Entertainment Industry

Category: iTunes

Apple making its move into cloud music

Apple_logo3 Preparing to launch its own "cloud music service," Apple Inc. has reached tentative agreements with all four major record labels that would allow users to listen to songs from an Internet connection.

It is unclear whether the Silicon Valley company has actual contracts with those labels -- Warner Music Group, Sony Music Group, EMI Group and Universal Music Group -- or whether details of the agreements are still being ironed out, according to people familiar with the negotiations.

Representatives of the four labels declined to comment. CNET reported last week that EMI had signed on to Apple's service.

Apple, whose iTunes music store is the dominant purveyor of music downloads with between 75% and 85% of the market, has been carefully monitoring moves by rival Amazon.com as well as newcomers to the digital music space, including Google and, in Europe, Spotify.

Amazon pounced first in March when it launched a music "locker" service, dubbed Amazon Cloud Player, that lets users upload their music to Amazon's computers and listen to their songs from any browser. Google followed suit in May with its Music Beta service.

With Amazon and Google launching music locker services in the last two months, Apple was starting to feel pressure to make its own move, said people familiar with the negotiations between Apple and the music labels.

Apple's service would differ from Google's and Amazon's in one key respect -- it would have the requisite licenses from all the major record labels, whereas Google's and Amazon's are unlicensed services.

For users, this can make a huge difference. To get around copyright rules, Google and Amazon must require users to upload their song collections, a process that can take hours or even days. With the appropriate licenses from music publishers and songwriters, Apple can simply scan a user's collection and make all of those songs available within minutes for them to listen over an Internet connection via Apple's computers.

Hundreds of millions of consumers already use iTunes to buy, store and organize their music collections, making the practical task of creating a cloud service almost trivial for Apple. The company also has the advantage of having the credit card information for more than 200 million customers who regularly purchase digital music or apps for their iPhones or iPads.

Apple may unveil a cloud service as early as June 6 in San Francisco, according to people close to Apple. That's when the company holds its annual developer conference, where last year it introduced Ping, a social network focused on music. The timing of the launch would depend on how soon Apple can button down its contracts with the major labels and publishers, sources said.

Google in particular has been frustrated by its attempts to negotiate with record labels for a licensed cloud service. At an event last week to announce the service, Google said music executives have been "unreasonable and unsustainable" in their negotiations. But label executives said Google was not able to provide enough assurances that the Mountain View, Calif., search giant would help the industry curb music piracy.

It's unclear how Apple cleared those hurdles with the labels. Calls to Apple were not immediately returned.

Apple's cloud service may work through the company's existing MobileMe service, which already lets users upload files to Apple's computers so they can access them on any Mac computer with an Internet connection.


Spotify cuts free music access in apparent effort to appease labels

Warner Music Group sold for $3.3 billion to Access Industries' Len Blavatnik

-- Alex Pham




Electronic Arts buys Firemint, developer of Flight Control and Real Racing

Electronic Arts on Tuesday said it purchased Firemint, an Australian developer of games for smartphones and tablets, for an undisclosed sum.

Firemint, which has 60 employees in Melbourne, is best known for two games that were first developed for Apple's iPhone and iPad, Flight Control and Real Racing. The company sold 4.5 million copies of Flight Control and 2 million copies of Real Racing.

The acquisition is the second in the last two months made by the company's mobile games division, EA Interactive, based in Playa Vista. In April, EA bought Mobile Post Production, a 60-person company based in Phoenix that specializes in adapting games to multiple devices and operating systems.

The two deals highlight EA's continued push into mobile games, a business that has blossomed since Apple released its iPhone and its iTunes App store opened in 2008. The online store now sells more than 350,000 applications made by a range of independent developers.

"They’re both small, but they’re very key to our overarching strategy," said Barry Cottle, general manager of EA's mobile games business.

EA in October bought Chillingo, a publisher of games for the iPhone and smartphones using Google's Android operating system, for less than $20 million in cash.

Cottle predicted that the overall pace of acquisitions for small innovative companies in the app space will increase over the year as more consumers turn to their mobile devices for entertainment.

