All posts tagged sales

  • October 24, 2011

    GameSpy story: ‘The Health of the PC Gaming Industry’, October 2011

    A story for GameSpy.com; my first for them. It’s a feature split into two parts: one to discuss the retail side of PC gaming, and one for digital.

    Excerpts from both halves included below.


    The Health of the PC Gaming Industry Part 1: Retail
    Dying or developing – just how is the PC doing?

    If you want to make a hardcore gamer roll their eyes in exasperation, tell them that the PC gaming industry is dead and/or dying. Variations on this well-worn statement have been circulating for years, and it’s never been particularly true. In 2011, it’s less true than ever: thanks to digital distribution, more people are buying and playing PC games, so it’s no surprise that developers and publishers continue to invest heavily in the space. Their efforts don’t necessarily have the goal of extracting gamers’ wallets from pockets, either: the burgeoning ‘free to play’ model is being taken seriously by publishers like EA and Activision. And though the hardcore among you might be loath to admit it, those who choose to while away their hours playing Facebook games are technically PC gamers, too.

    All told, PC game sales accounted for $16 billion in revenue worldwide last year, according to research conducted by DFC Intelligence on behalf of Nvidia. If DFC’s forecasts are to be believed, PC games will eclipse console game sales in 2014, and incur a sense of deja vu among those gamers old enough to remember a pre-console period where the PC ruled the emerging market for home video games.

    In this two-part feature, GameSpy will examine the health of the PC gaming industry across two fronts – retail and digital – in an effort to dispel those pesky death rumours once and for all.

    Bricks and Mortar
    When compared to the reams of laudatory material that have been dedicated to praising the virtues of digital distribution platforms, it’s easy to overlook the roots of PC gaming: the humble bricks-and-mortar retailer, a place where chunky, colourful cardboard boxes containing CD-ROMs once received pride of place on shelves a few short years ago. Though the cardboard boxes have been downsized and the CD-ROM technologically superseded, Steve Nix counters that there’s still a significant market for over-the-counter sales of PC titles.

    As general manager of digital distribution at GameStop, the world’s largest video game retailer – who employ some 17,000 full-time staff, and whose annual earnings in 2010 were $9.47 billion – Nix is well-placed to survey the PC gaming landscape. It also helps that he spent four and a half years at id Software, as director of business development and later, director of digital platforms. He’s been with GameStop since February 2011. “Many years ago, PC games were the largest category for GameStop,” he says. “But PC retail sales didn’t look good over the last ten years. There’s been a steady decline. As a PC gamer first and foremost, that always was very concerning. In the early 2000s, I was wondering, ‘What’s going to happen to the PC? Is it going to become completely extinct at some point, as a gaming platform?'”

    We now know that the answer to this question is a firm ‘no’. At the time, Nix reflects, “my strong belief was that we were seeing a user experience problem with PC games in a retail box, versus console games. Really, if you think about the fastest, easiest way for people to get a game and start enjoying it, it’s the consoles. They offer a really nice experience: you get your game disc, you pop it in, and you’re playing in under a minute. Whereas, by the mid-2000s, for PC gamers, games had gotten quite a bit larger. Before the DVD, you’d have nine CDs for some games. And then you might have to search the web for the latest patches. If you’d done everything correctly, maybe a couple of hours later, you’d actually be playing the game after all this work. Really, I think that a lot of customers who were PC gamers started transferring to the consoles just because the user experience on the PC was poorer at that point,” he reflects.

    According to Nix, all GameStop saw at that point was “the decline of the physical PC box sales, so they decided to focus on the console business. But fortunately, in the last few years, some of the leaders in the PC digital space have been more public about going out with their numbers. They’re seeing amazing growth. That information started to get back to GameStop, who did some extensive research and said, ‘the PC market is thriving, but it’s just shifted online. It makes sense for us to be a major player in the PC digital space’.” The company will invest $100 million in digital initiatives in 2011, according to a report in March. We’ll return to Nix and GameStop’s recent forays into the online marketplace in the second part of this feature, which focuses on the digital market.

