Competing Against Free

It's not hard to understand that the most difficult problem the music industry faces today is the pervasive availability of free music. Now, when I say free, I mean stolen, but that is merely a semantic difference that is immaterial to how people are finding, playing, and acquiring music today. So I will call it "free" for the rest of this post.

Many people I talk to think free music went away when Napster went legitimate, or when the RIAA started suing their customer base. But free music is still as easy if not easier to either stream or download from the internet. Some sites only let you stream music, while others let you download. Many services are run in countries far from the music industry's influence. Other services skirt the illegal sharing problem by acting as hubs that link to music on other servers.

Here are just a few sites that let you play or download free music:

SkreemR.com - An MP3 search engine. SkreemR scans the web for MP3 links and adds them to its search index. Type a song or artist name and get a list of MP3 download links. Sure they also link to places like Amazon or ThumbPlay where you can buy MP3s or ring tones, but you can also stream and download the song for free. The finally-out-of-beta Songbird player (shown below) makes it even easier to download: it integrates a SkreemR search right in the player and converts free MP3 search results into a list complete with download buttons. You get free music to download to your PC or take with you on your portable MP3 player.



Songza - An MP3 search engine. Songza only lets you stream the results in an embedded player on their site, often in the form of a video from YouTube, but sometimes from MP3 audio source. As long as you don't mind playing music from your PC, you get all the free streams you want.

SeeqPod - An MP3 search engine that also powers other music experiences. SeeqPod only lets you stream results in an elaborate embedded playlist manager on their site. Warner filed suit against SeeqPod in January 2008. EMI filed suit in February, 2009.

Blip.fm - An addictive Twitter-like micro-blogging service with free music streams. Blip.fm lets you search for songs, and play them for yourself and the site's social network. Songs are served either from a web server where the MP3 was found, or from Amazon's AWS hosting service. Blip lets its users upload music. Though they tell users to only upload original content, they serve plenty of copyrighted music from AWS. They're ripe for being shut down by Amazon.

Project Playlist - An MP3 search engine with Facebook application. Project Playlist only lets you stream results, and add songs to a playlist on the site. You can find other people's playlists and play them. The RIAA filed a lawsuit against Project Playlist in April 2008. They claim that since they don't host MP3 files, they aren't liable for theft. EMI, in what gives the appearance of blackmail, dropped its suit after Project Playlist agreed to license their catalog.

Sideload.com - Organizes links to MP3s on other people's web sites into a streaming, locker, and mobile sideloading site. EMI filed a lawsuit in January 2009.

Note that several sites play music for free legally, either because they've negotiated on-demand playback rights from the labels (e.g. CBS Last.fm, Lala.com), or they play non- or minimally-interactive radio style playlists under US compulsory license laws (e.g. Pandora).

Though some of the illegal free music sites have no business model, or have a model that would collapse if any royalties were actually paid, the preponderance of these extra-legal sites is evidence that content owners would benefit from a simple, legal way to let innovative services access streams for a reasonable price. Without such a service, music will continue to be played, but no artists or labels will be paid for the usage.

Music is the Bermuda Triangle of the Internet

How Will Owen Van Natta Turn Piracy Into Profits?

"...music has been the Bermuda Triangle of the Internet, swallowing anyone foolhardy enough to try to navigate its treacherous waters. The short reason for this seems to be that the money that record labels want to charge for the right to play their music is more than anyone can make from advertising or subscription fees."

UMG CEO Doug Morris Interview in Billboard

Exclusive Billboard Q&A: UMG's Chairman/CEO Doug Morris

This should be good: another interview with UMG CEO Doug Morris. Earlier, I commented on an interview Mr. Morris gave to Wired magazine in 2007. Now he's back with some more confessions. The interviewer jumps around with disjointed questions and starts the article trying to position the ego of the head of the world's largest music label as somehow modest. Here are some points from the interview that struck me as odd.

On promotional distribution, Morris says he doesn't do promotion, yet says his first experience with breaking a band was through radio promotion and a record order that included 20% promotional units.

