For several years, one of the hottest topics in ebusiness has been what will happen with online music.
A generation of young people has grown up downloading and listening to music through unauthorized services. The mainstream music industry has responded with lawsuits and anti file-sharing advertising campaigns. It's left a lot of people wondering if the world of music and the Internet would ever get along.
Magnatune is an interesting new ebusiness that is taking its cues from the success of open source software distribution. Magnatune is applying ideas from the world of open source software development to the world of music. They are doing this by licensing music with a Creative Commons license that lets people freely copy and share songs over the Internet.
Creative Commons has created a set of licenses based on ideas from the Free Software Foundation's GNU General Public License. The Creative Commons licenses are designed for creative works, such as music, writing, and film, instead of software.
Magnatune grew out of the experiences of its founder, John Buckman. He found his interactions with the music industry frustrating. " When my wife was signed to a British record label, we were really excited. In the end, she sold 1000 CDs, lost all rights to her music for 10 years (even though the CD has been out of print for many years), and earned a total of $45 in royalties."
Buckman also saw opportunity in the conflict between traditional music companies and Internet users. "Napster, Gnutella and Kazaa proved that people love music, and they want to share it....Clearly there's a huge public demand for Open Music." His answer was to create a company designed to fit with the realities of the Internet.
Magnatune is trying to capitalize on the needs of the millions of people that are actively downloading and distributing music. Magnatune starts with the idea that music should be shareware. It uses a flexible license that gives users greater freedom than in the past:
* Users can listen to music online, download it, and share it freely.
* The music can be freely modified into derivative works, such as remixes.
* While non-commercial use is free, commercial use requires license fees.
Mainstream music companies are spending tremendous amounts of money to generate demand, and then limiting supply. Magnatune is taking the opposite approach. They are spending very little to create demand, instead making an unlimited supply legally available.
While Magnatune may give away music, it's in business to make money.
They intend to do this in several ways:
* Complete albums are downloadable in high-quality formats starting at $5.
* Music can be licensed for commercial purposes, including broadcast use.
* They are planning on marketing merchandise tied into its music and musicians.
Magnatune's model is appealing: it is fair to musicians, it's easy on music lovers, and meets a need for Internet users. Magnatune's unique approach to competing with traditional music companies makes it an ebusiness to watch.