Five Lessons The Music Industry Can Learn From AllofMP3

The recording industry has been waging war against Russian-based music websites for years. While the industry has successfully litigated most file sharing networks out of existence, they haven’t had much luck stopping sites like MediaService’s AllofMP3. Despite the RIAA’s best efforts AllofMP3 continues to sell digital downloads to music lovers around the world, while technically complying with Russian copyright laws and licensing agreements.

While complying with the laws of your country may seem like a loophole here in the United States, it makes perfect sense to a company that’s based in Russia. Unfortunately for MediaServices that the loophole is about to be closed. There are signs the Russian government is planning to crack down on grey market download sites like AllofMP3 in an effort to gain admission into the World Trade Organization.

Regardless of what you think about the legality of AllofMP3, there’s no denying that MediaServices has created one of the most innovative and consumer friendly digital music services around. AllofMP3 is so well done that the “legitimate” recording industry could learn quite a bit by studying it. Hopefully the major labels will take a long look at AllofMP3 before it gets shut down.

Here are a few lessons the music industry could learn from AllofMP3:

  1. Digital Music Is About Freedom. It should come as no surprise that songs purchased from AllofMP3 are not restricted by DRM. As a result, AllofMP3’s customers have the Freedom to play their music on any device. While eMusic and a few other services sell unencrypted music, AllofMP3 is the only service to offer a full catalog of unencrypted albums from major labels, as well as independent artists. The recording industry would have you believe that they can’t make money selling DRM-free music – yet that’s exactly what AllofMP3 is doing. If the industry’s arguments were correct then AllofMP3 wouldn’t be selling many songs.
  2. Digital Music Is About Flexibility. Because AllofMP3 isn’t tied to a proprietary DRM system they’re free to encode their music in a number of widely supported formats. AllofMP3 is the only site that I know of that allows consumers to choose their preferred format. Mp3, AAC, WMA, Ogg Vorbis, take your pick.
  3. Quality Matters. AllofMP3 is the only digital music service that openly acknowledges the quality limitations of lossy digital music formats. Not surprisingly, it’s also the only service that I know of that sells digital music in lossless formats. In addition to the lossy formats noted above, AllofMP3 allows quality conscious consumers to download music in four lossless formats, including: FLAC, Monkeys Audio, OptimFROG, and WAV.
  4. The Price Of Digital Music Should Reflect Actual Value. AllofMP3 has a unique approach to pricing – they charge a flat rate per megabyte. As a result, song prices are based on the length of the song and the quality of the encoding. As I mentioned above, AllofMP3 offers consumers music in no less than eight digital formats. They also allow consumers to choose the bitrate of the encoding. Logically, higher bitrate files cost more to download because the file size is larger. As a result, price is reasonably reflective of the value the consumer receives when he downloads a song. Better yet, consumers can save money by buying music encoded at a lower quality. At some point a consumer may choose to re-purchase a song or album at a higher quality. It’s not unlike what happens today when the labels release a re-mastered CD with improved sound quality, except in AllofMP3’s model the consumer is always in control.
  5. You Can Sell Music By Giving It Away. Last week AllofMP3 announced that they were essentially giving their entire catalogue away for free. Users can download an unlimited number of songs in a low bitrate mp3 format for no cost. Of course there’s a catch, the songs will only play in AllofMP3’s proprietary player. While it sounds a bit like SpiralFrog ad supported music model, I have a feeling that it will also turn out to be a great way to sell music.

Given AllofMP3’s success over the past six years, there’s obviously a market for this kind of service. Rather than trying to shut AllofMP3 down, the music industry should be studying their business model and learning from what works.

17 Responses to “Five Lessons The Music Industry Can Learn From AllofMP3”

  1. Contayjen says:

    You forget to mention that their business model is founded on NOT PAYING THE ARTISTS WHO PRODUCE THE MUSIC. This is how they achieve such low prices and is blatant music piracy. Do you think anyone in their right mind would go to a distributor who will screw them over like that?

    This seems to be a pretty large part of the issue and I’m surprised that you dont seem to mention it.

  2. GraphiX says:

    Contayjen you seem more bothered and concerned that the artists whos multi millionares arn’t getting paid rather than getting screwed left and right with restrictions on something you buy from other places.

    i couldn’t give 2 stuffs if the artists dont get paid im sorry but i dont all i care about is if when i buy something i dont have to jump through a hundred hoops to play or use my purchases.

    i’ll never see the artists 5 mansions or 20 sports cars
    but i will see the hassle of buying DRM music

    i refuse to use a DRM system i dont like it i dont want it and im not paying to be restricted.

    so before bitching about the artists not getting paid
    try bitching about the customer getting ripped off

  3. Kirk says:

    Hey Contayjen, the royalty argument is a separate issue. Take a look at my list again. None of the lessons I’ve listed have anything to do with royalties. The point of this article is to explain why AllofMP3 is popular and how the music industry can learn from that.

