• A U.S. District Court judged ruled that video streaming site Veoh can claim exemption from liability under the DMCA's safe harbor protection in a lawsuit filed by Universal Music Group. Wrote the judge, "Service providers would be greatly deterred from performing their basic, vital and salutary function." There is not yet a decision in the case. (San Fernando Valley Business)

• Apple has reportedly inked deals with UMG, Warner Music Group and Sony Music to sell their music in the MP3 format. In return for the DRM-free format, Apple is said to be more flexible on track pricing. "Under the terms of the deal, song prices will be broken down into three categories--older songs from the catalog, midline songs (newer songs that aren't big hits), and current hits--said one of the sources." The ol' three tiers of music pricing...some things never change. (CNET)

• Music is the new Tupperware. "Through Tara Leigh, former EMI marketing executive Josh Zieman organized 2,500 listening parties at homes throughout the United States. The gatherings attracted a total of 42,000 people, 88 percent of them female." And yet EMI's market share dropped in 2008, and the parties produced "minimal sales." The big question here is what percentage of those sales would have been realized in the absence of those parties. If the percentage is high, EMI is throwing parties for existing customers already being reached through other means. (Billboard)

• Universal Music Group owned 49.4% of the Latin album market in the U.S. in 2008. Sony Music had 21.2% while EMI and Warner Music Group had about four and five percent, respectively. (Billboard.biz)

• GigaTribe is a community-based file-sharing application. The website says 1,031,356 user accounts have been created. V3 is out now. (Music Ally)

• Testimony has ended in the FTC's case against BurnLounge, which is alleged to have been a pyramid scheme rather than a business. BurnLounge, which went offline last year, was a service that allowed users to create their own digital music storefronts. (The State)

• Is there a single ISP that has worked out a deal with the RIAA? (TechDirt)

Ever since Nielsen put out the 2008 SoundScan figures, people have latched onto the fact that unique purchases of recorded music increased 10.5% last year. "Americans bought more music in 2008 than ever before," proclaimed the USA Today. Music purchases are "astronomically high," said Nielsen's president of music. Nielsen tracks only units sold -- not their value -- so I understand why the company has highlighted the 10.5% increase. But I hope people are thinking more about dollars spent rather than units sold.

Of course it's important to know how many units were sold in 2008, but don't bother trying to put lipstick on this pig (didn't think you'd hear that in 2009, did you?). Revenues dropped in 2008. Period. The number of units sold ranks way down the list in importance -- well below the mythical "track equivalent album." If you think a 10.5% increase in the number of units sold is so great, I'll trade you ten one-dollar bills for eight one-dollar bills and three nickles. It's a great deal -- you get 11 units and give up ten units. That's the easiest 10% you'll ever make.

Universal Music Group had 31.5% of the U.S. album market in 2008, a slight drop from its 31.9% in 2007 but well enough to retain its title as market share leader. Sony Music (formerly Sony BMG) was second with 25.3%, a slight improvement from 25.0% in 2007 but far from its share just years earlier. Warner Music Group was third with 21.38%, a good improvement from 20.3% in 2007 (but not as good as the 24.7% share WMG had in the month of September). EMI continued to drop. With 8.97%, it had the lowest market share of the four majors. In 2007, EMI had 9.4%. In 2006, it had 10.2%.

Independent labels had 12.8% of the market, a drop from their 13.5% share in 2007.

Market shares, according to Nielsen data, were reported in this Billboard article.

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• Music Marketing Jobs
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• Digital/Online Music Jobs

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• The RIAA has fired MediaSentry, the company that performed investigative tasks for use in its consumer lawsuits, and will replace it with Copenhagen-based DtecNet Software ApS. Actually, the report says the RIAA "quietly fired the RIAA months ago." MediaSentry has begun to phase out its controversial evidence collection arm. (Wall Street Journal)

• Sales of Nokia phones with Comes With Music have been good but not great, according to a report in the Financial Times. (Crave)

• A profile of music streaming service Spotify. The product gets rave reviews for speed, ease of use and use of few resources. The service is not yet available to users in the U.S. (TorrentFreak, via CNET)

• Though U.S. acts got the most airplay in Australia in 2008, a growing number of Australian artists landed on the "Most Played Artist Report." (Billboard.biz)

Album sales: down 15% to 430 million units
CD sales: down 20% to 362 units
Digital album sales: up 32% to 62.8 units
Track sales: up 27% to 1.07 billion units
LP sales: up 92% to 1.9 million units

The track equivalent album is a common measure that converts individual track sales into albums and adds the result to proper album sales. Typically, ten tracks equals one album (because they have the same wholesale value). This is a good way to gauge the impact of consumers' movement to single tracks and away from albums. Even though digital album and track sales were up in 2008, track equivalent albums dropped 8.6%.

Looking for a bright side somewhere? Here's one: track equivalent albums dropped 9.6% in 2007.

On the other side, consider the impact of digital track sales. If you convert all 1.07 billion track sales in 2008, you get 107 million digital albums. That's considerably more than the number of digital albums that actually sold in 2008, but it's far short of the 362 million CDs that consumers purchased in 2008. In terms of revenue, minutes of music purchased, and total tracks, the CD is still and by far the dominant format.

