The Future of Music?

by on May 23, 2006 · 18 comments

Ars profiles eMusic, the world’s number 2 online music retailer. And they don’t use digital rights management, choosing instead to sell their songs in unprotected MP3 format. Yes, you read that right: the world’s #2 music download service doesn’t use DRM technology. Why not? Their focus is on smaller labels:

The majors are terrified of piracy and so insist on strict DRM controls to safeguard their music. The indie labels that eMusic works with generally don’t have that fear. “The indies have always viewed the world differently,” says Pakman. “You know, the indies struggle for attention, for customers, so the notion of someone actually digging a track and e-mailing it to 10 of their best friends–doing self-promotion–that’s music to the ears of the indie record labels. Whereas an RIAA member says, ‘We’ve got to sue that guy.’

This, it seems to me, is the future of the music industry. The large market shares of the major labels is an artifact of 20th century distribution and marketing technologies, which had huge economies of scale. Only a large firm with a national distribution network could hope to compete effectively in a world in which you had massive up-front capital expenditures before you could sell your first record or CD. But that’s no longer true. I can upload an MP3 to my website and I’m a music distributor. Which means that the monolithic structure of the music industry is likely to be under pressure.


But in a world in which there are a hundred major labels instead of 6, you worry more about obscurity than you do about piracy. A certain amount of casual piracy might actually be good for you, because it brings your artists’ work to the attention of a larger audience. And you don’t have the luxury of dictating to your customers how they’ll consume the music they buy, because if you don’t cater to their needs they’ll buy from somebody else with a more customer-friendly service.

As the article explains, this gives eMusic an enormous competitive advantage over other music stores (aside from Apple):

The Holy Grail of online music sales is the ability to offer iPod-compatible tracks. Like the quest for the mythical cup itself, the search for iPod compatibility has been largely fruitless for Apple’s competitors, whose DRM schemes are incompatible with the iconic music player. For a music store that wants to succeed, reaching the iPod audience is all but a necessity in the the US market, where Apple products account for 78 percent of the total players sold. Perhaps that’s why eMusic CEO David Pakman sounds downright gleeful when he points out that “there’s only two companies in the world that can sell to them–Apple and eMusic.”

It’s rather a startling point–given the worldwide success that Apple has had selling iPods, one would think that music stores would do whatever it takes to make their offerings iPod-compatible. Attempts at bypassing or emulating Apple’s FairPlay have not been successful, however, and FairPlay is (famously) unavailable for licensing. So what’s a music store to do? To eMusic, the answer was simple: you offer songs as high quality, variable bit rate MP3 files instead. DRM is removed, consumers are happy, and the vast white fields of the iPod are ready for harvest.

When companies like Sony BMG whine that Apple has “not been willing to cooperate with our protection vendors to make ripping to iTunes and to the iPod a simple experience,” what they mean is that they’ve chosen to put their (ineffectual) anti-piracy efforts before the convenience of their customers. As more and more consumers discover the joys of working with a company that doesn’t treat them like criminals, I suspect that’s a decision they’ll come to regret.

Incidentally, eMusic appears to have some great bands on offer, including Arcade Fire and Belle and Sebastian. Perhaps I’ll sign up for an account myself!

  • Doug Lay

    I wonder if Singleton would consider eMusic marginal? Probably, though 12% of the U.S. market seems pretty major to me.

    I just did a quick survey, and 7 out of the last 10 “albums” I downloaded off iTunes are available at eMusic. I could have saved 50 bucks AND saved myself the hassle of removing Apple’s DRM crud. Methinks Apple will be getting less of my entertainment dollar going forward…

  • Doug Lay

    I wonder if Singleton would consider eMusic marginal? Probably, though 12% of the U.S. market seems pretty major to me.

    I just did a quick survey, and 7 out of the last 10 “albums” I downloaded off iTunes are available at eMusic. I could have saved 50 bucks AND saved myself the hassle of removing Apple’s DRM crud. Methinks Apple will be getting less of my entertainment dollar going forward…

  • http://zgp.org/~dmarti/ Don Marti

    Pakman is off by one — Magnatune also sells DRM-free music online, and you get the choice of MP3, Ogg Vorbis, or FLAC.

  • dmarti

    Pakman is off by one — Magnatune also sells DRM-free music online, and you get the choice of MP3, Ogg Vorbis, or FLAC.

  • http://www.robhyndman.com/2006/05/24/on-emusic/ Rob Hyndman

    Tim – what strikes me as interesting is the idea of the eMusics of the world turning the traditional scattershot model of the big labels on its head by forgoing DRM and turning instead to the long tail. The majors think they need DRM to protect the one hit that surfaces and pays for all the ‘losers’. The eMusic model is instead to increase the return on all the smaller acts. UnDRM is beginning to look like a viable competitive threat to the BigMusic model.

