Monday, March 08, 2004

Revisiting the subject of online music (aka "Free advice for the record companies")

Let's talk my opinions about online music, digital players, etc. No links to other sites, no links to other people's articles.

I am an avid early adopter of music devices, media, etc. My CD collection numbers into almost 2,000, most of which I bought at "bargain prices" at Tower Records or by joining BMG several different times.

When online file-sharing started in a big way, I was in the position of having an unlimited use Ethernet connection in my college dorm room. At that point, it would have been theoretically easier for me to download songs that I already had on CD rather than to take the time to rip them. Why? Because my Internet connection's throughput rate was actually faster than the speed of the CD-ROM drive in my computer.

Fast-forward to today and the world of iTunes, and I actually find myself paying for songs that I know that I own on CD, but do not yet have in MP3 (or AAC) format. Why? Well, it's actually easier to download them and pay $0.99 then to go through the hassle of flipping through all my CD binders to find one song. It goes back to the question: How much is your time worth?

I have heard about and researched the services that you can ship all of your CD's to, have them rip the tracks, and receive all of your music back on a hard drive. It's somewhat tempting because I could still make a fortune trading in all my CD's (they haven't become that irrelevant yet as to be worthless). However, I don't really want all of the music that I have on CD as MP3 files. If I liked 1 song by a group, I used to buy the whole CD. In the 90's, the one-hit-wonder years, there really were tons of CD's I bought where I only liked and still only like one song. So even if I got everything ripped to a drive by someone else, I'd still have to go through and get rid of all the songs I didn't want.

Many people ask me if I think that the downloading model is sustainable. My answer is always "no," which greatly confuses people. In these cases I like to remind people of the technology that got that company sued. When was one of the hot start-ups, they had a software application you could download that would allow you to "store" all your music on their site and listen to it from anywhere. Amazingly, after downloading this software, you could rip a CD to the site in mere seconds. How did they do it? The software simply read the information in the zero track of the CD (the same information that the CD Database reads) and gave you "credit" for owning the CD (or at least having a physical copy of the CD in your possession long enough to pop it into your machine) by adding the CD to your collection on their site. You could then take your "tracks" on the site and make playlists and all of the kinds of things you could do with MP3 players at the time. got in trouble because they had ripped a library of CD's on their servers, and when your played a track on their service, you were actually playing a MP3 off of their server, which is also why you were able to "rip" CD's so quickly with their software.

The thing that's sad to me about the demise of this service is that it had so much potential (by the way, the reason the service really could never succeed was because record companies had never put unique identifiers into the zero track of each CD, VIN's if you will, that would allow each CD to have a non-repeating code, thereby allowing services such as's to actively prevent copyright infringement). Try to imagine if the service still existed. You would have "ripped" all your CD's onto the service and made all the same playlists you have now, but you wouldn't have paid any more than the cost of the CD and you wouldn't' be at any risk of being sued by the RIAA. would probably be selling CD's or individual CD tracks online that would automatically appear in your library once the transaction was completed. No matter where you were, at home, at work, on a high-speed cell network, you would be able to access your music from any browser and listen to your music. CD sales might not have dropped so dramatically so quickly because that would still be the preferred method of getting your music into the service, and you would need something to listen to in your car.

Ok, time for my small diversion regarding high-speed car access: satellite radio is not the best idea in the world, but what it does do is provide an infrastructure for data access in a vehicle. Because Sirius and XM are aggressively working with manufacturers to get their equipment OEM'd into cars. If Sirius or XM were to cut the radio bandwidth and begin to provide relatively high-speed access to existing XM and Sirius subscribers, I doubt anyone would complain. Personally, I'd forgo all of the radio stations in return for being able to access my e-mail via voice command through my stereo system. Oh, and my stereo system would, of course, be configured to access my playlists and allow me to listen to them in my car.

There seems to be this overwhelming desire to own music, which I don't quite understand. I would be perfectly happy to pay subscription fees to companies like, my ISP, and maybe some few other people to access music. Not that I'm coming up with a revolutionary idea, there've been articles on Wired regarding people's ideas about music fees built into cable .

The music (and movie) companies are going to have to figure out some licensing because I am going to want to take my music (and movies) with me to places where I might not have Internet access. You will have to spend money figuring out how to license data to me for only 10 or 30 days that I can download to my personal player and take with me. "That's expensive," the music companies will say. My response is: "How much is it costing you to prosecute people because you didn't figure this out correctly in the first place? I'm sure it's not going to cost more than your attorney's fees." "People will hack it," the companies will say. And I would respond, "You are absolutely right. People hack everything. But trying making it harder to hack than just pressing 'shift' on my keyboard to get through the protection. Also, if the infrastructure doesn't make it convenient to hack it and the pricing doesn't make it worth it to hack it, then I probably won't hack it."

The downloading concept is cutting it for me now, but I truly don't believe it to be a good long-term strategy, for me as the user or for the companies as the purveyors. In fact, I know it's not working for you because after that brief blip in P2P usage during the first round of lawsuits, P2P is now stronger than ever and users can install cloaking software and sign up for cloaking services to make it harder for companies to prosecute them. CD's at their current price and how they currently work no longer cur it for me. And, to be quite frank about it, bundling a DVD with the CD and charging $20 for it isn't really my cup of tea either.

Change = pain, and no matter what the companies decide to do, it's going to be extremely painful. The problem is, in pursuit of profits, the companies lost sight of the fact that they make money when consumers work within the system, not against the system. The companies forgot that somewhere in the equation, there needs to be some degree of consumer satisfaction, which does not show up on a P&L statement and won't create a pretty chart for the board meeting. And the companies were so sure that music sharing was not going to be a threat to their business, that instead of being proactive early and embracing the new technology when it emerged, they are now playing a game of catch-up that they may never win. If the customer is once client of the companies, then the artists are the other clients who are losing out on this new world and beginning to use the very medium that is destroying the record companies to reach directly to their consumers and give the consumers the experience and music that they want in the format in which they want it.

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