"You’ll see more acquisitions of small creative shops," Cottle said. "You’re also seeing the power of scale, and publishing is more critical than ever."

-- Alex Pham




Rdio CEO Drew Larner on the future of digital music subscriptions

Apple Inc.'s announcement last week that it would start enforcing a 30% tariff on subscription services running on its iPhones and iPads sent waves of sturm und drang through the digital entertainment landscape.

Rdio CEO Drew Larner It seemed to be particularly bad news for music streaming services such as Rhapsody, eMusic, MOG and Rdio, which already pay more than half of their revenues to music publishers and record labels for the rights to stream millions of songs on demand. Slicing an additional 30% for Apple would leave these services with little left over to run their businesses, according to Rhapsody Chief Executive Jon Irwin.

Drew Larner, the chief executive of San Francisco-based Rdio, recently gave The Times a more sanguine point of view.

"Apple is obviously a very powerful and successful company, but it’s not the only platform out there," Larner said. "There will always be multiple ways to access music."

Apple's curveball is only the latest challenge to hit the music subscription business, which has struggled for years to get traction with consumers. Music analysts have estimated that the total number of subscribers in the U.S. who pay monthly fees between $5 and $10 has been stagnating at around 2 million, even though such services have been around since 2001, when Rhapsody launched.

Even so, Larner, a former executive vice president of Spyglass Entertainment and before that vice president at 20th Century Fox, said there are several reasons to think subscription music services will eventually thrive. Here are five:

1. The lightbulb moment. Most people aren't aware music subscriptions exist. Even giant retailer Best Buy, which purchased Napster, has had some difficulties marketing the service. Larner believes that once people catch on that they can get access to virtually any song they want on demand for less than the price of a CD per month, they'll pull the trigger.

"Subscription music services will still take some time for people understand why it is the future," Larner said. "Once we reach the tipping point, though, I think it will move quickly."

2. Idiot-proofing. Until recently, many services came with a number of head-scratching limitations. Some services worked only with certain devices. Others were saddled with lengthy copyright restrictions meant to curb unauthorized copying.

Now, there are fewer restrictions and device compatibility is much less of an issue. "The labels have become much less restrictive and more forward thinking with their digital strategies," Larner said.

3. Smart phones. They comprised 31% of the U.S. cellphone market in the fourth quarter last year, according to Nielsen, and are projected to hit 50% this year. Able to reliably stream music from a wireless connection and cache thousands of songs in their generally prodigious memory, smart phones have become portable mini-computers for a large chunk of the population. As a result, music subscription services are able to run far more seamlessly between a computer account and a mobile account, Larner said.

4. The What-to-Listen-to-Next problem. Earlier services played only what listeners directed them to play. But most people didn't want to constantly mess with the settings and had a hard time figuring out what to play next once they've run through their own top 40 list. Next generation services, such as Slacker and Pandora, solved that problem by asking the listener what they like to listen to, and then playing a constant stream of music that's similar.

The latest generation of music subscription services, such as Rdio, try to take things one step further by incorporating what their subscribers' friends are listening to. "It's Twitter meets Facebook meets music," Larner said.

5. Better software designs. It's not just about making the services easy and simple, Larner said. It's also about designing digital music services that let people can manage the thousands of albums they like to listen to while also discovering new music. This, as with points one through four, is a work in progress.

Will Apple's subscription plan slow down the work further? Most think that it will.

"The mobile platform as a whole is providing a growth opportunity for the industry as a whole," said David Krinsky, chairman of the subscription services working group of the National Assn. of Recording Merchandisers and head of label relations at Rhapsody. "To threaten that is extremely concerning."

Krinsky and Larner agree that most music subscription services would be forced to pull out of the iPhone and iPad if Apple follows through with its 30% levy in June.

Larner, for one, is looking ahead to see what's next on Rdio's playlist beyond Apple. "We’ve seen great uptake on Android," Google's mobile operating system, which made up 27% of the smart phone market in December, according to Nielsen. Rdio, founded by Skype creators Janus Friis with Niklas Zennström, also works on Microsoft's Windows 7 operating system, BlackBerrys and, as of Thursday, Roku players.

