The Future of Music?

by on May 23, 2006

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!

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