================================================================<br> J@pan Inc Magazine Presents:<br> M U S I C M E D I A W A T C H<br> Commentary on Japan's music technology news<br>================================================================<br>
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<a href="mailto:info@pbxl.jp">info@pbxl.jp</a><br>----------------------------------------------------------<br><br>CONTENTS<br><br>++ FEATURE: Thoughts on Sony's Acquisition of Gracenote<br><br>++ EVENT: AMAZIA: ASIA'S ULTIMATE ENTERTAINMENT CONTENT MARKET<br>
<br>++ NOTEWORTHY NEWS: <br> ** Japanese government looks at 'iPod Tax' again<br> ** Fair Trade Commission investigates JASRAC<br> ** Hatsune Miku mobile content site launched<br> ** KDDI announces chaku-uta full downloads hit 200 million <br>
mark<br> ** Label Mobile sells mastertone bundles<br><br>++ FEATURE: Thoughts on Sony's Acquisition of Gracenote<br><br>On April 22, Sony America announced that it was buying Gracenote<br>for US$260 million. While the move generated some interesting <br>
discussions on the tech blogs, the mainstream business media for<br>the most part simply reported what was in the press release and <br>left it at that. For anyone with an interest in digital music, <br>though, Sony's purchase raises some interesting questions, and <br>
marks a new chapter in the somewhat controversial history of <br>Gracenote and its widely-used CDDB system.<br><br>CDDB (Compact Disc Database) is an online database system that <br>allows software applications to look up information about audio <br>
CDs. Anyone who has ever ripped a CD and seen the title/artist <br>information for each track appear automatically knows just how <br>useful this service can be. It began as a small open-source <br>project in 1993, building its database of disc/track information<br>
through user submissions. All of the submitted data was publicly<br>available, in a manner that presaged the Web 2.0 user-generated <br>media of today. By 1998, the database had grown large, and the <br>three-person company managing the project decided to sell it to <br>
a device manufacturer called Escient. <br><br>In 2000, the company was renamed Gracenote. Patents were <br>obtained, license terms were quietly changed, and while user <br>data was still accepted, new submissions were no longer made <br>
available to the public. These moves upset and alienated many of<br>the initial contributors and developers, who thought they had <br>been participating in an open project where the evolving <br>database would always be available to everyone. Gracenote then <br>
embarked upon a course of patent litigation and other legal <br>maneuvers against its competitors and their customers, picking <br>up a reputation for anti-competitive and heavy-handed behavior <br>in the process.<br><br>
Along the way, Gracenote raised more capital from various VC <br>firms, including Sequoia Partners, and secured key licensing <br>deals for use in Winamp, iTunes and other applications and <br>devices. For a while, Gracenote appeared to be working toward <br>
an IPO, but these plans were apparently shelved. About a year <br>ago, rumors began swirling that the company was on the block, <br>looking for an interested buyer, and that was the about the last<br>anyone had heard of the situation until the Sony announcement.<br>
<br>So why would Sony pay a quarter of a billion dollars for a music<br>recognition company? In addition to CDDB, Gracenote also owns a <br>database of audio 'fingerprints' which can be used to identify <br>individual tracks using just a short audio sample. While this <br>
system and other Gracenote assets no doubt have some value, it <br>is not nearly enough to justify a US$260 million price tag. <br>Rather, the general consensus is that Sony simply overpaid by a <br>surprisingly large amount. Gracenote investors, on the other <br>
hand, appear to have made out very well in this deal, <br>particularly majority shareholder Scott Jones. As CEO of <br>Escient, Jones was responsible for the purchase of the original <br>CDDB back in 1998, and still serves as chairman of the board for<br>
Gracenote.<br><br>An even bigger question centers around Gracenote's current <br>licensees - particularly Apple - and their reaction to the sale.<br>At present, Gracenote's CDDB is used not only in iTunes (when <br>
CDs are played or ripped) but also in consumer electronics <br>devices made by Panasonic, Samsung and other companies that <br>compete directly with Sony in major markets. It seems unlikely <br>that these Gracenote customers will continue to use an online <br>
music recognition system that is now in the hands of a direct <br>competitor who could potentially monitor and store all of their <br>database queries.<br><br>Kevin Meyerson, CEO of Tokyo-based Rainbow Partners, has a <br>
unique perspective on the issue. As Gracenote's exclusive <br>representative in Japan from 2001 to 2003, Rainbow Partners <br>brought CDDB into millions of Japanese homes and cars, securing <br>licenses with all of the major consumer electronics and car-navi<br>
