net.wars: Music roasting on an open fire
by Wendy M Grossman | posted on 19 December 2003
So nearly four years after Napster, Big Retail is getting into the online music business. Wal-Mart, which is Retail as Big as they come, announced this week it is to open up an online music store. And so the price wars begin: Wal-Mart will charge 88 cents to Apple's 99. This would be great for consumers except of course for the little fact that a certain amount of the competition is just plain free. Illegal perhaps, but free (as long as you don't get sued).
Wal-Mart's release comes shortly after Microsoft's announcement that it is teaming up with Loudeye to offer the picks and shovels of digital music: a "solution" to let businesses sell music easily and quickly under their own brand. This makes a lot of sense, really. Digitised audio is suitable for a much wider range of outlets than just the online equivalent of record stores. It's easy to imagine that everyone from guitar makers to sports teams could come up with audio to sell.
Meanwhile, Steve Jobs admitted at a recent analysts' meeting that Apple basically makes no money from its iTunes service, using it as a loss-leader for its real business of selling iPods. Almost all the money collected from those 25 million downloads goes in copyright fees to the RIAA. So you have to admire Microsoft's strategy. You're a lot more likely to make money out of digital music by selling other people the tools and letting them take the risk. You can cash in later, when people have figured out how to make money out of it, by, say, demanding royalties on the use of your player, which by now "http://www.theregister.co.uk/content/archive/19889.html"> everyone has to use, you hope.
Excluding other media players from the dominant operating system is, of course, one way to achieve that future. So it should be no surprise that in other digital music news, we have Real Networks suing Microsoft for $1 billion on anti-trust grounds. This is a story we've all heard before: company that pioneers a particular technology watches Microsoft bundle competing technology - in this case, Windows Media Player - into its operating system. The story is basically Internet Explorer vs Netscape Redux (or CompuServe-AOL vs MSN Redux). Real's demise at Microsoft's boots was predicted years ago by Charles H. Ferguson in his book /High Stakes, No Prisoners/ , about creating and eventually selling the software we now know as Microsoft Front Page. Real vs. Microsoft has added run: we dislike David as much as Goliath here because of Real's aggressive marketing and data collection tactics.
It might seem as though we Netheads ought to be happy that digital music is beginning to achieve some of its potential. All these big guns wouldn't be lining up to sell us downloads if they didn't think there was a market here among the 50 million people who have downloaded music through file-sharing services.
The big problem is that we don't download music the way they want us to. This isn't solely about file-sharing being free. It's about the notion that compressed, digitally distributed music should cost the same as the less compressed versions we buy on physical CDs, or that the music we download should become unplayable if we let our subscription to the service lapse. It is understandable why such business models would appeal to this industry, but they offer nothing to consumers except the chance to pay most of the record companies' distribution costs for them. If you doubt that these businesses don't have a very good insight into Net.music, you have only to look at the number of online music services - such as eMusic - which promised subscribers "all you can download" and then were shocked and surprised when people took them at their word. Emusic wound up limiting downloads - and losing enraged customers when they did so.
What's scary is the likelihood that all these new services want to turn the Internet into an equivalent to the US's Clear Channel, which according to an article in the December 2003 issue of Harper's Magazine not only programs most of America's radio stations but some live venues as well.
Fortunately, although it's possible for one company to dominate the dial because the number of available bands is relatively small (at least as radio bands are currently allocated), there is no limit to how many Web sites there can be. As long as we do not allow the cable companies and telcos to seize control over content, we have a chance. Similarly, where a company like Wal-Mart could dominate retail music sales in a physical town to the point of exterminating the competition, its impact on the Net cannot be so comprehensive. It might run off competing, large, mass-market retailers, but hopefully we will still be able to have a future in which all kinds of people sell or give away good music for all sorts of reasons. The bigger threat there is probably Microsoft, if its player becomes a choke point for content.
The Net's promise is diversity, rather than the corporate sameness that now afflicts much of America's media (and probably soon the rest of the world's). I still hope that promise is delivered. We don't need 5,000 more places to download Britney Spears. We need places to download Boden and Spiers.
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net.wars: Music roasting on an open fire