    To read the rest of part 1, visit GameSpy. An excerpt from part 2 follows.

    The Health Of The PC Gaming Industry Part 2: Digital
    There’s money to be made in them thar online hills.

    In part one of this feature, we examined the boxed-retail past that many gamers have abandoned. Now we take a microscope to the digital-driven future of PC game distribution, which many gamers have already embraced. Like downloading music, downloading games for your PC makes a shitload of sense: it’s fast, convenient, better for the environment, and you can do it in your underwear and no-one will ever know. Sneaky and classy.

    Where did all the money go?
    Half to 70% of the $4 billion market for downloaded PC games are purchased through a platform named Steam [pictured below right], according to an article published by Forbes earlier in 2011. (Steam operator Valve refused to comment on the accuracy of this claim.) Though Steam was a right royal pain in the ass when it launched in 2002 during the beta period of Counter-Strike 1.6 – any gamer who recalls that frustrating time will no doubt concur – using the software is now as akin to the average PC gamer as breathing and circle-strafing. It’s the gaming equivalent of iTunes. Both are clear market leaders; both maintain an enormous brand loyalty worldwide.

    That same Forbes article quotes North American market research firm NPD Group as stating that, in 2010, “sales of PC games via download outstripped sales of boxed games in stores for the first time”. When I question Valve VP of marketing Doug Lombardi on the significance of this outcome – was this always a goal on the agenda, or happy coincidence? – he cryptically replies, “Our goal has always been to deliver a higher quality of service to the customer, regardless of where or how they purchase the product.” Perhaps enormous consumer uptake and financial success was always going to be a consequence of aiming to develop the market’s best digital distribution platform.

    Lombardi makes it clear that Valve still values traditional retail and healthy competition in the digital distribution market. “We don’t advise folks to skip retail, or other digital outlets,” he says. “Every publisher and developer should consider the widest possible distribution possible.” I’m curious as to how he pitches the service to prospective Steam clients – from indie developers, to the world’s biggest publishers. “We start with the 30 million-plus gamers connected to the service, the instant access to data on their Steam sales, and the increasing number of Steamworks features we offer free of charge such as matchmaking, anti-piracy, support for in-game DLC, and more.” Also of note is Lombardi’s eyebrow-raising claim that “Steam has grown over 100% year-over-year for the past six years.” A userbase of 30 million is a fairly compelling reasoning for both developers and publishers to do a deal with Steam, I’d imagine.

    Game developers such as Tripwire Interactive are among the legions of Steam supporters. The Roswell, Georgia-based studio – creators of Red Orchestra 2 and Killing Floor – have been fans since they signed up in 2005. “And we still are”, says vice president Alan Wilson. “They still have that Valve sense for what the people buying the games actually want, will give it to them at a good price, good customer service – and they treat the developers/publishers right as well. They’re always easy to work with. There are other good services out there – D2D, GamersGate and so on. But until Steam either starts getting it all wrong, or the others find some miracle formula, Steam will stay king of the pile.”

    To read the rest of part 2, visit GameSpy.

    1 Comment / Feature Journalism, Published Writing, Tech Journalism /

  • March 15, 2011

    The Weekend Australian story: ‘Independent bookshops: Holding the line’, March 2011

    A feature story for The Weekend Australian Review. The full story is included below.

    Independent bookshops: Holding the line

    Some of the big boys may be in trouble, but independent bookshop owners are stubbornly hanging on, writes Andrew McMillen

    “We’re all a little bit crazy. We’re all a little bit obsessive. We all work far too hard. We’re really passionate about what we do. We all do a huge amount of unpaid work in the community. We’re all literary award judges. We talk to schools. We’re passionate about literacy.”

    Fiona Stager, co-founder of Avid Reader in Brisbane’s inner south, is describing the sort of people who own and operate independent bookstores across the country.

