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.

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...

How Price Sensitive Are You?

It should be no surprise that the recent EMI announcement has spurred lots of discussions of late. In general, most people I've talked to are excited by the prospect of buying DRM-free tracks. If you take subscription models out of the discussion, you'd be hard-pressed to find anyone who wouldn't want more rights and freedom associated with the content they buy, regardless if they ever plan to exercise those rights.

The real nut of the discussion is whether you think it is worth a 30% premium. If I bought tracks (which I don't because a subscription service better serves my needs), I think I would gladly throw down another 30 cents on each track. Or - as the labels indubitably hope will happen - I'd just buy the whole album which are offered sans DRM without the premium.

But, I think the stipulation above is the key to it all... for people that currently buy tracks, I think they will pay the premium. The real question is, will those people that don't buy pay more for the same rights and content they currently get (for free). This is very similar to the recent announcement about Rhapsody raising their prices. It's a near-term win in that they will generate more revenue out of their EXISTING users. But I'm not convinced either will actually generate more users (certainly not the Rhapsody price change).

I recently read an interesting paper by economist Will Page arguing that the price of recorded music is quickly moving towards zero. I can see the logic in the argument, but it got me wondering... we, as consumers, seem to love to pay for things that are virtually free. How does the music industry learn from this?

At work, there is free coffee provided for those who want it. Yet, everyone goes and pays $2/cup for Starbucks. Same for water.... their are water fountains all over this country. Remember when we used all drink from them? Now everyone walks right by the free water fountains on their way to pay $1/bottle for the same stuff. Why do we do this? There is some perception that the quality is better for these premium products, even if that's not the case (Consumer Reports rated McDonald's coffee higher than Starbucks, but which do you drink?).

The problem for the music industry is that virtually no one cares about audio quality (in terms of bitrate), and even less can tell the difference - particularly when listening through a pair of 20 cent earbuds, or even a $200 "home theater in a box" system. There are people who claim that audio quality matters and that they can tell the difference between 192kbps MP3s and 128kbps MP3s. Yet, if they really cared about audio quality they wouldn't be listening to MP3s in the first place (it is a very lossy compression scheme). Freedom, portability and interoperability trump audio quality every time.

Don't get me wrong, I applaud EMI and I hope that the other majors follow suit. Actually, I think the other labels *have* to follow suit for the consumers to benefit. Having different content with different rights is going to confuse the hell out of people in the near term, and unfortunately the labels suffer under the delusion that consumers know and/or care what label an artist is on (and what that label's parent company is). It's like asking a moviegoer what studio put out the movie they just watched. Why would they care?

I don't claim to have the answers, but I certainly have a lot of questions....

EMI, Apple & Free Range MP3s

Thud. That's the sound of the first shoe dropping....

EMI Music Launches DRM-Free Superior Sound Quality Downloads Across Its Entire Digital Repertoire

LONDON--(BUSINESS WIRE)----EMI Music today announced that it is launching new premium downloads for retail on a global basis, making all of its digital repertoire available at a much higher sound quality than existing downloads and free of digital rights management (DRM) restrictions.

The new higher quality DRM-free music will complement EMI's existing range of standard DRM-protected downloads already available. From today, EMI's retailers will be offered downloads of tracks and albums in the DRM-free audio format of their choice in a variety of bit rates up to CD quality. EMI is releasing the premium downloads in response to consumer demand for high fidelity digital music for use on home music systems, mobile phones and digital music players. EMI's new DRM-free products will enable full interoperability of digital music across all devices and platforms.

I've seen other stories saying that The Beatles catalog is *not* included in this intial release, but I'm sure as the story continues to develop today we will learn more.

I made a prediction a couple of months ago about "The Perfect Storm" involving Apple, EMI and The Beatles. I originally predicted this to all happen in February, but know I have a sneaking suspicion that the June 11th iPhone release date would make a great day to announce The Beatles catalog availability...

The Beatles + EMI + iTunes + Unprotected MP3s = The Perfect Storm

Not that I need to tell you guys, but things are moving fast in the digital music space. The DRM dike is springing leaks and Edgar Bronfman doesn't have enough fingers to plug the holes...

Are we in the making of a perfect storm? Let's look at what is going on:

• Apple wants to sell unprotected tracks
• EMI is seriously considering going DRMless, and have recently done some tests with Norah Jones and other acts
• EMI is said to be hurting finanically and need to do something drastic to feed the bottom line and make their quarterly numbers
• Apple and Apple (The Beatles) are finally over their feud - with Apple (iTunes) getting a 3 month exclusive window to sell the Beatles catalog
• When Jobs introduced the iPhone, the Beatles were what was playing
• The Beatles catalog has been in the process of being remastered for digital distribution for some time (per George Martin), and rumors that they would be complete early this year
• The Beatles are on EMI
• Apple is said to be having an event at the end of the month (Feb. 20th) for some Beatles-related announcement

You see where this is going, right? Steve Job's is going to stroll on stage and announce that iTunes has the entire Beatles catalog... and it is available as unprotected MP3s. The flood gates open, they sell billions of tracks, EMI makes a boatload, the digital music consumers go crazy, everyone that isn't yet a digital music consumer becomes one, Apple sells a billion more iPods. Kaboom!

Hold on to your seats... this could be the big one.