MP3 2001 in Review: The Losers

By Richard Menta- 12/31/01

The first of a two part year in review, we run through the losers of 2001. It has been a very mercurial year with many casualties, the end result being that the future of digital music has become more clouded than ever. Below is our top eight in the loss category. Feel free to drop us a note if you feel we left anything out, a case can certainly be made to extend this list.

The jury is still out on many such worthy contenders as Fair Use, copy-protected CDs, Ogg Vorbis, Aimster, and others. Whether they will be winners or losers we can't say. What we can say is that 2002 will be a crossroads year for them, making them leading candidates for next year's lists.

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1. American Internet Music Industry

The dotcom crash, the DMCA, music industry lawsuits, and bad business decisions have severely weakened if not killed the notion of an American Internet music industry autonomous of the traditional record industry. The deaths of Riffage and Atomic Pop were only the beginning. The record industry laid siege hoping to own Net music as it could not own the radio stations or the record chains or MTV (though they do have investments in these industries).

Their tactics worked, but it still doesn't look like the major labels have any clue as to how to develop Net music. The initial failure of PressPlay and MusicNet to draw an audience is only the latest sign of this. In the end their efforts may only force Net music overseas to become an industry dominated by Napster clones in non-World Trade Organization countries. Beyond the grasp of the RIAA and the IFPA such companies may turn American Net music into a foreign import while US Internet producers, managers, Web developers, and administration staff crowd the unemployment lines.

2. Internet Radio

A site like MyCaster drew home webasters by offering an MP3 desktop player that empowered anyone with a PC, a 56K modem, and no technical knowledge with the ability to send a stream and broadcast to the world in 10 minutes. The Digital Millenium Copyright Act (DMCA) ended that by imposing royalties terrestrial stations never had to pay. Because of this the opportunity for individual expression through music selection is endangered. Amateur radio is not the only one at risk as Net radio may be ripe for the next music cartel. Below are some examples of how the year went:

Terrestrial radio stations - Radio stations don't have to pay royalties to recording companies for songs they broadcast, but the Copyright Office and a federal appeals court have ruled they have to pay when that same broadcast is simultaneously streamed across their Web sites. That's not all, the American Federation of Television and Radio Artists demanded added royalties for voice-over actors when their work is broadcast online. The end result was many stations backed off and shut down their streams while the industry went into court-imposed negotiations with the music industry.

A settlement was reached last December 17th between the industry and the major radio networks including CBS Broadcasting, Entercom Communications, Clear Channel Communications, Salem Communications, Susquehanna Radio; and the National Religious Broadcasters Music License Committee. This agreement has set the present standard for fees, healthy fees that may keep the streams of some non-network stations off the Net.

College radio stations - College radio was among the first to enter the Net radio space. It looks like they will be among the first to leave. The reason is almost all are non-profit and recent beltway dealmaking (including the December 17th settlement above) presently demand that college stations pay the same fees commercial stations pay.

Salon interviewed the University of California at Berkeley's radio station general manager Sandra Wasson. The passage below gives an idea of the new costs of doing business on the Net:

KALX pays a total of $623 per year to songwriters (as opposed to performers) to play music over the Web. The fee is low, Wasson said, because KALX doesn't run advertisements. If the recording industry's fee proposal goes through, KALX would have to dish out $10,000 to $20,000 a year in webcasting fees, Wasson said. And the fees would be retroactive to 1998.

Internet only commercial radio stations - the Dotcom crash has already left many financially reeling. NetRadio has died and back-royalties payments will be the last straw for those without a deep-pocketed backer like Shoutcast (acquired by AOL in its purchase of NullSoft) meaning a further contraction in the market.

Amateur Netcasters - They couldn't pay if they wanted to. This means some of the most innovative, eclectic and interesting streams will be forced from the air or risk being classified as pirate stations. Most have already closed shop. Unless Congress creates amateur Webcast licenses this segment will fade or go overseas.

3. Napster

It created the biggest grassroots effort in the history of the world. Now it is dormant and - thanks to better Napster clones - irrelevant. It's as simple and tragic as that.

4. MusicNet and Pressplay

Recently released, these major label services were greeted with public indifference.

5. Secure Digital Music Initiative (SDMI)

Infighting and the failure to develop anything beyond a poor watermarking technology has made this Net music copyright protection group as irrelevant as Napster.

6. Xolox

This P2P program took up less than 400K of space on the drive, had no spyware, was simple and easy to use, and was the first to allow simultaneous searches of multiple files. One of the best new Napster clones to appear, fear of litigation forced its creators to shut the project down. It's hard to afford court costs when you can't even pay your lawyer's initial consultation fee.

7. Intel's MP3 players

The Intel Pocket Concert was one of the best MP3 players we have ever tested. It was also one of the best selling digital music portables on Now Intel's entire MP3 portable line has been discontinued, a casualty of that company's decision to close its entire consumer products division.

8. The Record Industry Association of America (RIAA)

How can the RIAA be both on both the Winner and a Loser list for 2001? Lets see:

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