    Suzy Wilson, owner of Riverbend Books in Bulimba, an inner-east suburb of the Queensland capital, wouldn’t argue with that assessment. There’s “a certain addiction to doing this”, she says. “I love it and believe in it. I believe in how important bookshops are in communities, to the extent that I’m not prepared to disappear.” With a laugh, she adds an afterthought, “Which my accountant thinks would be a really good idea.”

    Entrance to Riverbend Books is gained by passing through the bustling Teahouse, Riverbend’s cafe. Monday morning business is brisk and walk-ins are hard-pressed to find empty seats. Inside, dozens browse the shelves; among them, young professionals and mothers with babes in arms. The sound of children laughing and playing echoes throughout the space. Handwritten staff recommendations hang from every other shelf. Overhead, a jazz soundtrack is played at just the right volume.

    A former schoolteacher, Wilson knows “a lot about literacy and the ways of leading children towards books”, but had “less than zero” business knowledge when she decided to open the store in 1998. Based on what she gleaned from books on the subject — and what other medium would a prospective bookshop owner use to increase her knowledge? — it became clear that since her business would not be based in a shopping centre or an area with a high passing trade, Wilson needed “some other thing to make it a destination”.

    Hence the Teahouse. Initially, a relaxation of Bulimba’s town planning laws allowed her to sell coffee, sushi and sandwiches, but not hot food. Since then, the overall store space has doubled and the Teahouse is now a restaurant in its own right, serving breakfast and lunch daily. Its earnings account for about 30 per cent of Riverbend’s overall business, but Wilson hopes the books and food split will return to 50-50, as it was in recent years. The two operations “complement each other really nicely”, she says.

    Visiting authors have commented on the bookstore’s atmosphere. Children’s author James Maloney regards it as the “community church”, and another writer compared it with an English pub, referring to the store’s power as a social space. “I really like that role,” says Wilson, eloquent and generous in conversation, and with her praise of others.

    Last year Wilson travelled to New York with Stager and two other bookshop owners, Mark Rubbo and Derek Dryden. Dryden is owner of Better Read Than Dead, in Sydney’s Newtown and Rubbo is general manager of independent chain Readings, which operates six shops across Melbourne. “He’s one of the few who’s significantly increased his online sales,” Wilson says, with unbridled admiration.

    Rubbo makes the point that “people will always want to have some face-to-face contact and the pleasure of going into a bookshop, discovering things and talking to people. I think it will always be important. But that aspect of the business is losing market share to internet retailers.”

    In New York Rubbo, Wilson, Stager and Dryden were the Australian contingent at Book Expo America, the largest annual US book trade fair. Calling it a place where “many interesting minds come together to talk and think about the book industry, and where it’s going”, Wilson found conversations there were the impetus for “facing the music”; for adding up the risks involved in continuing and the chances for survival.

    Wilson nevertheless gives the impression she would rather not have to deal with questions about her business and its future, whether asked by her accountant, her customers or a journalist. The mere existence of pleasant, inviting bookshops such as her own should be punctuated with an exclamation point, not a question mark. After all, what else but passion could fuel the pursuit of an endeavour such as hers?

    The business concerns of bookshops have been widely discussed of late, due largely to the mid-February announcement that REDgroup Retail — the company that oversees book chains Borders and Angus & Robertson — was entering voluntary administration. REDgroup chairman Steven Cain pointed his finger squarely at the federal government for its refusal to lift import restrictions or enforce GST on online shopping.

    When this topic is raised, Wilson is unequivocal. “I regard it as grossly, grossly unfair that Amazon doesn’t have to collect GST. Canada make them do it, so why can’t we?” she asks. “I’ve written a few letters to politicians over the years. I’ve been bamboozled as to why no one wants to do anything about it.”

    To Wilson, Amazon — the world’s biggest bookshop, whose storefront exists solely online — is “that horrible word we don’t like to use too often”. No wonder. Businesses such as Amazon and the Book Depository, an emerging online bookshop based in England that offers heavily discounted titles and free shipping to Australia, have altered the way customers buy books.

