Digital Music Will Cost You
Hmmmmm....one of the better articles I've read as of late. Not only does some of the material bode well for edig but also makes an interesting (& brief) analysis of the costs for online distribution.
wired.com
Digital Music Will Cost You
by John Gartner
3:00 a.m. 8.Dec.1999 PST
Even after 15 years, Jeremy Silver is still
jazzed about the music business, and he's
looking forward to his next challenges:
digital music and the Internet economy.
Some say record labels have been slow to
embrace the Internet. But nobody can
say that about Silver.
The vice president of new media at EMI
Recorded Music has been a Web addict
since 1994, when the command line was
king, and gopher and fetch were a
surfer's favorite tools.
"The Web used to be my hobby -- now
it's my job," he said. "Now I surf the Web
looking for my next hobby."
Silver, who started as a researcher in
1984 at National Sound Archive in
London, has been around long enough to
know that the retail channel is here to
stay. Although EMI, the world's third
largest music company, is adopting digital
music, Silver projects that even by 2005,
80 percent of the company's revenues
will come over the retail counter.
Silver is also a realist when it comes to
technology and its ability to make music
secure. Like music on compact discs, Net
music can never be fully pirate-proof.
"What we need to do is keep honest
people honest, which is a guiding principle
of the SDMI (Secure Digital Music
Initiative)."
Music publishers can't let the threat of
illegal activities dissuade them from
entering the Net age, he said. "If you
want Fort Knox, then don't release any
music."
Silver has faith that the SDMI will be
robust enough so that if one aspect,
such as encryption, is cracked, then
other components will remain intact. "We
don't want [online music] to be
equivalent to the physical world, where
one in three CDs worldwide is pirated."
The fear of piracy is just one reason that
record companies have held back on
releasing their libraries in downloadable,
digital form. Silver said.
"The reality is, consumer demand for
major artists' material hasn't been there,"
he said. Current methods of obtaining
music are too cumbersome for most
consumers.
Many digital music collectors enjoy the
outlaw aspect of finding and downloading
their favorite tunes -- they aren't as
interested in obtaining music legally.
Silver said scanning newsgroups, using
search engines, and jumping in and out of
chat sessions are part of the thrill of the
hunt.
Silver, whose company is an active
participant in the SDMI effort to protect
content, said the oft-maligned initiative
has gotten a bad rap. SDMI is not trying
to limit consumer choice, as many
pro-MP3 sites have opined. It is,
however, unabashedly trying to eliminate
opportunities for illegally music
distribution.
The SDMI group's famously contentious
meetings are healthy, according to Silver.
"You wouldn't expect that group of
people [who represent technology,
consumer electronics, and content
providers] to get together without having
fiery arguments. If they don't have
heated arguments, they are not doing
their jobs."
Companies that have not been involved in
SDMI may produce alternative security
solutions. Silver said it's unlikely, but if a
complete system for securing music came
out before SDMI has finished its work,
EMI would have to consider using it. "One
should not necessarily wait for the other,"
he said.
Silver shares one widespread criticism of
SDMI -- that products meeting the
group's requirements may not be
compatible.
"If I were a consumer, and I didn't have
interoperability promised at some time,
then I'd be severely disappointed," he
said. People can expect to travel the
world and cope with distinct languages
and currencies, but "when you're in your
home, listening to music, incompatibility is
less acceptable."
Silver said while the digital music market
is being winnowed to a handful of
technologies, music publishers and
consumers should plan on authoring and
using content in multiple formats.
"We're not going to choose one codec
[audio compression technology]," he said.
"And I would be a very wary of someone
who chose only one. Nobody has all the
answers."
Over the past few months, EMI has
signed agreements to deliver videos and
music in Liquid Audio and Microsoft's
Windows Media, and has signed a video
distribution deal with Launch.com.
Silver said EMI has no plans to directly
capitalize on the e-commerce boom. The
company will not sell to consumers
themselves but instead will let the
existing retail channel and emerging online
channel interact with consumers. "Why
would [consumers] want to deal with a
single record company?"
EMI also has no interest in developing its
own security technology and will continue
to focus on partnerships. "We don't want
to become a technology company," Silver
said.
Consumers who think that moving to
Net-based distribution might lower the
price of music may be sadly disappointed,
he said. "People have been talking about
'disintermediation' (where record labels
will be replaced by more efficient virtual
labels) for a while, but that's not going to
happen."
The Net actually causes
"reintermediation" -- as even more people
are put between the artist and the
consumer, according to Silver. Web
hosting, music directory, streaming
technology, security, watermarking, and
transaction companies all have a role in
digital music, and "the more hands, the
higher the cost."
At least in the short run, it will cost EMI
more money to distribute music digitally
than through its regular retail channels.
The economics for new labels that don't
have established channels may be
different, however.
The digital music landscape will likely shift
over the next 12 to 18 months, he said.
"Next year will be by far the biggest year
for experimentation [in music
distribution]," Silver said. While in-store
CD burning, secure portable players, or
set-top boxes may not be the "killer apps"
for digital music on their own, each
technology has a place, and could be
used in conjunction with things yet to
come.
He said industry observers who get
caught up in the numbers (of downloads
and digital sales) in the next few months
will miss the point. Once music is made
highly accessible, and highly usable, then
labels will have the incentive to distribute
content over the Net.
Silver, who once played flute and sang in
a band -- called Desmond's Leg --
believes recent controversies over acts
being forced to forfeit their domain names
when they sign with a label should not be
an issue. Bands should be able to
continue their personal relationships with
fans, and labels should host sites of
similar sounding names.
"We'll have the one with the hyphen in
the middle of the name," said Silver,
tongue firmly planted in his cheek. |
