Apple Shutting Lala: Subscription iTunes Soon?

iTunes icon

Five months after buying the web-based music service, Apple (NSDQ: AAPL) is now shutting Lala, in what is likely preparation for a web- or subscription-centric upgrade to its own iTunes Store.

The site has stopped accepting new sign-ups and will shut to existing users on May 31, says a message on Lala.

Since launching in 2003, iTunes Store, to the labels, has been a welcome bulwark against what would have otherwise been even more chronic decline. It now contributes over a quarter of U.S. music sales. But, in a North American music market that’s now shrinking faster than anywhere in the world, digital income has now basically flatlined, growing just 1.1 percent in 2009, says the industry’s IFPI.

Web-based streamers and new subscription models, offering unlimited music access, offer the industry promise of another shot in the arm. Spun-off Rhapsody now looks in shape to arrest the decline that’s brought it to 675,000 subscribers, Spotify’s excellent client has 320,000 premium subscribers out of seven million users but still has not launched in the U.S.

Against both the web and subscription rise, iTunes’ a la carte reliance looks archaic and one-dimensional, tooled for a market that’s plateaued.

But Apple has already moved closer to a web-based iTunes by displaying iTunes Store listings on a series of iTunes Preview pages. Reports, at the time of the acquisition, that Apple fancied Lala’s “payment and fulfillment systems”, suggest it’s also interested in subscriptions. It’s not clear whether it will launch a web-based service, a subscription offering or a combination of both, though a few industry sources I’ve spoken with speculate it will launch an underwhelming “locker”-type service, to house already-bought tracks in the cloud, before going all-out on subscriptions proper.

iTunes’ flatlining has created an opportunity for new services to race to a legal music gold rush, in a space partly created by a growing number of anti-piracy moves by international governments. The labels can’t wait. “The subscription models that we are promoting will create much more value over time than the per-play or per-purchase models,” Warner Music Group (NYSE: WMG) CEO Edgar Bronfman Jr said in February. “The number of potential subscribers dwarves the number of people purchasing music on iTunes.”

Maybe so. But, depending on what Apple does with Lala, rivals should be very concerned. Rhapsody and Spotify may be looming, may have an attractively-priced service and is on the horizon. But none has iTunes Store’s existing heft and leverage…

The store has over 125 million user accounts with credit card numbers - convincing just some of its music lovers to subscription will be very easy, and flipping them from occasional, one-off payments to recurring debits of, say, $9.99 a month, could create yet another massive new income stream for Apple, which has already introduced recurring subscriptions to its mobile apps. Whatever it does will likely have more impact than Lala, which has never launched outside the U.S..

“There is a short window of opportunity for Rhapsody and others to lock in some of that growth for themselves before Spotify launches Stateside or Apple launches its own version, thus changing the competitive environment,” wrote Forrester analyst Sonal Ghandi this week.

OMG + HP + SATC = Yahoo’s Big New Ad

How does dowdy Hewlett-Packard (HPQ) attract the short-attention-span gossip-seekers who visit Yahoo’s OMG site? With a giant ad that links Sex and the City and some shiny laptops, of course.

HP has taken over the gossip site’s home page for the day with an ad that manages to mash up the upcoming SATC film with some sort-of blingy laptops.

Home page takeovers are standard practice for the Web, but Yahoo is particularly proud of this one, because it’s the first time it’s rolled out this particular ad unit, which it built in-house.

Visitors to the site will notice some messaging for HP and SATC (oh – and Windows 7, too) at the top of the screen and in one of the 15 headline boxes that dominate the page, but they won’t see the full-page ad unless they click through.

Yahoo (YHOO) won’t say what it’s charging for its prime real estate, which attracts around 20 million uniques a month. But a good bet would be something in the $80,000 range for the day.