    Wilson tells a story about book-club members who had been buying titles at the store for 10 years. Discovering the Book Depository had the same books for half the price, members “took me to task”, Wilson says. “I asked if they’d let me put up a spirited defence of my situation because they actually thought I was ripping them off.” She sighs. “That hurts. So I put up my defence, but they’d already ordered the books, so they went away a bit sheepish. I said, ‘If you buy from them, you’re saying that this place has no value in our community.’ I completely understand that you have to watch your dollars, but it’s a choice about where you watch them and what you value in your community. I think you have to look at the bigger picture and say: ‘Do I want a community without a local bookstore?’ ”

    But this is all business talk. Wilson would much prefer to discuss Riverbend’s role as a community hub; how, for instance, seven local school principals use the Teahouse for their monthly breakfast meetings. Wilson regularly sits in with them. “They’re a really interesting group,” she says. In their most recent meeting, the topic of social media came up. It turned out that none of them — all “oldies”, according to Wilson, who lumps herself into that demographic — uses Facebook or Twitter. She realised last year all of her staff were “competent and involved” with such networks; at the time, she was blissfully ignorant yet aware of the necessity to keep her finger on the digital pulse. So, with the school principals as the first guinea pigs, Riverbend will soon begin hosting social media classes.

    These are the kinds of gaps Wilson loves filling: an in-demand service, provided for a greater good. An example is the Indigenous Literacy Project, which Wilson founded in 2004: since the start of the project more than 60,000 books have been delivered to 200 remote communities across the country.

    Wilson believes social projects at independent bookshops across the country are about “all of us putting our minds to building this community to be as strong as possible, so that we’ve got the best chance of surviving”, although she acknowledges they require a huge amount of work, which is “not really reflected in the returns”.

    However, the pursuit of what Wilson dubs “the tipping point of profitability” will determine the years ahead. By hosting school principals for breakfast and helping indigenous children, perhaps these community-focused measures, in a roundabout way, will help Riverbend’s doors stay open.

    Riverbend is not the first bookshop to realise the importance of leveraging its floor space beyond the basic act of stocking and selling books, and certainly won’t be the last. Stager sees the Avid Reader’s bulging events calendar as one of its key strengths. “We’ve put a greater emphasis on our events, which is what we’d started a couple of years ago. I’ve always been very event-driven; that was one of the core principles I started with, using Gleebooks in Sydney as a model.” Seeing as an example the growth of live music within an industry affected by declining physical sales, Stager decided to concentrate on what she deems “the live experience”; usually, visiting authors giving readings and conducting question-and-answer sessions with readers. Successes in the past 12 months include 400 payers attending a Shaun Micallef book launch at the Hi-Fi, a couple of blocks down from the bookshop on Boundary Street in West End, as well as more than 600 attending a Paul Kelly launch at the same venue.

    David Gaunt has managed Gleebooks since 1978. “We’ve been around for a long time and I don’t think we’ve ever been unaware that the best chance for independent bookstores to survive is to place a strong emphasis on social engagement in the community,” he says. “In our case, this includes heavy representation at festivals and conferences, events outside the shop, as well as the country’s biggest in-store author event program.” Such events sustain customer interest year-round, he says, but especially when the going’s “really tough, which it certainly is at the moment”. For Gaunt, the act of bookselling, online or off, has barely changed during his time in the industry. This year, the only real difference is that Gleebooks promotes its events program through social media channels.

    Enticing though such events are to so many, reading is still, by and large, a solitary pursuit. As to whether Stager views online bookstores as competition to the service in her shop, she responds cautiously. “Yes, they are. And that’s because everybody in the media has told the readers that Amazon and the Book Depository are our competition. I think they get millions of dollars of free advertising, which they don’t warrant.”

    It’s perhaps an irony that so many Australians have gained knowledge of these alternative, online retailers through the act of reading the news, and the growing profitability of online sites is proof people do still read; more than ever, perhaps.

