July 16, 1998
Digital Distribution of Music Is Spreading
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By JON PARELES
EW YORK -- The sound that could transform the music business is the quiet click of a computer mouse.
Right now, anyone with a mid-level computer and an Internet connection can hear music in a multitude of forms, from radiolike
Webcasts to snippets of songs. Many of those forms are ephemeral and in low fidelity, intended primarily for promotion. But it is also
possible to download, free or for a price, high-fidelity songs and full-length albums that can join a permanent collection. There's no need
to visit a store or wait for mail order; in fact, there's no need ever to handle a compact disk. David Bowie, Tori Amos, Duran Duran and
other well-known groups have released songs through the Internet.
For those who have been sending and receiving music via the Internet, digital distribution is a harbinger of a future when recorded music
has been freed entirely from physical form. Sold or disseminated as strings of 1's and 0's rather than disks, music joins the worldwide
flow of digital information.
For enthusiasts, digital distribution presents utopian possibilities. Freed of the costs of
manufacturing and distributing CDs, digitally distributed music could be cheaper for
consumers and more profitable for musicians. Music could be geared to more specialized
audiences that may be small but widely scattered; a fan in Helsinki could download tunes
from a band in Jakarta.
More radical changes have also been predicted by some industry figures. The possibilities
include drastically lower prices for recorded music by all but a commercial elite; other
performers might simply give away songs to promote albums or sell concert tickets.
Musicians could release music in small or large doses as they see fit, dealing one more blow
to the album as pop's standard artistic unit. Stores could see their role reduced as digital
distribution allows consumers to skip middlemen.
Eventually, home music collections could become obsolete, as recorded music becomes
available from central archives on demand.
To travel the Internet, music must be turned into a digital sound file that can be played through a computer. Electronic, or digital,
distribution of music is still the province of a small but significant group of computer users. At least 5 million software "players" in one
music format, MP3, have been downloaded, and MP3 is part of the Netshow multimedia package on Windows 98; 3.5 million players
in another format, Liquid Audio, have also been installed.
Because high-fidelity music involves large amounts of digital information -- a music CD holds 650 megabytes --
transferring music over the Internet is slow for most computer users; one song can take a half-hour to download
on a typical modem. Noting the technical obstacles, Jupiter Communications, an online market research firm,
has predicted that in five years the market for digitally downloaded music will be about $30 million, a minuscule
percentage of the $12 billion recorded-music market.
"But we still think it's something that labels should aggressively pursue," said Mark Mooradian, group director of consumer content for
Jupiter Communications. He said digital distribution could be important for its marketing value, to combat piracy and to reposition labels
as retail outlets.
Already, students and others with access to high-speed transmission lines have been sending around enough music to alarm the recording
business.
Electronic distribution is a major topic on the agenda at Plug In '98, a conference on music in the digital era, organized by Jupiter
Communications; Andrew Rasiej, founder of Irving Plaza, and Michael Dorf, owner of the Knitting Factory, that is taking place
alongside the Intel New York Music Festival through Saturday.
"You can't keep your head in the sand forever," said Thomas Dolby Robertson, who made new-wave hits in the 1980s and now runs
Headspace, a company that adds soundtracks to Web sites.
In 1996, Bowie offered a single, "Telling Lies," as a file that could be downloaded free; even though it took up to 45 minutes to transfer
the five-minute song, 300,000 people downloaded it. But that was a give away from an internationally known star. Getting paid for
downloaded music has been more difficult, in part because of the inconvenience of the process and in part because few well-known
performers have made it available.
But the advent of faster home Internet connections, including cable modems now being tested that can transfer computer data at rates
comparable to the video and sound signals of cable television, music could be downloaded in seconds rather than minutes. And on
college campuses, and some in high schools, with fast T-1 lines (special digital telephone connections to the Internet) students are already
trading and copying music.
"If you take a look at any dorm at Stanford," said David Weekly, an incoming junior majoring in computer science at Stanford
University, "people are listening more to MP3's than to radio."
Independent labels and individual musicians see digital distribution as a way to deliver music directly to listeners. "Record companies
have a lock right now on how an artist can get music out to a global audience," said Larry Rosen, the chairman of N2K, which owns the
online retail site Music Boulevard as well as its own N2K label, which makes some of its songs available for digital downloading. "With
electronic distribution of music, there's a break in that kind of power structure."
Digital distribution allows musicians to make their newest work available instantly worldwide.
The Jesus and Mary Chain, the English band scheduled to perform Wednesday night at Irving Plaza as part of the Intel New York Music
Festival, planned to record their set and place a live song on the festival's Internet site (www.intelfest.com) 15 minutes after leaving the
stage. The song was also to be available Thursday at Tower Records in Manhattan, transferred to a recordable CD and given as a
bonus with the Jesus and Mary Chain's current album.
Rasiej and Dorf organized the music festival and have set out to create the Digital Club Network, which would place cameras and
recorders in clubs around the world. Performances could be cybercast live or maintained as archives, with royalties going to clubs and
performers.
"The amount of money is insignificant today, but we're building a new content source," Rasiej
said. "You could create a chat room, collect your old friends from college and watch and
participate in a concert. You might not be able to slam dance against one another, though."