"It’s an opportunity for us to push the gas on distribution on other available platforms," Larner said.

-- Alex Pham

Photo: Rdio Chief Executive Drew Larner. Credit: Zachary Larner / WithExtraVinyl.








Mobile gaming binge continues; Intel, The9 invest $8 million in Aurora Feint

OpenFeint_logo These may be tough times, but not if you're a mobile game company.

A day after Electronic Arts announced it bought iPhone game publisher Chillingo, Intel Capital and Chinese online gaming company The9 said they have invested a combined $8 million in Aurora Feint Inc., a company in Burlingame, Calif., that helps players find friends, explore new games and post achievements.

Aurora Feint compares its mobile social gaming service to Microsoft's Xbox Live, but for games played on Apple's iPhones and iPads, as well as cell phones and tablets that run Google's Android operating system. The company has more than 3,400 games played by more than 45 million people in its service, called OpenFeint.

“Over the past few years, interest in mobile gaming has exploded, creating a huge market opportunity to deliver these games to the one billion plus mobile device users worldwide,” Mike Buckley, managing director of Intel Capital, said in a statement. Intel Capital is the venture investment arm of Intel Corp., the Santa Clara, Calif., semiconductor company.

It's not just Intel that's interested in Aurora Feint. DeNA Co., a Japanese company that last week paid up to $400 million in cash to buy Ngmoco Inc., also invested an undisclosed sum for a 20% stake in Aurora Feint a year ago. Ngmoco's Plus+ network is considered a rival to OpenFeint.

-- Alex Pham



Google's music entreaties fall favorably on record companies' ears

Google Inc., which is developing a digital music service, is finding a warm welcome at record companies that are hoping the technology company can loosen Apple Inc.’s grip on the digital music market with its iTunes music store.

The talks center on securing a sweeping set of licenses that would give Google the latitude to offer an array of products and services through its Android operating system for mobile phones as well as through computer browsers, said executives familiar with the discussions.

Music companies have all but rolled out the red carpet for Google, believing that the Mountain View, Calif., technology giant can serve as a counterweight against Apple, which controls more than 80% of digital music sales via its iTunes store. Though record companies collect 70% of the revenue generated by iTunes, they have bristled under Apple’s terms, which have in the past limited the prices music companies can charge, among other things.

With Google on the scene, the hope is that music companies can dilute their dependence on Apple.
“Google has smart people, and they recognize record companies need to be more than just suppliers,” said Jac Holzman, senior advisor to Warner Music Group Chief Executive Edgar Bronfman. “The attitude that you bring to the table is clearly the first step.”

For Google, the ability to offer a music service is ...

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The Morning Fix: It's all on Rupert! Box office blues. New life for Riley at ABC Family. Where will Emmys go next?

After the coffee. Before wondering what the deal is with those screaming crows outside my bedroom.

What's Rupert thinking? News Corp. Chairman and CEO Rupert Murdoch will play a key role in whether Apple's desire to offer television shows for rent on iTunes at the low, low price of 99 cents per episode gains momentum. The Los Angeles Times looks at Murdoch's obsession for Apple's iPad -- he thinks it can save print media -- and how that is influencing his thinking when it comes to renting video content. While Disney, on whose board Apple chief Steve Jobs sits, is also likely to cut some sort of deal with Apple, other broadcasters and cable programmers are not yet sold and fear Apple's plans will benefit Jobs a lot more than Hollywood. Even within News Corp., not everyone is on the same page as Murdoch. By the way, the reason Apple is pushing so much for the 99-cent rental business is because it isn't having much luck selling digital downloads of TV shows. 

Good news and bad news at the box office. On the one hand, Hollywood can boast of record revenue at the box office this summer. On the other hand, the number of people actually going to movies was off dramatically. Of course, the reason for this was 3-D, as "Toy Story 3" and "Shrek Forever After" helped lift the totals and probably gave the industry an artificial sense of success. More on the summer movie season from Bloomberg.

