Recording Industry Making It Impossible For Any Legit Online Music Service To Survive Without Being Too Expensive

from the good-job dept

You just knew it would happen again. Every time the recording industry finally agrees to license a new music service to try to take the "sting" out of "piracy," it demands licensing terms that are ridiculous. From the execs at the labels' perspective, unless you pay an arm and a leg, you don't get to offer music. So, a few companies agree, and then realize it's impossible to make any money and shut down. In the meantime, the whole point of those legal licensed music services (to compete with "pirate" sites and services) is lost entirely. Wired is chronicling how all of the legal music sites are finding it impossible to survive and offer a free music service -- including MySpace music (which beyond not offering much of value in terms of user experience) "is struggling to keep up with its own payments to music copyright holders."

Of course, it's really no surprise that most of these sites have struggled. Beyond the ridiculously high licensing rates that the labels forced on them (often by negotiating through lawsuits), none of these sites put together a well thought-out business model. Instead, they all seemed to think that they could just slap ads on the site and that would be enough. But, of course, when you're listening to music, you're not looking at that website or paying attention to the ads -- and if the ads got too intrusive, they'd just go elsewhere. A real business model would have been setting up something more comprehensive, that gave listeners a real reason to buy associated with the music. Eventually we'll get there, but in the short-term, the graveyard of failed "licensed" music startups will grow, just as more and more "unauthorized" sites grow in popularity.

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If You're Taking Away Features From Users, Don't Tell Them It's For Their Own Benefit

from the that's-called-lying dept

Sometimes, I really wonder if companies think their users are stupid. There are times when they treat them that way. My favorite examples are when companies are taking away features or raising prices, and claiming (somehow) that it's for the benefit of those customers/users. For example, when eMusic raised prices and disabled features it put up a blog post trying to spin it as a positive, claiming "more of the good stuff!" Yes, at a higher price, with fewer features, but why let that get in the way of claiming good news?

The latest example is online music streaming site imeem. The company has struggled of late under absolutely draconian terms forced on it by the record labels. Rumors held that the company came close to going out of business until Warner Music agreed to renegotiate its suffocating deal. Still, there are many who question how the company can survive without a drastic change in business models. But, taking away features from customers with little warning and pretending it's a good thing isn't exactly the best way to go about things. Clay Shirky points us to the news that imeem is removing features for users to upload videos or pictures without even offering a "download to save" option. But, even worse, the blog post announcing the change tries to play this up as good news again, saying that it's all about "simplifying imeem" as part of an effort to enhance the site.

Sure, simplifying a site can be a good thing -- but unilaterally removing features that people use, with little warning, isn't really simplifying. You can simplify without removing features. If you have to remove features, for whatever reason, why not at least admit the truth: it's not for consumer's benefit, but for some other reason, and you realize it sucks for many users.

In other words, sound human, rather acting like your users are morons. If you want to see a company that's actually done a good job of this, look at Hulu. While we think it's ridiculous that the company caved in to content providers and tried (and failed) to block a specific browser (Boxee) from viewing its content, at least Hulu's CEO was upfront and honest about the fact that it sucked:

The maddening part of writing this blog entry is that we realize that there is no immediate win here for users. Please know that we take very seriously our role of representing users such that we are able to provide more and more content in more and more ways over time. We embrace this activity in ways that respect content owners' -- and even the entire industry's -- challenges to create great content that users love. Yes, it's a complex matter. A tough mission, and a never-ending one, but one we are passionately committed to.

For those Boxee users reading this post, we understand and appreciate that you're likely to tell us that we're nuts. Please know that we do share the same interests and won't stop innovating in support of the bigger mission.

eMusic, imeem and others would be wise to take note. Taking features away and pretending your customers are stupid enough to believe it's for their benefit isn't likely to fly.

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Has The Recording Industry Given Up On DRM For Streaming Music?

from the would-be-good-if-true dept

We recently mentioned that a big supporter of DRM stopped by in the comments to insist that DRM was here to stay despite plenty of evidence of its gradual decline in the market. Well, now the EFF has pointed out more evidence of the death of DRM. It wasn't that long ago that the RIAA was pushing for laws that would require DRM on any streaming music offering (yes, streams, rather than downloads). Since many streaming services simply stream straight MP3s, it's possible to record them, or to simply copy them from their "hidden" places on your hard drive. Yet, the EFF has noticed that even the big services that have officially licensed music from the big labels are using plain MP3 streaming, which would suggest that even the RIAA isn't insisting that its partners use DRM on streams.

Of course, this raises a second important question. If these services are officially allowed to download MP3s to your desktop, is there anything illegal in then keeping the files? Most of these services work by effectively downloading the plain MP3 into a slightly hidden folder (it's not really hidden, they just don't make it clear where it is). Considering that it's a legal, RIAA-approved service downloading a plain old MP3 to your hard drive, it's difficult to see how they could claim copyright infringement if you were to keep that file, right? Of course, considering how much the RIAA is trying to charge these sites, they may not live all that long anyway.

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Labels Concede That File-Sharing Isn't So Bad After All

from the a-little-late dept

Imeem, a social networking site that was in the recording industry's crosshairs earlier this year for allowing file-sharing on its network, has pulled off an impressive feat. This summer it settled its lawsuit with Warner Music by promising to give Warner a cut of advertising revenues from the site. Now the Wall Street Journal is reporting that it's signed similar deals with all four major labels, meaning that Imeem is now the first website whose users have the music industry's blessing to share music for free. What's especially striking about this is that for the last decade, the fundamental principle of the labels' business strategy is that sharing music without paying for it is stealing. They drove Napster, AudioGalaxy, Grokster, Kazaa, and other peer-to-peer file-sharing services out of business on that basis. As we pointed out way back in 2000, all this accomplished was to drive file-sharing underground where the recording industry couldn't get a cut of the profits. Had they approached Napster in 2000 the way they approached Imeem this year, they could have been collecting ad revenue from every file-sharing transaction over the last seven years. Instead, they wasted a lot of money on lawsuits, angered a lot of their customers, and ultimately still had to concede that music sharing might be OK as long as they get a cut. The only significant difference between Napster and Imeem is that Imeem only allows you to play music on its website, whereas Napster allowed you to download songs to your hard drive. But this isn't as big of a difference as it might appear at first glance. The Imeem website doesn't provide a "download" button, but there's no DRM involved, and it's quite easy to download music files from Imeem using third-party tools. And because Imeem's site doesn't use DRM, Imeem downloading tools are probably legal under the DMCA. So what we have here is the de facto legalization of Napster-like sites, as long as the record labels get a cut of the advertising revenue. It's an exciting development, albeit one that should have happened seven years ago.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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Now That It's Getting A Cut, Warner Says Imeem's Not So Bad

from the protection-money dept

A service called Imeem launched a little while back, and it allowed users to build playlists of music, videos and photos and share them with their friends. Despite the fact that it didn't offer any way to download copyrighted music, Warner Music sued Imeem, saying it was making money on "the illegal use of free music." How quickly things change: Warner has now dropped the lawsuit and licensed its catalog to Imeem, in exchange for a cut of its ad sales. Paidcontent says the deal is part of a trend of media companies showing a willingness to cut deals with these sorts of companies, "having decided its better to bring in revenue" than fight in court. But looked at another way, Warner is charging Imeem for the privilege of promoting its music. It paid its lawyers to threaten the company with a lawsuit and hammer out this licensing/revenue share deal, when instead, it could have simply let Imeem be and embraced the promotional value of its own content. It's pretty unlikely that Imeem will deliver significant revenues to Warner; changing how it perceives its own content and evolving its business model seems the wiser long-term bet.

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