CNET is reporting that U.S. District Judge Richard Sullivan has denied EMI’s attempt to shut down ReDigi while the case goes to court. ReDigi is a Web site that allows users to sell the digital music on their computers.

Judge Sullivan, however, is allowing the case to continue because he is “fascinated” by the numerous technological and legal issues involved.

John Ossenmacher, ReDigi’s CEO, said that they are grateful for the judge’s decision in their favor. “ReDigi is breaking down the barriers that have kept consumers from enjoying their intrinsic and lawful ownership rights to their digital purchases.”

For those who don’t know what ReDigi does, it scans a user’s hard drive to get a copy of the song the user wants to sell. It will then delete the file from the seller’s hard drive.

ReDigi claims that the “First Sale” doctrine applies to their business, just as it does to any physical goods.

The company claims that they discourage the illegal copying of music with a verification system, but they can’t guarantee that users back up their music before they sell it.

EMI claims that ReDigi violates copyright law to run their business. The process of making copies of the file off of a user’s hard drive constitutes as an unauthorized copy in their eyes. They say that they have no “First Sale” rights because they sell songs that have been illegally obtained.

EMI was displeased with the courts not issuing the injunction, but they are confident they will win the case.

This case has the potential to set a powerful precedent. If the judge rules in favor of ReDigi, expect numerous businesses to pop up that allow people to sell digital items including movies and games.

Apparently, Android users that went to music.google.com from their mobile browsers were greeted with a landing page that suggested they can “shop millions of songs in Android Market.”

First noticed on German Android site newsondroid, the landing page promoted the Google Music Beta app for Android – touting that you can store up to 20,000 songs in its cloud locker. Just under that, however, we saw the evidence for the fact that Google is coming to the music-selling party.

As noted by Alexia Tsotsis at TechCrunch, that “shop Android Market” link didn’t work, but was set to redirect to market.android.com/music.

It looks like someone realized the mistake, because the whole part about shopping millions of songs is no longer a part of that page.

We first got wind of the upcoming Google Music Store a couple weeks ago, as sources leaked the fact that Google was planning an imminent release. Last week, Google’s Andy Rubin said that Google was “close” to launching a music store and that it “will have a little twist.”

We also learned that the Google Music Store will probably be worked into Google+, possibly in a way similar to how Spotify works on Facebook. Google+ users will be able to recommend songs to their friends and subscribers, who will then be able to listen to them free of charge one time before making a decision about whether or not to purchase the track.

It’s thought that Google Music Store will be highly integrated into Google Music Beta, which would make sense. Google Music Beta was supposed to come with the ability to purchase songs, but Google had a problem reaching agreements with the big record labels. Apparently, Google is still having issues with that, as it has been reported that Google Music Store will launch without deals from at least 2 of the major 4 labels.

CDs accounted for 65 percent of all music sold in the first half of 2009 compared to paid digital downloads, which comprised 35 percent of music sales. By comparison, paid digital music made up 20 percent of sales in 2007 growing to 30 percent of the music market last year.

"Many people are surprised that the CD is still the dominant music delivery format, given the attention to digital music and the shrinking retail footprint for physical products," said Russ Crupnick, vice president of entertainment industry analysis  for The NPD Group.

Russ Crupnick
The NPD Group

"But with digital music sales growing at 15 to 20 percent, and CDs falling by an equal proportion, digital music sales will nearly equal CD sales by the end of 2010."

When it comes to the unit-sales volume of all music sold, iTunes leads in the U.S. with 25 percent of music units sold, which is up from 21 percent in 2008 and 14 percent in 2007. Wal-Mart remains in the second spot with 14 percent of music volume sold at their stores and website and Best Buy ranks third.

iTunes continues to cement its lead in the digital music arena, as consumer downloads from iTunes represented 69 percent of the digital music market in the first half of 2009 followed by AmazonMP3, a distant second at 8 percent. Wal-Mart leads all sellers of CDs with a 20 percent share of the physical music market, followed by Best Buy at 16 percent and Target and Amazon tied at 10 percent each.

"The growth of legal digital music downloads, and Apple’s success in holding that market, has increased iTunes’s overall strength in the retail music category," said Crupnick.

"But the importance of the big box retailers shouldn’t be dismissed, as long as the majority of music consumers continue to buy CDs."

Digital platforms now account for around 20 percent of recorded music sales, up from 15 percent in 2007. Despite this the music industry is still plagued by large amounts of unlicensed music distributed online. The IFPI estimates over 40 billion files were illegally shared in 2008, giving piracy a rate of about 95 percent.

Single track downloads were up 24 percent in 2008 to 1.4 billion worldwide, while digital albums were up 36 percent.

John Kennedy
IFPI

"The recorded music industry is reinventing itself and its business models," said John Kennedy, chairman and chief executive of IFPI.

"Music companies have changed their whole approach to doing business, reshaped their operations and responded to the dramatic transformation in the way music is distributed and consumed."

Advertising supported services that are free to users are also opening up. One of the highest-profile launches was MySpace Music in the U.S. in September 2008. Several major music companies have also signed licensing agreements with YouTube.

Music companies are also increasingly licensing music to third parties. One area of success is the games market, where music games were responsible for 15 percent of overall game sales in the U.S. in the first half of 2008 (NPD Group). Guitar Hero and its sequels have sold more than 23 million copies in three years, generating more than $1 billion in North America.

