The week in review: making mobile music

Hello. Two weeks ago I was holed up in the office putting to bed the launch issue of Total Content + Media magazine. Last week I was in Barcelona for the 3GSM mobile conference. Below is the Week in review that was published last Friday on the site:

This week, entertainment executives rode in to Barcelona to toot the horn of the convergence train at the annual 3GSM mobile conference and convention, which apparently drew some 55,000 visitors this year.

In amongst the various mobile operators and equipment vendors that normally dominate the conference schedule, there was a good dose of executives from the media and entertainment industries, including Edgar Bronfman, Jr, the CEO of the Warner Music Group; J.F. Cecillon, the new CEO of EMI Music International; Mika Salmi, head of global digital media for MTV Networks; and Lucy Hood, CEO of mobile content aggregator News Corp/Verisign JV Jamba.

The music contingent was particularly strong—Bronfman quoted uncited figures that mobile music will generate revenues of $9 billion in 2007, which would certainly make it the biggest mobile entertainment revenue generator this year if it comes to pass. There were lots of references to the Apple iPhone, which was the 800lb gorilla that didn’t actually show up to the party.

EMI’s J.F. Cecillon went great guns on the promise of mobile music and the future of EMI. On the subject of the company’s current problems, he summed those up in a simple enough statement: “EMI is doing great as long as our music is doing great.” Unfortunately for EMI, the currently skyrocketing sales of Norah Jones’ latest album haven’t been repeated enough in its other repertoire.

EMI issued its second profit warning, saying that in particular CD sales in the U.S. are still in a slump. The bad news prompted calls for CEO Eric Nicoli to resign. Nicoli has only been the CEO since January, although he’d been the company’s exec chairman prior to that. The news also hit other record labels hard, with shares of Warner Music tumbling. Aside from EMI, Warner Music is the only other of the four major record labels to trade as an independent company (Universal being a part of Vivendi Universal and SonyBMG being a joint venture between Sony and Bertelsmann). WMG had been eyeing up a merger with EMI, although European regulators seem to be looking on this idea unfavourably these days.

The presence of EMI, Warner Music, and other tunefully inclined companies at 3GSM underscores how labels are in a mad scramble to get a cut on the next generation of how music will be delivered.

And delivered, rather than sold, is the operative word in today’s world, it seems. At the end of January, EMI said that it had settled a long-standing dispute on copyright infringement with Chinese portal Baidu, with the result being that now all of EMI’s music is available on the site for free. The company hopes that it can instead now make money off of advertising that’s running alongside the tracks.

Cecillon told TC+M that he doesn’t think the free music model will be replicated elsewhere, at least for now. “We have put the system in place in China specifically because of the piracy issue. You have to do this to get into the Chinese market at some point. But we don’t have plans to extend the model outside of China,” he said. “Of course time will tell if that will change.”

Meanwhile, EMI is seeing small advances in its piracy battles. This week its Russian subsidiary Gala won a suit against a pair of Russian Internet sites, www.delit.ru and www.delit.net, who were selling EMI songs for 15 cents per track, without authorisation. As EMI only got the equivalent of about $2,300 as a settlement, the victory was perhaps more of a pyrrhic one.

“The music industry was worth $40 billion two years ago. Because of piracy, it’s now worth $30 billion,” said Cecillon. “That $30 billion is up for grabs.”

Indeed, back at 3GSM, Bronfman in his Wednesday keynote said that music execs weren’t there only to speak at the conference. Some of them were actually there doing business. He mentioned that one artist’s manager was walking around the stands. And if it really is true that the digital revolution is empowering artists to do more and more outside of the label’s reach, there may have been even more music managers walking around, unaccompanied by A&R men, in stealth mode.

(For a roundup of TC+M’s coverage of 3GSM and the iHollywood digital conference, type Barcelona in the search window at the top of http://www.totalcontentandmedia.com.)

The rest of the week…
In other news, the gaming industry got some attention, with Google apparently finally closing in on its purchase of in-gaming advertiser Adscape. The non-gaming media world is also taking a shine to the geek’s corner, it seems. This article from the WSJ says that publisher Hearst, among others, is incorporating gaming elements into web sites to grow traffic. Ladies mag Cosmopolitan is featuring a game called “Boy Toy.”

Baidu had a whopping fivefold increase in profits, but in what seems to be a theme at huge Internet portals, shares in the company traded down on the news. (Google too faced problems in its share price after reporting that profits had tripled.) In the case of Baidu, such is the boom in the Chinese market, that despite Baidu’s growth in profits, the company actually missed its ad revenue targets and didn’t take on as many new advertisers as expected. And analysts are very sceptical about its expansion into the Japanese market. Growing pains have never been so sweet.

Putting my convergence/telecoms helmet back on here to also note that Ericsson struck a deal with Turner Broadcasting last week to help reformat content for mobile phones, starting with CNN news—a very flashy interface for the service, I should add—and this week Huawei also got in on the vendor-as-content-aggregator act by signing a deal with the Orchard to develop a mobile music product. (Orchard represents smaller record labels.) Motorola was one of the first to move into this area in a deal in China several months ago where it effectively made itself into a label for non-pirated music.

Google faced a setback in Europe this week when a Belgian court ruled against it in the ongoing Copiepresse suit for copyright infringement when posting excerpts and links to plaintiffs’ news stories on its site without permission (the plaintiffs were French and German newspapers published in Belgium). The Internet giant is supposed to now pay a fine of E25,000 a day from when the suit was filed in September 2006, which amounts to E3.45 million. The sum is not huge for Google, but the implications of the suit are. Google is appealing the case.

Last but not least, this week a person at Yahoo told me that the company is getting ready to launch a new service that will combine the best of branded entertainment content with user-generated content and social networking. Given that Vaio Nation, a Sony-backed venture, seems to be promising the same sort of thing, this clearly will be the place that large media properties will hope to play in the year ahead.