From RB:
BLOCKBUSTER (Loosely connected dot IBM->Madison project->EPAC->e.Digital):
+MADISON PROJECT - Silicon Alley Reporter Magazine (Issue #27)+
MADISON COMES HOME
Mark Pesce follows the digital music project that brought the Big 5 record companies together
In mid-July, a series of highly anticipated technology trials began, marking the first time in a decade of trial-and-error that the big entertainment companies have successfully used the Net to extend their markets. The Madison Project?the entertainment industry's equivalent of the Manhattan Project?looks to bring the record store into every living room, a cash-and-carry (well, cash-and-download) business that will help the music biz turn the corner from bricks-and-mortar to bits-in-ether.
In San Diego, the high-tech home of such communications giants as Qualcomm and General Instrument, a small selection of bandwidth-rich consumers of Time Warner s Road Runner CTM (cable television modem) system will find that they can order and download entire albums of music from major musical talents. This might strike many as a ho-hum event, barely a pip against the noise generated by the new music portals such as listen.com or Michael Ovitz s scour.net. But if content is king, the "Big 5" music companies must be the kings of content.
Since the 1920s, the business of music has been concentrated within a relatively tight group of companies?fierce competitors who have always presented a united front to the world-at-large. Some of those first firms, such as RCA, CBS or Capitol, have faded or been folded into the trans- media zaibatsu that controls every aspect of production and distribution of the entertainment product. That is, until the Web came along.
That's not to say that these folks were caught unawares. Back in 1993, just as the word "browser" entered the technical lexicon, Time Warner tried to invent the future of entertainment, an ambitious fiasco called the "Orlando Project." Working with SGI, which provided hardware and know-how, the folks at Time Warner managed to blow nearly a billion dollars on a high- speed network reminiscent of @Home, or later, of Road Runner, connecting souped-up set-top boxes to an astonishingly evolved array of products and services. The system featured video-on- demand, home shopping (before it was known as e-commerce or e-tail) and networked video games, designed around a 3-D "carousel" of program selections.
What they learned was that a broadband TV system for the home would be too expensive?at least $2,500 per television?requiring billions of dollars in network plumbing. And, frankly, families didn't find video-on-demand as alluring as market research had led the industry to believe. The ideas, all quite sound, didn't have an infrastructure to back them up, and Time Warner couldn't carry the ball by itself.
Just after the Orlando Project collapsed, Blockbuster announced a collaboration with IBM to bring "music kiosks" into its stores. These kiosks would allow a customer to select a series of tracks, from any number of different albums, then burn them onto a compact disc. The system featured high-speed network access to a vast database of titles. At least, that was the plan. But someone forgot to ask the record companies, and as the rights-holders on all of that music that IBM wanted to pump through digital networks to Blockbuster s outlets, they simply refused to provide the content that could have made it all a smashing success.
Why did they do this? To answer that, we need to look at the evolving landscape of musical rights over the 1990s. Before the mid-1990s, a record company owned the rights to an artist's songs in all media. Given that this meant?at the outside? radio, television, film and albums, this wasn't a particularly hard deal to do or to understand. But when digital technologies went ballistic in the late 1980s, canny lawyers worked in clauses indicating that rights renegotiation with the artists would be required if the record companies moved into "new media" operations. All of a sudden, the Blockbuster/IBM kiosks pushed an issue before the record companies?each with thousands of artists' contracts?that the record companies had been hoping to avoid.
When, in 1997, IBM and Blockbuster unloaded their interests in their joint venture, which had gone under the name NewLeaf, Tom Szabo appeared on the scene, ready to make the most of the broken pieces. This included several key patents covering the digital distribution of media, and together with Scott Smith, the two created Digital On Demand as a way to leverage this technology into the growing consumer market for customized media. Lately, DOD has scored big deals with Disney and Sony?their kiosks are big moneymakers in Disney s theme parks?but back in 1997, when DOD approached Warner and Sony, they asked if there wasn't a way to achieve the goals of the IBM/Blockbuster plan without screwing the record companies.
By this time, the first trials of CTMs were well under way in places like San Diego, California; Bangor, Maine; and Fremont, California. All of a sudden, the high-speed network needed for on-demand high-fidelity media was everywhere; now the record companies could bring their content home. Given the Blockbuster debacle, the record execs knew they faced two large problems, neither of which had anything to do with technology: 1) renegotiation of rights, and 2) working with each other.
Leaving alone the thornier issue of rights renegotiations, the record execs? beginning with Sony and Warner, the two pioneers of Madison?sat down and came to an agreement on a strategy that would give them a level playing field in the digital future. To ensure the future of commercial music on the Web, each had to put aside their pet projects or dreams of Net dominion, and acknowledge that only by working together could they reach the critical mass that had so far eluded them.
