Don't Tell eMusic You Can't Succeed Selling DRM-Free Music

from the invisible dept

Major record labels insist that they can't sell music downloads without their pointless copy protection, that they need it to "keep honest people honest", and that they can't compete with free. Neither of these are true, in particular the contention that people won't pay for music if it's available for free somewhere else -- just look at anybody that's ever bought a paid download. In any case, while some music retailers try to get the major labels to relent on their copy-protection insistence as a way to expand their potential customer base to include users of iPods and other incompatible devices, the labels stick to their insistence that they just can't make any money without DRM -- ignoring the quiet success of eMusic. It's now got the second-biggest market share for download stores (behind iTunes), taking 11% of the market -- equal to the shares of Rhapsody, Napster and MSN Music combined. The figure's made a little more compelling when you consider they're doing it by marketing to a niche audience, with no major-label content. An exec from one indie record label that sells music on the site says it's this audience that makes the DRM-free approach work, and that if iTunes quit using copy protection, nobody would buy, and all the music would "end up on the file-sharing services." This is typical record-label thinking: the music is already on the file-sharing networks, yet people continue to pay for it, choosing convenience and/or legitimacy over cost. Removing the copy protection from music -- since it doesn't work anyway -- has plenty of benefits to offer: it cracks open the iPod to a wider range of retailers, breaking Steve Jobs' stranglehold on the labels, it gives retailers the freedom to tinker with their business models to find new ways to increase sales, and it removes the hassle of incompatibility for users that keeps them locked into one particular store or brand of devices. But the major labels ignore this, because the music might end up on file-sharing networks. For their benefit, it bears repeating: the music is already there. The sooner the labels accept that, and get down to business rather than figuring out more fruitless ways to stop piracy, the better off they'll be.


Reader Comments (rss)

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  1.  
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    Sanguine Dream, Jul 31st, 2006 @ 10:50am

    Good luck...

    trying to get the label execs to notice that they can take advantage of new technology. They are comfortable with their current model and are afraid to take a chance on changing becuase changing may carry the risk of a loss in profits in the short run. We all know that the main agenda of label execs is to make money, not protect artists. Oh how I'd love to to see a mass exodus of artists abandoning their labels... But that would hurt the artists (for the most part labels own an artists work not the artist) in the short term yet they would come out a lot better than the execs that make their living off the work of others.

     

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  2.  
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    Joel Coehoorn, Jul 31st, 2006 @ 10:57am

    For the most part I agree with this, but there is one important change. It's not the music the record labels are worried about moving the file-sharing services. It's the customers.

     

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  3.  
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    Nathan Kully, Jul 31st, 2006 @ 10:57am

    All music eventually will end up on file sharing n

    Teenagers and younger adults are the prime market for music companies, however that is probably the group that is willing the pay the least for music as well. College networks are one of the most widespread networks out there because not only can they share music on P2P networks, they can also use other programs that run on the high speed college network like DC++ and Mytunes.

    If there is a song out there that requires software to install, but at no cost, people will take that route. The problem with that is also if one of those songs gets downloaded or found on the internet, next thing you know the number of people with that file has increased exponentially 25 times. If music companies want to rely on solely pay sites, they need to get rid of file sharing programs all together (although a $100 million fine for Kazaa is pretty stiff).

     

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  4.  
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    Xcetron, Jul 31st, 2006 @ 10:58am

    Its already too late to stop the piracy, its everywhere and I can guarantee that at least 5% of the population of a major city have downloaded music and other softwares through the P2P technology.

     

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  5.  
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    Stephen Thomas, Jul 31st, 2006 @ 11:01am

    Of Course eMusic Makes Money

    As much as I dislike DRM, the crux of the issue isn't whether sites like eMusic can make money. Of course they can. Given the choice between DRM or non-DRM most thinking folks would obviously choose non-DRM. Therefore, anyone selling non-DRM would have a distinct advantage.

    It's not music sellers (e.g. eMusic or even iTunes) that want DRM (though Apple is probably happy about the iPod lock-in they're getting with FairPlay). Any pure music seller (iTunes doesn't really count because of the iPod) would prefer non-DRM.

    The real interesting aspect of eMusic's success is that there are enough consumers willing to purchase music from little known acts (i.e. those not signed by major record labels who insist on DRM) to make eMusic viable.

     

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  6.  
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    Carlo, Jul 31st, 2006 @ 11:17am

    Re: All music eventually will end up on file shari

    If music companies want to rely on solely pay sites, they need to get rid of file sharing programs all together (although a $100 million fine for Kazaa is pretty stiff).