    According to Stager she has “one big advantage over Amazon. If it’s on my shelf, you can buy it, there and then. I’ll gift wrap it for you, beautifully. I offer events and interaction with other readers through great customer service. There is more to retail than just getting something. Retail is an experience, and I have to make sure that when you come into my shop, you’re having an experience.”

    Stager is adamant book consumers shouldn’t support independent retailers just because they’re smaller and thus perceived to be vulnerable. Instead, she says, “They have to support us because of what we offer: customer service, our range and a whole lot more. We have to be good citizens as well, so we have to be doing the right things by our staff, by our community.

    “That all comes into play. Don’t support me just because I’m small and an indie; support me because of the things I do.”

    For the full story, visit The Australian’s website. Thanks to all of the helpful independent bookshop owners I spoke with for this story, many of whom I had to omit. Please note that the above photo was taken by Lyndon Mechielsen.

     

    No Comments / Feature Journalism, Published Writing /

  • September 22, 2010

    triple j mag story: ‘Music Counts For Something’, September 2010

    A feature for the September 2010 issue of the recently-renamed triple j mag, which discusses what Australian musicians make from selling music as a proportion of their overall income. The full article text is underneath.

    triple j mag story, September 2010: 'Music Counts For Something' by Andrew McMillen

    Music Counts For Something

    by Andrew McMillen

    We asked some top independent artists to speak specifics on the art of selling music in the digital age – and to advise up-and-comers on how not to get rorted.

    Throughout the history of recorded music, album sales were a strong indicator as to artists’ personal wealth. The equation used to go: gold and platinum record sales + sold out tours = money in the bank. But in 2010, people are less and less likely to pay for recorded music, with the equation continuing to shift away from sales toward touring.

    The Presets

    The Presets’ Julian Hamilton is blunt when discussing musical economics, as an ambassador for APRA – the Australasian Performing Right Association – might well be. “These days, if you want to be a working musician can’t just rely on record sales to make money,” he says.

    According to Julian, music sales through publishing account for “around a third or a quarter” of The Presets’ overall income. “But it’s tricky because the way that musicians earn money is so varied, through so many different revenue streams that come in at different times. Some months, you might make no money.”

    His advice to aspiring musos: “Try to keep the creative and business sides of the bands different: don’t talk about money when you’re rehearsing, and don’t talk about lyrics when you’re in a business meeting. Set up a group account under the band’s name, where all members can see where the money’s going.”

    “If you can sort the shitty business side out, so that you don’t worry about it, that’s gonna make the fun stuff even more fun.”

    Gotye

    Under the pseudonym Gotye, Wally de Backer put himself $30,000 in debt to fund his ARIA Award-winning album Like Drawing Blood in 2006. That risk paid off: following mainstream interest in his independently released second LP, Wally eventually made over $100,000 in album sales and royalty payments.

    At the release of the first Gotye album, 2003’s Boardface, de Backer got the feeling that “making music wouldn’t ever be more than something I could produce and finance in my spare time from ‘real work’. Having been a full-time musician for a couple of years now, I’m amazed at how much time can be spent dealing with accounting, chasing and checking royalty statements, managing budgets, and basically financial planning so you don’t end up in a bus in middle of Eastern Europe with a maxed out credit card and the bank foreclosing on your mortgage back at home. I’d rather be on top of everything and organise my music-making time accordingly, rather than remain oblivious and potentially have tax and income issues down the track.”

    His advice for young musos: “If you can cover all or most bases and get your career off the ground yourself, then you’re in a strong position to negotiate good deals later on, rather than being at the mercy of ‘industry standards’.”

    Eddy Current Suppression Ring

    Melbourne rock band Eddy Current Suppression Ring’s third album, Rush To Relax, debuted in the ARIA top 20 earlier this year.

    Despite their popularity, the band’s guitarist (and manager) Mikey Young is frank about how he and his bandmates treat the project.

    “We all have other ways of making money. We treat this band like a hobby. Outside of shows, we get a random few grand every so often from record sales, APRA and publishing, but once it’s split between the four of us and we put a bit back towards the band, it’s really just bonus pocket money.”