    But since you broght the issue up, lets talk about artists royalties for a second. First of all, AllofMp3 has made the claim that they pay 15% of their revenue to ROMS (a Russian licensing organization). ROMS in turn is responsible for distributing the royalties to the labels, who in turn pay the artists according to the terms of their contracts. That’s the way money flows in the music business. Retailers generally don’t pay the artists directly.

    ROMS claims they have tried to make payments to the labels, but the labels have refused to accept. Apparently the labels are trying to make a statement about the legality of ROMS. They say ROMS has no right to accept royalties on their behalf. If all of this is true, then it would seem that the artists are not being paid because their labels are trying to make a statement.

    And by the way, you should know that there are quite a few artists who are unhappy about the royalties they’re being paid on sales of iTunes. Sony BMG is being sued by Cheap Trick and the Allman brothers over digital royalties. Note, these bands aren’t suing Apple, they’re suing their label.

    The RIAA is saying that artists are being ripped off by AllofMP3, but the truth of the matter is that even if the labels accepted payments from AllofMP3 practically none of the money would be paid out to the artists anyway.

  4. audiotruth says:

    I won’t candy-coat this… thankfully there are several ways to pay for the AllofMP3 service so Visa and Mastercard be damned. The selection of music available at the brilliantly designed site simly blows the doors off iTunes, Rhapsody, eMusic, etc. They offer a longer preview than the typical (and utterly useless) 30 seconds per song that every other site offers, which for some types of music (ambient for instance) is a god-send. Furthermore, unlike the infuriating iTunes, you can preview an entire album at once. Also importantly, you can choose the quality of the download in terms of bitrate, all the while purchasing music at prices that make me buy more music and expose myself to many more bands and albums than I would at a buck a track.

    The fact that the record labels have elected to not sign on with the Russian version of performance rights organizations BMI, ASCAP, and SESAC is not AllofMP3’s fault. And the truth is that I buy more discs now from Amazon et al BECAUSE I have been exposed to so much more incredible music at great prices from AllofMP3. The RIAA and the U.S. gov’t have absolutely got to end the Gestapo-like policing of this issue. Enough said.

  5. Contayjen says:

    Kirk, you may think the royalty issue is a separate one, but like any other industry where its possible to undercut the competition by not paying the people who produce the product, I think it is highly relevant to the issue.

    I am all for killing the big music corps, but stealing other peoples work is not the way to do it. Its not the big names that are being hurt, a large percentage of smaller labels have folded in the last few years and a lot of those that are left are running at a loss.

    GraphiX, if you think all artists have 5 mansions or 20 sports cars you are sadly mistaken. Most recording artists need day jobs to support themselves. Very few are lucky enough to make any money at all. I know of several high-profile producers in the dnb scene who dont make enough money from music sales to cover their production costs, let alone live on, and I also know many popular small-time artists who are struggling to make ends meet while their music is freely available on p2p or allofmp3. The bottom line is: music sales don’t make any money for the vast majority of apparently professional musicians, and allofmp3 isn’t helping matters.

    Sure, us artists will still make music for free because thats what we love doing, but do us a favour and just admit that you dont mind stealing if you can get away with it. If you can buy my music directly off me, why would you bother when you download it cheaper from them? Who cares if the artists gets nothing, right?

  6. Contayjen says:

    A major player in the breakbeat scene annoucned its going down just yesterday:

    “Intergroove the biggest Breakbeat distributor has closed its doors today….” > “..its seems the scene is getting battered due to people downloading/sharing music and not paying artists and distributors their dues…Intergroove the biggest Breakbeat distributor has closed its doors today

    http://www.nuskoolbreaks.co.uk/viewtopic.php?t=60633&postdays=0&postorder=asc&start=0

  7. Kirk says:

    Contayjen – I have to disagree. The point of this story is that labels can learn from what Allofmp3 has done right. The fact that a legitimate digital music store would have to pay royalties wouldn’t prevent that same store from doing any of the things suggested in this article.

    I’m all for artists being compensated for their work. But as I noted, artists are currently not being fairly compensated for legal downloads. If you haven’t done so already, take a look at the article Kassia wrote last week about the flow of money in the music industry.

    It’s easy for the RIAA to stand up and say that sites like Allofmp3 are ripping off artists. It’s much harder for them to explain why their members are using iTunes to essentially do the same thing.

  8. Contayjen says:

    Well, I sell my music through iTunes and no one rips me off. I take 91% of what iTunes pays out. Everyone is happy with that. Its cheap music for the buyer and i get the lions share of the revenue.

    Like I said before, I’m no fan of the big labels. They are hugely inefficient and turn out standardised mash. Heres a newsflash for you: You dont need to sign away your life to a big label to sell your music anymore.