  • http://www.robhyndman.com/2006/05/24/on-emusic/ Rob Hyndman

    Tim – what strikes me as interesting is the idea of the eMusics of the world turning the traditional scattershot model of the big labels on its head by forgoing DRM and turning instead to the long tail. The majors think they need DRM to protect the one hit that surfaces and pays for all the ‘losers’. The eMusic model is instead to increase the return on all the smaller acts. UnDRM is beginning to look like a viable competitive threat to the BigMusic model.

  • http://gondwanaland.com/mlog/ Mike Linksvayer

    Don Marti, he’s off by a large number. There are many DRM-free music stores, not counting many labels and artists selling only their music DRM free.

    Technically Pakman’s comment should be qualified with “having non-neglible market share” or similar, but this does not detract at all from his point.

  • http://gondwanaland.com/mlog/ Mike Linksvayer

    Don Marti, he’s off by a large number. There are many DRM-free music stores, not counting many labels and artists selling only their music DRM free.

    Technically Pakman’s comment should be qualified with “having non-neglible market share” or similar, but this does not detract at all from his point.

  • http://www.gbgames.com/blog GBGames

    ****WHY are there no investors flocking to develop high-quality content that is not protected by DRM? IF there is another way, this is a HUGE opportunity for someone to make a lot of money. WHERE are the new business models? Grokster is just a distribution technology, it doesn’t PRODUCE content.

    How is one supposed to tie music or movies to services if anyone with a digital editor can untie them and post the untied content!!!!! ****

    That was from Solveig Singleton on May 15th in a comment on a previous TL post. So besides asking audiolunchbox (which offers ogg as well as mp3), I guess the query can be posed to all of the compaines listed above, too. B-)

  • http://www.gbgames.com/blog GBGames

    ****WHY are there no investors flocking to develop high-quality content that is not protected by DRM? IF there is another way, this is a HUGE opportunity for someone to make a lot of money. WHERE are the new business models? Grokster is just a distribution technology, it doesn’t PRODUCE content.

    How is one supposed to tie music or movies to services if anyone with a digital editor can untie them and post the untied content!!!!! ****

    That was from Solveig Singleton on May 15th in a comment on a previous TL post. So besides asking audiolunchbox (which offers ogg as well as mp3), I guess the query can be posed to all of the compaines listed above, too. B-)

  • http://raflaw.blogspot.com Robert Feisee

    so does this mean that emusic is a substitute for itunes or am i way off?

  • http://raflaw.blogspot.com Robert Feisee

    so does this mean that emusic is a substitute for itunes or am i way off?

  • http://www.LigerMusic.com/music_distribution/online_music_stores.html Froppo

    I’m glad that there are some companies in the world that have realized treating customers like criminals equal decreased sales. I put a post on a BMI hosted forum to stir the pot a little bit. Basically in my post I stated, “isn’t it ironic that an industry bent on ripping people off immediately came to the conclusion that everyone was trying to rip them off?”. As you can imagine I got quite the response. Most of the respondents cowered to name calling and telling me I was worthless because I was an intern. Others ripped on the fact that I was a college student and concluded that because of this I must not be very intelligent. Funny all of them avoided the issue at hand. None of them gave me facts or evidence to the contrary of what I was saying.

    Needless to say I think I’ll be using eMusic from now on. The major label record industry obviously does not need sales from ignorant college students or, God forbid, ignorant college interns.

  • http://www.LigerMusic.com/music_distribution/online_music_stores.html Froppo

    I’m glad that there are some companies in the world that have realized treating customers like criminals equal decreased sales. I put a post on a BMI hosted forum to stir the pot a little bit. Basically in my post I stated, “isn’t it ironic that an industry bent on ripping people off immediately came to the conclusion that everyone was trying to rip them off?”. As you can imagine I got quite the response. Most of the respondents cowered to name calling and telling me I was worthless because I was an intern. Others ripped on the fact that I was a college student and concluded that because of this I must not be very intelligent. Funny all of them avoided the issue at hand. None of them gave me facts or evidence to the contrary of what I was saying.

    Needless to say I think I’ll be using eMusic from now on. The major label record industry obviously does not need sales from ignorant college students or, God forbid, ignorant college interns.

  • pauljs75

    If this was dealing with CDs instead of online content, TweakUI and winLAME used in combination might yield a ridiculously simple solution.

  • pauljs75

    If this was dealing with CDs instead of online content, TweakUI and winLAME used in combination might yield a ridiculously simple solution.

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