By Robert Menta- 4/13/00
"The reality is that we need to start someplace," said Kevin Conroy, senior vice president of worldwide marketing and new technology for BMG. This in response to record behemoth BMG's announcement that they will be jumping into the Internet digital music arena this summer by selling tracks of its major artists online.
This announcement was quickly followed by Sony records, who plan to do the same by this May, a month before BMG's June target.
The actions of these two companies - who combined control a large proportion of the music distributed worldwide - reveal the realization by the music industry that they need to stop worrying less about music piracy and more about lost opportunity.
MP3.com, who offer free MP3 files to promote new artists, and Emusic, who sell MP3 singles of established artists and independent labels, are the leaders online. They are growing with each quarter, establishing their territory and threatening the privileged oligopoly the music mergers of the last few years have constructed.
The problem that BMG and Sony have to face is how to develop a successful model in a new industry without the constraints of old industry practices. If there were any prescient individuals two years ago who realized the potential of the Internet for music delivery, they were ignored.
Corporate music is now rushing to catch up, even before they get to fully think out the medium. An example of this is how they are choosing which format to distribute their music on.
Neither BMG nor Sony plan to put their music in the MP3 format, hoping to promote more controllable formats that will limit music piracy. The vast release of material in any one competing format would provide the ample content needed to build a worthy competitor to MP3's dominance on the Net.
The problem is that both companies will use different formats. Sony will use its ATRAC3 format and BMG a combination of Liquid Audio and Microsoft's WMA format, with further security developed by IBM, and Reciprocal inc.
This will only fragments, not coalesce, rival codecs and in the end it may serve only to strengthen the MP3 format as confused consumers turn their backs on a melange of incompatible compression schemes.
Other music labels are expected to make similar announcements soon. Universal Music Group, Warner Music Group, and EMI all look to join Sony and BMG by the middle of this year.
These companies have money, lots of it. Deep pockets can go a long way in staking ones claim in a Web equivalent of the Oklahoma land rush. What still needs to be established is evidence of vision, the direction that utilizes that money in an efficient manner.
An example of vision, or lack of it, is the music industry's legal attempts to derail digital music downloads from the Net. Rather than assemble a game plan to explore this new field, they initially condemned it and went to the courts to stamp it out.
By taking this action before they fully understood the nature of the medium, they have not only lost several legal precedents on the definition of music ownership (with more expected to come out of the Napster case), but incited a grass roots effort against them in the colleges. The irony is that nothing may have promoted online music trading more than the miles and miles of press attention directed to these lawsuits.
Despite these set backs and backlashes, the record companies do have one major ace in their favor. They control the content. For all the talk of technology and rights, that is all the average consumer is concerned about.
Furthermore, they have made a shift in direction where they are now embracing the technology they were damning a few months back. This means online digital distribution will flourish faster than before and that is good news for music fans.
Still, keep an eye on the Napster case. It is the wild card here to who will control what and where in the coming years.
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