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by Mike Masnick

Filed Under:
drm, free, free music, ipods, record labels


Yet Another Report Of Free Label Music That Isn't

from the details,-details dept

Last week, we noted that the press couldn't stop talking about Last.fm's supposed effort to offer "free" music, when the details showed it was a lot less than the press made it out to be. You'd think that maybe they would be more careful the next time around. However, when you combine the words "free" and "music" it appears that some folks in the press just can't help themselves. Thus, when a company named Qtrax announced "free" file sharing, with the backing of all four major labels, plus iPod compatibility, the press ran with it. The Associated Press and Reuters both ran with it... though, at least the Associated Press has quickly started backtracking after the various record labels all started denying any kind of deal with Qtrax. They admit they're talking, but no deals have been signed -- meaning that Qtrax jumped the gun, as did the reporters who ran with the announcement. Even if the labels do come around on this one, it's a plan that will go nowhere fast. It involves crippling DRM and annoying advertising that won't even be close to effective. This is a non-story turned into a story by the use of two words: "free" and "music."

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    AG (profile), 28 Jan 2008 @ 10:28am


    Be careful assigning a zero or negligible value to digital goods.

    There is still a scarcity at play due to the fact that digital goods require physical resources for hosting and transport, albeit in much smaller unit quantities than physical goods. For a case in point, look at the financial statements of Level 3 (an internet bandwidth provider) and Akamai (a hosting service). Those two randomly selectd firms, which represent a sliver of the industry, had combined revenue close to $4 Billion last year, and have experienced double and triple digit annual revenue growth.

    This demonstrates that society does place value on digital goods. To the extent that consumers can substitute physical goods with less costly digital goods, in the long run this supply/demand dynamic will tend to drive the price up as the digital economy continues to move along its marginal cost curve. In the long run, Internet technology is no more immune from "diminishing returns" than any other.

    As another case in point, the combined average household expense for for bandwidth (cell phone, broadband, cable/sat TV, sat radio, phone, etc.) has been steadily increasing each year. If digital goods are getting cheaper, why is it that we are spending more money on them?

    Peer-to-peer architecture and ad-supported business models do not make these costs go away, they just shift them to different places in the value chain (i.e. ultimately the consumer still pays).

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