Twin-Tone Records, the independent label that introduced the Replacements and Husker
Du to rock fans in the 1980s, has announced that it will sell all its new releases through the
Internet, preferably through downloading, and will stop manufacturing new CDs in bulk;
downloading a song will cost $1.50, with albums at $10.
"The retail market isn't what it used to be," said Paul Stark, the president and co-founder of
Twin-Tone Records. "The number of releases has gone from 3,000 to 25,000 or 30,000, all
competing for the same shelf space."
"If I wholesale a CD for $10, I'll only see about $3 of that after mailing, returns and
advertising," Stark explained. "It costs me about $1 to manufacture the CD and the group
gets $2 in royalties, which leaves me about 10 or 15 cents. On the Internet, with no manufacturing or distributing costs, I can cut my
sales to a quarter of what they were and still come out ahead. The economic model of the recording industry is changing very quickly,
and the Internet is the only future we have."
Marc Geiger, the founder of Artist Direct, a company that offers some downloadable music through the Ultimate Band List Web site,
said: "You might be able to lease music for a certain amount of listenings, like a jukebox. You might pay a different amount to own it for
an unlimited number of listenings. Or you might have an arrangement like cable television, where you pay $29.95 to an aggregater and
listen to most of the music you want for a month."
Stores won't be directly threatened by digital distribution for some time. Still, the prospect of consumers getting music delivered instantly
at home, without visiting a store, is not a happy prospect for them.
"Part of me is scared because we don't own any content," said Mike Farrace, vice president for publishing at Tower Records. "We are
not intellectual property holders; we are brokers and agents and aggregaters. But I don't see digital distribution taking over. I can see it
becoming a component, absolutely no doubt about it. The art for us is, How do we incorporate this into the business?"
When Capitol Records announced that it would sell a Duran Duran single, "Electric Barbarella," over the Internet, retailers protested,
worrying that they were being bypassed. The song was made available simultaneously at stores and as a digital download, with one
remix available only from the Internet. "We expect to have digital distribution be a piece of the pie, not to cause retail to disappear," said
Liz Heller, executive vice president for Capitol Records.
Major labels, which own manufacturing plants, warehouses and trucks and invest heavily to shape the careers of musicians, are wary of
digital distribution. As with all new technologies for transferring and copying music, they see the possibility of widespread piracy.
"The upside of digital distribution is the huge market that you have access to, which you can market and promote to in different ways,"
said Frank Creighton, senior vice president and director of investigations for the Recording Industry Association of America, the trade
association that represents the larger recording companies.
When it comes to electronic distribution, he said, the labels are "moving with some trepidation in light of the fact that currently the
majority of uses of distributed sound files are unauthorized. Right now, there is no set standard as to how these sound files are going to
be distributed, protected and controlled."
There are three main technologies for digital distribution of music: Liquid Audio, AT&T's a2b and MP3. Liquid Audio and a2b are
favored by companies that are worried about unauthorized copying. In both the music is encrypted so that it can be played back only by
an authorized user and it is watermarked so that its source can be traced; every download is registered, and royalties can be deducted.
Liquid Audio allows a buyer to copy the music once onto a recordable CD; a2b does not.
Scott Burnett, the vice president of marketing for Liquid Audio, said that there are about 10,000 songs available on the Internet in the
Liquid Audio format, and that the company will soon establish the Liquid Music Network, a widely linked Web site that will hold
100,000 songs from independent labels including Rykodisc, Rounder and Platinum Entertainment, for $1.50 to $2 a song.
N2K, which sells CDs and tapes through mail order online as Music Boulevard, offers songs from its N2K label in a format it calls
e-mod, using Liquid Audio; Twin-Tone also uses Liquid Audio. In the year that N2K's system has been in operation, fewer than 10,000
people have downloaded the songs for 99 cents each, said Rosen on N2K.
But the available songs have been by little-known musicians. N2K has just signed David Stewart, formerly of the Eurythmics; he plans to
release his next album in downloadable form on the Internet before it appears in stores.
Meanwhile, MP3, which is short for MPEG Audio Layer 3, can create endless generations of digital copies once a piece of music has
been encoded as an MP3 file. Portable MP3 players, separate from home computers, are being manufactured. And MP3 files can be
created from any piece of recorded music through encoders, called rippers, that are downloadable from many Web sites. The
combination has led to an extensive Internet traffic in MP3 songs.
The recording-industry association considers any unlicensed copying to be piracy. It recently tracked down someone selling the entire
recorded works of the Beatles, compressed into MP3 files on a single CD-ROM disk, and it has been working to shut down Internet
sites offering large numbers of songs as MP3 files.
A new company, Goodnoise, plans to sell songs as MP3 files for 99 cents each. "Fans don't have access to legitimate content on MP3,"
said Gene Hoffman, the president and chief executive of Goodnoise. "MP3 is never going to go away, the technology is there and
available, and you might as well make it easier to buy it than to steal."
But in most MP3 uses, no money changes hands. In 1996, Weekly used Stanford's computer to offer about 200 songs as MP3 files. "I
put it up, told a few people about it and it just exploded," he said. "We were not pirates, we were certainly not making money from this;
we just thought it was a great technology."
The site was online for a week and a half before record-company representatives called Stanford and had it shut down. "On the last
day," Weekly said, "Stanford network services told me that 80 percent of outgoing bandwidth was my music. It shows that Internet
music wants to happen, in whatever form, and there are people out there who are ready for it." |
