Playlists Are the New Albums

"The playlist is the new album. Consumers love to customize and express themselves through playlists, which are a tremendous driver of discovery."

That's Michael Nash, Warner Music Group's executive vice president of digital strategy and business development. He was telling me about the record label's decision to href="http://www.washingtonpost.com/wp-dyn/content/article/2008/03/20/AR2008032003729.html">strike a licensing deal with the music-focused social network called imeem.

"Imeem's model is a template for how we want to build our business in social media and online communities," he said, adding that it is "fair to assume" that Warner is in discussions to make its content available on other big social networks as well.

Others have reported that MySpace is working on it's own music service.

He went on to say that shifting all music consumption online would cause record labels to come up short on the revenue side. Instead, establishing a revenue-sharing deal with a site likeiImeem, and integrating a way to purchase music as well, will help labels get revenue from several different channels.

David Card, an analyst with Jupiter Research, said he's bullish on the opportunity for the digital music industry, which is growing at a clip of 20 percent a year. He projects $3 billion in digital music sales in the next five years. But that compares to about $10 billion that typically comes in from CD sales--so labels are more willing to take chances on ad-supported models.

"Labels have never tapped into ad-supported marketing before," Card said. He pointed out that the royalties from traditional radio stations often went to publishers, composers and songwriters rather than the recording studios. Labels saw radio time as good publicity, "all in support of selling the physical problem," he said.

Now that online streaming services have become a powerful form of music discovery, like radio, labels are interested in tapping into the strong advertising revenue from the Web. "They're coming around and are aggressively experimenting," he said.

Imeem founder Dalton Caldwell said giving labels more control over what music gets shared--by using music fingerprinting technology created by Snocap--helps them have more confidence in Imeem's model.

"The music industry has been slow to change and now [labels] are hyper-accelerating through some of these changes that could have been made over the years," he said. "Now we're able to partner effectively with these guys and we're starting to see the traction."

By Kim Hart  |  March 21, 2008; 2:01 PM ET  | Category:  Kim Hart
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Posted by: Chris Blake | March 23, 2008 2:53 PM

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