profitability of iTMS

Per Coolfer:

In the New York Times’ Bits blog, Saul Hansell makes a case that iTunes may be Apple’s best business segment.

Last year, PacificCrest analyst Andy Hargreaves estimated iTunes’ operating margin to be 10% and possibly as high as 15% (it would be better today due to the increases in volume). Earlier this year, Billboard’s Ed Christman estimated $161 million to $390 million of operating profit on revenue of $1.9 billion. That comes out to an operating margin of 8.5 to 20%.

Whatever the true operating margin, we can safely assume iTunes is making money hand over fist. Steve Jobs might downplay its success, but we shouldn’t.

I’ll buy Hansell’s argument that the iTunes music store is contributing a nice chunk of $$$ to the bottom line, but I want to point out that operating margin isn’t the only part of the equation: opportunity cost matters. If Apple could earn more by investing that same money in, for example, a search engine, it’s losing money by accepting the lower rate of return.

Also, I want to point out the subtext of the conversation. Coolfer is generally a conservative on music industry issues, and Hansell’s argument would tend to support the conservative perspective. The trad recording industry is deeply committed to per-piece unit sales as their main line of business. They’re seeing the internet as a new distribution channel for download sales, not as a way to upsell concerts, merch, and whatever an advertiser thinks they can move.

I’ve argued in the past that ad-sponsored streaming is the way it’s all going, and that downloads will become a profitable but small part of the market. I’m supporting that view by not fully accepting Hansell’s argument. (And my perspective is what the tech industry wants to hear, because big internet companies are all about advertising).

While I’m pointing out who has what axe to grind, it’s important to know that Billboard is more or less the house organ of the big record and movie companies. If they’re estimating X profit margin for Apple, and the record companies are feeling bilked, X is probably high. iTMS gross revenues probably reached a big enough scale last year that the proportion of fixed cost to marginal cost probably went to zero; that proportion doesn’t keep improving once the fixed cost is a negligible part of the whole.

On the whole, though, I do buy the argument that the iTunes Music Store is a decent if not great business.

lead sheet for “He’s in the Jailhouse Now”

Over the weekend I posted my own sheet music for the old song “He’s in the Jailhouse Now” on my musician blog.

Some good things about it:

  • Carefully proofread and corrected. I used it in a couple different rehearsals and ironed out the bugs.
  • On a single page. No page turns.
  • Big type and simplified changes. Easy enough to visually parse that you can play from it on stage with minimal lighting and rehearsal.
  • Evenly spaced, with four measures to a bar.
  • Lyrics, melody and chord changes in one place.
  • Source Sibelius file provided for making modifications.
  • PNG, PDF, and Sibelius can all be shared, modified, and redistributed, because they are under a Creative Commons Attribution-Sharealike license.
  • Pretty damn good if not perfect copyright status, to ensure that people could really use it.
  • Good documentation on the history of the song. I spent a couple hours looking up the details and collated a number of different sources.

Doing a clean and thorough job with sheet music is pretty rare. Free (as in beer) sources are usually a mess. Commercial sources are usually oriented towards piano players or beginners. My version is higher quality than other free sources and is oriented towards real-world players.

How to add Moon of Manakura to your web page

Go to Rhapsody.

Ignore annoying upsell to their download store.

Do a track search for “Moon of Manakoora.” You have to set the scope of the search in the dropdown next to the entry field.

In the search results, right click on the link to the song and do “copy link location.”

Go to your own web page.

Paste in the link location, like this:

<a href="">Moon of Manakoora</a>.

Add goose to your page like this:

<script src=""></script>

Save and load the page. There will be a working play button next to the link, and the song will play in the context of everything else in the page, e.g. MP3s, oggs, whatever you have in there.

audio response to Marco’s klankbeeld

I plugged in the electric, hooked up Audacity, hit record, and flipped over to the same image that Marco used for his like a child piece. It’s a quickie job but what the hell that’s what blogs are for: Lucas Gonze – response to klaaankbeeld like a child (MP3)

On a musical level I was thinking about the bassy, jazzy, and introspective flavor of Marco’s piece, and that led to me towards Les Paul’s ballad playing in the 50s, e.g. Moon of Manakoora.

