understands the industry and then you make the same faux pas…

As Chris “Cedub” Walcott so elegantly expounded on the NYTimes death of the album article, recent changes to Apple’s iTunes service makes me think that Apple feels albums are very much important to consumers, even in the pop world.

The big change that everyone is raving about is the “Complete My Album” function. When you chose this feature iTunes will determine what other tracks you already have for the album and then download the missing tracks tracks to complete the selected album. Of course you need to purchase the music (iTunes credits you $0.99 for each song you have already) before you can download it, but its definitely a cool feature… minus all the other issues I have with iTunes (DRM, costs, digital quality, etc).

So, if the album is really dead why would they roll out this feature? Why would be people be so excited about it? I think the reality is that albums make sense for a lot of people. Yeah, we all like singles and they work for some styles of music but seriously… gimme an album (even an EP) over a single any day.

My initial understanding of Weed’s music distribution service was based on a brief scan of their site and what I had read/heard from others. I was under the impression that Weed was a P2P based service that allowed users to buy and sell music via a Weed developed download client software. Their service also provided a pay back system that rewarded users for sharing files and having friends purchase them. My first impression was sort of right… sorta. Weed is in actually a lot simpler then that but at the same time offers a lot more.

Weed is actually more of a file format that a music economy is built around, rather than a simple P2P distribution service. A Weed file is a DRM encrypted Windows Media file that can be played for free 3 times by anyone, once the person opens a Weed account. After 3 plays, the file is locked until the user pays for the file. The 3 play time limit is tracked per the user’s account, so a user can pass this file on to a friend and the friend can then play the file 3 times for their account. It pretty much gets down to a try before you buy kind of implementation, if you like it you buy it… if not you delete the file and no money is spent.

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Michael Robertson, founder of Mp3.com and Linspire, has written a well thought out rebuke to Steve Job’s open letter to the industry. In a sense, Michael is telling Jobs to put his money where his mouth is and prove that this letter is not just political/media “posturing”. I think all four of Michael’s ideas are great options and really focus on making the customer’s music experience much better.

“My vision is that customers should be able to mix and match the type of computer, music software, retail option and music devices they want to use. No single company is the best in every product category so consumer choice ensures the best music experience.”