How High Will Spotify’s Paid Subscribership Go? August 10, 2011
Posted by Bill Rosenblatt in Business models, Europe, Music, Services, United States.1 comment so far
More on the direct consumer revenue trend: the first set of results of Spotify’s US launch are in, courtesy of the Wall Street Journal’s All Things D. As of earlier this week, only a month into the service’s US presence, Spotify has signed up 1.4 million subscribers, of which 175,000 are paying. At 12.5%, that’s a bit lower than the 15-16% paid subscribership Spotify is enjoying in Europe, but it doesn’t change Spotify’s overall paid-subscriber rate very much.
All Things D’s Peter Kafka points out that the US conversion rate from free to paid is likely to be lower because US subscribers get more free music during the first six months of the US launch than European free subscribers do. But I would also argue that the conversion rate is lower because Spotify is new in the US, and people are just trying it out — many of whom may already subscribe to a competing service such as Rhapsody.
Given that the addressable market for Spotify increased by 150% when it launched in the US (about 150 million Internet users in the seven European countries in which Spotify operates vs. about 220 million in the US), Spotify’s total subscribership could end up in the multiple tens of millions fairly quickly. But to me, the more important question is: given the steep growth in its percentage of paid subscribers, where does that growth stop?
Here’s a poll:
Do Paid Music Subscriptions Indicate a Tipping Point? July 20, 2011
Posted by Bill Rosenblatt in Business models, Music, Services, United States.3 comments
Maybe it’s reflective of consumers’ generally increased willingness to pay for content, now that more paid models are out there. Maybe it’s the launch of legal content services that are really easy to use and represent what users, as opposed to record labels or online retailers, want. Maybe it’s both factors and more. But whatever the reasons, consumer sentiment towards respecting copyright and paying for legitimate content seems to be moving in a positive direction — at least for music.
Let’s get one thing out of the way quickly: yes, digital copyright infringement is still massively rampant, and it’s not going away. And the changes I’m observing are small in magnitude. But they indicate trends that could become larger.
I’m seeing comments to stories on mainstream tech sites such as CNet News.com and TechCrunch that are more balanced than they have been about the need to respect copyright and ensure that content creators can get paid. As I mentioned last week, the reaction to the recent Copyright Alert System announcement from major ISPs and content owners was more measured than I would have expected. There were even anodyne statements such as “Educating users about copyright is a worthy endeavor” and “…important educational vehicle that will help reduce online copyright infringement” from EFF and Public Knowledge respectively. Could this be a sign that extremism in the “copyright wars” is mellowing?
The biggest quantitative sign of a tipping point is that the music industry has reversed its long slide and reported an increase in revenue for the first time since 2004. The overall increase is only 1%, but digital sales are back on the rebound too, at double-digit increases.
Yet there’s a more telling statistic that no one seems to be talking about: the dramatic uptake in paid subscription music services over the past year. This chart from Spotify data, culminating in 1.6 million paid subscribers on the eve of its recent US launch, tells the story best:
Rhapsody’s subscriber numbers are up, too, reversing a decline that bottomed out in early 2010 before it spun out from RealNetworks as an independent company:
Pandora’s revenues from paid subscriptions also rose dramatically in the last year. The company’s recent IPO filing documents indicate an increase in revenues from subscribers to its Pandora One paid service (no ads, better sound quality, unlimited skips) from 6% to 9% to 14% over 2008-2010.
Pandora’s percentage of paid subscribers (as opposed to revenue) is much lower than that of Spotify; it’s only about a third of a percent. But it is also growing much faster than overall subscribership. And interestingly enough, that’s exactly the same as the New York Times’ percentage of paying online subscribers, when expressed as a ratio of paying subscribers to unique monthly website visitors. (The Times figure was released in April 2011, only a month after the paid service went live.)
The difference between subscription music services on the one hand and the Times and Pandora on the other is easily explained as a matter of consumer expectations. Newspapers and “radio” are services that consumers expect to get for free. Getting them to pay was always going to be a tough proposition. But subscription music services have no such legacy in the pre-digital world; they represent a new value proposition.
Rhapsody only operates in the US; until now, Spotify only operated outside the US. Now they’re direct competitors. Before its US launch, Spotify had paid subscribership that amounted to about 1.1% of the Internet-connected populations in the seven countries in which it operated. Rhapsody’s subscribership in the US is 0.36% of the net-connected population. Of course, Rhapsody has more direct competitors in the US, including Napster, Rdio, and MOG, though their subscription numbers are smaller.