Lions Gate is on a roll, but Icahn still looming. Although production company Lions Gate can smile about the success of "The Expendables" and "The Last Exorcism," its future remains in limbo as the cloud of investor Carl Icahn hangs over it. The Wrap looks at the studio's summer and the latest on Icahn's takeover plans.

What's the next home for the Emmys? Sunday night's awards show saw a slight growth in viewers and a dip in adults 18-49. The decision to air the show live coast to coast doesn't appear to have hurt viewership at all, and although the numbers might have been bigger if the show had aired in September, the competition would have been heavier. Now the Academy of Television Arts & Sciences needs to strike a new TV deal. Under the current pact, the license fee is about $7.5 million a year and that does not include production costs. Matching that figure will be a challenge. There is debate about whether the Emmys would benefit from a permanent home or should continue to rotate from network to network or even be expanded to cable. More on the numbers and the contract from the Los Angeles Times and Wall Street Journal.

Wanna play? The New York Times takes a look at GSN, otherwise known as the Game Show Network, and its challenge of making TV game shows in a video game era. The cable channel, which is co-owned by Sony Corp. and DirecTV, started as a home for reruns of old shows like "Password" and "Concentration" but now is making a big push into original shows that include remakes of classics ("The Newlywed Game") as well as new games.  So far, big success has eluded the channel, and industry analyst Derek Baine told the NYT that GSN "really needs to reinvent itself and find out how to boost the ratings."

Radio war. The radio industry's fight against paying for the music played on stations may be nearing an end as a compromise is in sight, reports Variety. The deal, per Variety, would establish tiered rates under which stations would pay 1% or less of their net revenue to the musicians. The National Assn. of Broadcasters, which has been vocal in its opposition to paying, is taking the pulse of its membership as this deal would be less onerous than previous proposals.

Life of Riley. Disney has filled Paul Lee's post as president of ABC Family with Michael Riley, a Canadian native who most recently was running Disney's radio operation. The post opened up earlier this month when Lee took over as head of ABC's prime-time entertainment in the wake of Steve McPherson's abrupt exit. Riley has TV experience, but most of it was overseas with Turner Broadcasting, and his specialty was corporate development and marketing, not programming so there might be a learning curve. At least he inherits a channel that has been on a creative roll as of late. More on Riley's new life from Broadcasting & Cable.

Inside the Los Angeles Times: Jimmy Fallon had a magic night hosting the Emmys; here's how he did it. The Los Angeles Forum is rapidly becoming a fading memory, and that's not good news to its owners. Another bunch of faux celebrities have signed up for ABC's "Dancing with the Stars," but hey, at least Jennifer Grey is giving it a whirl.

-- Joe Flint

Follow me on Twitter; it'll make the day go by faster. Twitter.com/JBFlint

Hulu Plus gets lots of minuses on iTunes

One the sacred commandments of retail is "Thou shalt not raise prices, at least not so noticeably as to incur the wrath of thy customers."

Seems that rule also applies to online videos. Hulu Plus, a $9.99-a-month video service introduced Tuesday, is getting lots of minuses when it comes to user ratings for its iTunes app, which lets subscribers view Hulu videos on Apple Inc.'s iPads. 

Hulu Plus iTunes Ratings As of 9 a.m. Friday, the Hulu Plus app had received 3,173 one-star ratings out of a total 3,836 on iTunes. That's 83% of reviewers claiming to be unhappy with the app. Check out a snapshot of the full ratings profile, pictured on the left.

Just for comparison, 24% of those who reviewed the Netflix app gave it one star.

Why all the frowns for Hulu Plus?

Hulu executives this week said the new service would be in addition to the site's current offering of free TV shows. But viewers aren't seeing it that way. One reviewer summed up the rage in a relatively tame comment, saying, "Why pay $10 a month for something that was free on my computer?"

Another common complaint: the ads. One reviewer wrote, "They want $10/mo to watch TV shows WITH COMMERCIALS included. No thanks." Another review, entitled "Useless," read, "What idiot would pay 10 bucks a month to watch ads."

Note to TV executives: Fabulous app! Except for one small thing. Viewers don't seem to like it.

-- Alex Pham


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