Here’s what OMG visitors will see when the page loads the first time:

And what they’ll see with the ad turned on:

The execution is a little confusing: If you click on most parts of the square, the ad will open up a new window in your browser that takes you to this HP-hosted page. If you want to stay on OMG and see the ad, you’d have to make sure you clicked on the “engage” button.

I’m also not sure how many OMG readers will be enticed to click on any part of the square, period. But Yahoo says that future iterations of the unit will offer advertisers the option to take over the screen for a few seconds without any prompting from users, like some other ads already do.

And repetition is the real point of this exercise: Yahoo is trying to create ad units that seem novel and fresh for visitors (and ad buyers), but are designed to be stamped out over and over again. Interesting to see if this one works.

How to Pitch a YouTube Viewer: Talking Babies Are a Good Start

YouTube’s homepage is some of the most valuable real estate on the Web: A “click to play” ad  on the top right corner of the page costs hundreds of thousands of dollars, justified by the Google (GOOG) unit’s enormous reach.

But those ads only work if people click on them, and the performance can vary dramatically. Web video tracker TubeMogul evaluated the views generated by 10 different video ads, each of which ran on the home page for a day earlier this year. Check out the range:

OK. So what does that tell us?

Maybe that YouTube’s core demo — 58 percent of the site’s users fall in the 15-24 range, TubeMogul estimates — like ads with talking babies (who doesn’t?). And that they have very little interest in tax software or Italian cooking travelogues.  Or

Here’s the best performing ad in TubeMogul’s sample:

And the worst:

You can check out the other eight on your own time:
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Touchstone Pictures

Hulu Muddles Through Without Jon Stewart and Stephen Colbert

What happened to Hulu after it said goodbye to Jon Stewart and Stephen Colbert, two of the video sites’ biggest stars, in March?

Not much. At least not in the first few weeks of their absence, according to Comscore (SCOR).

Check out Comscore’s tally of the top video sites in the U.S. for February:

And now for March:

Stewart and Colbert left Hulu, the joint venture site owned by GE’s NBC (GE), Disney’s ABC (DIS) and News Corp.’s Fox (NWS), on March 10. But note that Hulu actually streamed about 10 percent more videos that month than it did in February.

Meanwhile streams at Viacom (VIA) sites, now the only places that can host clips like Stewart’s Apple (AAPL) smackdown, increased as well. Perhaps some of that is because Hulu has been good about the breakup, and is directing Daily Show and Colbert Report seekers directly to Viacom’s sites. Which they’re not required to do.

But for whatever reason, it looks like Viacom’s decision to yank the clips — or Hulu’s decision not pay more for them, depending on your interpretation — made sense for both sides.

Some of the requisite caveats: This is just the first sample, and it’s not apples to apples, because February is the shortest month, etc. And overall video traffic appears to have increased around the Web month-to-month. Also, Hulu has been hovering around the billion video per month mark for some time now, so perhaps this its natural level.

(A Hulu aside — how are they possibly getting the $200 million-plus run rate they boasted about earlier this year? Last week I sat down and watched an entire episode of “Lost”, which should be their most premium inventory. The show started off promisingly, with a Verizon sponsorship, but by the end of it I was watching ads for 5-Hour Energy and then what appeared to be some non-profit giveaways. That can’t possibly be right, can it?)

And while we’re looking at the numbers: Note that Vevo, the “Hulu for music videos”, is back in the top 10. And, as always, that Google’s YouTube (GOOG) towers above every other site, by a huge margin.

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Apple: We’re At 200,000 Apps and Counting. And None of Them Use Flash

Apple’s iTunes store now boasts 200,000 apps, Steve Jobs notes in a post today.

The rest of the Apple CEO’s 1,671-word essay is dedicated to attacking Adobe’s Flash  (ADBE) standard, and most of it is stuff Jobs and company have either said before, either publicly or sotto voce.

