
Fidel.ru - everything
It's time to close the project. He worked for almost 6 years. Six years is an incredible period for the digital distribution market, especially in Russia. A lot has been done during this time. Except, perhaps, the main thing.
Fidel.ru was the first in the CIS to sign a contract with Universal Music, and subsequently with all other majors, and with a huge number of indie labels. The first, among market participants, attracted major investments, the first sold all available models of music distribution, from the sale of wma files with DRM (even scary to imagine now) to the Freemium model. We conducted various advertising campaigns and, as a result, probably tried everything we could, starting from banal banners and ending with complex BTL designs. Traffic, at times, reached 120 thousand unique visitors per day. But we were not able to earn. Moreover, we did not even come close to the payback of the project. Why? In this article we want to examine the current market in detail and understand: where could we be wrong.
Catalog
In fact, the main thing a user needs is a directory. You can reassure yourself as you like and think that the catalog already has a lot of things. Almost all. But "almost" in this case does not work. Absolutely everything is needed. This is natural and normal. People are accustomed to the fact that the Internet has everything, and it is natural that when they came to a specialized site, it is understood that everything is collected here. And people get upset when they don’t find something. But he does not find it quite often. Why is it possible to make everything so? Working according to the classical model of obtaining a catalog from software, probably still not.
There are a huge number of copyright holders, and even if you have a huge staff of managers in your company, it is unlikely that you will be able to get the rights to everything. However, it is worth recognizing that the Western market is moving towards the aggregation of content and, possibly, after some years it will be possible, after signing 1 contract, to gain, for example, access to the entire indie directory. But there is a local directory. In Russia, collecting all Russian music is definitely unrealistic. Imagine that there can easily exist a company that owns 5 “necessary” tracks, I emphasize: not albums, but tracks. And they only have related rights, and 4 completely different companies have copyright on the same 5 tracks. So, in order to get these 5 tracks to the service, you need to sign 5 or 6 contracts, get the files on your hard drive and put your hands on your platform. Then make reports to all these companies, coordinate and sign their paper version. And I do not touch on finance.
And there are also majors. Everything is not easy there either. For example, you have a contract with Universal Music, which Metallica has been releasing all its life, but this does not mean that Metallica will appear on your service. It’s just that Lars Ulrich and James Hatfield don’t want her (Metallica band) to be available for streaming. And there are a lot of such artists. Well, now imagine a music service without Metallica, AC / DC, Rammstein, etc.
Well, there are also exclusives. That is, it turns out, for example, the expected and high-profile release (by the way, there are not so many of them in a year) and it is sold exclusively to some kind of service. Everyone else before publishing this long-awaited release is waiting for this exclusive to end, the next release is being sold to another service, etc. What the user does in this situation is not clear. That is, the user is invited to either run through various services, register and pay for a subscription in each of them, or not to listen to this release and wait for it to appear on the service that it uses. And you can just hammer on all this nonsense and download the album from anywhere, which most often happens.
Finance
Let's estimate the economy. Let's start, again, with the catalog, as this is the basis of the service.
The copyright holder wants at least 50% of the service revenue for related rights, plus another 10-12% of the service revenue for copyrights. There are a lot of different conditions, but the bottom line is that the software wants about 65-70% of revenue. There is still billing - 3-5%. The remaining ones need to contain employees, ensure the technical operability of the service, create new functions, applications and attract new users.
Also, copyright holders have such a concept as Minimum Guarantee. This is what the copyright holder expects to receive minimally from the service. How this amount is calculated is unknown. She just is. So, the approximate amount of minimum guarantees for the rights to catalogs of 4 majors plus a certain number of individual labels is $ 1 million per year.
For the rest you need about the same. Think a lot? Perhaps, but less failed. Staff + office rental + content storage and so on. In short, for operating break-even, the service needs to earn at least $ 2.5-3 million per year (that is, 7.5 million rubles per month). If the subscription costs 250 rubles per month (minus 18% VAT = 202 rubles), then it turns out that (very rudely and without marketing) about 40 thousand paid users per month are needed. We could not. And, most importantly, we do not know who could.
