Maybe there IS money in digital music.

In an age of declining CD sales and rampant online piracy, can the major labels make money from digital music?

The answer just might be yes. The Music Industry News Network is reporting the latest quarterly results for Warner Music Group, and one thing that stands out to me is that their digital revenues are increasing in real numbers, and proportionally.

Specifically,

* Total revenue of $989 million increased 7% from $928 million in the prior-year quarter, and grew 1% on a constant-currency basis.

* Digital revenue was $141 million, or 14% of total revenue, up 9% sequentially from $130 million in the fourth quarter of fiscal 2007 and up 41% from $100 million in the prior-year quarter.

$141M in digital revenue… 14% of total revenue… 41% growth from the prior year. That’s nothing to sneeze at, and it goes a long way in answering the basic question that has kept many from taking the digital plunge, that being “Where’s the Money?”

Sure, we don’t know the costs associated with bringing in those revenues, but I’d argue that they’re proportionally less than their CD side of the business. No waste, no worry, and my bet is more money to the bottom line.

For some of us that proclaim the eventual death of the traditional music industry (yeah, I’m in that group), these figures also highlight the real facts that 1) consumers place real monetary value on premium content, and that 2) consumers are willing to pay for something that they could obtain for free.

That’s all good news. Although we need a radical restructuring of the music industry’s business model, we don’t want the labels to tank. Like any industry that is forced into change, from horseless carriages to cars, from trains to airplanes, from landlines to mobile phones, we need the major labels to survive by better serving their music acts and servicing their customers. They should have the opportunity to thrive through technological innovation and targeted marketing that only the Internet and mobile arenas provide. They should benefit from economies of scale and efficiencies that result from making their massive catalogs available, well, to the masses.

We want them to succeed, and some–those that are willing to weather the change–will succeed.

So here’s to you, WMG. You’ve made money from digital music sales, and the indications are positive. Congrats.

There isn’t any gold in them thar hills, because the golden days are over. But don’t knock copper mining, either–there’s still plenty of money to be made.

Flux vs. Ning–Is there a clear winner? Not yet.

In my never-ending quest for a “community in a box,” I was originally quite enamored by Flux. Their site offers several layers of services- 1) fShare, a social networking tool for sharing content; 2) Flux Lite, for sharable customized profiles, and 3) Flux Custom, their “full community” offering. Flux Custom is structured as the competitor to Ning (which I’d posted about earlier) , so I thought I’d give it a shot.

First of all, let’s be fair and say that all of these applications are still in beta. Flux is upfront with that, and recognizes that some bugs exist.

Registration for Flux Custom was easy. You then get an email where you’re able to set up the basic site preferences for your community site–name, logo, etc. You also get a follow-up email from a real Flux representative, which goes a long way in my book.

You can edit the themes and layout of the main community page, and customize the individual community widgets.

I haven’t populated the widget blocks yet–that’s what a community does–but so far I’m encouraged. I did run into some glitches and error messages, but many seem to have been resolved. I’ll bang on it a little more.

Bottom line–these guys are worth looking at, and Ning’s no longer the only game in town. Now everyone can have their own community!

Ning–A Community Site In A Box?

As I mentioned a couple days ago, there are several paths to take regarding community implementation and management for your online business. If you don’t want to subcontract out the work (we know building it yourself isn’t the way to go), then you might want to consider a hosted solution. One of the dominant players in this space is Ning. From their site:

Ning offers the latest social networking features, all infinitely customizable to meet your unique needs. The Ning Platform makes this possible. As a platform, you don’t have to appeal to Ning for the features you want. If you have the time and the inclination, you can build them yourself. It’s the software equivalent of Home Depot.

I tried it out, and I must admit it was fairly easy to set up and it seems pretty feature-rich. As an administrator, you have the ability to customize the look and feel, the layout of features, member management, registration questions, and a host of other community-centric items.

So what do you have? You’ve got blogs, forums, groups, photo uploading and sharing, video uploading and sharing, music uploading and sharing, online/offline member status, activity tracking, multiple language management, Flickr importing, site and member usage stats, CSS management and other cool “widgets” and services.

It really is a decent approach to building a basic community around your core online business.

Oh, and did I mention it’s FREE? They do have upgrades that will give you more storage space and bandwidth. When you create a free social network on Ning, you automatically get 5GB of storage for Public Content, 500MB for Private Content, and 100GB for bandwidth. You can also pay to run your own ads, or pay for your own URL or domain. The prices look reasonable if you’re serious about using community to drive traffic and stickiness to your site.

It’s better than relying on Google Adwords to do the same thing.

Furthermore, you have little, if anything, to lose. So yeah, start a community around your online business. Just remember that obtaining and implementing the features and functionality are the easiest part of building a community. Growing, managing, and sustaining a community is where the work is–which is a topic for another day.

Next up–Flux. As powerful as Ning? We’ll see.

The “Community Question” for Business–Build, Buy, or Join?

The “Community Question” haunts almost all companies with an online presence, and shapes both our day-to-day and strategic approaches to eventual success. Furthermore, there’s no doubt that online communities are the life-blood of today’s ecommerce sites–eBay, Amazon, and Lulu (where I work) depend on their communities for feedback, return traffic, repeat business, site stickiness, viral marketing and brand reinforcement. Your community is your strongest asset and staunchest ally. Be kind to your community because, in truth, it’s not your community. They own you, and will quickly turn on you if you slight them.

But, for better or worse, your online business definitely should have a community around it (see where community ranks in “Top 10 Things To Do As a Startup“) . A strong, dynamic, and exciting community is a significant competitive advantage and serves as a barrier to entry for others trying to gain traction in your space–especially in new markets.

On the other hand, building a successful enterprise requires focusing on your core strengths, i.e. those specific efforts that will deliver superior products or services for your market. Unless you’re like Flickr or YouTube–that is, depending on ad revenue or social network effects–your core strengths will not be community technology. As a matter of fact, companies (large or small) can easily get distracted by spending development cycles on important, yet non-critical, community platforms and infrastructure.

Avoid the temptation. There’s no need for you to build a better blog, a better profile management system, a better photo arranger, or a better widget. Why? For one, you’ll always be behind the curve because this isn’t your space. You didn’t hire your engineers to be experts in this field, and they’re not. Two, you’ll never know which one of the top 20 widget functionalities you’ll need–which will add the most value, and there’s a good chance you’ll pick the wrong one. Three, by the time you pick one to work on, and even if it is the right one, before you deploy it there will be 20 more newer cool applications to emulate. You’ll get distracted. In essence, you’ll catch yourself looking at every pretty girl (or every cool community app) that walks by while your competitors are focusing on the “one thing” (whatever that is) that brings success in your market.

So what’s a company to do to take advantage of the community phenomenon?

There are two paths, actually.

* Subcontract the development: If you can’t avoid the NIH (“If it’s Not Invented Here we won’t use it”) approach and decide to build your own community tools, then subcontract these efforts through an external engineering house to meet your specs. But don’t spend your key development resources on this project.

* Buy, Rent or Join “off the shelf” community platforms: This option was the primary reason for writing this post to begin with, but I caught myself needing to post the preamble above. But recently there have been several compelling “community in a box” hosted applications that have caught my attention–namely Ning, Flux, and Wetpaint, which I’ve been investigating. At this point each deserves it’s own separate post, so we’ll start with Ning tomorrow.