    “None of us could solely live off [the band’s income]”, he continues, “But that’s our fault and not due to the state of the music industry or anything. We choose to keep our band a thing we do for fun when we feel like it, so we’ve never made that leap into having a crack and living off it.”

    Urthboy

    Tim Levinson – better known as MC Urthboy, in addition to being a founding member of The Herd and head of Sydney independent label Elefant Traks – reveals that royalties from album sales comprised 14% of his overall income in 2009. The majority of his earnings came from touring and label-related revenue.

    “If a musician has only ever had a part time job to sustain their real passion of playing music for a living, you can understand how vulnerable they become,” says Tim. “It’s important to take this into account when understanding the significance of how much sacrifice artists make to pursue their music.”

    For all but the biggest fish in the Australian musical pond, Tim confirms: “If you’re a musician, you can never piece together anything resembling an income without including some sort of regular or fall back job. But if you’re instinctively passionate about it, you have no choice. You are compelled to do it. It’s art that is created out of just a necessity to express yourself, and that’s a great thing.”

    Philadelphia Grand Jury

    Philadelphia Grand Jury’s manager, Martin Novosel, runs us through the economics of a popular, self-released indie band. “Once a quarter, the band will see approximately $8-9,000, minus 25 per cent in distribution, minus pressing costs for the albums (if more needed to be pressed), minus any marketing costs, minus mechanical costs, and finally, minus management commission on profit. In real money terms, this equates to something in the vicinity of a couple of thousand dollars per quarter for the band members.

    “However it does go up if you are a commercial act,” he continues. “The reason for this is because bands are kept in consumers’ minds through media presence.”

    Martin acknowledges that the indie market is very live-driven; “An act needs to be playing often to keep its currency with media to get that exposure. And an act can really only tour Australia twice or three times in an album cycle before it has overplayed and needs to provide new material”.

    Compared with their income from touring, publishing and merchandise, Novosel estimates that the Philly Jays’ music sales comprise only 5-10 per cent of the band’s overall income.

    The Butterfly Effect

    The Butterfly Effect’s bassist, Glenn Esmond, suggests that about 25 per cent of the band’s yearly revenue is from album sales.

    Though he grew up idolising the glam rock model of luxury and privilege – private jets and the like – as he got older and started playing in cover bands at local pubs, Esmond realised that “it’s just enough to be able to pay your rent, and have a bit of money left over at the end of the day to buy a beer.”

    He suggests reading the book Music Business, by Shane Simpson. “You might decide to be independent or you might go with a label, but at least you’re informed about how the industry works, and how deals are recouped. I’ve read about some bands who signed deals where the label makes 85% of the band’s income while retaining the rights to the masters. It’s insane, man. How does anyone ever make any money? Sometimes people don’t, and that’s the reality.”

    With a laugh, he concludes: “You’ve gotta do it for love until you get too old, or your missus goes, ‘Sorry mate, you’ve been doing this for ten years and you’ve made no money – you need a real job!’”

    2 Comments / Music Journalism, Published Writing /

  • November 11, 2009

    Rolling Stone story outtake: A conversation with Gavin Parry, General Manager of Digital & Brand Development, Sony BMG

    Here’s an outtake from my first Rolling Stone story on streaming music subscriptions. It’s an interview with Sony BMG‘s General Manager of Digital & Brand Development, Gavin Parry [pictured below right]. Sony launched the digital music outlet bandit.fm in late 2008. I spoke to Gavin on 25th August, 2009.

    Andrew: As I understand it, Gavin, Bandit is currently a pay-per-download site, but in October, it’s being re-launched as a purely subscription-based site for streaming music. Is that correct?

    Gavin Parry of Sony BMGNo, that’s not correct. I think what happened with the article in The Herald and everything sort of spiraled out of control and there was misreport after misreport. Essentially what’s happening is we’re continuing the download service, and a subscription service will run along side of it. You can either choose to download on a pay-per-download model, or you can choose to be involved in a streaming model, which is basically a monthly payment plan.

