A few months ago Spotify introduced the ability to purchase songs and albums directly from them, though it was a little long-winded and hard to find. Users had to right-click on songs to see the “Buy” option before being directed to partner 7digital’s site to complete the purchase.

There is now a clear “Buy” button next to all songs and albums available to purchase and the transaction process is pretty much the same as iTunes.

Check out the demo:

Despite the lack of success music subscription services have had, entrepreneurs seem to be lining up to have shot at it. We’re hearing about new subscription services every week, and none of them have a USP. They all seem to have the same business model – pay a high monthly fee for a very limited access to music.

The latest company to try their hand at it is satellite television company Sky. Sky’s plan is to charge £7.99 a month for unlimited streaming and 1 album download (or 10 songs) – downloading more songs will cost extra.

Details on the new service are sketchy, some sources say they have partnered with Universal, while others say they have struck deals with all the majors and a number of indie labels.

The problem with subscription services such as this is that consumers don’t like being restricted. £7.99 a month for one album makes little sense to me, why would one choose to be restricted to one album a month when they can go to iTunes or Amazon for the same price. And the unlimited streaming doesn’t really add any value since there are services like Spotify and we7 out there that offer that for free.

The fact that over 9 million UK households have Sky as their digital TV provider will certainly work in its favour, but in reality I think Sky’s business model is flimsy and won’t attract much attention from music lovers.

On September 8th, Apple unveiled its latest ‘innovation’ to help prop up the recorded music industry – the iTunes LP. For only seven bucks more than a regular digital album, you can get some pretty pictures and liner notes. Facepalm!

But the story doesn’t end there.

Last week, Brian McKinney of Chocolate Lab Records told Gizmodo that Apple was charging record labels $10,000 in production costs to release an album in the iTunes LP format – and indie record labels need not apply. Apple later denied that allegation and said it is working on releasing the specs for the LP format and making them available to all, indie and major labels alike.

Regardless of the outcome of this “he said she said” tempest, it amplifies the silliness of the iTunes LP format itself.

Several web developers have dissected the format to find that it is essentially HTML, Javascript, CSS, and multimedia content – a website. For a little more than the cost of an actual physical CD, you get to save files to your hard drive that largely mirror content you can find online, from the artist’s website itself to Wikipedia, YouTube, and others.

I’ve been unable to find sales figures for albums released as iTunes LPs, but I’m curious to see how successful (or unsuccessful) it has been to date. Until then, the question remains whether Apple’s initiative – jacking up prices to include nicely designed text and album art with digital music files – can connect with fans, especially as consumers are shifting away from the album as a default container for music.

Until Apple opens up the specs to the iTunes LP format, indie artists who wish to bundle additional content with their albums can stick with a tried and true format: the zip archive. For years, netlabels and some independent artists have simply added media and documents to zip files of album tracks and offered the complete package to fans.

Bandcamp (one of the best music hosting/distribution sites out there IMHO) recently began offering this feature to artists on their site. Types of content you can include are limited only by your imagination and file-size concerns – videos, images, pdfs, etc. And with a little web development skill, artists can replicate a centralized user interface for interacting with the album’s content just like the iTunes LP.

I saw Mike Masnick post this on TechDirt a few days ago but only got around to reading it this morning. This is a paper written by Bas Grasmayer as part of the research for his thesis on the future of music distribution. Bas analyses 5 musical releases that used new business models; Radiohead’s ‘In Rainbows‘, Nine Inch Nails’ ‘Ghosts I-IV‘, Groove Armada’s ‘Drop The Tough‘, Danger Mouse and Sparklehorse’s ‘Dark Night of the Soul‘ and Mos Def’s ‘The Ecstatic‘.

Click here to read.

After analysing each one he draws the following conclusions:

What does NOT work (well)

• Not going all the way. Fans love free music and so do people that are not familiar with the artist’s work, but if you’re going to give something away then really give it away. If you don’t, you won’t get the attention you were hoping and might even disappoint some fans instead of connecting with them.

