Nick Denton Mon, Apr 14, 2008 at 7:26 AM

I'm amazed we've managed to keep a lid on this news; that, given your naturally gossipy natures, must be a first! We're spinning off three sites: Idolator, Gridskipper and—this one may be a surprise—Wonkette. There were indeed some rumors about Maura Johnston's music blog late last year; they were true of course. For reasons that I'll explain below, both it and our travel and politics sites have better commercial futures outside Gawker than within. (Excuse the corporate lingo: some of it is unavoidable.) But, first, the facts, which will be hitting the wires later this morning, or as soon as you leak this email. Go ahead!

* IDOLATOR is going to Buzznet, a music-focused web and social network. Buzznet recently acquired Idolator's chief rival, Stereogum, and received a big investment from Universal Music Group. * GRIDSKIPPER isn't going far: it's being taken over by Curbed, the network founded by Lockhart Steele, in which Gawker Media is a shareholder. * WONKETTE is being spun off to the managing editor, Ken Layne, former founder of one of the web's very first news sites, Tabloid.net. The title will become part of the Blogads network of political sites, which includes Daily Kos, among others.

Why these three sites? To be blunt: they each had their editorial successes; but someone else will have better luck selling the advertising than we did.

Music audiences are fragmented across genres; Maura's Idolator gave Stereogum a good run, but a group with a whole array of music sites will command more attention from record labels than we could. In the case of Gridskipper, our urban travel guide, we could never match Curbed in attention to city-specific content and advertising. As for Wonkette: political advertisers are a strange breed; they don't come through the same agencies our sales people deal with.

I'm relieved we've found pretty decent homes for the three sites, and most of their writers, but we're gutted to lose them. Idolator's Pop Critic's Poll was a tremendous coup—and Patric's bleeding-heart logo for the site was one of my favorites. Gridskipper is so far the most sophisticated travel blog: it entirely deserved its inclusion in Time's list of the 50 coolest websites.

And Wonkette is one of the brands with which the company is most associated; people will be shocked that we would ever part with it. The political site has won an array of Bloggies and other awards; it introduced the word ass-fucking into the dictionary of political abuse; the founding editor's slippers are even on display in the new media museum in Washington, DC. And Ken and his team have brought a new liveliness to the site this election season—validated by the record traffic of the last three months.

So why not wait, at least till the election? Well, since the end of last year, we've been expecting a downturn. Scratch that: since the middle of 2006, when we sold off Screenhead, shuttered Sploid and declared we were "hunkering down", we've been waiting for the internet bubble to burst. No, really, this time. And, even if not, better safe than sorry; and better too early than too late.

Everybody says that the internet is special; that advertising is still moving away from print and TV; and Gawker sites are still growing in traffic by about 90% a year, way faster than the web as a whole. But it would be naive to think that we can merely power through an advertising recession. We need to concentrate our energies, and the time of Chris Batty's sales group, on the sites with the greatest potential for audience and advertising.

The dozen sites that remain represent some 97% or our 228m pageviews per month, and an even higher proportion of our growth and advertising revenue. (Key facts are below, in case anyone asks.) We'll be able to devote more attention to breakouts such as Jezebel and io9, as well as established titles such as Gizmodo and Kotaku, which are becoming utterly dominant in their domains. And, then, once this recession is done with, and we come up from the bunker to survey the internet wasteland around us, we can decide on what new territories we want to colonize.

Both Noah and I are around to answer any questions. On email, IM, or phone. I'm 917-XXX-XXXX and Noah is on 917-XXX-XXXX.

Regards

Nick

—-—-—-—-—-—-—-—-—-—-—-—-—-—-—-—-—-—-—-—-—-—-—-—-—-—-—

GAWKER MEDIA KEY FACTS
* A dozen sites, Gizmodo first launched in August 2002, most recent,
io9, in January 2008
* Gawker, Gizmodo, Kotaku, Lifehacker, Jalopnik, Deadspin, Defamer,
Jezebel, Valleywag, io9, Consumerist, Fleshbot
* A record 18 "Bloggie" nominations in 2008, way more than any other
blog collective (one of those was for Idolator)
* Audience of 29.7m unique visitors a month for the whole network, up
82% at annualized rate (http://www.quantcast.com/p-d4P3FpSypJrlA)
* Each individual site has at least 1m uniques or, in the case of io9, soon will
* Pageviews of 227m in March — 219m if you take out the three sites
being spun out — up 89% on a year earlier (Sitemeter)
* For those who measure these things, Gawker is the web's leading
independent blog group

And now for the Kremlinology: Karin Gilford, head of Yahoo Entertainment, seems like the big winner here. Amy Iorio, the widely disliked executive whose team launched women's site Shine, loses out. Moore's mostly winnowing the number of direct reports he has — which should give him more time to call old pals in Redmond. And Rogers? Got out while the getting was good.

