My take on the DigiTrax KaraokeCloudPro service…

For those that missed the Karaoke Cloud Music City Summit 2012 stream on 06/22/2012, here is a not-so-brief summary of one session that was delivered today.

Ryan Sherr from PCDJ, did a demo of using the PCDJ Karaoki software connected to the DigiTrax KaraokeCloudPro service.

In a nutshell, a KJ pays a monthly fee for unlimited access to all of the tracks that will be available from the DigiTrax cloud service. I believe the number that was suggested was in the order of 60,000 tracks with duplication across multiple manufacturers. You can either stream from the cloud live, or you can temporarily store a local copy for offline use when no Internet connection is available. KJ’s would be allowed to synch to up to 3 computers time, but only one computer at a time can be used.
The suggested fee during the presentation was possibly a $99 introductory fee with a regular cost of $199/mo. This would be “per system” which, when clarified, meant that running concurrent shows would require multiple subscriptions. Thus, if you are a multi-rigger with concurrent shows, you have to have a subscription for each concurrent show.

So….

If a KJ were to have 3 shows at 3 venues all on the same night, that would require 3 subscriptions at $199 each for $597/mo.

That is a LOT of money even for the most aggressive KJ/Hosting company. If you only have 1 rig/show running 5+ nights a week, then *maybe* $199/month would be worth it provided DigiTrax produces new music quickly and regularly. But the multi-riggers I know of, don’t buy the exact same new music for every single rig they have in operation. They tailor it to the venue/crowd/location. Thus, a flat $199/mo might make sense for one location where it is way too much to spend for access to new music that will never be requested at another.

But lets keep it simple for now…. 1 Rig/Show

If a KJ runs it themselves (not hiring someone) and they get $125/night for a 5 night run at a venue, that means ~$2500/mo Gross pay. Which also means that 8% (@$199/mo) of the Gross pay gets chewed up with the cloud subscription.

But lets account for different wages –

5 nights x $200/night = ~$4000/mo = 5%
5 nights x $175/night = ~$3500/mo = 5.5%
5 nights x $150/night = ~$3000/mo = 6.5%
5 nights x $125/night = ~$2500/mo = 8%
5 nights x $100/night = ~$2000/mo = 10%
5 nights x $ 75/night = ~$1500/mo = 13%

…and for those who don’t work 5 nights a week –

3 nights x $200/night = ~$2400/mo = 8%
3 nights x $175/night = ~$2100/mo = 9.5%
3 nights x $150/night = ~$1800/mo = 11%
3 nights x $125/night = ~$1500/mo = 13%
3 nights x $100/night = ~$1200/mo = 16.5%
3 nights x $ 75/night = ~$ 900/mo = 22%

The math is pretty simple so you can easily see where you fall into the mix based on nights and wages. The point is, the cloud subscription as proposed now is a fixed cost. The more nights you have and the higher your wage, the easier it is to absorb the cost. It is more valuable on months where a bunch of new, desirable music gets released and much less valuable in months where music sucks eggs.

Regardless, the cost is pretty much out of reach for the low wage/low volume operators.

If we look at it from the perspective of how much new music a host adds per month on average, and we use the preliminary results of the poll I posted, no one is spending $200/month on new music for a single rig. Since established hosts will already have an investment in music, there is nothing to gain from adding the cost of the cloud service except to increase the size of their library (which has a highly debatable impact on marketability).

This seems to suggest that established hosts have nothing to gain from adding the extra monthly cost to their business plan.

However, there are two groups of KJ’s where this model does work out…at least in the short term.

New KJ’s coming on the scene

Instead of purchasing a bunch of music up front, for a mere $199, they can set up shop and have access to a huge library that rivals many long term hosts. The potential for even more market saturation is very high and is something I view as a threat to wages across the board and to the future of independent karaoke hosts as a whole. Long term, I can see bars just setting up their own sound, paying the monthly fee, then hiring hosts at minimum wage to run the shows.

Pirates that want to avoid a lawsuit/go legit

See above. $199 and they are golden.

Of course, in both cases, as time goes on, the benefit goes down. For a few thousand dollars, a KJ can buy discs retail, on eBay/Craigslist, or from other KJ’s and have a permanent library that they own outright. After approximately two years ($4776 in cloud service fees) they will have paid as much as what it would have cost to buy the content. Call it poor man’s financing. Some will do it because it is the only means they have. The smart ones will figure out they are not getting a very good deal and either not sign up in the first place, or buy content elsewhere and drop the service. Accounting for the volume and wages calculations above, and it just doesn’t make a very cost effective solution.

What DigiTrax could change…

Lowering the cost is a double edged sword. Lower cost makes it more valuable to the long term KJ but also dramatically lowers the barrier to entry for new/pirate hosts increasing market saturation and driving down wages. This is a tough one to crack – balance value for established hosts vs market saturation vs sales/profitability for DigiTrax. I personally think they will do the latter. After all, the more they sell, the more they make, and I don’t think they have a true grasp on what is “right” for the industry as a whole.

A few variations on a potential solution would be….

Offer a Trade-In Program for a reduce service fee. KJ’s could trade in existing libraries in exchange for a “certification” and drastically reduced fees. This gives established KJ’s “credit” for their existing investment while reducing the cost to access new content dramatically. I personally don’t like the idea of giving up my discs….so an alternative would be…..

An audit, or, since that word has left a bad taste in many a mouth, some means of proving you own an existing quantity of discs and provide a discount based on what is already owned.
In both of these cases, it would be a high overhead/cost/administrative option for DigiTrax so i don’t see it being implemented either. But I want to offer solutions along with my critique.

Another option……

Allow storage of existing physical library in the cloud.

Provide a “ripping service” to convert existing physical libraries into MP3+G and store on DigiTrax Servers. This could either be facilitated by shipping discs to them to rip and then ship back or even store in a secure location, or, just put a disc into a local computer and rip it to the cloud and keep the original locally.

The obvious problem with this is determining if it is an actual original or a burned copy, so some additional verification would be required. Since an audit would add in the administrative costs/headaches noted above, I don’t see that as the solution. It might be possible to do scanning or photos. My bank allows me to scan checks and deposit them via the web, we should be able to figure out how to scan or photograph discs and deposit them to the cloud.

The final suggestion (and what I think is the best solution) is this –

Instead of coming to market with a 60,000 track library at $199/mo, Lower the monthly fee ($19.99 – $39.99/mo) but only provide access to the last 1-3 years of content. Established hosts won’t be paying for access to stuff they bought 5, 10, 20 years ago, new hosts won’t be instantly competitive with established hosts without investing in additional sources of music, and pirates can’t simply go legit without any repercussions. DigiTrax could then charge a much higher fee on a one time basis, for access to older content. Maybe in the order of $1000 or more for access to 5 year blocks of music, or certain collections of older karaoke music. Package it up and sell it a la carte. Just don’t offer financing for it as that defeats the purpose. Make people put skin in the game and put it on their own card or take out a 2nd mortgage or whatever the rest of the REAL karaoke hosts have done over the years.

I am trying real hard to see the benefits of using the DigiTrax cloud over using the current standard of computerized systems, but the costs just don’t play out without some real disruption in the market. I does have the opportunity to bring more legality to the marketplace, but it isn’t going to do the already legal hosts any favors from a wage perspective. KJ Wages are more likely to continue to go down relative to the cost of the service. We *will* end up here, but we may be in for some real shocks and surprises on the road there.

-Chris