Also: FLAC and Vorbis versions. Licensing for my music here: Creative Commons Attribution-Sharealike 3.0 unported.

KlankBeeld Raaphorst: Like a child

I like this moody klankbeeld by Marco Raaphorst.

KlankBeeld Raaphorst: Like a child

Friday, 16 May 2008


Ik heb mijzelf een opdracht gegeven: elke vrijdag een nieuwe compositie op basis van een foto ter inspiratie. Vandaag voor de vierentwintigste keer. KlankBeeld Raaphorst.




Per Reuters, Universal cements music publishing lead:

Two interesting points in this article.

One, UMG has grown their publishing business very substantially.

Universal Music’s publishing division has overtaken EMI as the world’s leading major music publisher, according to market research on Monday.

Music & Copyright (M&C), which is published by Informa said Universal’s market share among major music groups rose to 24 percent in 2007 from 11.9 percent a year earlier.

From 12% to 24% is a huge rise. There’s a lot of thrash in this market — it’s not acting like a mature market.

UMG’s share of the recording industry has also grown in the recent past. These guys are firing on all cylinders, and no doubt emphasizing publishing deliberately to offset shrinkage of the recording market. They used to be a 600 pound gorilla, now they’re a 900 pound gorilla.

Two, the combined publishing and recording industries are no smaller than they were in 1996, around the historic peak of the CD industry:

“According to M&C the value of music publishing has risen in Europe from $3.6 billion in 1996 to $5.2 billion in 2006 while recorded music sales have fallen from $9 billion to 7.5 billion.”

5.2 – 3.6 = +1.6 growth. 9 – 7.5 = -1.5 shrinkage. 1.6 – 1.5 = .1 billion increase.

In other news which does not in any way suggest a pattern:

Due to increased demand for its products, Gibson Guitar plans to increase its general labor and manufacturing workforce by approximately 200 people.

So if you added gains in instrument sales and teaching to the overall picture, wouldn’t you find that the music industry is actually healthier than before the internet? Too bad Guitar Center is now a private company, because it’s the bellweather of the instrument business and now we don’t know their numbers any more. But Best Buy, anyway, is growing it’s instrument business:

Best Buy Co. Inc. is announcing a massive new initiative that sets aside store space for an array of musical instruments and gear in dozens of sites nationwide.

business aspects of Cartoon Network vs. Cablevision

Judge OKs Tivo-In-The-Clouds: Hosted DVR services — which allow cable companies to create “virtual” Tivos that live in a datacenter somewhere, not on a hard drive in your living room — are legally sound. Specifically, network-based DVRs “would not directly infringe plaintiffs’ exclusive rights to reproduce and publicly perform their copyrighted works,” says the U.S Court of Appeals for the Second Circuit in New York.

As a policy issue, the right thing is for it to be legal to move technology from hardware devices to the cloud. Anything the user could do by pressing a button the user should also be able to have a cloud service provider do on their behalf. The principle has to be that an individual can delegate, and once they do the service provider has proxy access to their rights.

As a business issue, it makes no sense for labels and studios to try to turn this into a licensing revenue source. Each and every service provider isn’t going to negotiate with each and every rights holder for works in any medium. Trying to make that happen is a waste of time.

And this is exactly what is happening. What the Cartoon Network wants is for Cablevision to pay for licenses. And Joe’s Garage Startup. And Gmail. And each of these service providers would need to work out a deal with EMI, Disney, Sub Pop, etc.

If that was the normal state of things, technology would choke to a halt. Nobody would get anything done. Everything would be more expensive. Only huge companies would be in business, because negotiation with lots of small companies is too much overhead.

gurdonark interview quotes

Lots of great stuff in this interview with gurdonark:

I do not see patents and copyrights per se as an unworkable situation. I do oppose artificial term extensions. Yet I am perfectly comfortable with reasonable protections for artists and innovators.