And what are the actual proposals?
There is a feeling that you need to offer a slightly different approach. The main idea of our proposal is that each market participant must fulfill its function.
The task of the music service is to provide the user with the ability to conveniently consume any music on the network in any convenient way, from any device, anywhere, anytime. Instead, get traffic and learn how to monetize it as much as possible, that is, adequately assess the cost of this service. While the task of the copyright holder is to realize his intellectual property (in our case, a catalog of musical content) with the greatest benefit for himself.
Now it is happening very strange, exactly the opposite. That is, the software does not want to realize its asset in any way, setting barrage conditions for those who want to help them in this. These conditions could be considered as the most favorable if the copyright holder knew how to properly protect his property. And since the software does not know how to do this (and most likely, it is simply impossible), it turns out that this property has no price at all. Therefore, in our opinion, the only way out of this situation is, first of all, to provide the most simple and convenient access to your catalog for everyone. Thus, simply replace all files with legal ones. For starters, this will provide an opportunity to represent the real consumption of your asset in order to adequately assess its value. To do this is technically not at all difficult. It is enough to offer the XML of your catalog to everyone who uses music in their services and receive reports in response. No need to transfer files, because all of them are already on the network and get there much faster than if you do this through existing import systems. Well, there are a lot of such things that all market participants duplicate, and everyone wants to put the cost of this work on the consumer. Well this is the topic of another post.
We will try to implement these and our other ideas through the new project www.tracksflow.com . From a technical point of view, there is no breakthrough in this project, they have already written about it here . However, we believe that this model is the most correct foundation for building new relationships with both copyright holders and users.
The project is at the alpha testing stage. Habr, as always, one of the first tries everything. Visit us at www.tracksflow.com , leave your mailing addresses and we will send invites, today it is especially active. Well, follow our project on Facebook , Twitter , and VK .
Fidel.ru was the first in the CIS to sign a contract with Universal Music, and subsequently with all other majors, and with a huge number of indie labels. The first, among market participants, attracted major investments, the first sold all available models of music distribution, from the sale of wma files with DRM (even scary to imagine now) to the Freemium model. We conducted various advertising campaigns and, as a result, probably tried everything we could, starting from banal banners and ending with complex BTL designs. Traffic, at times, reached 120 thousand unique visitors per day. But we were not able to earn. Moreover, we did not even come close to the payback of the project. Why? In this article we want to examine the current market in detail and understand: where could we be wrong.
Catalog
In fact, the main thing a user needs is a directory. You can reassure yourself as you like and think that the catalog already has a lot of things. Almost all. But "almost" in this case does not work. Absolutely everything is needed. This is natural and normal. People are accustomed to the fact that the Internet has everything, and it is natural that when they came to a specialized site, it is understood that everything is collected here. And people get upset when they don’t find something. But he does not find it quite often. Why is it possible to make everything so? Working according to the classical model of obtaining a catalog from software, probably still not.
There are a huge number of copyright holders, and even if you have a huge staff of managers in your company, it is unlikely that you will be able to get the rights to everything. However, it is worth recognizing that the Western market is moving towards the aggregation of content and, possibly, after some years it will be possible, after signing 1 contract, to gain, for example, access to the entire indie directory. But there is a local directory. In Russia, collecting all Russian music is definitely unrealistic. Imagine that there can easily exist a company that owns 5 “necessary” tracks, I emphasize: not albums, but tracks. And they only have related rights, and 4 completely different companies have copyright on the same 5 tracks. So, in order to get these 5 tracks to the service, you need to sign 5 or 6 contracts, get the files on your hard drive and put your hands on your platform. Then make reports to all these companies, coordinate and sign their paper version. And I do not touch on finance.