    No, they don't -- that was the point. Getting rid of file-sharing completely is an impossible task, because people will simply stay a few steps ahead of the labels' attempts to stop them. Instead of spending their time figuring out ways to deliver a product to people in a way that's attractive to them, they put their resources into lawsuits that do nothing to stem the tide of file-sharing.

    If there is a song out there that requires software to install, but at no cost, people will take that route.

    Then why does anyone at all actually buy music? Again, that was the point here -- that people will choose convenience, or security, or legitimacy or other factors over pure financial cost.

     

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  7.  
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    Simon, Jul 31st, 2006 @ 11:33am

    Self justification..

    There's another reason why the labels/RIAA like DRM. They know that technology is making them redundant by moving the artist and consumer closer together. Let's face it, it's pretty easy to create an MP3 from the raw material - any studio engineer can do it with their eyes shut.
    Now if they can convince the artists that they must have this really complicated hi-tech DRM stuff with legal licenses to arrange and special encoding and distribution "but don't worry, we'll handle it for you" then suddenly they are 'adding value' to the transaction.

     

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    tehdirtaddict, Jul 31st, 2006 @ 11:35am

    Convenience over cost

    That is so right. Follow allofmp3 business model, with a correct prices (maybe 50 cents per track or so). People with buy left and right, and not go back to P2P. Convenience over cost, period.

     

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    Jimmy Bear Pearson, Jul 31st, 2006 @ 11:55am

    Indeed, eMusic is pretty good

    eMusic is a great place to get music, and actually is one of the top seller sites for my music - even though I just sell a few tunes every month. I like the user-aspect of eMusic too. The playlists, the download histories, etc...

    My fans (if they express a preference) really like easily-downloaded music - particularly easy WRT them getting the music in their cars and portables. They express this - even more than DRM-free or not. My opinion on DRM? Personally, I just want the fans to be happy. I just want people to enjoy music.

     

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  10.  
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    Michael Long, Jul 31st, 2006 @ 11:58am

    Then again, back in the day...

    Back in the day of VHS, "casual" copying of tapes was rampant. People would buy a movie and make several copies for their friends, neighbors, etc.. Manufacturers even made tape decks with two slots and an easy to press "dup" button.

    That's when the studios introduced MacroVision, the VHS copy-protection scheme that prevented such "casual" copies. Things settled back down, and coincidentally, sales of blank tape plumeted. Yes, you could buy hardware that still allowed copies... but the vast majority of people didn't bother.

    I suspect that the parallel with music and DRM is similar. It's not designed to stop the "hard-core" file sharers, and it's not that a determined individual can't circumvent the scheme. But doing so does take "some" effort, and most people will probably not bother.

    Which is all the music industry probably expects...

     

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  11.  
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    RareButSeriousSideEffects, Jul 31st, 2006 @ 12:16pm

    Simon already made the point, but...

    ...this bears repeating: The "we have to stop file sharing" mantra is a deliberate red herring. The labels collectively acting under the name "RIAA" have to use this ruse because, well, it wouldn't make for good PR to admit that they're simply trying to insulate a dying monopoly on the artist -> consumer conduit.

    It's ironic that their public explanation for screwing artists over amounts to "we're trying to make sure the artists get paid." Tell me, what artist has ever seen a share of the licensing surcharge added to blank "CD-R Music" discs?

    These people are parasites on the arts, plain and simple. I don't get why people are so lazy that nobody does anything about these goons. An RIAA-free satellite radio station or an MPAA-free cable station would be great tools to expand awareness & gather critical mass with new & emerging artists.

     

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  12.  
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    Anonymous Coward, Jul 31st, 2006 @ 12:27pm

    > "Teenagers and younger adults are the prime market for music companies, however that is probably the group that is willing the pay the least for music as well."

    Interestingly the market would disagree with you; marketing experts count 12-25 years olds as thier most lucrative consumers. If you're not sure take a second look at advertising. Also note the youth-oriented aim of advertising over the last 30 years. Its only been in the last 5 years that advertisers have started to look again at 30 and over something consumers.

    Also note the trend of advertising firms to hire and retain only the youngest executives. Advertising professionals, at least those involved in leddling pop crap are often ousted in thier 30's.

    Lastly, you would have to be blind that believe that the iPod campaign is aimed at 30-something yuppies or pop music in general is only aimed at "people with money." Apparently, teenagers and college aged kids have enough to satisfy the pop culture industry.