"We don't look at anything as promotion. Take a look at MTV. It turned out to be a disaster for us. We sold some records, but they built this huge company and we gave them our [music] for nothing, and what did we get?"

What did he get?! His companies didn't just sell "some records". They sold tons of records from the free prmotion MTV gave them, and MTV built a business. If Morris wanted to own that business, why didn't he start it himself? His attitude towards digital is the same thing. If he thinks he can do digital better, why doesn't he? Because, as he admitted to Wired last year, he has no idea what digital is. So why not make and sell great music, and let someone else build your business by figuring out how to promote your product?

Morris brags how he pulled his videos from Yahoo! and might not renew Universal's YouTube agreement at the end of the year.

With YouTube, the quality isn't great; it gets low [cost per thousand]... Why would you want to be in the middle of music-generated product that doesn't demand high CPMs?

...we called [Yahoo] and I said, "You're making money off our videos and not paying us anything... we don't want the promotion, we want to get paid." And [they] said basically something like, "Over my dead body." And we took all our videos down. As soon as our videos came down their viewership went down, because we're about a third of all their videos.

Morris doesn't mention that his sales also went down, and have still been falling ever since. Most businesses want to be where their customers are. So why didn't he work out a deal with Yahoo? I imagine his demands included more than just getting paid. They probably included getting paid too much, and unrealistic technology limitations that would have shrunk Yahoo's usability anyway. Morris says videos are now a cash-positive business, which is great, but what additional value is he leaving on the table?

Regarding RIAA lawsuits and theft of music, Morris makes this ironic statement, as anyone who has tried to deal with the labels says they're the ones that are not logical:

You have a lot of people who think that things should be free. I don't know how they think we should produce it for free, but there's a lot of people who aren't logical.

Morris even obliquely refers to his disasterous comments from the Wired article about not being able to recognize a technology person by claiming he can recognize other great business people (bold added):

Whatever their education is, whether it is or isn't, it's about them having some connection with culture and the fact that they are competitive and driven and intelligent. When you get that group of people together, you win. I can recognize them a mile away.

I give Morris credit for building a label that has around a third of the music market (by having best acts around, and lots of them), but his lack of digital savvy will help bury any post-physical future major labels may have had.

DRM is Poisonous

I will admit that I used to think DRM was an enabling technology, especially for unlimited music subscriptions. Without DRM, nobody will let you download an unlimited amount of content. Without an unlimited amount of content for a fixed price, music consumption is bogged down with any number of 99 cent buying decisions. An a la carte permanent download (PDL) world is just not how music should be enjoyed.

Unfortunately, users do not want subscriptions to music. They've never really subscribed to music: radio is free (paid by advertising on a fixed and predictable compulsory license rate structure); and LPs, singles and CDs were purchased a la carte giving the customer a sense of physical ownership. Thankfully, now to the rescue of unlimited consumption comes streaming and an always-connected broadband world. Now DRM doesn't matter - services can still provide an "all you can eat" experience without too much worry that the user will walk away with your entire catalog. To limit or turn off consumption, just turn off streaming access.

So back to the thesis of my headline: DRM is poisonous. Not only was customer support for Microsot's DRM expensive, most companies who have tried a DRM music service are now feeling the pain of what it means to migrate, sell, or shut down their DRM services. MTV's Urge, Microsoft's MSN music store, Yahoo!'s Music Unlimited, and Wal-Mart's a la carte store have all had their customers revolt after attempting to shut off DRM re-licensing for PDLs they sold. This is a brand manager's nightmare.

And those are the DRM service that have already closed. What will happen when Napster is sold or shuttered? What will happen with Rhapsody decides to change its business model? What happens when Apple wants to change its delivery method? Yahoo! has announced they will be giving coupons to re-purchased music on Rhapsody to customers whose PDL licenses have been lost. Wal-Mart has decided to keep its DRM license servers up longer. In an already razor thin margin business, dealing with DRM customer service issues, and keeping servers running after a service has been shuttered turns music into a money-losing weight on distributors.

