Psonar, the new music service offering a simple payment model to revolutionise access to streamed music in the same way that pay-as-you-go revolutionised mobile phone access, has signed a licensing deal with INgrooves, the digital music marketing and distribution firm, at midem.

Psonar Signs Deal with INgrooves - L to R Psonar's Simon Lait and Martin Rigby, INgrooves' Alex Branson - (c) Midem News

Instead of offering a limited amount of free (ad-supported) use or monthly subscriptions, Psonar’s Pay-Per-Play (PPP) payment system is affordable and simple by charging one pence/one cent/one eurocent per track.

Users are able to pay via phone bills (pre-pay/contract), credit/debit cards or PayPal. “The deal offers a whole new way of reaching a whole new audience by driving content to kids who listen to music on mobile devices,” said Martin Rigby, UK-based Psonar’s CEO.

“The platform’s viral capacity offers a great capacity to music fans,” added Alex Branson, senior vice-president/managing director at INgrooves, which has 1 million tracks in its catalogue. “There are already acts who have 10 million streams on YouTube; Psonar is like that but more targeted, and can also encourage fans to go and buy.”

Digital Confusion
Now, with the rise of digital music, it’s different – some bands achieving considerable success without a label (OK Go’s Damian Kulash wrote about this in the Wall Street Journal) others giving their music away (e.g. Nine Inch Nails). Even major bands, including Radiohead with the ‘In Rainbows’ album, have experimented with a ‘Pay What You Want’ approach – although it was not successful enough for Radiohead to use it for subsequent albums.

A Tale of Three Artists (and Labels)
Out of this confusion it’s possible to discern three different outcomes for artists and, to some extent, labels.

The Major Artist
Major artists signed to major labels (Sony, Universal, EMI, Warner) can rely on their pre-existing reputation and following and/or the marketing effort of their label to gain mindshare among music fans. They monetize this through gigs (see this latest excellent Economist piece in a series on the economics of live music), conventional CD sales, digital downloads and subscription streaming services. Moreover, focussing on spend per consumer rather than revenue per track, the streaming music services have started to close the gap with iTunes in the revenues they routinely return to the major labels. This is an arrangement that can work well for both major label and major artist, especially if the latter is the author as well the performer of the music.
The Emergent Artist
Online services such as Bandcamp, ReverbNation, HypeMachine, SoundClick or SoundCloud serve emergent artists very well. Their primary objective is to gain the exposure that will translate into traffic to their own websites, sales of gig tickets and growth in their fan base. Monetizing their music is nowhere near as important as getting people to listen to it, like it and share that enthusiasm with other people.
The Squeezed Independent (and Authors and Others)
Independent artists and labels sit squarely in the middle of these and face a dilemma. They need their content to be available on streaming services so that millions of users can access it but they get little collateral marketing benefit, have to deal with opaque accounting and suffer poor pay-out rates. Yet they need to make their music available on Spotify or Deezer in order to maximise the chances of discovery by new fans. Even then there’s a further dilemma since a subscriber to an ‘all you can eat’ streaming service is unlikely to make the additional outlay to purchase a download when they can listen to the music as often as they like through the streaming service (especially if it offers offline caching on mobile devices).
Independent artists don’t always have the fan base to fill a major gig venue so their live performance options are limited and generate poor returns. For the majority of independent artists, paid download of whole tracks and CD sales remain the principal ways they earn a living and online music service need to be complementary to these and not risk cannibalising them.
The increasing focus of the subscription streaming services (and major labels) on revenue per user, rather than revenue per track played, disenfranchises everyone involved in the track except the label itself and, perhaps, the featured artist (though there’s even dissent there). Publishers and authors (i.e. composers and lyricists), managers, session musicians and anyone else involved in creating a song and turning it into a recording, rely on the revenue per track played to earn their livelihoods and revenue per user undermines these economics.

An Open and Transparent Digital Music Service
Now Psonar wasn’t created to right the wrongs of the music industry but its simple and transparent business model is good for both fans and artists & labels.