I favor the “velvet revolution” of voluntary contribution of works into the public domain and the Creative Commons. I believe that the easiest way to create a framework for the collaboration that digital culture will demand is not the eternal fight between silly DRM and needless kids-pirating-Britney. Instead, artists in music, software, literature, photography and science will create for public use a new “sharing culture” of ideas and expressions.

in my world, music and the arts will no longer tread this tiring bright line between artistic “haves” who are business “have nots” and business “haves” who are artistic “have nots”. This new world will involve people who work day jobs and play music at night. It will involve people who run their music as a business, and not as a way to get “a big record deal”. A new parlor music is arriving, and we’ll share songs in the way we read one another’s weblog posts.

I get bored with people who illegally download from the majors because it’s so unimaginative. There are worlds of truly creative people out there, on netlabels, on websites, and among us. Why give legitimacy to poorly-chosen music aimed at our lowest common denominator?

I prefer to use shareware and freeware [for making music]. Because I am so fond of the music of Marco Raaphorst, a Reason-master, I did buy Reason 3.0, but a year or two later, I finally gave it, unopened, to a pianist friend to use.

Whether I am a creator or a listener, a melody “fits” for me when it conveys a bit of an emotion or an idea — not with a direct “this is this and this is that” of a wonderful Motown song, but with the sense of ambiance or whimsy that fits my notions. I love the way I can listen to Jamendo artist Henri Petterson, for example, and be transported to a downtempo yet cheerful sophisticated Europe of my dreams, or the way that the netlabel artist Cagey House can envelope the listener with a quirky, upbeat bit of instrumental fun — a kind of new Americana world of familiar sounds, all strange and wonderful. I love the way that great jazz bands often come from Scandinavia or Japan, because people take these wonderful ideas and re-interpret them from an outsider place, to the delight of all.

Netlabel owners came to understand that once the whole “make me a star and make me rich” element is removed from the equation, incredible shared experiences between artists, label and listener can result.

But imagine if music were a weblog post — a thing one shares like one shares an essay or a poem or a personal note or a flickr image. Marco Raaphorst writes soundimages (klankbeelds) — simple free downloads which soundtrack still images. Vlog artists eschew video-as-movie-madness for video-as-weblog.We as music makers can begin to see our work as ways of achieving inter-connection, rather than as ways to get record deals.

Courtesy of the internet archive, here’s one of Marco Raaphorst’s klankbeelds:

And here’s a Short experimental voodle featuring a fine flock of ambiguous furniture with beautiful music by gurdonark:

what is the point of the right to redistribute?

Something I’ve never understood about Creative Commons is the emphasis on redistribution rights.

For the most part, CC licenses focus on who can upload a copy of a file. A song under any CC license can by uploaded by anybody whose activity fits within the terms of the license. For example, the Attribution-Sharealike license allows third parties to upload copies without asking permission as long as they give attribution and use the same license on their uploads.

Who needs the right to upload? It’s not something that anybody making work under a CC license even needs to grant, since virtually of them host freely accessible copies on the web. All anybody needs to access these works is to know the URL of the original file.

With files that are already on the web it doesn’t make sense to do filesharing, so there’s no need to permit redistribution. Filesharing is purely a pain in the ass for users, who have to leave the normal browser experience and launch a dedicated piece of software. You could maybe make a case for BitTorrent as a way to spread the bandwidth load, but that relies on a level of popularity which almost no CC works attain. And anyhow, there’s no need for an explicit license to permit BitTorrent as long as the rights holder hosts the seed file, since that would very much imply that BitTorrenting was fine.

The only thing that you really need a Creative Commons license for is the ability to make derivative works, which gives you the ability to do remixes. This is genuinely useful because there is no other way to do it. Without a license to make a derivative work you are up a creek, and making derivative works is a fundamental operation for participation in culture.