    So it’s up to the consumer to consume music how they want, basically.

    It’s all about trying to provide as many options as possible, remembering that we also provide all our videos free to the user, free video streaming. Every featured artist on the site, which is about 1,000 featured artists at the moment and that’s increasing, they have three tracks each that are free to the users for streaming. That’s there right now.

    How long has the streaming service launch been in the works? I know Bandit was launched in November as a download service.

    We’ve had it in place since November, when we organized all our licenses. It’s always been in our plans.

    To my knowledge, all the major labels have music for sale in the store, but Sony is the ones running the site. Is that correct?

    Correct – you have to be very clear here. What happened with The Herald article is it said we were running the service on behalf of the industry. That is incorrect. At Sony, we’ve set up Bandit and we own and operate it, but we have licensed any music from any other three majors.

    And Sony is the main financial backer of Bandit.

    Yes.

    What do you think the benefits are of a streaming-based subscription model to the previous, per-download model?

    Bandit.FM logoI just think it’s about options. There was a lot of feedback online about how people don’t stream music to the PC and people would never use it. If you look at The Music Network this week, they did an article in there that said 50% of kids stream music to their PC on a weekly basis. We know how popular Spotify is in the UK and Europe. There is no doubt that a streaming service, not just to the PC, but to any Wi-Fi device could be quite popular.

    Conversely, what do you imagine some of the costs of a streaming-based site might be, such as high bandwidth and the necessity to allow many concurrent users?

    The cost from our perspective or the cost to the consumer?

    The cost from your perspective.

    From our perspective, basically you have to employ someone like Akamai to cope with the volume. We currently employ Akamai. You are familiar with what Akamai is?

    I haven’t heard of Akamai, no.

    Rather than streaming from our servers, we basically employ a series of other computers, a network of computers that Akamai operate to take the load off of us so the streaming that occurs from a local PC – if you’re in Perth and you’re streaming from Bandit, you’ll be streaming from a computer in Perth rather than a computer from our hosting arrangement. This means the biggest cost to us is actually paying Akamai to be able to operate that high bandwidth.

    There are also hosting costs, obviously to ingest and to hold – we’re up to about 70 Terabytes worth of data. The cost of hosting is pretty significant, as well.

    Where do Australia’s internet service providers sit within this discussion? Are you concerned that Australia’s network might be ill prepared for this kind of streaming model, given that other territories have had faster connections and unlimited bandwidth, compared to Australia?

    I think it will be fine. It just depends on what sort of plan you’re on. Obviously, cable will work fine; it depends on what plan you’re on with the ISPs. A lot of the bandwidth now should be able to cope with the streaming service.

    I can imagine traveling throughout the city and falling into black spots with mobile phone coverage and having the song interrupted by buffering might be a bit annoying.

    It’s the same thing you’ve got if you’re on a Wi-Fi network. You’re up to the vagaries of what the network might be. There are concerns but it will all be up to the consumer to ensure the bandwidth they’re paying for with their ISP is adequate to stream the music.

    With Bandit, did you consider putting in place an advertising-based free service, as Spotify had done in the UK?

    We essentially have got that in place with the video streaming, and with the ‘three free tracks’, which is a limited audio catalog. The problem you’ve got is the advertising model globally, when you actually look at Spotify and other services like iMeem and Last.fm, those services have really struggled to generate enough advertising revenue to continue to operate.

    On a similar note, is Bandit’s launch time to beat Spotify to the Australian market?

    Spotify logoNo, not really. To be honest, when we launched Bandit in November, Spotify was on the radar and probably has significantly upped its profile in the last twelve months. Bandit’s plan was always to have a subscription service operating around October/November of this year.

    The other thing I should mention is there is another service that we’ll operate, and again, this is all about providing options to the consumer. We’ll be operating a model very similar to eMusic as well. People can sign up and pay a monthly fee and receive a certain value of downloads.

    A certain value, what do you mean?

