I was talking to an executive at a major label the other day. We were talking about startups and he noted that they either sue these companies out of business or legitimize them out of business. That is not far from the truth. How many legitimate, standalone digital businesses can you name that rely on licenses from the labels for their primary business and are profitable? Let’s categorize by business model:

E-Commerce/Transaction-based: iTunes immediately comes to mind. It may be profitable on its own, but we all know that Apple’s main business is to sell iPods and now iPhones. eMusic is the other one, and I think it has a real business on its hands — of course the vast majority of its repertoire is non-major label.

Music Subscriptions: This segment is dominated by Rhapsody and Napster. Neither is solely a music subscription service, but that’s what both are best known for. At any rate, neither is profitable. RealNetworks’ music business lost $1.9 M in the second quarter of this year. Napster? Well its stock chart kinda says it all; it’s currently trading for a little less than the cash it has on its books. Continue »

For decades radio and later, MTV, were the dominant and proven marketing channels for the music industry. The symbiosis was, on its face, an elegant one: Radio and video promoted the product for free/fee, retail outlets sold it, and everyone made gobs of money. Radio, while still powerful, is no longer perceived as the vibrant marketing channel for music it once was. MTV certainly isn’t.

They’ve been replaced by the web — in particular, by social networking communities and blogs. This is Radio 2.0. While I don’t blog about music as much as I’d like, I still get pitched very regularly by music promotion companies on new music. I can only imagine how much music blogs like Pitchfork, Brooklyn Vegan and bloggers like Fred Wilson get pitched. Moreover, the labels are embracing social networks as a new channel — the EMI/Sigur Ros/YouTube and Warner Bros/REM/iMeemiLike tie-ups are cases in point. Of course Clear Channel and MTV (outside of the U.S, at least) will still get plenty of world premieres, but I suspect this will decrease as MP3 blogs and social networks continue to gain relevance and audiences.

“Tell me something I don’t know,” you may sigh. Well, it’s unclear that these sites actually generate commerce revenue the way traditional marketing channels have. If that continues to be the case, then the artists and labels will have to figure out how to get a big enough piece of advertising and other revenue streams to warrant “giving” their content to these new channels. Regardless, we are seeing a changing of the guard: Maybe Pitchfork founder Ryan Schreiber is the new Jann Wenner; Ali Partovi or Dalton Caldwell, the new Bob Pittman.

Based out of London, Raghav “Rags” Gupta is VP of International Partnerships at Brightcove, where he has worked since ‘05, prior to which he was a senior executive at Live365. His blog can be found at www.ragsgupta.com. The views expressed here are personal and do not necessarily reflect those of any company with which he is affiliated.

Given my past performance, I’m going to refrain from making any predictions for the year ahead. Instead, below are the top five questions — and their related trends and themes — that I’ll be tracking in 2008 (in no particular order):

1. Can user-generated video be directly monetized and made to be profitable? The jury is still out on this, but I’m skeptical that the effective CPMs from running ads on UGV will outweigh the cost of goods sold (bandwidth, etc.) enough to make it a great business. In fact, one of the pioneers of UGV, VideoEgg, seems to be more focused on being an overlay ad network — that ought to tell you something. To date, UGV sites have kept going on the VC dollars they’ve raised and have used the audience gained by their user-created content to try to acquire, commission or license professional, quality content that can be profitable. So I think we’ll continue to see UGV being a loss leader of sorts. Ad format standardization should continue but, as I’ve written, it’s all about adoption. Continue »

Despite all of the issues plaguing the music industry these days, there is plenty of innovation in digital music to be found from a range of startups out there. Many of these startups require content from the labels, yet choose to plow ahead with their product marketing without getting licenses. This irks the labels, of course, but it’s of their own doing — it is generally much easier to beg forgiveness than ask permission.

Given all the hoops that need to be jumped through — technical, financial and legal, to name a few — negotiating content licensing deals with labels can take months. And that’s if they’ll do a deal with you at a price you’re willing to pay. Of course, the labels have sound business reasons for making companies jump through such hoops.

But from a practical perspective, a cash-strapped startup typically won’t have the patience, expertise or resources to ‘ask permission’ as such. Instead, they calculate that it’s better to move forward with bringing their product to market and deal with the consequences if and when they gain traction (because if they don’t gain traction, no one will come after them and it will all be moot anyway).

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It’s official. Madonna is leaving Warner Music Group (WMG) in favor of Live Nation in a long-rumored landmark deal said to be worth $120 million. In exchange for the concert promotion company’s participation in a number of revenue streams, including recorded music, merchandise, ticket sales and the Madonna brand, the artist will get equity in Live Nation, plus a huge chunk of change.Many analysts think Live Nation (LYV) overpaid for the deal, and as far as monetizing Madonna herself, they’re probably right.

But Live Nation has to be viewing this in a much larger context, hoping that having Madonna as the charter artist in their “Artist Nation” program will give them credibility to sign up other entertainers, both established and up-and-comers.Fox (NWS) used this strategy in 1994 when, as a then-upstart network, they won the rights to broadcast the NFL. It put them on the map, allowing them to win affiliate stations and subsequently increase their reach.

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The introduction of the iPhone later today will signal a sea change for the music industry, especially mobile music. It won’t solve the music industry’s woes immediately, but it will herald a new era in which music can elegantly coexist with a phone on the same device.

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