Record Labels Discuss Digital at Midem

By Richard Menta 1/21/06

Hard CDs sales continual to drop with week to week averages off this year when compared to last. When supposed blockbusters like the DreamGirls soundtrack top the charts with under 100,000 copies sold you can understand the anxiety felt by the industry. The jury is still out on whether sales of digital media online will be able to compensate, but the early buzz from the Midem conference suggests record execs are more open to loosening restrictions to help it.

Open, but not necessarily in agreement. The technology companies are pushing the non-restricted MP3 format for paid downloads, a concept that has helped propel EMusic into the number two seller of digital tracks online, despite the fact that EMusic sells only music from the independent labels. Tracks from EMusic can play on the Apple iPod, but major label fare bought from any service other than iTunes will not due to incompatible DRM.

The industry is extremely distrustful of a format that has no digital rights management attached to it. Still, it is the only other format that will play on the iPod and the only one that can challenge iTunes near-monopoly of the paid digital download market.

Sony NW-S205F is available on Amazon

According to IFPI head John Kennedy, this is giving the major labels reason to rethink the market. "Each of the majors is wrestling with the question of whether to go unrestricted," Kennedy told the International Herald Tribune. "I think this is an experimental year."

Still. DRM is not the only issue regarding digital major label music as EMusic also sells tracks for roughly a third of what iTunes sells music for. Price is another issue that record execs will need to discuss, though it is doubtful if 2007 will bring any change. Many execs feel that their most popular acts should sell for much more, with a $2.50 price point frequently mentioned. The idea of dropping prices below $0.99 a track - at least for each label's biggest artists - is all but unthinkable for them.

Then there are the issues of the legal path the industry has chosen with regards to suing file traders. A recent commentary in the Houston Chronicle is highly critical of that path as are many other pundits. This brings to mind another issue, not really discussed, but potentially the most important effect on the record industry's digital dreams - Public Relations.

Lawsuits against families for file sharing bring bad press. Payola scandals bring bad press. Shutting down popular Web destinations bring bad press. Discordant relations with technology partners bring bad press (press that puts into question the ability of the record industry to be a good business partner). It doesn't matter if these moves are justified or not. It matters what consumers and partners think. What makes PR particular dangerous is that it is hard to measure.

Yes, record execs have a lot to think about, but don't expect a lot of change yet. Considering how fast the Internet moves, this type of slow reaction may pose the biggest risk of all to their business.

Other MP3 stories:
Apple Sells 21 Million iPods


Back to