Wednesday, April 11, 2007

4.12.07 WALLS TUMBLING DOWN

[This article originally appeared in the 4.12.07 issue of Metroland]

A really, really big shoe dropped a week ago when EMI (the smallest of the four major record companies) and Apple announced that most of the EMI catalog would be sold at the iTunes store free of any DRM restrictions.

About ten years ago, music MP3s made their initial appearance on the internet. Compact files that sounded OK could be transmitted over the web and played on a computer. Kids loved them. Soon portable MP3 players appeared, de-linking the music from the computer, and then programs and networks like Napster started popping up, making it easy to find and download MP3s. In a few short years tens of millions of consumers were bathing in a literal free-for-all of unrestrained music.

The problem being that nobody was getting paid. The stewards of the music industry, instead of figuring out a way to tap into this sea change of activity, brought lawsuits trying to kill the technology. Device manufacturers, software companies, and ultimately downloading consumers were dragged into court, while the industry lamely offered nothing online, only CDs at demonstrably inflated prices.

The industry’s biggest bugaboo was that MP3s were uncontrollable, and perfect copies could be endlessly reproduced. Never mind that recorded music has always been copyable by consumers (albeit imperfectly); never mind that the precious CDs the industry was selling could easily be copied onto blanks, or ripped into MP3s; never mind that it was already happening anyway. The industry refused to sell MP3s or anything else on the web, and finally, faced with crumbling sales and Congressional sniffing about anti-trust and copyright abuse issues, the industry allowed for there to be digital sales of its music. But only on the condition that the digital files be laden with DRM, which restrict how many times a digital file could be copied or played, which dictate what sort of devices would play the music, and which sometimes made a file disappear if a buyer failed to make a monthly payment.

Meantime, a generation of music listeners has grown up regarding CDs as irrelevant, the record companies as the enemy, and focused on singles rather than albums. This generation can’t quite figure out why it should pay some big company for gooed-up digital files when it can get the same track without the goo elsewhere for free.

For years the music industry has been told, loudly, what consumers want, and the industry’s reaction has been to sue them and offer them something else. One doesn’t need an MBA to see that this isn’t a winning strategy. And now it’s judgment day.

EMI’s announcement may well be too little too late, but at least it’s a step. While details are still a little sketchy, it appears that the door will be open to enhanced quality downloads with sliding scale pricing, meaning that you’ll be able to download tracks that rival the quality of CD tracks, rather than the often thin and compromised compressed tracks typically offered previously.

The other three record companies reactions so far have amounted to a lot of unfocused harrumphing. Apparently, Apple paid EMI a pile of upfront dough for the right to sell the DRM-free tracks, so presumably the other labels will be closely watching EMI’s sales levels and back-channelling demands that Apple pay them some big bucks, too.

Meantime, there is a lot of uncharted territory, and a lot of unanswered questions. For example, by selling unlocked music at iTunes, music from the store will be playable for the first time on devices other than the iPod. What is this going to mean for all those iPod pretenders out there? And to the iPod itself, which just hit the 100 million sales mark?

EMI’s premium DRM-free tracks are still competing with free. Clandestine downloads still outnumber legitimate sales by at least 50 to 1, according to recent studies. Last weekend a 22 year old explained to me that he gets all his music from visiting on-line music forums that link him to albums posted on sites like Rapid-Share. “Kicks Limewire’s ass,” he said. For him the issue is the best way to get free music. Paying is simply not a consideration.

Then there is the whole European Union thing. The EU has been putting the heat on Apple, both for its DRM restrictions and for the fact that iTunes’ pricing varies significantly in Europe from country to country. The recent EMI announcement was no doubt a reaction to this, and more changes have to be the works. Some of what happens over there will involve straightening out the patch-work quilt of antiquated European intellectual property laws and arcane music industry practices; this will have little effect over here. But a lot of what happens, like issues of DRM and interoperability, will have stunning effects all over the world.

Interestingly, the EMI announcement did not include its prized Beatles catalog, which is still not legitimately available digitally anywhere, despite enticing hints and a lot of make-nice noise by historic arch-enemies Apple Corps and Apple Computer. I’m betting on a Beatles / iPhone tie-in this summer. Bet you a nickel.

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