No, this is about the twisted dynamics of the music industry. Selling unprotected MP3s is all the rage now, even though label executives have insisted for years on copy-protected formats, like the kind Apple sells through iTunes. Forget Jobs's propaganda about Apple wanting to "free" music from copy protection. He doesn't care one bit about the digital-rights management software, or DRM, that record labels insist on. And he knows that most consumers don't care about the issue. He just wants to sell iPods, and his customers just want to buy them.

What Jobs does care about is other music stores having something Apple doesn't. The labels have been favoring competitors like Amazon.com with licenses for MP3 files — because they now fear Apple more than they fear piracy. And Jobs knows that DRM doesn't work to stop piracy, anyway. But what it does do is lock music to devices, because hardware manufacturers can't risk breaking the DMCA's circumvention provisions.

So Apple needs a new hook to win the labels back. Selling subscription music would allow Apple to lock down its music once more. According to reports of the proposals Apple and the labels are considering, iPod buyers would pay anywhere from $20 to $100 to get all the music they can download. Ah, but they'd have to download it from iTunes, onto an iPod.

Bundling music would give Apple a huge edge over the competition. Nokia's also proposing an all-you-can-hear music plan. But for all of Nokia's talk about cell phones replacing MP3 players, only 7 percent of cell-phone owners listen to music on their handsets. Amazon.com could try a subscription plan, but it's hard to see how it would make money, since it doesn't have the iPod's hefty profit margins.

Jobs comes out on top, again. Apple sells more iPods by giving the record labels what they want — copy protection and revenue — without having to share the iPod's profits. The compliant tech press corps will hail his plan as genius, forgetting he ever said anything about consumers wanting to own their music. The losers here are the musicians. Apple and the labels will divvy up subscription revenues, and the artists' cut will likely be smaller than what they'd make off of by-the-song sales. But since when has anyone asked their opinion about how to run the music business?

(Photo by AP/Paul Sakuma)

"Hustler," Simian Mobile Disco

"Loose," Spank Rock & Benny Blanco

"Frank Sinatra," Miss Kittin

"Lazer Life," The Blood Brothers

"Flux," Bloc Party

The short clips we posted are newsworthy and will not be taken down. But the letter itself is informative. In it, Simmons's lawyers say that the video was filmed by Traci Anna Koval, and that a company Allied Industry bought the rights from her in 2003. Is Koval the woman in the video, referred to as "Elsa" by GenesSecret.com? Unclear. Here's the letter:

Update: Gene Simmons's lawyer has confirmed the sex tape's authenticity in a cease-and-desist letter sent to Valleywag. With Simmons's identity established, we've shortened the excerpts to the bare minimum: Simmons's face, unquestionable; the activity he's engaging in, unmentionable.

The short version: record label 2.0. Some "newfangled" profit-sharing scheme. Lodwick's charm has managed to hook an entire artist on the premise. Too bad three fatal words have killed Normative before it even got off the ground. "We will promote our albums in new ways that are hundreds of times more efficient; ways that record labels don't understand, but are obvious to a seasoned Web entrepreneur." Spicy.

Sarkozy said Internet service providers should automatically disconnect customers involved in piracy. (AT&T has privacy advocates all fired up after proposing a less-stringent plan.)

For the rest of us, and at least one major record label executive, the numbers suggest the recording industry should stop trying to plug the Hoover Dam with bubble gum. Change has come.

(Photo by kyle simourd)

But then Coulton quit his job and started the Thing a Week project where he produced a song a week for a whole year. And now he's famous! And doing a show on February 22 in San Francisco.

Whatever. Here's what you really need to know: Timberlake's label is participating in a Pepsi Super Bowl promo that's giving away 1 billion songs, in MP3 format, through Amazon's music store. Sure you could rip Timberlake's songs from a CD yourself, or purchase the PG-rated iTunes version, but the masses have never been able to purchase the superstar digitally without annoying restrictions on the use of the tracks.

As CNET points out, it's all about the business ties. U2 lead singer Bono is the most stylish managing director at Elevation Parters, the Sand Hill private equity firm. Elevation cofounder Marc Bodnick is on the board of directors of iLike. Hence, the arrangement. Bonus for close students of the Valley's real social networks: Marc Bodnick's wife is Michelle Sandberg, the sister of Google executive Sheryl Sandberg, who's married to former Yahoo Music chief Dave Goldberg, who's an iLike advisor. Got that?

I'll admit I had an account there and frequented it quite often. At the end of the day, what made OiNK a great place was that it was like the world's greatest record store. Pretty much anything you could ever imagine, it was there, and it was there in the format you wanted... it existed because it filled a void of what people want.

MediaMouth is trying to shift out of its failed business of burning CDs via kiosks, an efforts that will remind some of K-Tel Records attempts to reinvent itself as a dotcom. Its "Music Store" doesn't sell digital tracks. Instead, it creates a playlist which the company then burns to a disc and mails to the purchaser. CD-burning kiosks didn't work, so why would this? As they say, the problem with instant gratification is that it's not fast enough. By adding the extra step of sending a CD in the mail, MediaMouth has, improbably, made a bad business model worse. Why dig yourselves deeper?