• Creating unnecessary mediums instead of utilizing existing ones. While the Bacardi B-Live Share application looked cool (now offline), it was completely unnecessary. Instead of creating a digital dashboard with meaningless graphics, it could have been executed in a much simpler fashion by utilizing existing social networks or filesharing websites. IF you’re going to set up such a thing, then at least make it interactive, social (in terms of enabling users to interact with each other) and add value (with videos or a game for instance). You could even use it to sell other products of the band or artist.

• Expecting people to pay for what they can get for free. People might pay, but most will pick whatever way is most convenient. Usually, this is by remaining seated at your computer and by avoiding complicated online payment procedures. Sure, people should use legal ways to buy music, but the reality is that people go for convenience.

What does work (well)

• Giving fans a reason to buy. Instead of expecting people to pay for something which they can, perhaps more easily, get for free, create added value. This is what Nine Inch Nails, Mos Def and Danger Mouse and Sparklehorse all did very well. Instead of expecting people to pay for the music, they all created something besides the music which people would be more willing to pay for.

• Freemium. By offering something for free, one connects with fans and they will spread the word about you (as long as what you’re offering has value). Once attention has been garnered, and perhaps sympathy has been won, you can offer a premium product. This is how Radiohead and Nine Inch Nails have been successful with forementioned albums. First you give something for free, then you market your premium; freemium.

• Understanding that the package IS the product. This goes for all of the cases, except for Groove Armada. In the case of Danger Mouse and Sparklehorse as well as Mos Def, the package was actually the reason to buy the product. In the case of Radiohead and Nine Inch Nails, they marketed the package as premiums, perhaps understanding that it’s hard to make money if you have to compete with free, meaning music downloads.

• Buzz. By generating buzz, you can turn people just turned on to your product into fans. These fans can then later be marketed to when trying to sell premium packages (or subscriptions for example). Even if they don’t buy, having them talking about your brand or product increases the buzz. This works best if they can give others free samples (free music) to see for themselves how great the brand or product is.

• Co-branding. By co-branding, the two brands can both benefit of each others’ resources and skills. In the case of Groove Armada and Bacardi, the latter benefits mostly from Groove Armada’s image and the ability to promote themselves on all Groove Armada-related products, this includes live performances. Groove Armada on the other hand, benefits from the resources Bacardi has, for instance to set up the website and network for the distribution of the music, as well as their marketing capacities. Both are connected to different audiences and by working together, they can promote each other to their respective audiences, perhaps new ones.

This was a great read and I love the conclusion. I highly recommend you read the entire paper, it’s only 20-odd pages, check it out here.

Image by Gary Simmons.

Radio station to offer web streaming is not news. Web site to offer radio programming is.

CBS Interactive Music Group recently announced that it will begin offering music programming from Last.fm on HD radio stations in New York, Los Angeles, Chicago, and San Francisco beginning October 5th. The stations will effectively hand the broadcasting reins over to the crowd-sourced, music discovery site – bringing listeners “an eclectic mix of music aggregated and influenced by the service’s user-generated weekly charts, combined with live performances and interviews from the Last.fm studios in New York, and event updates.”

According to CBS, this is the “first time a music website has been transformed into its own broadcast entity.”

How to tune in?

Listeners will be able to access the station through multiple outlets including Last.fm and select CBS RADIO station websites; CBS RADIO’s streaming platform including its partnerships with AOL Radio and Yahoo! Music Radio, as well as mobile applications on the iPhone, iPod Touch and select Blackberry devices.  Music fans with HD Radio receivers in New York, Los Angeles, Chicago and San Francisco will also be able to interact with the multicast station broadcast on CBS RADIO’s WWFS-FM (102.7 HD2), KCBS-FM (93.1 HD2), WXRT-FM (93.1 HD3) and KITS-FM (105.3 HD3), respectively.

While this is an exciting and innovative development, the question remains whether HD radio itself can still catch on. Awareness of the format itself is very low; meanwhile, less than 10% of new automobiles come equipped with factory-installed HD receivers. CBS hopes this announcement – along with Microsoft’s soon-to-be-released Zune HD devices – will spur interest in the broadcast format.

