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Saturday, November 06, 2004

What happened with music online?

What Went Wrong with Music Online?

Music piracy and wholesale sharing has single-handedly decimated the music industry as we know it. We all know about the music downloading practices of our kids and many of us download music ourselves for various reasons. It is often the default method of acquiring music these days. Even though it’s illegal. Even with the poor quality and security risks. Even with the risks of being sued.

Why did it happen?

When polled, consumers (adults and kids) protested the high price of CDs, the fact that they couldn’t legally buy music online and that they were forced to buy an entire CD even if they only wanted one track. The industry, pre-P2P responded by allowing people to subscribe to music-listening services. They could install a song into the new MP3 players, but if the subscription was not continued, the song would expire. But this model, on its own, never worked. Everyone was buying portable digital players, often sold by the same companies leading the music industry. People wanted to buy one song, and install it into their new digital music players. But the music industry held out. And, unfortunately, held out too long.

The Internet then did what it does best. It routed around an obstruction. The obstruction was the music industry itself and its refusal to sell single tracks of popular artists online. So P2P became the default method of obtaining music. It was easy, it was cheap and it addressed the needs of the music consumers.

The media industry fought P2P in courts, and began a protracted legal strategy, including lawsuits against children and other music downloaders. Unfortunately, the lawsuits seemed to be the main pin in their multi-prong strategy to stop illegal music downloads.

There were rumors that the music industry had salted the P2P files with malicious code, and had otherwise corrupted many music files on P2P networks. While they strongly denied the allegations (and to my knowledge have never been proven to be responsible), many P2P music files were corrupted and many more contained malicious code. People became concerned about the security risks and the quality of their downloads.

At the same time, services such as iTunes and others began to offer single-track music downloads, and eventually single-track music downloads of popular artists and highly desirable albums. These pay-for-play services shortly became available to users of both Macs and PCs, and after some early fallout, became a popular alternative to downloading music from P2P networks fraught with malicious code. Given the legal and security risks, kids everywhere told me it wasn’t worth it to save $.99.

That, in my humble opinion, not the lawsuits, was the beginning of the real solution. The fact that they could now buy high quality, virus free music tracks for $.99 gave them a choice they hadn’t had before. The lawsuits gave them added incentive, but most kids I have spoken with don’t think they would be sued. They were willing to play the odds. But they were unwilling to play the odds on music quality and security of their computers.

But this wasn’t the key answer. And large music industry studios were, in their own ironic was, feeding the demand for stolen downloads of music. They offered portable digital player storage capability of thousands of songs, some more than 10,000 songs. Few consumers had access to that many digital songs they wanted to hear. So, piracy continued just to fill their digital players.

What’s the answer? I wish I knew.
I do know that allowing single-track paid downloads was a major change to the music industry business model. Historically they had always relied on the sale of the entire album to bring the less immediately popular songs to the listeners’ attention. They would often become popular once played a bit. What will this do to that way of finding the next “hit.” And what about music composers and song writers? The “hits” have long supported the other songs in an album. And they claim that they are lowest on the licensing fee totem pole for legal music downloads.

It is clear that what we have known as the music industry business model has to change to survive. The recording industry pre-1998 is over. And now, as they had when the radio became popular, and tape recorders became available, it will have to adapt and find the next business model for selling, licensing and distributing music. I suspect as did video sales for the motion picture industry, they will find a new way to make more money and provide what consumers want.

Let’s all pray that they do. Soon.


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