     

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  13.  
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    ConceptJunkie (profile), Jul 31st, 2006 @ 1:01pm

    eMusic is awesome... they "get it"

    This is how media business on the Web should be.

    I received a free trial for eMusic and almost immediately fell in love with the service. After you get over the initial shock that they don't carry the big labels (but occasionally have some big name artists), you can get down to exploring and discovering all kinds of great music. The recommendations, links and member-created lists are very valuable for discovering the often-hidden gems that eMusic has in their huge library.

    If you are into jazz, it's even better, because they have an incredible collection of jazz and I've gotten lots of classics. I'm a big fan of progressive music and have discovered tons of great progressive, instrumental and fusion rock in the past year, much of which I'd never heard of before eMusic. I have a $20/90 tracks a month account and frequently buy "boosters" because of the great value for downloading. The cheap price encourages taking risks and experimenting with things you might not otherwise want to try.

    The MP3 quality is largely very good (>192kbps, often VBR), although occasionally you will get 128kbps tracks that don't sound very good, although I would imagine this is because that's how the artist or record company delivers it. Out of 100 or so albums I've purchased, only about 3 were of a quality that I found problematic (although in each case the music itself was very good), but since you can preview... you can can decide for yourself.

    I'm not associated with eMusic, just a happy customer since November 2005. These guys get it. They deserve the business and are actually embracing technology rather than fighting it or pretending it doesn't exist.

    I would also recommend Mindawn, who also deliver excellent quality and value min much the same way (plus FLAC!), although they don't carry a whole lot yet.

     

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  14.  
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    ConceptJunkie (profile), Jul 31st, 2006 @ 1:07pm

    Re:

    The big names will make millions appealling to the lowest common denominator, but educated customers will find a far, far better value in places like eMusic. eMusic serves the "long tail" by providing lots of obscure and esoteric stuff (a side effect of the fact that the big labels won't deal with eMusic, although you can find all the big labels' material on file sharing sites).

    eMusic doesn't treat me like a crook, and recognizes how much cheaper it is to distribute music electronically and passes the savings on. Depending on the number of tracks on a particular album, you can save 60-80% or more over buying it from an overpriced music store. If you are interested in something other than the big label sludge or those classics that have been pounded into your head relentlessly for the last 40 years, eMusic is the perfect alternative.

    Disclaimer: I'm not associated with them. Really. Honest. ;-)

     

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  15.  
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    ConceptJunkie (profile), Jul 31st, 2006 @ 1:10pm

    Re: Convenience over cost

    Well it helps to be legal, which allofmp3 wasn't.

     

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  16.  
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    Anonymous Coward, Jul 31st, 2006 @ 1:13pm

    Re: Convenience over cost

    Correct-a-mundo

    I would and do buy music from allofmp3 because it is a closer to correct price point. I wish it were more legit (artist got a cut), but again...convenience is my selling point.

     

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  17.  
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    TJ, Jul 31st, 2006 @ 1:37pm

    Re: Simon already made the point, but...

    Tell me, what artist has ever seen a share of the licensing surcharge added to blank "CD-R Music" discs?

    Actually, SOCAN (which is the Canadian equivalent to America's ASCAP and BMG) does this. These are the companies that collect such fees as radio air-play fees and, yes, the "levy" added to blank media sales and distributes those fees to the artists. Most every country has their own group that provides these services. So not to worry, when you pay that extra surcharge on you blank media, as much as we all like to dump on the RIAA and the labels that pushed for this move, the money actually does go to the artists, although I'm sure a percentage of the money is withheld for "administration fees".

    But on the topic of this thread, I speak as the co-owner of a music retail site that sells only independent artists' music (www.indieground.net). We chose not to go with any DRM on our music, the artists know it, the customers know it, and we have never had a problem. What's more, we also chose to provide a purchase history which allows a user to re-download purchased tracks.

    But enough of the cheap plugs, I just wanted to let everyone know where both I and my company stand. DRM is inconveniencing those who are actually, legally paying for the music. It's really an insult to the consumer, "Here, we would like you to pay for this and download it from our site instead of getting it for free via P2P, and while your at it, we're going to limit your use of the product. So basically your going to pay for something that's not quite as convenient as its free counter part". Removing all DRM would definitely increase online sales. With DRM, like many of you have mentioned, there are hacks to work around it, and it only takes one DRM-hacked copy of a song and a few minutes to get it on all the majour P2P networks. But with all the legalities, technology and everything else aside, If your music is popular enough that it is being pirated, then congratulations, you're famous, and the small amount of sales you're losing is "One less ivory back-scratchier". I'll trade with any artist or label that's not making quite as much as they could if P2P didn't exist.

