Music industry finds new beat in online recommendations

Tell a friend.

The music industry may still be suffering at retailers, but online word-of-mouth about music is anything but anemic.

Several websites have latched onto the concept of recommendations as a way to sell new music, with one — iLike — attracting more than 10 million users in just a few months.

Last week, AOL introduced the latest twist: AIM Tunes, a plug-in for the popular AOL Instant Messenger (AIM), lets you tap into the music collections of your instant-messaging contacts, discuss music and actually listen to the songs from their library while connected.

AOL Senior Vice President Marcien Jenckes says the company introduced AIM Tunes in response to demand from fans who wanted to discover music through their AIM "buddies."

"These are the people most important to you in the world, a close network of people who are mutually interested in each other," Jenckes says.

Online music-subscription services Yahoo Music, Rhapsody and Napster have offered similar features, including playlist-sharing, but only paying subscribers could hear complete songs. Non-members got song samples.

ILike, an offshoot of GarageBand.com (free music from unsigned bands), offers tools to post your musical tastes and find similar artists, either via song samples or quizzes. It launched in October 2006 and quickly amassed 4 million members.

In May, it expanded with an application on the red-hot Facebook social network, where it now has more than 9 million users.

"People are more inclined to listen to music based on what their friends tell them," says iLike CEO Ali Partovi.

ILike is 25% owned by IAC/InterActiveCorp iaci, the home of Ask.com and Ticketmaster.

AIM Tunes and iLike join a parade of recent sites that try to find new music for you, usually by computer analysis of your tastes.

Last.fm, recently purchased by CBS for $280 million, and online radio sites Pandora, Slacker and Yahoo Music's Launchcast create online radio stations based on your tastes. ILike offers free MP3s of unsigned bands (from GarageBand) it deems similar to other bands you like.

"Clearly, radio is losing its influence," says Phil Leigh, an analyst at Inside Digital Media. "This is replacing it as a way to discover new music, because we tend to appreciate what our friends appreciate. If a friend recommends something, we'll pay more attention."

Even with the explosion in digital sales (unit sales are up 46% in 2007, while CD sales are down 14%, according to Nielsen SoundScan), the music industry continues to suffer.

The increase in digital sales isn't enough to stem the decline in CD sales. All told, the music industry's sales were down 6.2% in 2006, with sales of $11.5 billion, according to the Recording Industry Association of America, from $12.2 billion in 2005.

AOL's Jenckes says the recommendations services can only help the business.

On AOL, getting movie recommendations from friends "is huge," he says, and music is no different.

"What we're trying to do," he says, "is help you find an artist you didn't recognize before. If you go out and buy the album, great. We have tools to help you do that."

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