And there are also majors. Everything is not easy there either. For example, you have a contract with Universal Music, which Metallica has been releasing all its life, but this does not mean that Metallica will appear on your service. It’s just that Lars Ulrich and James Hatfield don’t want her (Metallica band) to be available for streaming. And there are a lot of such artists. Well, now imagine a music service without Metallica, AC / DC, Rammstein, etc.
Well, there are also exclusives. That is, it turns out, for example, the expected and high-profile release (by the way, there are not so many of them in a year) and it is sold exclusively to some kind of service. Everyone else before publishing this long-awaited release is waiting for this exclusive to end, the next release is being sold to another service, etc. What the user does in this situation is not clear. That is, the user is invited to either run through various services, register and pay for a subscription in each of them, or not to listen to this release and wait for it to appear on the service that it uses. And you can just hammer on all this nonsense and download the album from anywhere, which most often happens.
Finance
Let's estimate the economy. Let's start, again, with the catalog, as this is the basis of the service.
The copyright holder wants at least 50% of the service revenue for related rights, plus another 10-12% of the service revenue for copyrights. There are a lot of different conditions, but the bottom line is that the software wants about 65-70% of revenue. There is still billing - 3-5%. The remaining ones need to contain employees, ensure the technical operability of the service, create new functions, applications and attract new users.
Also, copyright holders have such a concept as Minimum Guarantee. This is what the copyright holder expects to receive minimally from the service. How this amount is calculated is unknown. She just is. So, the approximate amount of minimum guarantees for the rights to catalogs of 4 majors plus a certain number of individual labels is $ 1 million per year.
For the rest you need about the same. Think a lot? Perhaps, but less failed. Staff + office rental + content storage and so on. In short, for operating break-even, the service needs to earn at least $ 2.5-3 million per year (that is, 7.5 million rubles per month). If the subscription costs 250 rubles per month (minus 18% VAT = 202 rubles), then it turns out that (very rudely and without marketing) about 40 thousand paid users per month are needed. We could not. And, most importantly, we do not know who could.
And what are the actual proposals?
There is a feeling that you need to offer a slightly different approach. The main idea of our proposal is that each market participant must fulfill its function.
The task of the music service is to provide the user with the ability to conveniently consume any music on the network in any convenient way, from any device, anywhere, anytime. Instead, get traffic and learn how to monetize it as much as possible, that is, adequately assess the cost of this service. While the task of the copyright holder is to realize his intellectual property (in our case, a catalog of musical content) with the greatest benefit for himself.
Now it is happening very strange, exactly the opposite. That is, the software does not want to realize its asset in any way, setting barrage conditions for those who want to help them in this. These conditions could be considered as the most favorable if the copyright holder knew how to properly protect his property. And since the software does not know how to do this (and most likely, it is simply impossible), it turns out that this property has no price at all. Therefore, in our opinion, the only way out of this situation is, first of all, to provide the most simple and convenient access to your catalog for everyone. Thus, simply replace all files with legal ones. For starters, this will provide an opportunity to represent the real consumption of your asset in order to adequately assess its value. To do this is technically not at all difficult. It is enough to offer the XML of your catalog to everyone who uses music in their services and receive reports in response. No need to transfer files, because all of them are already on the network and get there much faster than if you do this through existing import systems. Well, there are a lot of such things that all market participants duplicate, and everyone wants to put the cost of this work on the consumer. Well this is the topic of another post.
We will try to implement these and our other ideas through the new project www.tracksflow.com . From a technical point of view, there is no breakthrough in this project, they have already written about it here . However, we believe that this model is the most correct foundation for building new relationships with both copyright holders and users.
The project is at the alpha testing stage. Habr, as always, one of the first tries everything. Visit us at www.tracksflow.com , leave your mailing addresses and we will send invites, today it is especially active. Well, follow our project on Facebook , Twitter , and VK .