manufacturers (check the MMW archives for the two-part interview<br>we did with Kevin back in July 2002). Rainbow Partners now <br>handles exclusive licensing in Asia for Gracenote's major <br>competitor AMG Lasso (now owned by Macrovision). Not <br>
surprisingly, he says in the days since the sale Rainbow has <br>been inundated with calls from Gracenote customers who are wary <br>of Sony looking actively for an alternative to Gracenote/CDDB.<br><br>So it will be interesting to see how this all plays out. The <br>
deal certainly looks like a bad one for Sony to begin with, and <br>can only get worse if major customers such as Apple migrate over<br>to AMG Lasso or some other competing system.<br><br>-- Steve Myers<br><br>++FEEDBACK<br>
Want to comment? It is now even easier to voice your opinion<br>than ever before! Simply post a comment at the bottom of the<br>article: <a href="http://www.japaninc.com/mmw121">www.japaninc.com/mmw121</a><br><br>++ EVENT<br>
<br><br>ASIA'S ULTIMATE ENTERTAINMENT CONTENT MARKET<br><br>AMAZIA, 17-20 November, 2008, Hong Kong, is the first Asian<br>business-to-business exhibition and international conference<br>dedicated to the creation and distribution of entertainment<br>
content across all delivery platforms. AMAZIA provides key<br>professionals from the TV, games, music, internet and mobile<br>industries an unparalleled opportunity to develop essential<br>business, discover new trends, creative talent and innovation<br>
throughout Asia<br><br>The earlier you register, the less you pay.<br><br>Register now <a href="http://www.amaziacontent.com">www.amaziacontent.com</a><br><br>++ NOTEWORTHY NEWS:<br><br>** Japanese government looks at 'iPod Tax' again<br>
In brief: On May 8, the Cultural Affairs Agency in Japan met to <br>discuss the possibility of issuing a levy on portable digital <br>music players and hard disc recorders. Currently a 1% levy is <br>applied to the retail price of MD players, DAT players and DVD <br>
recorders. A group of copyright organizations including JASRAC <br>has been lobbying the government to extend the levy to include <br>portable music players. A similar proposal was discussed within <br>the agency in 2005, but was eventually abandoned after various <br>
consumer electronics groups voiced their opposition.<br>Source:<br><a href="http://headlines.yahoo.co.jp/hl?a=20080507-00000038-imp-sci">http://headlines.yahoo.co.jp/hl?a=20080507-00000038-imp-sci</a><br><br>** Fair Trade Commission investigates JASRAC<br>
In brief: On April 23, representatives from the Japanese Fair <br>Trade Commission entered the offices of JASRAC, Japan's dominant<br>copyright organization, and began a surprise audit and <br>investigation. The FTC says they are investigating possible <br>
violations of the anti-monopoly law, particularly to see if <br>JASRAC has obstructed recent competitors such as e-license and <br>JRC. <br>Source:<br><a href="http://www.itmedia.co.jp/news/articles/0804/23/news051.html">http://www.itmedia.co.jp/news/articles/0804/23/news051.html</a><br>
<br>** Hatsune Miku mobile content site launched<br>In brief: Krypton Future Media, which makes the 'Hatsune Miku' <br>software package for the PC, announced it had launched an <br>official mobile site on KDDI where it will distribute Hatsune <br>
Miku arrangements and Flash content for the mobile phone. The <br>PC software features an animated character singer named Hatsune <br>Miku, who 'sings' lyrics and melodies input by the user. The <br>software features Yamaha's Vocaloid 2 technology for <br>
synthesizing vocals to match a given set of lyrics and melody. <br>Source: <br><a href="http://k-tai.impress.co.jp/cda/article/news_toppage/39809.html">http://k-tai.impress.co.jp/cda/article/news_toppage/39809.html</a><br>
<br>** KDDI announces chaku-uta full downloads hit 200 million mark<br>In brief: On May 3, wireless carrier KDDI recorded the 200 <br>millionth download from its chaku-uta full (full-track mobile <br>download) service. The announcement comes a little over a year <br>
after KDDI announced it had reached 100 million downloads in <br>February 2007. KDDI was the first carrier in Japan to begin <br>offering full-track downloads in November 2004. There are now <br>148 sites on the chaku-uta full menu offering a total of 120,000<br>
tracks.<br>Source:<br><a href="http://plusd.itmedia.co.jp/mobile/articles/0805/07/news056.html">http://plusd.itmedia.co.jp/mobile/articles/0805/07/news056.html</a><br><br>** Label Mobile sells mastertone bundles<br>In brief: Last week, Label Mobile began selling bundles of 2-5 <br>
songs in chaku-uta (mastertone) format through its popular site <br>on KDDI. Called 'uta-packs', the bundles sell for 315 to 525 yen<br> (US$3-$5).<br>Source:<br><a href="http://it.nikkei.co.jp/mobile/news/index.aspx?n=NN001Y481%2014052008">http://it.nikkei.co.jp/mobile/news/index.aspx?n=NN001Y481%2014052008</a><br>
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<br>++END<br>