For fans, Psonar Pay-Per-Play offers easy, selective access to streaming music on a per-track, ‘pay as you go’, value-for-money basis. They can pay via mobile phone (pre-pay or contract), credit card or PayPal. They can also share music on Facebook, Twitter, blogs or email, where other people can pay to play the music shared. Fans can also gift plays via Facebook Messaging, Twitter DM, SMS or email having pre-paid for another person to listen.

For artists and labels, Psonar Pay-Per-Play has a single, straightforward tariff that’s the same for all distributors or labels, as well as clear and transparent accounting where every stream is monetized apart from promotional activity. Psonar offers labels the tools to build highly social, viral promotion campaigns that don’t involve unlimited free access to music and which can be fine-tuned to generate revenue or promote viral spread (or both) as the label judges best. Since all monetization is per track streamed, everyone with an economic interest in the music earns their share of the revenue generated.

Psonar is the digital music service that reaches the ‘mobile music generation’ – digital natives unwilling or unable to pay for subscription streaming – with rich, social features that allow artists and labels to seed the viral spread of new music confident about monetization, transparency and pay-out levels.

Psonar iPhone App

For artists and labels, Psonar opens up a whole new world of viral and social marketing. By gifting plays to their fans, artists encourage them to spread the music on to their friends in turn. And fans are rewarded for sharing: 1 free play for every 10 Pay-Per-Play tracks played as a result of their gifting or sharing activity. Psonar play links can be embedded in tweets, Facebook updates, emails, texts, IM messages, blog posts and on artists’ and labels’ websites or Facebook pages. Psonar play links can be configured to allow different fan behaviour, such as play once or many times or allow gifting to one person or many people. This flexibility gives artists and labels, especially independents, the power to create a viral marketing campaign that’s tailored to the demographics and behaviour of their fans. Importantly, they can limit the number of plays that are free – knowing that any further spread monetizes on a Pay-Per-Play basis.

No-one can doubt the challenge we face in launching and growing Psonar. We’ve been lucky that some important players in the global music industry (The Orchard, INgrooves, Essential Music, Virtual Label, Skint/Loaded, Stealth Records to name a few), especially in the independent music sector, appreciate our vision and have partnered with us. At the start of the year when Congress will decide whether to pass the most draconian anti-piracy measure yet contemplated to protect copyright, SOPA, Psonar is about liberating the potential of the web to spread music and encourage listening in a way that rewards creators: to misquote Bill Cinton “it’s all about being social, stupid”.

That said, you can still play anything you want, create playlists and tweet them or send them to your Facebook timeline – and, most important of all, you can gift tracks and playlists to other people straight out of the app. Here’s what it looks like in iTunes:

Psonar in iTunes Preview

Apple’s determination to maintain high standards for the user experience with iPhone and iPad apps is laudable and has set the standard by which smartphone apps on all platform are measured. That said, I don’t really understand why Apple considers Psonar’s Pay-Per-Play payment model to be ‘rental’ and thereby contrary to App Store guidelines. Still, we’ve found ourselves in good company in having to separate payment from use to get the Psonar app approved – Amazon Kindle, LoveFilm and NetFlix have had to do the same as well.

Uniform Motion published their pay-out rates

There’s been a long-running spat between songwriters and Spotify over pay-out rates, triggered by a 2009 blog post which extracted data from the Swedish performing rights society (STIM) to show that Lady Gaga had received $167 payment as co-composer of ‘Poker Face’  (this doesn’t include any payment to her as performer, which would have been channelled through the label as master rights holder) from 1,000,000 plays of the song.  Whatever the rights and wrongs of whether this is a fair or reasonable level of payment to a composer, the issue is symptomatic of significant disquiet among songwriters.  In a BBC interview in 2010, Patrick Rackow, chairman of The British Academy of Songwriters, Composers and Authors (Basca), commented “At the moment, the amounts of money that are actually being received are tiny.  That might be because there is no money there. But there is no clear trail that can be established so that the songwriter can trace back what they ought to have got. These things are behind a blanket of secrecy, and that is extremely worrying.”