The burgeoning Rhapsody-vs.-Spotify rivalry is generating a healthy buzz about subscription music services that should buoy all of the players. You can see the nature of the competition in blogs and support forums. Rhapsody has more features and a steadfastly loyal subscriber base. But Spotify has a cleaner design and, more importantly, a far better mobile experience than any of the US-based competition. Music has been enjoyed on portable devices ever since the advent of the transistor radio over half a century ago. The use of PCs and Macs for playing music will soon be viewed as a detour from its natural evolution.
It will be interesting to see how high paid subscription service subscriber numbers climb. It’s the first born-digital business model for music that actually makes money. It may even become a keystone in the re-stabilization of the music business. I’ll report back after Spotify has been in operation in the US market for a year.
iCloud Cuckoo Land June 7, 2011
Posted by Bill Rosenblatt in Music, Services, United States.6 comments
As part of Apple’s iCloud announcement this week, Steve Jobs announced a “cloud sync” feature similar to those launched by Amazon and Google in recent weeks. This service had been heavily rumored and even partially pre-announced for weeks. The announcement answers most questions about how iCloud differs from the Amazon and Google offerings, and what Apple is able to offer now that it has licenses from the major recording companies while the others don’t… yet one tantalizing point remains unexplained.
iCloud automatically stores users’ iTunes music tracks online. It automatically downloads newly purchased tracks to all of a user’s connected iTunes devices, which include iOS devices (iPhones, iPod Touches, iPads) and Windows PCs (Vista or higher; XP isn’t supported) and Macs with iTunes software. Users can choose which of their previously-purchased iTunes tracks are copied to all of their devices. It’s all free to iTunes users, but you have to use an Apple device or Apple iTunes software to use this feature of iCloud.
Apple doesn’t make any mention of streaming content from iCloud to Internet-connected devices, whether Apple or otherwise. It all seems to be file copies and downloads.
This leads one to wonder: just why did Apple pay $80 Million for the streaming infrastructure of Lala.com in December 2009?
Apple is ambiguous (at best) on this point.
The iTunes Match feature adds to the mystery. iTunes Match, which will launch this fall, lets users store their non-iTunes tracks in iCloud, regardless of their origin and as long as they are in a standard DRM-free format.
iTunes Match incorporates a feature that has come to be known as “scan and match”: it identifies music on the user’s device, using techniques such as examining ID3 metadata tags in MP3 files and acoustic fingerprinting. If it finds a match and the track exists in the iTunes catalog, then it need not be uploaded to the Cloud; Apple will simply make a copy available for that user. If iTunes doesn’t have the track, then it’s uploaded to online storage.
Apple charges users $24.95 per year for this feature, a chunk of which will go to record labels as royalties. Given that most “non-iTunes” tracks are likely to be of dubious origin (downloaded from file-sharing sites, ripped from friends’ CDs, etc.), this amounts to a “piracy amnesty” fee. It’s also worth noting that Apple didn’t originate this technique. Apart from Michael Robertson’s MP3tunes.com, which had to drop that feature under legal pressure from the record labels, CatchMedia offers this feature today in the UK, in partnership with Carphone Warehouse. It has record company licenses and charges consumers a fee that amounts to double Apple’s price.
The scan-and-match technique has two advantages over the Google and Amazon schemes, which require every track to be uploaded. First, uploading takes time. Depending on the number of tracks in a user’s collection and the Internet connection speed, uploading could take hours, days, or even weeks. Scan-and-match takes seconds per track as long as it finds a match. The other advantage is that for matched tracks, the user gets iTunes’s high-quality (256kbps AAC) version of the track regardless of the quality of the track on the user’s device.
The question is, how does the user get this track? Is it downloaded to the user’s device(s) or streamed? If it’s downloaded, does the user’s original file stay or disappear? Again, Apple does not say. The web page uses language that sounds intentionally ambiguous: “the music iTunes matches plays back at 256-Kbps … quality.” The press release says “replaces your music,” which is a bit more suggestive of downloads; yet it also says “it makes the matched music available in minutes (instead of weeks to upload your entire music library)”, which implies that “replacing” does not involve downloads that could be as time-consuming as uploads. Furthermore, Apple’s acquisition of Lala tips the balance back towards streaming.
Even knowledgeable commentators have mixed views; some (like CNet and the New York Times) say download, while others (like the Associated Press via Eric Garland of online media measurement firm BigChampagne) say stream. Others such as Music Ally and Digital Music News are hedging their bets.
The difference is certainly important. So why isn’t Apple forthright about this aspect of iTunes Match? Leaving aside Apple’s penchant for secrecy before launch — which Apple otherwise didn’t exercise this time — there are a few possible explanations. The options, as I see it, are these:
- Apple intends to let users stream their tracks to any Internet-connected device, not just iOS or iTunes devices, using a web interface. Google and Amazon offer this.
- Apple intends to let users stream their tracks, but only to iOS devices or PCs/Macs running iTunes, using some type of proprietary secure streaming protocol that excludes non-Apple devices.