By December 1998, the Big 5 (Warner, Sony, BMG, Universal and EMI) sat together at a New York press conference and unveiled their new working relationship project, Madison, which would promote a system that could be used to securely deliver a commercial property consisting only of bits. The record companies reasoned that a such a system?which emphasizes property rights and carefully protects their valuable copyrights?would be the only thing that could save their lunch in the age of ubiquitous digital networks. The sooner they could define their strategies, the safer they'd be.
Very little of this had anything to do with MP3, the audio format that began living in its own little hype bubble at just about the same time. Many pundits have supposed that Madison was designed to "defeat" MP3, but nothing could be farther from the truth. Madison's delivery is agnostic to compression schemes; it can be MP3, or MP4 or EPAC, or just about anything else. (As it turns out, most of the delivery will not be in MP3, because, according to the "golden ears" audiophiles who make these sorts of decisions for the Big 5, it has the worst Sound quality per bit of any of the available formats.) But the timing was bad; the first question out of every reporter s mouth went something like this: "Are you trying to kill MP3?" or "What about free music, isn't that going to kill your business?"
In fact, free music?both as a promotional vehicle for established artists and as a means for unsigned artists to achieve some recognition?will remain an important part of the marketing strategy for the record companies. But artists can't eat goodwill?and neither can the record company executives?so most of the most popular content will remain locked up, protected, and available only through Madison?or its descendents.
After the announcement, the real work began. Delivering a stream of bits to a customer's computer poses no real problem, nor does any of the digital audio watermarking or other rights protection schemes. But these companies have catalogs of music going back 50 years? think cool jazz or Frank Sinatra?and while some of this exists in digital formats, none of it has been optimized for Net delivery. And the artwork?an important part of the overall package?has never been designed for anything other than a lithographic press. Some of the record companies (most notably, Sony) have been aggressively digitizing their assets, preparing for the day when they'll be able to deliver them over a network. Others, particularly the smaller companies, have very little in the way of available digital assets, and it will take them some time, and a lot of money, before they can provide the customer with something that can compete with a store-bought product.
So the strangest side effect of Madison has been the transformation of the Big 5 into database concerns. Each is struggling to round out its offerings, to build out its database with more than music, adding the album art and liner notes and track information?the kinds of things we think of as completely digital in 1999, but in the case of Electric Ladyland (1968), are likely lost or incomplete.
So this transformation will not come cheap, and that's even before the Big 5 considers the legal costs of contract renegotiations?not that any of them see a lot of money in this business in the short term. But a deal is a deal, and they'll have to go back to U2 and Michael Jackson and Ricky Martin and cut a different kind of deal for digital distribution. That's going to take some time. The experiment will feature both top-sellers and popular catalogue bands such as Black Sabbath and Cream. Much of the music will be targeted toward older demographic groups?the consumers with credit cards?and not to music-saturated Generation Y.
Nevertheless, my sister?who has a Road Runner cable modem in San Diego?will be able to type in a password and a credit card number and download a whole album. The 660 MB of data is reduced to a little over 100 MB. If she so desires, she could even burn it onto a CD. Of course, she could keep it on her hard drive, but that's not nearly as portable a format as the CD, which she could play in her car, or on a player while she's out for a jog, or at a friend's party. Madison may be all about bits, but for now, atoms still rule.
Eventually, after all of the deals have been done, Madison will be able to offer singles, rather than just whole albums. This is a bit scary for the industry, which made the transition from singles to albums back in the 1960s?and gave us album-oriented-rock--building an economic model around a monolithic product containing a number of songs from a single artist. Those days are soon to end. With the rise in electronica, perhaps they have already ended. So too will the relationship between artist and distributor change to accommodate the fact that Warner or Sony or EMI doesn't need to press a million copies of a CD, get it into the stores, and promote the hell out of it. Now, all the companies have to do is promote?and make sure their servers are up 24/7, which is an expensive proposition. One industry insider calculates that the total cost of delivering an album digitally is the same as pressing it onto a CD.
But all of this forces another question that the record companies haven't even begun to answer: What am I buying when I purchase music from Madison? Am I buying the bits themselves, or a license to the bits? Ideally, I should be able to get these bits anywhere, from my computer at home, or my computer at work, or my Palm X (with its embedded MP4 decoder and high-speed network link), or the digital radio in my car. The record companies would like nothing better than to charge me a buck a day (or month) to have unrestricted access to their archives, so that I can play any song they own, on demand. And this means the record industry must become a service industry?a house built out of bits. [sar] |