The Apple event took place yesterday after weeks of anticipation and among the big announcements; a new and improved iTunes 9 (surprise surprise), a new, cheaper iPod Touch line, a new iPod Nano equipped with a video camera and microphone (don’t look at me), increased storage and price cut for iPod classics and a “genius” function for the iPhone and iPod touch that creates playlists based on your history.

But what you all really want to know about is the not-so-top-secret “Cocktail” project. Well, I can reveal that Apple has launched a new digital album format called iTunes LP.

The iTunes LP is pretty much as we expected. It’s a digital album with extra features such as music videos, artwork, liner notes, lyrics, photo albums, bonus tracks etc.

Sounds good? I agree.

One thing we always talk about is artists giving fans a reason to buy, this indeed does. All these bonus goodies are likely to make albums more attractive to fans.

However; there is no such thing as a flawless idea in the music business, and this is no exception.

Apple is charging $16.99 for these LPs. That’s $7 more than a normal digital album. It’s not a reason to buy because fans are paying for the additional features, most of which they can download for free anyway. And one person is not going to want all of the extras, probably just one or two. So they’re going to be paying for stuff they don’t want.

The point is people don’t want to buy albums, so offering them the same thing at a higher price is not a smart move. Artists need to be offering fans this kind of stuff in the first place, not at extra cost. It will be interesting to see what kind of sales these LPs see over the next 6 months. My prediction is not many.

Forrester Research recently released a report that lays out a “radical vision” to “save the music industry from the current Media Meltdown it finds itself in.”

While the actual report is only available to Forrester customers, the company’s blog reveals that the plan involves broad “music release windows,” similar to the chart on the right. “Premium” content is released first, followed by a “mainstream” release at a later time, and eventually wide dissemination to free and “feels like free” services.

Judging by comments on the Forrester blog and elsewhere, many scoff at the idea of regaining content scarcity through this staggered release approach. “What about pre-release leaks?” they ask. True, the industry has increasingly bumped up release dates of albums – Jay-Z’s latest came out three days early today – in part to combat the problem of early copies leaking onto the internet. But it’s important to keep in mind that large swaths of music listeners are not running around downloading leaked copies of albums off torrent sites.

It is also counter-intuitive when one looks at the movie industry and how the release cycle of a typical movie – which has been staggered between theatrical release, dvd release, and television release – has shrunk over the last decade or so.

I’m guessing, though, that the example illustrated in the graphic above is just that – an example. Rather than a one-size-fits-all solution, Forrester is suggesting an approach to music that doesn’t revolve around the traditional album release cycle (release an album – tour – repeat next year). They propose shaking off the “strait-jacket” of the album and thinking of all content generated by musicians and bands as product (backstage footage, mobile apps, merchandise) in order to create a “continual artist-fan relationship with artists delivering a steady stream of creative output.”

Sound familiar?

It sounds a lot like what the major labels had been talking about earlier this year at a 2009 NARM panel. And that discussion sounded a lot like what we here at GrindEFX have been saying.

Ditching the album format as the default container for music and releasing smaller blocks of music more often – that’s the 3P concept.

Building a continual artist-fan relationship to make money outside of selling non-scarce recorded music – none other than CwF + RtB = $$$.

So, while not exactly radical, Forrester’s report does indicate the direction the big players in the industry are heading toward, as well as validate what many of us on the sidelines have been saying.

On August 28th Apple announced that they had approved the Spotify iPhone app. Yesterday, the music streaming service officially launched in the app store and you can now download it for your iPhone or Android.

I myself don’t have an iPhone so I can’t give it a test drive (as much as I am dying to!), but early reviews say it is pretty much just as it was described in the video demo we saw back in July (see it after the jump).

As we said before; the mobile service is only available to Spotify premium users, so if you want it on your phone you’ll have to sign up to the €10 ($15) a month agreement.

The most exciting feature about the mobile app is the “offline mode”. Spotify can cache a playlist created by the user and allows you to play it offline, for example in the subway or on a plane. I’ve also been told the streaming is lightening quick compared to other services.

At the moment the app is only available in Europe, a U.S. launch is expected later this year.

For my fellow Europeans, you can download the app here. Hit the jump for the video demo.