The songwriters have been joined by some high profile artists as well, including Coldplay according to an article in Friday’s Independent which stated that the band had refused to make ‘Mylo Xyloto’, its latest album, available on Spotify.  The article went on to say that the band had given no reason for its refusal but that EMI, Coldplay’s label, were “embarrassed” by the refusal, since it is a 2% shareholder in Spotify.

Whatever the merits and demerits of any particular digital music service whether it’s based on download like iTunes and Amazon, streaming like Napster and Spotify or an internet radio service like We7 or Pandora, it’s clearly sub-optimal to lose the confidence of artists and songwriters.  Nothing corrodes that confidence like secrecy and a lack of transparency which imply that the parties to a deal have something to hide. Which goes a long way to explain the chorus of agreement and dismay when Uniform Motion published their Spotify pay-out rates (and the rates they get from all other music sales channels) on Gizmodo.

At Psonar, we have a single tariff structure that is transparent to all and the same for all parties determined only by their role in creating, publishing and distributing that music.  Artists can see clearly how much the label, distributor and service provider itself (i.e. Psonar) is getting from each play of a track and since there is no industry ownership of Psonar there is no scope for a conflict of interests to arise.

One of the principles we promised to respect when you signed up for the service was keeping you fully informed of what we’re planning to do – and letting you know of changes as early as possible.

Over the past 22 months we’ve stored over 2,000,000 tracks for people and have had over 15,000 users sign up to the service worldwide.

Nonetheless, as a small entrepreneurial business we have to react to changes in our market and two significant changes have led us to change the focus of the Psonar service:

The launch of cloud music storage services by Amazon, Apple and Google
The increasing interest in, and demand for, Psonar Pay Per Play

The impact of these leads us to re-focus all our effort on Psonar Pay Per Play. In consequence, we’ve turned off the music uploading component of the Psonar Cloud service and, from 10 August 2011, we’ll be closing down the storage servers as well. This gives users at least 30 days in which to download any music they want to save locally or to transfer to Amazon, Apple or Google.

Since we would not be where we are without the loyalty and encouragement of our users, we’d like to offer everyone 100 complimentary plays on the Psonar Pay Per Play platform once the public beta goes live in August.

Psonar Pay Per Play

Wouldn’t it be great to be able to listen to new music direct from the artist or label without having to download and pay for whole tracks or sign up for a subscription music service? With Psonar Pay Per Play you can – pay 1c, 1 eurocent or 1p and play any track once. You can pay through your mobile phone (contract or pre-pay) or by credit card or PayPal.

Even better, why not share the music you’ve found – totally legally. The more you share and the more other people play what you’ve shared, the more free plays you earn.

If you want to send a musical message to someone you love, why not create a playlist and pre-pay for them to listen one or more times – all for the same great price: 1c, 1 eurocent or 1p per play.

Psonar – the pay-as-you go music sharing service.

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iCloud Music - Copyright: Apple Inc

But attention to the seemingly tivial is the Apple way which, on show again during the WWDC keynote, reminded me of that observation by Steve Jobs recounted by Steven Levy in both his book about the Macinctosh and his more recent book about the iPod: “Fruit – an apple. That simplicity is the ultimate sophistication. What we meant by that was when you start looking at a problem and it seems really simple with all these simple solutions, you don’t really understand the complexity of the problem. And your solutions are way too oversimplified, and they don’t work. Then you get into the problem, and you see it’s really complicated. That’s sort of the middle, and that’s where most people stop, and the solutions tend to work for a while. But the really great person will keep on going and find, sort of, the key, underlying principle of the problem. And come up with a beautiful elegant solution that works.”