- Apple will download copies of iTunes Match tracks to users’ iTunes devices.
The first of these strikes me as unlikely, given that everything else about iCloud and iTunes Match seems designed to recapture the platform lock-in that Apple enjoyed when it used DRM. Now it’s lock-in through the convenience of seamless, automated cloud sync. Yes, you can copy your tracks to non-Apple devices, because they are DRM-free, but it’s a hassle compared to the automated ease of iCloud.
Furthermore, because Amazon and Google offer streaming, wouldn’t Apple want to publicize it heavily instead of using ambiguous language? Apple is not shy in using a competitive matrix to claim its superiority over the others.
The second is a distinct possibility. It would also explain Apple’s ambiguous language: it’s the type of “feature” that critics would pounce on, given that it’s clearly less open than Amazon and Google, and includes what could be called DRM. If this is what Apple intends to offer, it’s not surprising that Apple would be reticent or evasive about it now.
The last option is also a possibility. It is consistent with platform lock-in; moreover, it increases the possibility that users will use iTunes and iOS devices as their only music players. It could be a feature of the financial deal that Apple struck with the record companies.
But there are two problems with this option. First, it would cost Apple much more money, as royalties on downloaded copies would be much higher than on streams. Second, this option “elevates” non-iTunes tracks to the same status as tracks purchased from iTunes. It sends a message that users need not purchase tracks from iTunes, yet those tracks can become full-fledged iTunes tracks anyway. That’s the status quo for tracks stored locally, but it’s inconsistent with Apple’s opportunity to re-establish lock-in through the Cloud.
What do you think? Here’s a poll:
In any case, what Apple is definitely not offering with iCloud is the ability to stream any of the music from its vast library on demand, as is the case with services like Spotify, Rhapsody, Napster, Rdio, and MOG. Instead, Apple is sticking with the paid-download model. It boggles my mind why journalists and analysts aren’t focusing on this distinction, which to me seems far more important than “cloud sync.”
I have said that cloud sync is now a “checklist item” for online music services. I’ll go further and state that it may turn out not to be a particularly valuable feature. For those who use streaming subscription services, it’s irrelevant. And for those who hoard thousands of MP3s on their hard drives — a crowd that overlaps considerably with the crowd that actually uses more than one or two music devices actively — cloud sync could become a nuisance once their 8GB or 16GB portable devices fill up with tracks that the almighty Cloud puts there automatically (for that scenario, Apple needs to invent iCache).
Furthermore, if you have multiple music devices, the odds are that you listen to different types of music on each device anyway. My PC is used mostly for background music in the office; my Android handset is for active listening while commuting; my iPad is for home with the kids. I have a moderate-size digital music collection (a few thousand tracks) and use Rhapsody and Pandora as well as file-based music players. Occasionally I want to copy music files from my PC to another device; a cable or Bluetooth works just fine. Cloud sync doesn’t help me.
Music Forecast: Even Cloudier May 11, 2011
Posted by Bill Rosenblatt in Law, Music, Services, United States.add a comment
Earlier this week, Google announced Music Beta by Google, its long-awaited music service. It’s currently an invitation-only beta, and it has gotten mixed reviews including negative press from the New York Times, Wired, and elsewhere. Like Amazon’s Cloud Player/Cloud Drive, it is not licensed by any of the record companies.
Google evidently decided to release an incomplete product after licensing talks with the major record companies broke down. This decision could be a negotiating tactic, a “just try and stop us” gambit to get the record companies to improve their terms. It could also be a rushed-to-market response to Amazon’s recent launch as well as a way of beating Apple to market with a music streaming service.
Whatever the reason, Music Beta by Google hardly bears comparison to full-featured music services like iTunes, Spotify, Rhapsody, etc. It is essentially as much functionality as Google believes it can offer without music licenses. It’s little more than a subset of Amazon’s offerings, with more free storage.
Its functionality is quite similar to that of Amazon Cloud Player/Cloud Drive: it lets users upload and store music they already own onto an Internet file storage service and stream it to any web-connected device with a music player. It also (again, like Amazon) incorporates an app for Android devices that has various additional functions. Of these, the most interesting for our purposes is the ability to store music on Android devices for listening without a network connection (“offline listening”).
Google’s service keeps a limited amount of most-recently-played music on the handset for offline listening. It also allows users to specify which tracks or albums they would like to store on their Android devices for offline listening. As I have mentioned previously, other services such as Spotify, MOG, and Rhapsody offer similar functionality, but they have music licenses. (This means, among other things, that the locally-stored copies must be protected with some form of DRM, even though the services aren’t using that term.)