Next up is what happens to the CinemaNow and Movielink movies you have purchased? Movie studios understandably want to protect their content, and in their case, streaming is not yet an option for high resolution HD 720p or 1080p video. Netflix, Hulu and others seem to be able to stream decent video quality, but customers will soon demand higher resolution as they convert over to newer, larger flat-screen and home theater displays.

So I'm converted: DRM is evil.

YAPF - Yet another physical format

Music On microSD: I Can't Believe The Labels Fell For This

SanDisk is going to try to sell music on teeny tiny SD memory cards.

The link above says it all for me. Though I'll bet it wasn't the labels falling for it (they likely extracted healthy advances from SanDisk); it's SanDisk that I can't believe fell for it.

Physical music is dying. It doesn't matter whether it's CDs, cassette tapes, DVDs, or tiny chips with music already on them. Sony once proposed selling flyers with album download codes at stores, which customers would enter into their computer at home to download the album. That sounds like a solution for the retailer, not for the customer. People are simply not getting their music at stores as much as they used to. That trend will continue its downward spiral as more mobile phone delivery and always-on connected services come on-line.

SanDisk claims that people are already walking around with microSD players in their mobile phones. But most people with phone memory use it for their photos and contacts. To play music, you'd have to disassemble your phone, take out your contact list and photos, and plug in your music. When the album was done playing, you'd have to do it all over again. Imagine trying to switch out a microSD card in the car, on the train or bus or airplane, in a kid's messy bedroom, or even in your own living room. Your music would quickly join your pocket change in the folds of the sofa.

Even with a USB dongle attached to your computer, you'll still need to change the music far too regularly. Maybe SanDisk needs to sell a SD card changer (though it would more likely be a tiny 50-port rack that all your SDs get plugged into for both storage and playback.) If they expect you to simply upload the album from the card to your computer, then what was the point of getting the card in the first place? Your computer is already hooked up to any number of download stores.

At least SandDisk will have a lot of unused inventory they can erase and resell as mere memory.

UPDATE 2008-12-05: YAPP II

Here is news of another USB memory stick music solution. An Australian company D:Net Media is going to attempt to sell music and bonus materials (videos, remixes, interviews, biographies, photos, lyrics, etc.) on a memory stick in stores. Their product apparently includes an online service component that sends you updates when more media related to your purchase becomes available. Though the bonus materials are a nice bonus, this again sounds like a solution primarily for retailers, not for users. The web site with more info is DDA4me.

Resnikoff on DRM-Free

Resnikoff's Parting Shot: The Downer on DRM-Free

Paul Resnikoff of Digital Music News spends an amazing amount of time following the digital music business. Where does he get the time!?

In the post linked above, Paul discusses the lack of any sales bump from licensing non-DRM music to Amazon and others, and compares it to Apple's continued dominance, even though most Apple music remains locked up in Fairplay DRM. The complaint seems to be that non-DRM is not moving the needle.

I look at it the other way around: it was DRM that didn't move the needle.

This proves DRM was an unnecessary technology the music labels forced on distributors for years. DRM is inherently anti-consumer, and at the razor-thin margins the labels require (driven by Apple's refusal to budge on the 99 cent price point), no distributor can afford the customer support calls DRM creates.

Even after DRM has been proven a failure, the labels continue to make stupid mistakes even now with restrictive licensing rights and lack of margin to build a business.

MySpace Music

Why MySpace Music Is Likely to Fail

Here's a post by Om Malik on the coming-soon MySpace streaming music with upsell to Amazon MP3 downloads experiment. Om thinks it will be a failure. I hope he's wrong, but the key lines from his post are:

The record labels are still not facing the proverbial music and understanding that their business model is completely broken... They need to learn that they don't need to start a company, but instead encourage a thousand others

The music labels must get out of the way of distribution - both in terms of price and rights.

My usability opinion is that any web-based streaming service is bound to fail as the music stops playing when the web page it's playing on unloads. One way around that is to pop out a player that can be minimized to the task bar, but that defeats any display advertising. Online music will only succeed when it becomes custom radio, complete with local, regional, and national audio advertising and the occasional upsell to a favorite "now playing" song or album download.