Jobs’ argument in summary:

  • Flash is a crappy product.
  • Flash is particularly crappy for mobile devices like the iPhone and iPad, which put a premium on battery life.
  • Flash’s main benefit is that it allows developers to build for multiple platforms. But we’re not interested in helping developers build for multiple platforms — we want them to build for our platforms, which are awesome. And anything you can do with Flash, you can do better with the standards we’re supporting.

In short: If you were a developer, publisher, video creator or anyone else who was still clinging to the hope that Apple (AAPL) would let you continue to work with Flash and play on its platform — get over it. Not going to happen.

Back to you, Adobe.

’09 Music Sales Shed $1 Billion; U.S. Downloads Stagnant

Alicia Keys singing performing in Oslo

Global recorded music sales shrank by 7.2 percent, from $18.3 billion to $17 billion, through 2009 - meaning the industry has scored fewer sales each year since 1999.

Digital sales grew 9.2 percent and now make up over a quarter of all music income…

But the extra $363 million brought in by digital last year still wasn’t enough to offset $1.74 billion lost from physical sales, says the International Federation of the Phonographic Industry’s Recording Industry In Numbers report, marking wholesale trade value, not retail value.

Some details…

—North America digital sales grew so slowly, they’re basically stagnant, the slowest in the world at just 1.1 percent. iTunes Store is now the U.S.’ biggest music seller, with over a quarter of sales - so the industry must hope Apple (NSDQ: AAPL) innovation can provide it with another shot in the arm. iTunes Store boosted sales after its launch in 2003 - so maybe a subscription iTunes offering can do it again.

—It’s not bad everywhere. UK music sales grew in 2009 on digital surge and a strong line-up, albeit by just 1.4 percent, and it’s now one of six countries (along with India, South Korea, Thailand, Mexico and Australia) to have hit the “tipping point” at which digital income is offsetting physical decline, IFPI says.

—But the global picture is being dragged down by the U.S. and Japan, its two biggest markets. They’re to blame for 80 percent of the sales loss. Ignoring these two countries, the global fall would have been only 3.2 percent.

So the industry is not getting off the piracy soapbox just yet. The IFPI says it remains “one of the biggest obstacles”. CEO John Kennedy: “Growth is within reach for the music business – it depends, above all, on how quickly governments can act to deal with piracy.” Labels are encouraged by new legislation enacted in the UK and France that would level education and sanctions against freeloaders - but these controversial measures haven’t yet been implemented and still face opposition.

The picture is more chronic in Spain, where P2P use is double the Europe-wide rate and the market is worth just 38 percent of its 2001 value. But Sweden, yet again, may be an exemplar - the IFPI hails a carrot-and-stick approach that saw ‘09 music sales there grow 11.9 percent on subscription adoption after homegrown Spotify and after a new law compelling ISPs to identify freeloaders to copyright owners.

Having largely dropped stringent DRM for downloads, the industry is also now pinning hopes on uptake of unlimited-access subscription services like Spotify and Rhapsody, and on ISPs introducing bundled music packages.

This report does not cover income from music publishing or live music, which is growing.

Yahoo Strikes Premier League Highlights Deal

Michael Owen, Manchester United football club

By Mark Sweney: Yahoo (NSDQ: YHOO) has struck a deal with the Premier League for the UK online highlights for the 2010 to 2013 seasons.

From the start of next season in August, Yahoo, which is in final contract negotiations with the Premier League, will run a five-minute highlights package of every match on Highlights will be available from midnight on Sunday after weekend matches and at midnight the same day for midweek fixtures. Virgin Media (NSDQ: VMED) currently have the rights.

“The acquisition of Premier League rights shows how serious Yahoo is about providing the best in video content for our both our users and advertisers,” said Rich Riley, the company’s European managing director.

Yahoo’s deal also includes the right in the UK to syndicate all, or part, of the Premier League highlights content to third parties.

Yahoo in the US has similar deals with big name sports including the NBA basketball, PGA golf, NHL hockey and MLB baseball.