    There’s not a lot that a label can do for me that I cant do myself, except pay me a big heap of cash. I have 2 albums on sale, music buyers can pay me directly through paypal for me to send them a CD, or I can use a fulfilment facility like CD Baby as I plan to for my next (hopefully faster selling) album. They take a flat fee $4 cut, notably less than the standard – music label > distributor > high street shop – model. The fat middlemen are cut out of the picture entirely and this trend is growing fast. If I sell my CD for $10, I’m taking home 60% of the revenue. You can’t argue with that.

    Promote this distribution channel if you want to be on the side of the artists and not the music pirates. There IS a choice.

  9. Kirk says:

    Hey Contayjen: Glad to see we finally agree on something. The world is changing rapidly and musicians are finally starting to re-think the benefit of signing to major labels. You’ll get no argument from me on that point.

    But here’s a news flash for you. The vast majority of musicians selling music through iTunes are on more traditional recording labels. Those musicians don’t get the same 91% payout you do. Are they stupid? No. They’re in long term contracts and they have no say in the matter. Even if artists were to move on after their contracts expire most of their catalogue recordings would be tied up for years.

    So while newer artists like Clap Your Hands Say Yeah have the opportunity control their own destiny, artists who’ve been around a few years longer are locked into the old way of doing things.

    By the way, getting back to the topic at hand – Allofmp3.com has indicated that they do pay royalties to a Russian recoding federation. The major labels have refused to take payment. As a result no money has been distributed to the artists. Allofmp3.com has suggested that perhaps the artists should start dealing with them directly in order to receive their pay. That’s not much different from what you’re doing with iTunes. It’s just another sign that the music industry could learn a thing or two from Allofmp3 – which, by the way, was the point of this article.

  10. Contayjen says:

    Yes, its true that the situation is changing fast. I am trying to figure out the best marketing plan for my next release so I am keeping a very close eye on the whole digital market.

    Now, sure the major labels have got a lot of artists screwed down hard with their exclusive contracts and it further justifies the death that is coming to them. Its a harsh situation in the present economic climate, but some artists are only too happy to sell their soul for their shot at fame and untold riches and take the gamble.

    At the end of the day though, no one is solely responsible for the market changes due to technological advance and like you I have little sympathy for those who fail to adapt. There has been plenty of time. Evolution suggests they must adapt to the new environment or die.

    Now this Russian royalty organisation..I have my reservations about the accountability and trustworthyness of that organisation, considering what I have been told by my russian counterparts and the financial dealings within Russia. It seems that the laws are set up purely to exploit western intellectual property. Like most of Asia, I doubt if they really have anyones interests at heart but their own. That aside…

    ..the other issue, and equally important is…can they really to pay the artists even if they want to? A large number of independant artists have music online, some of which I have seen on allofmp3. These artists aren’t registered with the usual royalty-collecting organisations because it doesn’t make financial sense for such small-timers. And if they aren’t registered then their royalties are going to get ‘lost’ somewhere along the line.

    So, on that ground alone, knowing that they will definately never recieve anything owed to them, I think these artists would be dismayed to see their music on sale there. If allofmp3 would allow artists to opt-in to allow downloads, with proper and accountable sales tracking, they might have a chance of winning over these artists. We will have to wait and see what unfolds. Until they open their doors and let artists chose their own prices I remain skeptical.

  11. Daniel says:

    I live in eastern Europe and I can tell you, that all the copyrighted stuff having the governmental watermark is selling at 2-4 USD in shops all around the country – and this are the official copies. It’s really not the fault or mistake of AllofMP3 to sell on internet what everyone is buying here in the shops for the same conditions.

    RIAA & Co. should urgently learn from AllofMP3 then I have never found anything similar and useful. Since I found AllofMP3, I’m paying for the music while before I just downloaded whatever I got on the internet. And if the russian copyright protection organization is not paying a dime to the US labels, then it’s definitively NOT the mistake of AllofMP3 that is in fact paying money. The US copyright organizations would do very well to get agreements with the russians about getting paid. But they will certainly also have to make some concessions because the fat years are over.

    And to Contayjen : at your place I would run and get in touch with AllofMP3 mega fast, making a deal that they become your exclusive distributor. And forget about all the hassles with PayPal & Co. and sending CD’s to buyers. I would never buy anything from you if I could not download music and pay for it online. And PayPal, in addition, only processes payments from some countries and PayPal is a nightmare (just read all the peoples that have lost their money http://www.paypalwarning.com)

    As for myself, I will continue to support and buy at AllofMP3 instead of getting music for free on P2P. But on the other hand, if I would have to pay more as 4-5 USD per album, I wouldn’t buy anymore.

  12. As long as DC++ and Torrents sites exists, MP3 music will be downloaded free of charge and almost nothing can stop it. I live in Eastern Europe and even tho they are trying now to stop somehow movies from beeing copied through networks, they can’t. They just can’t put 80% of the population in jail or make them ALL pay. This process may last for 10-20 years at least untill some small results to the illegal copying of Mp3 and movies.

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