As Zachary McCune, a sophomore at Brown University, once a hotbed for student anti-war protests in the Vietnam era, puts it:

People wonder why college students aren't rallying more around the Iraq war," Mr. McCune said. "If there were a draft, we probably would be. Students are so quick to fight for this cause because we're the ones bearing the burden.

Ah, that's an idea for NBC Universal chief Jeff Zucker, the industry's most notable anti-piracy whiner! Rather than enlist the entire government to fight copyright, use a government draft to enlist college students to fight the war in Iraq! I suspect file sharing would no longer be today's college kids' most pressing political issue. And then, better yet, Zucker could make a reality show out of it. (Photo by Thomas Good)

This is bad news for iLike, one of the most popular third-party Facebook apps. The company's president said in July, "our goals are first to become the dominant music player on Facebook and, second, to become profitable." Step one just got a lot trickier.

We've always said that the Facebook Platform was CEO Mark Zuckerberg's playground. He has no problem stomping on outside developers — and why should he? Last we checked, it's his company. And while app developers can add features to users' profiles, Facebook has the unique ability to set up custom profiles with special fields for artists. Most importantly, only Facebook can lift the 5,000-friend cap that has limited the amount of useful fan outreach on the site thus far.

This makes a lot more sense than launching yet another music store. A partnership with an existing outlet such as iTunes could set Facebook up with an easy way for artists to sell music and to make deals with record companies to get already-signed bands on board. Heck, now that talks between Microsoft and Facebook over the software giant taking a stake in the company have apparently cooled, maybe it's time for Apple to step up to the till.

• November 1996 Yahoo and MTV announce the creation of UnfURLed, "the ultimate guide to music on the Web." The site is promised to launch in January 1997.
• January 1997 UnfURLed does not launch.
• July 1997 UnfURLed launches, six months late. The site later disappears, forgotten.
• February 1999 Viacom acquires Imagine Radio, a service which lets users listen to preprogrammed music channels, or create their own. (If that sounds a lot like Last.fm or Pandora, that's because it was a lot like those sites.)
• May 1999 Viacom acquires SonicNet, an online music-news and information site.
• August 1999 Amid Internet fervor, Viacom creates the MTVi Group as a rollup of its Internet websites, hoping to take it public to cash in on the market for Internet stocks.
• August 2000With an IPO off the boards, Viacom reorganizes MTVi, giving control over websites like MTV.com and VH1.com back to their respective cable channels.
• 2001-2004 MTV does nothing interesting with Internet music for five years or so, as best we can tell.
• April 2005 MTV launches Overdrive, a broadband "channel." MTV later brags about how many "video streams" Overdrive serves, not noticing the complete apathy with which music fans greet it.
• July 2005 News Corp. swoops in and inks a deal to buy the parent company of MySpace. Viacom is widely reported to have been interested in buying MySpace, which gained popularity by embracing music on user profiles and getting bands to use the site to communicate with fans.
• January 2006 Microsoft and MTV launch Urge, an online music store.
• August 2006 Google and MTV announce an experimental deal to distribute videos over Google's AdSense network. The experiment, apparently a failure, dissolves quietly.
• September 2006 Viacom CEO Tom Freston, a longtime MTV exec, is fired, reportedly for missing the chance to buy MySpace. Later that month, Microsoft knifes MTV in the back by announcing its Zune player and companion store, rendering Urge pointless.
• August 2007 MTV merges Urge into RealNetworks' also-struggling Rhapsody music service.

Did I miss anything? Leave a comment below.

Liking the Pet Shop Boys should indicate that he has good taste in dance music, but liking the Pussycat Dolls indicates that he has terrible taste in, well, everything else. Add the Red Hot Chili Peppers and Fatboy Slim to that stew and I can't help but wonder if his PSB fandom is a fluke that happened because someone threw on "West End Girls" at the party where he first got wasted. Good times!

The big beef is SoundExchange's nonprofit status prohibits it from spending money on anything besides the administering and settling of disputes from the collection, distribution and calculation of royalties. Supporting groups like MusicFirst doesn't make the cut — despite SoundExchange's claims to the contrary.

Wired's Eliot Van Buskirk, always a friend to the digital music industry, hectors SoundExchange about any appearance of a conflict of interest: "With more power would come greater status and bigger paychecks for its officers and directors. Even if the agency were only acting in the interests of artists and labels, it would appear to have a direct stake in the fight." How tiresome. He ought to be lecturing, instead, the Internet radio industry: Take a lesson from SoundExchange and, if you actually care about lowering your royalties, hire some ball-busting, rule-breaking, down-and-dirty lobbyists of your own. Sheesh.

Among all record labels 48% of all executives thought ending DRM would boost download sales - though this was 58% at the larger labels. Outside the record labels 73% of those questioned thought dropping DRM would be a boost for the whole market.

Among all those questioned, 70% believed that the future of downloadable music lay in making tracks play on as many different players as possible. But 40% believed it would take concerted government or consumer action to bring this about.