The record companies must now decide whether to let Amazon and Google continue operating their services without licenses or to put legal pressure on these two tech giants. Their decisions will be based on several interrelated technical, legal, and business issues.
To understand these issues, first we should be more specific about what features these services are and are not offering. Essentially they let users do three things:
- Upload and store copies of their music files online.
- Stream those files onto virtually any network-connected device with a music player.
- Store some files on a user’s Android device for offline listening.
- Google does not actually supply music. In other words, it does not provide a way for users to get music they don’t already have; it doesn’t even recommend or point to new music. (Amazon has an MP3 download store for that purpose.)
- Both use Flash for their player apps and thus won’t run on iOS devices (iPhones, iPads, iPod Touches).
Now’s let’s turn to the business issues. As I mentioned last month, a number of startups have been offering similar sets of services with licenses from the record companies. So-called “cloud sync” services like DoubleTwist and Catch Media enable file distribution across multiple types of devices, not just Android devices. But Catch Media in particular charges users for this service and pays royalties to music companies, whereas Amazon and Google offer it largely for free and do not pay royalties. This must cause the Catch Medias of the world much pain and resentment. The same goes for paid subscription services like Spotify, Rhapsody, and MOG, which supply music in addition to offering Internet streaming and cloud sync features.
The record companies are going to have to decide whether to press Google and Amazon for licenses or risk the wrath of existing licensees, which are presumably paying for the right to offer certain features including those that Google and Amazon are offering without licenses.
So what exactly are those features that require licenses? Both Google and Amazon claim that they are simply offering personal online file storage capabilities, similar to those available from “online backup” services like Norton Online Backup and Trend Micro SafeSync — or even general file-sharing services like RapidShare and DropBox. These services simply enable users to exercise Fair Use rights, and none of them have licenses from copyright owners, so why should we need them? …goes their argument.
This brings us to the technical and legal issues, which are intertwined. The fact is that all of the services mentioned in the previous paragraph offer more than just online storage of a user’s files. For example:
- Google, Amazon, and RapidShare (paid premium accounts) offer streaming of music files.
- RapidShare, DropBox, and SafeSync offer ways for users to give other users (friends, colleagues) access to their online files.
- RapidShare, Norton Online Backup, and SafeSync let users publish links (URLs) to their online files.
- RapidShare and DropBox let users download files onto any computer where they log in with their user IDs.
- Google and Amazon will download certain files onto users’ Android devices.
The right to store copies of one’s existing files on a network server is not really settled law in the United States. The recent Cablevision decision in the Second Circuit, which determined that server-based PVR (personal video recording) services are legal, is somewhat but not exactly relevant. Nevertheless, none of these services have been sued just for enabling personal online file storage. The ambiguities — and therefore the potential legal battlegrounds — lie in the other features.
Here we get into the meanings of words like “copy” and “cache.” A “copy” is something that is presumably covered under copyright law. A “cache” can imply something known as an “incidental copy,” which has a certain meaning under copyright law and is often assumed not to require licensing. (For example, streaming buffer data kept in RAM usually falls under the “incidental copy” rubric.) Google, in its description of Music Beta, circumlocutes these terms by using phrases like “will automatically be available offline.” Amazon uses the more straightforward phrase “download to your device” while still avoiding words like “copy” and “cache” in its description of Cloud Player/Cloud Drive features.
The Cablevision appeals court decision of 2008 established some precedents for determining “when is a copy not really a copy,” but it did not cover the use cases here, which are of uploading a user’s own copies of copyrighted content to a network file storage service for later retrieval and downloading them onto a user’s device for offline playback. Arguments would need to be made in litigation over whether features such as those mentioned above qualify as fair use exceptions to copyright infringement or require licenses from copyright owners. If the music industry decides to sue Amazon or Google, then both sides will have work to do to get courts to see things their way.
Music Forecast: Cloudy April 5, 2011
Posted by Bill Rosenblatt in Business models, Mobile, Music, Services.3 comments
The latest trend in online music services is a feature set sometimes known as “cloud sync.” With cloud sync, users can upload their MP3s to an Internet server, which will copy the files onto the user’s other devices, stream the music onto devices with MP3 players and Internet connections, or both.
Cloud sync is not a new concept. It has been incorporated into several music services, including MP3tunes, DoubleTwist, Audiogalaxy, GrooveShark, Spotify (paid version), Catch Media, Rdio, and MOG. But last week’s launch of Amazon Cloud Player has thrust cloud sync into the limelight and raises some interesting legal and economic issues. Cloud Player is the client side of a cloud sync service that also includes Cloud Drive, Amazon’s existing online storage facility.
The legal question is: does a service provider need a license from music companies in order to offer this set of services? The answer appeared to be yes… until last week.
