Money, Money, Who's Got the Money?

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This is Celia Hirschman with On the Beat for KCRW.

Ordinarily, August is "sleep mode" for the record business. Traditionally, record executives flee their jobs this time of year to rest before the September Back-to-School craze of music consumerism.

But this August has actually been very busy with the record industry announcing several new business ventures.

Earlier this month, the social music-marketing site, Amie Street, picked up sizable new funding, led by the book and CD-seller Amazon was already one of the largest retailers of music and in May, they announced they'd be launching a music download site. Expect to see the memo of their download start-date any day now.

The element that sets Amie Street apart from all the other music-download sites is their "dynamic pricing" model. Music is not sold at a flat rate per download like iTunes, nor is it sold through a subscription model like eMusic. Amie Street allows music to be sold at the starting price of Free. Yes, I did say free. As the song's downloads increase, the price will go up. Popular songs might sell for 30¢ to 50¢ each and no song can sell for more than 99¢. The artist keeps 70% of the revenue generated after the first $5.00 in sales.

Amie Street is putting a robust stock market sensibility into the business of selling music. Some love this idea, others hate it. Amie Street is operating like eBay, keeping up with the consumer demand as it happens, thereby limiting the consumer risk and maximizing on credibility. I’ll be very curious to see how Amazon integrates this model in the launch of their music site.

And late last week, Universal Music Group, the largest of the four major label conglomerates, announced they were "experimenting" with new online strategies. For a limited time this year, Universal will abandon the controversial Digital Rights Management code, and offer thousands of DRM-free downloads to select sites. Missing from the site list is the market giant, iTunes. ITunes is brilliant if you have an iPod but impossible if you don't. And recent studies show that the surge in demand for iTunes downloads may be slowing. Analysts think one of the key reasons iTunes downloads may be slowing on is the lack of file interoperability with other music devices. Consumers want flexibility to use whatever devices they want, when they want.

But perhaps the most interesting part of the new Universal experiment is the strategic partnership with gBox. Gbox is a Google-based company that puts a retail widget on participating band websites for consumers to buy music directly. Since fans already use Google to search for their favorite bands, Google can point to these websites with priority. Universal pays an advertising rate for the service and in turn receives revenue on every download. It’s a no-brainer, a home run for selling music.

Moving forward, one thing is very clear. The record business is changing and the current model is just one stop on the highway. This is a business that still needs to discover the best way to monetize itself, with the consumers’ interest in mind. Expect to see even more creative problem solving in the coming months.

This is Celia Hirschman with On the Beat for KCRW.