In 2008, growth rates for both tracks and digital albums nearly converged around 30%. The bad news is the days of explosive growth rates are gone. The good news is unit increases get bigger while the growth rates drop. With no new retailer or business model on the horizon, and with iPhone applications better at free music services than enticing purchases, expect digital growth rates to continue their downward trajectory.

Nielsen's 2008 SoundScan figures were released yesterday and they show greater physical losses, slowing digital gains and a net decline in revenue. In 2008, consumers purchased 88.8 million fewer CDs than they purchased in 2007. That's a 19.8% drop, far sharper than the declines in previous years. Brick-and-mortar retail continued to cut shelf space. Retailers staggered from the worsening financial climate. People continued to adopt digital music -- which often means buying individual tracks instead of albums.

But digital music gains are a small fraction of CD losses. Digital album sales increased 32% in 2008 -- a large percent increase, but a paltry gain in actual units. Only 16 million more digital albums were purchased in 2008 than were bought in 2007. Only a 16 million-unit gain in digital albums versus an 89 million-unit decline in CDs.

The revenue implications are incredible. Assuming a $10 CD wholesale cost (which is very conservative), about 127 million digital albums would be needed to replace the lost CD revenue. But consumers purchased only 16 million more digital albums, leaving a shortfall with a trade value of nearly $780 million.

What about the 27% increase in digital track sales? That was a unit increase of about 230 million tracks, which has a trade value of about $160 million. If you take $160 million away from the $780 million shortfall in album revenue, you're left with a decline of $620 million.

The revenue decline is not totally an issue of digital piracy. When consumers adopt digital music and gain the ability to purchase a few tracks instead of an album, revenues will be for the worse (as long as no more consumers become active music purchasers, which is the case here). While 73 million fewer albums were bought in 2008, 230 million more individual track downloads were purchased. If consumers are substituting albums for tracks, that means each album lost was replaced by the purchase of 3.15 tracks. Now, this type of format substitution -- on a massive scale, by active music purchasers -- goes a lot further to explain drops in revenue than does file sharing. The effects of piracy are hard to pin down, hard to quantify. Format substitution is right in front of our faces.

Choruss, a proposed non-profit organization that would collect fees from universities while granting the right to download music "without the fear of legal reprisal," got a harsh vote of no confidence in a ContentAgenda post by Rick Carnes (president of the Songwriters Guild of America) and Chris Castle (managing partner of Christian L. Castle Attorneys).

Why is the theory doomed to fail? Because there will be thousands of copyright owners who do not participate in Choruss. It seems highly unlikely that Choruss will be able to sign up all copyright owners in the universe, or even most. And note—the word “indemnify” does not appear in Choruss’s pitch materials. If the Choruss legal theory is such a great idea, why doesn’t Choruss indemnify the universities and students from any claims? What are the students paying for exactly?

The gravest concern to creators, however, is that Choruss would have virtually no accountability to the songwriters, artists, musicians and vocalists who fuel the Choruss business model. The program offers no solution to accounting to creators for file “sharing” uses—campuses would merely “estimate” usage. Choruss stands in stark contrast to ASCAP, BMI, SESAC and SoundExchange, all of which spend considerable effort in tracking actual usage of the works they are permitted to license to be good fiduciaries to their members.

There are a few holes in the pair's arguments. For example, previous investments in "legitimate music and video services" should not prevent the adoption of alternative models. What has been spent is in the past and does not necessarily indicate the best path forward (otherwise the best business plan would always be the one with the greatest investment). And Choruss would not disproportionately reward artists backed by the largest marketing budgets. Indie artists are downloaded on P2P and on other "reactive" technologies. The majors would be at no greater advantage.

But overall, the post lays out some shortcomings of Choruss. Without the participation of all rightsholders, Choruss would not be able to provide indemnification to a university or ISP. The Choruss "covenant not to sue" is, as Carnes and Castle wrote, "a nuanced, untested, flimsy, and complex legal strategy" that would leave participants open to legal problems.

Then again, the four majors are the busiest litigators. As long as they are on board, universities and their students have far less reason to worry about lawsuits. And I doubt Choruss would be able to move forward without the blessings of all four majors, a good portion of indies and most major music publishers. Too much needs to be agreed upon to leave anybody out.

Another wrinkle in the Choruss story is the RIAA's recent decision to stop suing individual downloaders. To many people, the goal of Choruss -- a blanket license for unlimited downloading -- is to bring a sensible end to consumer lawsuits. The need for new distribution and payment models is almost an afterthought. With the threat of consumer lawsuits now gone, there is less pressure on universities and ISPs to adopt the Choruss plan. The RIAA has already granted downloaders indemnity in exchange for emails to be sent by ISPs to repeat offenders (I expect little toughness toward their customers on the part of ISPs). Where's the incentive to lift a finger for the music industry? Self-regulation is always better than enticing Washington's involvement, but the U.S. government is unlikely to get involved to the extent of the UK and French governments.

I was on vacation when recent news about Choruss hit, so if you aren't familiar with the proposed plan read this article at Epicenter by Eliot Van Buskirk.