Music industry provocateur Michael Robertson initiated the cloud sync trend in 2005 with MP3tunes. MP3tunes let users stream their music to any MP3-enabled Internet device. It also went a step further by identifying music in users’ collections and letting them skip the upload step if the music was already in MP3tunes’ server library; essentially all you had to do was prove you owned the music and it would be available online. The music industry sued MP3tunes, alleging that it did not have the rights to do this. The suit is unresolved at this writing.
Other services, such as Rdio, MOG, and Spotify offer cloud sync features as part of their paid subscription streaming services. One would assume that cloud sync rights were included in the license agreements they negotiated with the record companies to supply music.
Yet other services, including MP3tunes, don’t actually supply music; they just work with users’ own files. So does Amazon’s Cloud Player; it is separate from Amazon’s MP3 retail store (for the most part; more on this shortly). And thanks to Ars Technica, we now know that Amazon doesn’t have music licenses for Cloud Player.
Amazon claims that it doesn’t need any additional license. Its position is that it is merely helping users play music they already own and do what they could do with any number of existing online storage services. Sony Music, for one, has raised concerns about this.
Amazon launched Cloud Player quickly in order to get to market before similar services from Apple as well as Google. As David Pogue points out in the New York Times, Amazon is trying to give consumers reasons to use its music services instead of iTunes. The major record companies gave Amazon licenses to distribute music in DRM-free MP3 format back in 2007 in order to create a viable competitor to iTunes. It’s also noteworthy that Cloud Player uses Flash, so it won’t run on Apple iOS devices.
From that perspective, some record companies might want to welcome any features that Amazon can add that attract users away from iTunes — at least until Apple launches its own streaming services. Amazon is most likely betting that the combination of offering record companies a better competitor to iTunes and “we have big lawyers, so go ahead and sue us” will deter the majors from taking legal action where they had done so before.
Yet there is another aspect of the legal argument. As I argued in my discussion of Catch Media a few months ago, the odds are that most of the files that users upload to cloud sync services don’t contain music that they really own in the first place: it’s illegal downloads or ripped CDs from friends. Record companies are concerned that cloud-sync services merely encourage unauthorized copying by making the copies more valuable.
Of course, a suitable license fee could ameliorate or eliminate those concerns, as it has done for Catch Media. That brings us to business model issues.
Amazon offers Cloud Player for free… up to a point. Users can store up to 5GB for free, enough space for roughly 1200-1400 songs. If you want more space, you have to pay Amazon for it, US $1 per GB per year or about a third of a cent per song per year. Yet if you buy MP3s from Amazon, Amazon includes the online storage space for them at no extra charge.
This mostly-free standalone cloud sync model, as opposed to those offered as part of paid monthly subscription services, will wreak havoc on other standalone cloud sync providers that depend on revenue from direct consumer payments (Catch Media), advertising (GrooveShark, Audiogalaxy, DoubleTwist), or both (MP3tunes). Catch Media’s one retail partner (Carphone Warehouse in the UK) charges users about $4/month for unlimited use. That’s not sustainable pricing.
It’s pretty clear where this will end up: once Apple and Google enter the streaming market, cloud sync will be a “bullet list item” for all music services and will be expected to be entirely or mostly free. Music services will need to find other ways to create value that consumers will want to pay for. Sell T-shirts, maybe?
Don’t Know Much about E-co-no-my February 2, 2011
Posted by Bill Rosenblatt in Book reviews, Economics, Music.add a comment
I have read many studies, articles, books, etc., about how digital technology affects copyright, and I’ve come to a conclusion: the writer’s opinion about the subject is heavily dependent on who he or she is.
This may sound extremely simple-minded, and at the first level, it is. A musician who wants to quit her day job will care much more about strong copyright than a tenured professor. A think tank report commissioned by the RIAA will espouse a hugely different position than one from Public Knowledge.
But there are deeper levels to this seemingly inane assertion. The National Academies’ Impact of Copyright Policy on Innovation in the Digital Era project group was really onto something when it asserted that in order to make progress on digital copyright, emotions and philosophies need to be removed from debate. As a corollary, those writers who deal as much as possible in hard facts and the real world are more likely to be right than those who deal in abstract principles.
To be specific, I’ve found that economists have the firmest grasp on reality in the digital copyright debate, and they deserve more attention than they are getting. (Bear in mind that this “insight” comes from someone who took only one economics class in college and did very poorly indeed.) For example, the academic researcher at the National Academies’ workshop last October who struck me as the most knowledgeable about real-world digital copyright developments was not a legal scholar but the lone economist at the event, Mark MacCarthy of Georgetown University.
The latest example of this is a new book: The Price of Everything: Solving the Mystery of Why We Pay What We Do
One of his chapters, “The Price of Free,” considers the momentum towards free content on the Internet. He cites the famous 2007 “pay what you wish” experiment by the rock band Radiohead — and while his immediate observations are somewhat off base, he gets it right by the end of the book.
