Quite a gimmick, though Live Search Senior Director Frederick Savoye says SearchPerks, like Cashback, is actually part of Microsoft’s (MSFT) grand plan to “innovate the [search] business model.” If that’s so, the company might want to rethink it. Because Cashback really hasn’t done much to bolster Microsoft’s laggard search service, which remains a very distant third in the search market. According to Nielsen Online’s MegaView search ranking for August, searches on MSN/Windows Live declined 23.8 percent year-over-year. Its August 2008 share of the search market: 10.7 percent.

A 23.8 percent YoY fall in searches doesn’t seem like much of an innovation to the search business model. And with its search market share in decline, Microsoft clearly needs something more than a steady stream of gimmicks to stem the bleeding. Said Collins Stewart Internet analyst Sandeep Aggarwal: “Internal initiatives at [Microsoft] need time to lift off and prove their merit, but sooner or later the company will have to face the realities and decide again if a combination with [Yahoo] can speed the process.”

Cupertino is reportedly in talks with some of the major music labels about adding over-the-air downloads and a greater variety of ringtones and ringbacks to iTunes in advance of the debut of the 3G iPhone. But getting the labels to agree to such a thing may come at a price, or rather a variable-pricing model.

The labels have long wanted iTunes to abandon its policy of selling songs at a flat rate of 99 cents in favor of a variable-pricing system that allows them to charge more for popular tracks. In the past, they haven’t had the leverage they needed to force Apple to do this. But with the mobile music market at stake and the company gunning for a big 3G iPhone launch come June, Apple may have no choice but to agree to the labels’ terms.

“[Mobile is] clearly an opportunity Apple is missing,” IDC analyst Lewis Ward told Wired News. “And Apple is going to want to do it all themselves, but these OTA music storefronts have not sold very well. Maybe there’s secret sauce Apple’s thinking about, but the track record [of mobile music and ringtone stores that require a credit card rather than charging users via their cellphone bills] has not been impressive to date. The real issue is billing. People are much more comfortable with paying through a carrier [because] you don’t have to enter a credit card number or be worried about security. … That puts the carrier in the supply, and the carrier is going to want their cut, which means the margin for Apple goes lower.”

The RIAA and its online counterpart, the Digital Media Association, have petitioned the Copyright Royalty Board to slash the so-called mechanical royalties paid to musicians and music publishers for digital downloads, subscription music services and ringtones. Seems the RIAA and DiMA feel they’ve suffered unfairly during the transition to digital distribution and they’d like artists to share in their misery.

The National Music Publishers’ Association, noting the favorable economies of digital distribution, asks for a royalty of 15 cents per track for permanent digital downloads. The RIAA argues that a royalty of approximately 5 cents to 5.5 cents per track is more reasonable. The DiMA–which represents Apple, Amazon and RealNetworks, among others–suggests cutting that royalty further still.

Find that astonishing? Just wait; it gets worse. For streaming music services, the NMPA proposes a rate of the greater of 12.5% of revenue, 27.5% of content costs, or a micro-penny calculation based on usage. The RIAA finds 0.58% of revenue more reasonable. And the DiMA says there really shouldn’t be any royalty at all. “Fundamentally, this fragile marketplace is showing signs of promise, but it cannot be saddled with additional, excessive costs,” the DiMA argues. “The board should be careful not to impose a royalty that kills the proverbial goose and deprives songwriters and publishers of their golden egg.”

An interesting choice of metaphor and one in which the DiMA and RIAA might easily figure as the giant at the top of the beanstalk:

Fee! Fie! Foe! Fum!??
I smell the blood of a musician.
Be he ‘live, or be he dead,
I’ll grind his bones to make my bread.”

Grind his bones to make my bread, indeed.

Said Rick Carnes, president of the Songwriters Guild of America: “Our opponents have to recognize that this rate-setting is not a matter of gamesmanship for songwriters, but rather one of survival. As I stated in my testimony, in response to a question from those seeking to cut the mechanical royalty rate in half and to denigrate the importance and contribution of professional songwriters to the music industry, ‘Yes, songs are plentiful, just as rocks are plentiful. But if you want diamonds, you are going to have to pay the miners a living wage.’ ”

World War II was won by the Allied forces, not only because we were right, but also because we had more men and women, more weaponry and more money, and that money in turn would train more men and women and build more weaponry.

“But being fair, and being just, is what allowed our civilized society to survive and prosper, while that of our conquering ally, the Soviet Union, cracked, crumbled and collapsed because it attempted to perpetuate a society that was fundamentally unjust and unfair.

“And if the Internet should require an unjust and unfair paradigm in order to perpetuate itself, then it too will crack, crumble and collapse, and it won’t take five decades of Cold War politics for it happen.

“That is why it is in your interest to join our fight to protect and defend the property rights of creators everywhere. And that is why we are bringing our fight to the court of justice and to the court of public opinion.”

–Warner Music Group boss Edgar Bronfman Jr., May 26, 2000

Edgar Bronfman Jr.’s abusive relationship with Steve Jobs has apparently resulted in a Stockholm Syndrome-esque emotional attachment between the Warner Music CEO and Apple. Speaking at the GSMA Mobile Asia Congress in Macau, Bronfman–who’s long been critical of the company that arguably legitimized the digital music business–turned tack and lauded iTunes as a prime example of digital music done right.

“For years now, Warner Music has been offering a choice to consumers at Apple’s iTunes store the option to purchase something more than just single tracks, which constitute the mainstay of that store’s sales,” Bronfman said. “By packaging a full album into a bundle of music with ringtones, videos and other combinations and variations, we found products that consumers demonstrably valued and were willing to purchase at premium prices. And guess what? We’ve sold tons of them. And with Apple’s cooperation to make discovering, accessing and purchasing these products even more seamless and intuitive, we’ll be offering many, many more of these products going forward.”

And so began a paean to Apple which, by the time Bronfman concluded, had heaped adulation on everything from the company’s design chops to its billing-platform savvy. “You need to look no further than Apple’s iPhone to see how fast brilliantly written software presented on a beautifully designed device with a spectacular user interface will throw all the accepted notions about pricing, billing platforms and brand loyalty right out the window,” Bronfman continued. “And let me remind you, the genesis of the iPhone is the iPod and iTunes–a music device and music service that consumers love.”

Clearly, Bronfman’s had quite an epiphany since his war-against-the-consumer days, when he was calling for mandatory peer-to-peer filtering and taxes on recordable media and MP3 players and demanding a share of Apple’s iPod revenue. “We used to fool ourselves,” he said. “We used to think our content was perfect just exactly as it was. We expected our business would remain blissfully unaffected even as the world of interactivity, constant connection and file-sharing was exploding. And of course we were wrong. How were we wrong? By standing still or moving at a glacial pace, we inadvertently went to war with consumers by denying them what they wanted and could otherwise find and, as a result of course, consumers won.”

What is a ringle, you ask? Well, it’s a new product that conveniently packages a hit song and a digital ringtone in the near end-of-life CD single. For $5.98 or $6.98.

Or, to put it more simply, it’s the stupid person’s idea of a clever person’s new media format.

“Each ringle is expected to contain three songs–one hit and maybe one remix and an older track–and one ringtone, on a CD with a slip-sleeve cover,” Billboard explains. “The idea is that if consumers in the digital age can download any tracks they want individually, why not let them buy singles in the store as well?”

Wow. If that’s the best the industry can come up with, Apple has nothing to worry about.

(Image courtesy the Megatron Don)