     

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  18.  
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    Daryl, Jul 31st, 2006 @ 2:27pm

    People who are willing to pay will pay

    Look, the execs look at this all wrong. They think that they can compel audiences to buy something by making it difficult to get it for free.

    The truth of the matter is, though, that most people who can afford to buy music, pay for it. People who cannot afford to pay for it may choose to steal it but this has been the case for years and years.

    Make it easy for buying patrons to get what they want, and they are more likely to be your customer.

     

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  19.  
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    Motopsycho, Jul 31st, 2006 @ 3:41pm

    the old emusic

    I miss my old emusic.com I started using them back in 2002, and loved it. 15 bucks a month, all you could download :D Ahhh, those were the days....

     

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  20.  
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    B_Billy, Jul 31st, 2006 @ 4:17pm

    A New Business Model

    The best thing a record label could do is to come out with some good music instead of the crap they put out today!!!
    >:(

     

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  21.  
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    DittoBox, Jul 31st, 2006 @ 4:26pm

    Re: Re: Convenience over cost

    What does that have to do with anything? If a legal service like allofmp3 existed, then it'd be even more popular.

     

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  22.  
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    Insights 2.0, Jul 31st, 2006 @ 6:01pm

    eMusic has the long tail but still needs the head!

    Like many, I have received a very generous free trial from eMusic. I would be curious to know to what extent the market share you mention (11%) is due to this free offer. From my own personal experience, I am not sure that the conversion to actual customers is so high. Althou I consider myself a fan Indie Rock, I had a hard time finding the songs I wanted, and it took me some time to spend the 20 free songs. I have nothing against selling artists of little-known musicians, I think this is great. However, I think that eMusic's limited offer (probably the studios' fault because music is not DRM) is still a major turn off to attract or retain more users.

     

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  23.  
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    Brian, Jul 31st, 2006 @ 6:36pm

    Re: Of Course eMusic Makes Money

    The real interesting aspect of eMusic's success is that there are enough consumers willing to purchase music from little known acts (i.e. those not signed by major record labels who insist on DRM) to make eMusic viable.

    Aye, there's the rub. Non-DRM music (and videos for that matter) remove their gatekeeper role. So long as there are only a few groups under their control that the can market in a controlled way with controlled distribution for prices that they control, you have a controlled market. [With reasonably predictable profits I might add.] Now along comes eMusic where their control is entirely removed. Indeed, even the marketing is more word of mouth than anything else, so what is in it for the big labels? Nothing at all.

    Way back when a guy by the name of Gutenberg came up with this nifty thingy called a printing press. Lo and behold! Anyone that could afford a printer could become a publisher and scribes were put out of work. [They went on to become bureaucrats, but that's another story.] This is yet one more step down the path and they just don't get the fact that their controlling (gatekeeper, toll-charging) ways are history.

     

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  24.  
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    techdirtaddict, Jul 31st, 2006 @ 7:37pm

    Re: Re: Convenience over cost

    i never said allofmp3.com was legal. i said it had the perfect idea. just change to a more correct price.

     

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  25.  
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    Anonymous Coward, Aug 1st, 2006 @ 2:20am

    DRM Under Siege: The Yahoo Music Experiment

     

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  26.  
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    Anonymous Coward, Aug 1st, 2006 @ 5:07am

    Re: Of Course eMusic Makes Money

    The real interesting aspect of eMusic's success is that there are enough consumers willing to purchase music from little known acts

    One would be surprised, if they tok the time to actually look through the eMusic catalog, how much music is NOT by little known acts. I've found albums by Nine Inch Nails, Sevendust, Black Label Society, and Powerman 5000 among others on the site. Not all well known bands are, or always were, with major labels (especially in there early days).

    The other key selling point is price. At 25 cents, the service is a lot more appealing than if they tried jacking the price to a buck like most other services do.

     

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  27.  
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    Thornton, Aug 1st, 2006 @ 1:38pm

    iPod lock-in

    Why does everyone still think that Apple has an iPod lock-in? This is the Steve Jobs reality distortion field at work. I ripped all my CDs and was able to load them onto my iPod using a WinAmp plug-in, without any DRM issues. I was even able to load a bunch of MP3s that I got by ripping net radio streams. Where's the lock-in?

     

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