As an economic thinker, Porter believes in homo economicus, i.e., that people make economically rational decisions. This leads him to incredulity that 38% of the people who downloaded Radiohead’s In Rainbows album from Radiohead’s site paid more than zero for it.
The Radiohead In Rainbows experiment has become a sort of Rorschach Test for those interested in digital copyright. Those on the “free culture” side claim that it was a huge success, while those on the “strong copyright” side claim that it was proof that the free content model doesn’t work. To sum up arguments on both sides, here is a variation of a chart I made for a conference talk last year:
| “Free Culture”: It Was a Success! | “Strong Copyright”: It Was a Failure! |
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Porter ends up deciding that Radiohead could only get away with this because they were already famous — a position similar to that of Jaron Lanier in his book You Are Not a Gadget last year. To back up this point, Porter finds another case that the free culture types don’t like to talk about: Trent Reznor (Nine Inch Nails) tried a similar experiment, which achieved more or less the same results as Radiohead. But when he got his friend, the far-less-famous Saul Williams (a/k/a Niggy Tardust), to try the same thing, the results were dismal.
The same could be said of the thousands of unknown indie bands who give their content away on MySpace every day. Because these artists are unknown, and MySpace gives them “some” exposure as opposed to “none,” Porter finds that giving away content is worthwhile to indie bands. Yet later in the chapter, Porter predicts that content will ultimately suffer from the move towards free because there will be no way to pay for the cost of its production.
Unfortunately, Porter fails to connect the dots between these two ideas. Indie bands on MySpace also have to pay to produce their music, though admittedly orders of magnitude less than the cost of a Hollywood movie. So, just as it is with the free software movement, if you look at it on strict economic terms, indie music on MySpace is subsidized by indie musicians’ day jobs.
So why did 38% of visitors to Radiohead’s website pay more than zero for music they knew they could get legally for free? The answer is perceived value of content, which has been ingrained in people’s minds (in industrialized societies, at least) over a very long time. Strong copyright advocates are gravely concerned that such value will erode as the price of music online floats downwards towards zero. Porter doesn’t cover this at all.
Yet elsewhere in The Price of Everything, Porter deftly analyzes another major area where people pay for intangibles: religion. People pay for their faiths with money, time, and restrictions on their behavior. He makes a solid case that religions succeed to the extent that they impose such demands in a cogent way, and moreover that if they relax the demands, they lose adherents.
If one applies this logic to music and other forms of artistic output, the conclusion is inescapable: it must have a perceived value in order to survive. Content producers do themselves no favors in the long run by allowing that perceived value to erode. Although Eduardo Porter looks at this argument purely in terms of justifying the monetary cost of producing content in the first place, the overall arguments he makes in The Price of Everything bolster this conclusion.
Cricket Wireless Sings the Same Old Song December 21, 2010
Posted by Bill Rosenblatt in Business models, DRM, Mobile, Music, United States.1 comment so far
Cricket Wireless, a small wireless carrier that spun out of Qualcomm in 1998, announced the imminent launch of a new music service called MuveMusic. The service will launch at CES next month in the Las Vegas area, with other markets to be added later. Unfortunately, the Wall Street Journal’s All Things Digital blog (piece written by Ina Fried of CNet, who ought to know better), Engadget, and other media outlets have fallen for the deceptive hype that this service has created for itself.
MuveMusic calls itself “the first wireless plan with unlimited music included.” It offers a library of millions of tracks from all of the major music companies. This description is misleading. MuveMusic is actually similar to services offered in Europe and elsewhere, such as from Vodafone and other carriers through Omnifone’s white-label MusicStation service. It’s really a paid monthly subscription music service where the US $10/month fee happens to be tacked onto your mobile phone bill instead of paid separately, as with Rhapsody, Napster, MOG, Rdio, etc.
The only “first” about the business model is that it is the first such price-bundling deal to launch in the United States. (Look carefully at the quotes from the music execs in Cricket’s press release and you’ll see that they agree.) And the network offering it is a small one by US standards, with about 5 million subscribers, compared to over 90 million each for AT&T Mobility and Verizon Wireless.
As for the technology, Cricket also claims that the service offers “DRM-free files,” the truth of which — to be charitable — depends on your definition of “DRM.” The files themselves are not encrypted, though they are surely sent over the air to the handset (about which more shortly) using an encrypted protocol. But the files are stored in a secure partition of a special SD card from Sandisk. The files can only play on the user’s handset; capacity is limited to 3000 songs (or about 300 albums); there is no streaming. It’s unclear whether a user can take her SD card to another MuveMusic-licensed handset and play the music there (thereby “lending” the music). Unlike Vodafone’s service and similar ones, the music files cannot be played on users’ PCs.