"There is a momentous debate going on about the environment on which our business, and all the people working in it, depends," said Kennedy.

"Governments are beginning to accept that, in the debate over "free content" and engaging ISPs in protecting intellectual property rights, doing nothing is not an option if there is to be a future for commercial digital content."

Overall album sales declined 8.5 percent compared to 2007, which shows that the digital growth did not offset the decline in physical sales during the year.

More than 40 million digital tracks were purchased in 2008 representing an increase of nearly 60 percent over 2007 compared to a 73 percent increase in 2007 over 2006.

Digital album sales increased nearly 70 percent compared to 2007 with sales of 3.4 million compared to 4.7 million sales in 2007 and accounted for 10 percent of total album sales in 2008. In 2007 digital album sales increased 93 percent compared to 2006.

In the final reporting week of 2008, digital track sales surpassed 1.8 million, breaking the previous sales record of 1.2 million.

Digital album sales in the final reporting week broke the 1100,000 mark for the first time with album sales of 142,000, surpassing the previous record of 99,500.

The top 200 digital tracks accounted for 19 percent of all track purchases in 2008; 7.7 million sales compared to 4.7 million sales in 2007.

For me, (RED) is a powerful brand that offer lots of sustainable opportunities, and it’s great to see the fund looking towards new media as one of its strategies. Personally, I think that (RED) should look more actively into using the power of social media and networks to encourage word of mouth. There are lots of ways in which the Web could be used more actively to promote the fund, the product line, and to ultimately penetrate the heart and minds of brand ambassadors and supporters (and their communities) who – because of the very emotive nature of the cause – could become viral agents.

Bono, give me a call when next you’re in town

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Douglas Merrill
(Photo: Google.com)

Digital Daily noted the Valentine’s Day, 2008, quote from Merrill, where he called his position at Google “the best job in the world.” He will take up a task with EMI to run their digital initiatives.

John Furrier picked up on Merrill’s see-ya email to Googlers. Furrier said Merrill will try to figure out what EMI can do to make its business models more relevant to modern times.

Merrill won’t despair for a lack of challenges. The music industry as a whole has suffered as fans increasingly opt to obtain music digitally rather than buying CDs. Blame the labels for setting themselves up for a fall; after years of getting burned with high-priced CD purchases containing one or two good songs, fans had no qualms about ditching plastic for MP3s.

The Google executive’s departure comes amid a steady stream of Google higher-ups streaming for the exits. Variations on the “seeking new challenges” theme occur regularly when people like Merrill and new Facebook hire Sheryl Sandberg depart.

For folks who were with Google long enough to watch their stock options turn into real wealth, there’s probably little motivation to doing the same old thing each day. Without such a financial cushion, does a Douglas Merrill opt to parachute into the decaying remains of the music label industry, we wonder.

As the Los Angeles Times cited, EMI has lost money and artists, and is in the middle of serious cost cutting. If Merrill manages even a modest turnaround that stops the red ink from flowing, it will be an improvement.

The $400 million agreement being bounced around as a done deal by UPI seemed like a low number even as we learned about it today. Split between living Beatles and the estates of Lennon and Harrison, plus all of the music labels with a stake in such a deal, $400 million didn’t look like a lucrative payday, especially since the world’s most famous boy band still receives fawning veneration to this day.

As it turns out, news of Beatles music coming to iTunes users appears greatly exaggerated. CNET said Sony/ATV denied any such deal took place:

While EMI Group owns the recording rights to the Beatles catalog, Sony and Jackson own the rights to the vast majority of the catalog’s publishing rights. Had a deal been cut, Sony/ATV would “absolutely be informed,” the Sony/ATV spokeswoman said.

EMI and Apple aren’t talking right now, despite the reports swarming all over the Internet as well as in news publications in the UK. At this rate, the wait for The Beatles on a digital music service may outlive the band and all of its fans.

"No industry has felt the impact of the anywhere consumer more strongly than the recording industry," said Michael Goodman, director of digital entertainment at Yankee Group.

"It’s not just that the record labels are facing declining revenue; rather, the basic relationship between recording artists, record labels and consumers is in major flux. As bands retain ownership of their music, the record label’s role shrinks while the role of technology vendors and online music stores grow."

The Yankee Group predicts that in the U.S. online music will grow faster than mobile music downloads and online single downloads will outpace album downloads or subscriptions. Despite mobile carriers efforts, online distribution will continue to dominate the category, making up 80 percent of the industry revenue. The market for music phones will grow to more than 266 million, only 9 percent of mobile users will actively use them as portable music players the firm says.

Music sales, which combine albums, singles, music videos and digital tracks, increased to 1,369,000 from 1,198,000 with a 14 percent increase.  Overall album sales dropped 9.5 percent. The purchasing of physical CDs online grew by 2.4 percent and 20 percent of total album sales for the year took place in the last six weeks of the year.

Digital music sales numbers continue to increase, as 844.2 million digital tracks were sold in 2007, a 45 percent increase from 2006. Fifty million digital albums were purchased in 2007, a 53 percent increase over the previous year. Digital music accounted for 23 percent of all music purchases in 2007.

Universal Music Group had the largest share of the market with 31.9 percent, a small increase over 2006. Sony BMG had the second largest share with 24.97 percent a decrease from 27.44 percent the year before. Warner Music Group had a small growth in its market share, from 18.14 percent up to 20.2 percent. EMI was the fourth largest major label with a 9.37 percent share.