Never Go Up Against a Sicilian When *Death* is on the Line!

Image from WikipediaVizzini vs. The Man in Black in "The Princess Bride"... one of the most quoted and memorable movie scenes of my generation. The battle of wits to the death comes to mind often when I sit and watch what is going on right now in the music industry. The labels are Vizzini... overconfident, over-thinking, but also over-looking (the obvious). The consumers are The Man in Black... practical, nimble and immune.

For those of you that watch the industry, you have seen a flurry of announcements lately about the new approaches the labels are taking, the partners that used to be defendants, and how everything is the next "iTunes-Killer". While hyperbole is aplenty, clarity is hard to come by when it comes to making bets on what happens next.

• Last.fm offering free streaming of millions(?) of tracks has also just announced that they will also offer streaming simulcasts of CBS Radio stations (sister division)
• imeem cutting deals with all the majors with other "gray" services being coerced into similar deals
• MySpace Music's announcement today about offering free streams (from 3 of the 4 majors) and selling both DRM'd and DRM free tracks
• Nokia's "Comes with Music" offering (aka "the hardware tax")
• Apple's rumored discussions around their own subscription plans ("hardware tax")
• Omniphone's music subscription as bundled with wireless plan service in Europe ("wireless tax")
  
• Universal Music Group's "Total Music" plan(s) that are still unclear ("hardware tax"?)
  
• Warner Music Group's announcement last week that they hired Jim Griffin to drive and promote a service offering that would be bundled with your ISP bill (aka "the ISP tax")
• MP3 Search Engines (aka "information retrieval tools") and online storage lockers, like Seeqod and MP3tunes, being sued by major record labels
• New playlisting and music services popping up daily (see Muxtape and Mixwit)
• Other services getting acquired (Foxytunes, Qloud) while others close up shop (Ezmo)
  
• XM & Sirius merging
• EMI hires ex-Google CIO to head up their digital division
  
• Yahoo and MTV shedding their subscription music services (to Rhapsody)
• Yahoo Music VP, Ian Rogers, decided to move on to a new job focused on the *creation* side of the industry... presumably because the consumption side is such a mess?
  
• AOL farming out their radio programming (and presumably royalty liabilities) to CBS Radio
  
• Amazon is now the second biggest digital music retailer, but iTunes is now the biggest music retailer (digital or physical) surpassing Wal-Mart
  

The list goes on and on. The good news is that there are a lot of smart and passionate people dedicated to trying to change the way the music business operates. The bad news is that most of the business models being pursued above can only succeed at the expense of all the other models.

I like the notion of making music "feel free" even if it's not. The problem is are you going to pay Nokia, Apple, Verizon and Comcast all an incremental fee for the same rights (all the music you can enjoy)? Some would say the labels have finally gotten smart by recently making some online bets after years of just trying to wish the internet away. Others would say that they are extorting the digital music companies, forcing them to make huge upfront deals and trade away big chunks of their companies in the name of self-preservation. Taken a step further, many claim the labels are moving towards extorting the consumers directly (after years of suing them) by trying to inflict an "optional" ISP music fee that basically buys you (and the ISP) immunity from being sued.


The only thing clear to me is that there is a nuclear bomb coming, and I'm not betting on any of them until the smoke clears. Any one of the (r)evolutionary models will send ripples throughout the music/tech community.... anointing new kings while massacring hundreds of others in the process.

That is, of course, if Steve Jobs decides to let any of it happen or not.

Warner Music's Take on Subscription Music

Source: WikipediaNews yesterday that Warner Music is pushing forward with their own take on subscription music... one that bundles a monthly fee (around $5/month) into your ISP bill and then lets you download any/all things you want (presumably most happening via P2P networks) with immunity from litigation.

As I have said numerous times, I am a big fan of the value proposition offered by subscription services, but this opens stirs up far more questions for me than answers based on my (assumed) use case below...

• Comcast pays some collection agency a couple/few bucks for on every ISP customer they have
• Comcast either then charges me an extra couple of bucks on my $50/month ISP bill or throws a few more ads at me to cover their incremental cost
• I (and they) now have "immunity" for anything I download over their network - from MP3 search, P2P, etc.
  

If that is correct, then that sparks a bunch of related questions...

1. Does it matter how many people are on my network? Theoretically, my ISP is monetizing each user but in reality they would be monetizing the household, no? What if I open up my wireless network, and invite my neighbors that don't have broadband to jump on? What if I open a coffee shop and let hundreds of users a day get on free of charge? What if I resold access, is it then different?
2. How does my ISP cover their incremental costs via advertising? Many people don't ever visit their ISP's webpages (myself included). Do they they have to require their users to use/frequent their portals/sites? Do they require some application (like some of the old free ISP models) that throws pop-ups at me?
3. What about wireless? Is my cellphone company considered an ISP and subject to the same fees? If so, then isn't the consumer getting charged twice for the same rights (e.g. once by Comcast and once by AT&T)?
4. This is repeatedly denied as being "a tax", but to make this work it would have to be a *required* fee to every ISP, no? Otherwise, there is the danger of people switching to the *cheaper* ISPs that don't have cover this cost?
5. If the ISPs need to monetize these music consumption experiences (to cover their incremental costs of contributing to the pool) that seems to dictate that they (or at least some of them) can no longer just be a dumb pipe to 3rd party music sites.
6. Does this force Comcast and Verizon Fios (and others) to invest in building out there own music destinations to compete with Yahoo Music, AOL Music and MTV?
7. Does this trigger an avalanche of music service acquistions by the ISPs? Does Comcast buy Napster? Does Verizon buy imeem? Does Cox Communications buy Seeqpod? If they don't "own" the music experiences of their customers then how do they cover their additional licensing costs? If the ISPs can't cover these costs (or generate additional revenue around music) then what's in it for them? Just immunity from lawsuits themselves?