In any case, this is not new either, but rather reminiscent of Datz Music Lounge, which launched in the UK back in 2008 and has since folded. Datz Music Lounge offered unlimited downloads for £99/year but required users to insert a dongle-like secure USB device into their PCs in order to download music to them.
In fact, MuveMusic files can only be played on a single handset model, the $199 Samsung Suede SCH-r710. Unlike the Omnifone services (or device maker-based bundled services like Nokia’s Ovi Music Unlimited), MuveMusic files can’t be played on users’ PCs at all.
The “DRM-free” claim that so many new content services make is rich in irony for those of us who have been in the field for a while. In the early days of DRM (mid-late 1990s), the term DRM was meant to cover a wide range of technologies for managing rights in a digital environment, only some of which happened to involve encrypting files and controlling their use. Subsequently the press co-opted the term so that it only referred to the narrower, more restrictive technology. Supporters of rights management cried foul.
Now this interpretation has been turned on its head: content services that put limits on content uses can be called “DRM-free” as long as they don’t meet the narrow definition of DRM or don’t use a “brand-name” DRM technology such as PlayReady or Marlin or OMA DRM or Flash Access or Widevine.
Subscription services like MuveMusic need some form of usage restrictions, otherwise they are too easily abused. MuveMusic is no exception; otherwise the majors would not have licensed it. As I’ve said before, the term “DRM” has turned into a pejorative, so subscription services are using the idea of DRM while avoiding (or, in Cricket’s case, outright denying) the term.
No, Cricket Wireless’s MuveMusic is not a “game changer for everyone,” as Ben Bajarin of Creative Strategies amusingly puts it in the press hype. With newer mobile music services offering such features as cloud-based sync among all of a user’s devices, higher-fidelity files, and streaming, all Cricket is really offering is a billing convenience. In all other respects, it’s just singing the same old song.
The End of the DRM-Sideloading Era December 2, 2010
Posted by Bill Rosenblatt in Devices, DRM, Music, Services.2 comments
Rhapsody has released new versions of its mobile app for iPhone and Android platforms that enable subscribers to download songs over the air for offline listening as opposed to streaming. This brings Rhapsody into line with Spotify, MOG, and a few other subscription services that offer offline listening on mobile devices. Rhapsody has mobile apps for iPhone, Android, and BlackBerry.
Rhapsody had been one of the primary users of Microsoft’s PlaysForSure DRM scheme for tethered portable devices. With PlaysForSure, users could download music (or video) files onto their PCs and transfer them to certain portable devices via cable. The devices would have to be connected at least once a month to get their DRM licenses updated.
This scheme never worked smoothly. There were always glitches with licenses, especially if you did something like upgrade your PC version of Windows Media Player. And if you had a Mac, you were out of luck.
The new breed of subscription services for mobile devices are able to assume better and faster connectivity, at least up to a point. Therefore they can allow over-the-air downloads as well as streaming, knowing that most users will have decent experiences, even in the relatively mobile-challenged United States.
These services, as I have mentioned before, use DRM for their so-called offline listening modes. Rhapsody lets users set “force offline mode” so that all tracks are downloaded to the user’s handset. The files appear on the device in encrypted form. The value of this type of service for device makers, from the DRM perspective, is that they need not support a DRM (Microsoft Windows Media DRM for Portable Devices in this case) out of the box. The DRM is now included in the software download.
For example, my new Motorola Droid 2 Global runs the Rhapsody app for Android, and it’s registered to my original Rhapsody account on my PC. But it doesn’t show up in the PC Rhapsody app when I connect it via USB cable to my PC. Both devices are on the same account, can view the same library, share playlists, and so on. But there’s no “tethering” to the PC; it’s all done through the cloud.
In all, it’s a superior user experience. Microsoft has considered PlaysForSure a legacy technology for years; Rhapsody’s move to cloud-based authentication is yet another nail in PlaysForSure’s coffin.
Rhapsody only exists in the US market. Its new 2.0 mobile apps do an admirable job of closing the feature gap with Spotify — which has now missed yet another of its projected US launch dates (though Rhapsody Mobile 2.0 has glitches of its own which have nothing to do with DRM).
File-based DRM will become unnecessary in subscription applications like Rhapsody if and when mobile infrastructure becomes fast and reliable enough — and perhaps more importantly, user confidence over streaming rises high enough — to support the true long-held vision of the “celestial jukebox.” When that happens, digital music fans will really have three distinct options: DRM-free file ownership, streaming subscription services, and various flavors of web radio.
