Abbey Road Launches Music Tech Incubator

Abbey Road Red's first investment

The famous Abbey Road Studios has gotten into investing in a big way by launching Abbey Road Red, a music tech-specific incubator for entrepreneurs, researchers and developers.

Backed buy Universal Music Group (which now owns the studio), Red is offering expertise, mentorship, advice and a testing ground for products in exchange for a 1 to 2% equity stake. The incubator has an ambitious agenda of hosting 3 startups every 6 months.

The first project for red is Titan Reality's Pulse, which was on display at the Red launch in the facility's famous Studio 2 last week.

Pulse is a sensor pad and controller that recognizes objects on its surface and in the air, enabling you to play a virtual instrument without having to physically touch a control surface. The device will be released by the end of the year with a retail price of around $1,200 US.

This is a great thing for the music tech industry in that traditional money sources have difficulty grasping the music market and the significance of a product, therefore making the money raising process somewhat harder than other tech segments. Find out more about Abbey Road Red here.

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For Some, The Music Business Holds Its Own

The sky is falling for most artists and companies in the music business, but not all. Universal Music Group (UMG) announced earlier this week that their gross income was about even with last year at this time. Given the economy and the fact that a 20% loss is actually considered good, UMG had a great year.

The company had sales of a bit over a billion dollars, with digital sales comprising about 28% of gross revenue. What's more, digital sales were up by almost the same amount over last year. Although CD sales fell by a bit more than 9%, the loss was offset by an increase of the same amount in artist services and merchandise sales (from 360 deals?).

As a Universal exec said to me in private, "We still sell an awful lot of CDs, and we have a lot more income sources than we used to."

So what does this mean? Say what you will about UMG, but they seem to have figured something out. The rest of the industry's income takes a bath and theirs stays flat (which is a win in this economy). Digital sales stay flat for the rest of the industry while theirs is up 28%.

I'm a big proponent of Music 3.0 (have a book coming out about it, as you know if you read this blog regularly), and believe that it's a big part of the new music business, but the fact of the matter is that not many artists have broken out of the noise of the Web despite the advantages it provides. And, the vast majority of artists selling even the meager numbers of units that we see on the charts every week are still tied to a major label or large indie.

So who will be the first artist to really take Music 3.0 to the next level and break out big? It will happen some day, the question is only, when?

The Suit That Could've Change Everything

Rapper Eminem and record label Universal Music Group (UMG) just completed a battle in court that could've dealt a final death blow the music industry.

Eminem's FBT production company sued UMG over what amounts to the definition of ownership of a digital file. FBT claimed that UMG owed them more money because a digital file sold by iTunes or Amazon MP3 is actually a license. UMG insisted that regardless of whether it's a CD, vinyl record, or digital file, Eminem's music is part of their distribution deal.

So is it licensing or is it distribution? That's what the court had to decide.

There was a lot of money at stake here. If the court decided that selling a digital file is a licensing deal, then the record label and the artist would split the proceeds 50/50 and the artist would be entitled to about 35 cents per download. But if they decided it's distribution, then the original recording agreement would still be in force and the artist would make about 15% (more or less), or about 10 to 20 cents on every download instead.

FTB claimed that, since there's no manufacturing or packaging costs (which are covered by the record label), and only a single copy is delivered to the digital download companies, then it should be a license, since that's what occurs in other licensing deals. UMG argued that a sale is a sale regardless how it happens.

On Saturday, the court sided with UMG and the industry released a giant sigh of relief. You can be sure that the issue isn't dead and will be revisited in the future, however.