I think this philosophy is supremely evident in iCloud and in the way that Apple have set about giving people the ultimate music ownership experience. Having bought a piece of music, however you did that (on vinyl, CD or by download) you should be able to enjoy it wherever you are and on whatever (Apple) device you happen to be using. Therefore iCloud synchronises your iTunes music collection across your devices and, in that final step that gives ultimate simplicity, for $25 per annum, iTunes Match gives you the same seamless, ubquitous access to all the music that you didn’t buy through iTunes.

You have to hand it to Apple, it often takes them longer to launch a new service than other people but, when they do, they equally often seem to achieve that ultimate elegant simplicity.

Nonetheless, the announcement is a welcome, major brand vindication of the business models of the existing cloud-based locker services, such as MP3tunes.com and mSpot in the US, and and Tunesbag in Europe. It must make sense in the battle against piracy to encourage people to acquire music legally through the Amazon MP3 store and then let them access it wherever they are through Cloud Drive/Player. It’s just that Amazon didn’t get major label agreement to the service prior to launch.

The 100lb gorilla lurking the corner, however, is new listening habits. Forrester Research’s Mark Mulligan identified this problem earlier this year in an excellent piece on the music listening habits of younger teenagers, whom he dubs ‘Digital Natives’. Mulligan points to data showing that they no long rip, sideload and hoard music in the way that the first generation of fans exposed to digital music did. Instead they find music and listen to it there and then, expecting to be able to come back to it whenever they want. Mulligan describes these listening habits as ephemeral music consumption. He gave a video inteview on these ideas after his keynote speech at MIDEM this year.

At Psonar we’re aiming to meet the needs of these digital natives – the ‘mobile music generation’ with a service that not only lets fans listen to music ‘ephemerally’ – paying 1c / 1p /1 eurocent to stream one track once – but also lets them integrate music into their social lives. Psonar enables people to share music legitimately or even to gift playlists to other people, where the giver has paid for the recipient to listen to the music one or more times – on the basis of 1p / 1c /1 eurocent for each play of each track.

Music doesn’t just need to be easy to buy, store and access, it also needs to be available without ownership commitment where people can share or gift it – and all at a price that makes piracy not worth the hassle.

While Steve Purdham, CEO of We7 was frank in a recent interview with the BBC’s Rory Cellan-Jones about the challenges facing digital music businesses – and didn’t succeed in dispelling Cellan-Jones scepticism evident in the post “…I’m still not clear how an ad-supported service like We7 – already in quite a crowded digital music market – is ever going to become sustainable” – Psonar is offering something that fits much better with the way people are engaging with digital music.

The ‘mobile music generation’ – especially teenagers – want to access particular music, when they want it and from any device. Therefore, it’s got to be on-demand streaming, not seeded internet radio.

For the mobile music generation music consumption is ephemeral, as Mark Mulligan of Forrester explained so well at MIDEM. They want access to music to be so cheap that it’s almost free – which Psonar Pay Per Play offers at 1c / 1 eurocent / 1p to listen to one track once – not pay £120 pa for a streaming music service.

And the mobile music generation is also the Facebook generation and online social behaviour is integral to the way they live their lives. They want to share music with their friends and Psonar’s ability to let people gift playlists to each other, where the donor has pre-paid for the recipient to listen, is deeply social and potentially hugely viral.

We think 2011 is going to be an interesting year!

MidemNet Lab is the only international pitch platform for the world’s most innovative music startups and highlights the best companies bringing exciting new digital solutions to the music industry. Its second edition will take place at MIDEM, 23‐26 January 2011, Palais des Festivals, Cannes. MidemNet Lab is an important opportunity for us to find new business partners, as well get noticed by investors, and create more ‘splash’ so that yet more people will find out that Psonar is simply the best place to keep their music.

What we’re really excited about is the opportunity to showcase Psonar Pay-Per-Play – the radical new way to discover and enjoy new music that is completely legal and much better value-for-money than subscription streaming or buying every track you want to try.

Watch this space – more on Pay-Per-Play in the New Year!