    Are you familiar with the eMusic model?

    No.

    You pay a monthly fee, but you are given a certain value for that fee. You’re given a value; for say $20 a month you’ll get $30 dollars worth of value that you can download. It’s not about streaming. Again, it’s a regular payment plan, but it’s all about downloads.

    Will this value package be launched at the same time in October, or is it currently available?

    The plan is we’ll launch it at the same time as we launch the subscription package.

    Are you able to provide some figures on Bandit since it launched in November, such as how many users or what is the volume of weekly downloads?

    We’ve got a monthly net browsers now of around 80,000. We’re doing about 2 million page impressions per month. We’ve got over 50,000 active users that have actually purchased something. That’s probably enough to give you an idea. We’re quite happy where we’re at after only nine months being operational. We’re pretty much on plan, as far as where we expect the service to be. We’ve done very limited marketing so far.

    I was looking around your website earlier, and I noticed that a lot of artists have unique content-rich splash pages, which includes images, artist’s recommendations, and news [example below left]. Who supplies the content that is displayed on those pages? Is it managed in house or is it syndicated?

    Queens of the Stone Age on Sony's Bandit.fmWe’ve got our own editorial team that puts together news stories, and also looks after Bandit on Twitter and our Facebook page. We also have licensed in the All Music Guide.  When you’re looking at all the biographies and all of the similar artists and influenced by, that all comes from the All Music Guide.

    What we’re trying to do is build a very deep, rich site that is more than just a download store. You can see how it’s been built by creatives. They’re very graphical and it’s a very appealing site. That shows with our average session duration which is around 15 minutes.

    How many staff are working on Bandit full-time?

    We’re still in development mode, so we’ve got a team of probably four developers. We’ve also got a person in customer service, editorial, operations, and also we have a programmer who deals with the other labels.

    It’s still a pretty small team of around ten, would you say?

    Yeah, which we’ll scale down once we’ve finished the development phase.

    What inspired the decision to make Bandit operate within the browser as opposed to an external program, such as Nokia’s Music Store?

    It’s really a matter of what you can support. If you build something within a browser – it’s really a phased approach. The first thing is once you build it within a browser, you know you’ve got a higher chance of compatibility with most computers. If you build an application, it’s much more work to get compatibility with all the various operating systems. It’s really initially a cost consideration, but having said that; we’re currently working on a download manager which is built using Adobe AIR. That’s basically an application that will sit above the site, which will manage the download process, and also manage your library. We have to roll that out in October, as well.

    October is going to be a big month for you, then.

    Yeah, the guys are flat-stick at the moment. We’ve got them down in the dungeon, working hard!

    Final question – are Sony using the Australian Bandit Store as a kind of testing ground for potential expansion to foreign territories?

    I think the focus is just making the Australian site a success, and then we’ll see where it goes from there.

    Fair enough. That’s all my questions. Did you want to add anything else?

    'Grunged' channel on Sony's bandit.fmThe other thing that we’ll be adding in October is a level of social networking, which will be quite interesting. In that case, the core part about Bandit is the channels. You can see different channels which split music be genre, by demographic. We put up the faith channel yesterday, which is all about Christian music. Coming in October, when we launch the social network piece, each user will not only have a user profile, but also will have his own channel. The idea is that a user can go on, select their own playlists, stream music, connect to other artist, connect to other channels, connect to other users, and in that way we’re actually giving people a lot more context. Their channel will be a representation of themselves, musically, online.

    This idea of ‘channels’ kind of makes me think that you’re trying to build on the concept of the radio station, so everyone has their own channel.

    To some degree, that’s it, the ability to essentially create your playlist. We think the subscription service also has quite relevance to families, and it’s not just focused on teenagers and young adults. I think the subscription model going to a family where they have unlimited music online, and they can basically just turn Bandit on to their stereo, set up their playlists, and play music in stereo, I think that is a big thing. In that case, they are actually setting up their own radio station.

    Okay, thanks for your time, Gavin. I appreciate it.

    No problem.

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