Public perception will be one of the biggest hurdles (and in my opinion, most important) to overcome in this new plan. The labels have done a fabulous job painting themselves as the bad guys over the past few years and most consumers don't really care whether or not they survive. While there are lots of reasons why the blanket licensing plan has merit, it will be all for naught if the consumers aren't convinced it's in their best interest.

I suggest that Warner Music gets a great PR firm on retainer quick before this rhetoric gets loud enough to smother the plan.

The next *big* question is then... how does this ISP-fee plan work in conjunction with the other approaches that Nokia is pushing with their "comes with music" plan and rumored Apple subscription plan that would put the tax on the devices themselves. How many times do I need to pay for my music... once with my phone + once with my iPod + monthly with my ISP + monthly with my cellphone???!

Related articles

• Collective Licensing for Web-Based Music Distribution [via Zemanta]
• Industry Moves: WMG's Bronfman Taps Jim Griffin To End Industry's 'Tarzan Economics' Model [via Zemanta]
• Happily ever after for Comcast and BitTorrent? [via Zemanta]
• Music Outlaws, There's a New Sheriff in Town [via Zemanta]

Seeqpod Next Target for the Major's Legal Machine?

Looks like WMG (or their legal department at least) is now targeting Seeqpod. Who wants to bet the next announcement we see is that Seeqpod is moving to an ad rev-share model with the major labels.

Warner Music Lawyers Roll Again, Seeqpod Latest Target — Digital Music News: "Warner Music Lawyers Roll Again, Seeqpod Latest Target

Warner Music Group is now directing its legal guns at Seeqpod (seeqpod.com), a media-focused search service. The Seeqpod engine resembles larger and more established players like Google, though it focuses on playable media results. That includes a heavy amount of music, and Seeqpod allows users to access and stream millions of songs on-demand through an integrated player.

That eventually grabbed the attention of Warner, which first filed against the engine last week. The label claims that Seeqpod is illegally allowing access to its music by accessing servers worldwide. But Seeqpod notes that it hosts none of the content in question, and therefore enjoys protection under Digital Millennium Copyright Act (DMCA). Elsewhere, Google also indexes web-hosted MP3s, and search engines represent a growing method for music acquisition."

It was my understanding that search engines were protected (per the story above), but for a little company like Seeqpod it's probably a lot less painful to cut a deal than fight. Thoughts?

2008: Already Turning Out to be a Good Year for Music Consumers

Ding, dong, the witch is dead! It looks like the remaining two major labels made great New Year's Resolutions and have already delivered by offering (at least some) of their catalogs available sans DRM (for a la carte purchases - subscription services is another creature).

Sony BMG Plans to Drop DRM: "In a move that would mark the end of a digital music era, Sony BMG Music Entertainment is finalizing plans to sell songs without the copyright protection software that has long restricted the use of music downloaded from the Internet, BusinessWeek.com has learned. Sony BMG, a joint venture of Sony (SNE) and Bertelsmann, will make at least part of its collection available without so-called digital rights management, or DRM, software some time in the first quarter, according to people familiar with the matter.

Sony BMG would become the last of the top four music labels to drop DRM, following Warner Music Group (WMG), which in late December said it would sell DRM-free songs through Amazon.com's (AMZN) digital music store. EMI and Vivendi's Universal Music Group announced their plans for DRM-free downloads earlier in 2007."

Time to buy Amazon stock?

UPDATE: I just saw TechCrunch's headline (also referencing our favorite witch-melting ditty). I swear I didn't see that before I posted, but I get a kick out of the fact that so many people have that same view of (and imagery) of DRM...

Lala Shakes Things Up

Whoa... this one came out of left-field...

Lala.com to send songs directly to iPods - Yahoo! News: "PALO ALTO, Calif. - Entrepreneurs behind Silicon Valley startup Lala.com hope to transform the CD-swapping site into a music portal where members can download songs directly to their iPods, bypassing the computer hard drives where most music is stored.

The Palo Alto-based company has an agreement in principle to sell nearly 200,000 songs from Warner Music Group Corp. for 99 cents each, starting Tuesday. Members will also be able to play the Warner songs for free, and the company will pay Warner a penny each time someone listens to a song."

Interesting that they are populating your online library from the back-end (instead of you uploading) - this was something that was offered by MyPlay back in the '99 and they got sued for it. Part of the pitch to the labels (I’m assuming) is that the DRM-free AACs never reside on your hard drive. Sound like through a browser plug-in it goes from the cloud directly to your iPod (never going through iTunes). Not hard to copy stuff back off your ipod to a PC, but just a bit of a hassle.

Imeem Gets Sued

I think most of us saw this coming...

WMG sues imeem for copy infringement: "Warner Music Group Corp. is suing the operators of the social-networking Web site imeem, claiming the portal enables millions of computer users to share its artists' music and video content without permission."

Actually what I think is even more scary is that the *users* of imeem could be next. I'm guessing that the company is looking to claim safe harbor protections - in that the users are uploading the content, they don't check to see what it is. The issue for the consumers are that that all of the content that they upload is attributed to them - so they are just as exposed to litigation.

Check out my earlier coverage on them here: http://globallistic.blogspot.com/2007/03/imeem.html

And listen to The Arcade Fire courtesy of their service...