Odds and Ends November 29, 2010
Posted by Bill Rosenblatt in Events, Law, Music.add a comment
A couple of odds and ends:
Everyone has to have a music blog, right? Well, I started one three years ago. It’s called Bill’s Musical Box. I picked it up again recently and ported it over from Blogger to WordPress. It’s up now, and there is a link to it on Copyright and Technology. As a mark of the occasion, I put a new appropriate image up on the blog page.
My musical interests are actually a lot more wide-ranging than the blog suggests; the blog just covers my area of “deep dive.” Enjoy!
Also, the National Academies have posted the audio of presentations at their October 15 Workshop on Copyright Policy on Innovation in the Digital Era, including mine. Each presentation is ten minutes plus Q&A.
The End of Two File-Sharing Services: LimeWire and Choruss October 27, 2010
Posted by Bill Rosenblatt in Law, Music, Services, Uncategorized, United States.13 comments
Yesterday a federal judge issued an injunction against the file-sharing network LimeWire, causing it to stop distributing and supporting its software. Meanwhile, the Choruss initiative to implement “flat tax” file-sharing on college campuses appears to have died, despite the effort that Warner Music Group and longtime flat-tax ideologue Jim Griffin put into it.
Judge Kimba Wood’s injunction against LimeWire, which follows her summary judgment against the company back in May, is a milestone in the company’s four-year legal battle with the music industry, and by all accounts, it’s the end of the war. It’s also the first time that the Supreme Court’s 2005 Grokster decision, which created a new category of liability for “inducing copyright infringement,” has manifested itself in a major court action.
LimeWire CEO Mark Gorton claims that he intends to figure out a way to turn LimeWire into a legal paid service. Good luck with that strategy, Mark; it worked so well for Pirate Bay, iMesh, and Kazaa, just to name three.
Gorton’s attempts at emulating Michael Robertson in the music-industry-nose-thumbing business have failed; neither his blatantly disingenuous legal strategy nor his PR charm offensive have worked. And whereas Robertson made tens of millions selling his original MP3.com to Universal Music Group, Gorton may find himself personally liable for that much in fines.
The failure of Choruss is a different story, but there are common elements to both. Choruss was an attempt by Warner Music Group CEO Edgar Bronfman to experiment with a music licensing model that the copyleft has been advocating for years: a flat monthly fee per user in return for unlimited rights to use content on a network. Bronfman had hired Jim Griffin, a respected digital music pioneer as well as a vociferous advocate of what I call the flat tax approach, to lead the effort.
Griffin quickly found that the industry was not going to adopt a US-wide flat tax model voluntarily; it would require getting Congress to enact a statutory license. That wasn’t going to happen in any reasonable timeframe (if ever), so he turned his attention to college campuses.
College campuses had several advantages in terms of openness to the flat tax model: legal, technical, and economic. The legal advantage was that college administrations could have been held liable for the copyright infringements of their students — which are typically massive — so they had incentive to adopt a legal music service of some sort. The technical advantage was that colleges control their campus networks and are capable of filtering them (at least to some extent) so that file-sharing can be done freely inside the firewall but not through it to the outside world.
The economic advantage was that college administrations could easily charge students a monthly fee for use of content on the campus network. Such a fee could be added to existing student activity or IT fees without too many people noticing or caring, especially alongside the five-figure tuitions many colleges charge. Subscription services like Napster had been offering this arrangement to colleges. But unfettered file-sharing with access to a large, DRM-free music library would be better for users, all else (such as price and music selection) being equal.
In other words, Choruss was offering a value proposition to colleges that was actually superior. Unfortunately, Choruss failed because it couldn’t get the licenses to music from at least one of the major music companies and several publishers. (See my article from earlier this week for a possible reason why.)
Choruss had intended to partner with a file-sharing service called Audiogalaxy, which would have provided the infrastructure and user interface. Here’s where the commonality with LimeWire comes in. Audiogalaxy was a file-sharing service that operated during the original Napster era. Like LimeWire, Audiogalaxy used patently ineffectual technology to block sharing of copyrighted works, and like LimeWire, it was shut down in music industry litigation. (Yet in some ways, Audiogalaxy was ahead of its time: it was the first file-sharing service to incorporate what we now call “social” features in its user interface.)
Now that Choruss has failed, Audiogalaxy is relaunching as a service that lets users sync their own music files across their devices and stream it from a server — in other words, it now looks a lot like other current services such as Catch Media and DoubleTwist. In a post last week, Digital Music News’s Paul Resnikoff noted — as I did for Catch Media — that most of the files that would be “synced” with such a tool are most likely not legally obtained. In calling this “ironic,” given Audiogalaxy’s history and Jim Griffin’s intentions with Choruss, Resnikoff was right on the mark.
Bill Rosenblatt
Azita Arvani
Bill Jones
Niels Thorwirth
