Online Music's Bugaboo
April 12, 1999
Robert Hertzberg
The debate over Internet-delivered music will pick up again this week, when executives from Internet and music companies come together in Los Angeles.
This time, though, the conversations are less likely to be about the threat being addressed by the music industry's Secure Digital Music Initiative (SDMI) and more about the opportunities inherent in digital music. Those opportunities are being pursued by many of the companies attending the Spring Internet World show, this publication's conference counterpart, taking place at the L.A. Convention Center.
It's no secret that the music industry feels threatened by the Net, and in particular by MP3, a format that allows music listeners to download free (and often illegal) copies of songs. The extent of the threat was underlined last October when the Recording Industry Association of America sued Diamond Multimedia, the maker of the Rio, a handheld device that plays MP3 music files.
Since then, from the music industry's perspective, things have only gotten hairier. Several other makers of consumer electronics gear have promised to introduce portable MP3 players, allowing millions of Net users, in the industry's worst fears, to walk around listening to music for which they haven't paid a cent.
And this week Microsoft is expected to give the music industry something new to worry about when it puts forward a proprietary system of its own for secure delivery of music files over the Net.
To be an executive at a music company today is like being a railroad executive at the dawn of aviation. There's a real risk of being rendered irrelevant. But there are opportunities, too, and those will be the focus this week.
One clear opportunity is to reprice music in a way that expands the market. Without having to manufacture and distribute CDs, music labels could charge less, thereby increasing demand. In using the Net, the labels would also escape the economic constraints that limit the number of singles that can be released. That would allow more a la carte buying of individual tracks.
Indeed, it is arguable that the Internet will change not just the distribution apparatus of music, but the way artists work. Will the practice of retreating to a studio for three months in order to put together a full-length CD seem quite so essential once the Internet is available as an immediate download mechanism? One of the music labels' big fears has been that artists will go directly to their audiences, thereby decimating the licensing fees that are the labels' main source of income. But such a change, already visible at sites like MP3.com and GoodNoise, with their profusion of independent artists tending to the avante garde, seems unlikely to occur with the most popular artists. For the foreseeable future, at least, such artists are going to want the marketing power the big labels bring.
If the labels can take comfort in their enduring role as talent scouts, and in their proactive attempt to control the future through the SDMI initiative, it's harder to see a silver lining for distributors of CDs. And it's not just the brick-and-mortar stores such as Sam Goody that are at risk here; online CD sellers like Amazon.com and CDnow face risks, too. The plain fact is that digital music will eat into sales of CDs. The question is who's going to grab the opportunity at hand, which is to create stores with rich archives of downloadable music.
Copyright 1999 Penton Media
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