Representatives from three of the world's largest music labels met late last week during a panel discussion at Gavin.com's Music on the Net conference. The trio discussed the progress made to date in putting music on the Internet along with the difficulties technology poses for online copyright protection.
With companies like Napster and MP3.com garnering a fair amount of attention for their controversial approach to Net music distribution, the music industry heavyweights said their knowledge of artist promotion techniques will aid traditional players' success in the long run. The group debated how to take advantage of promotional techniques in the digital medium and how to deal with the roadblocks that Internet technology poses to conventional business models.
Kevin Conroy, chief marketing officer and president of new technology for BMG Entertainment, sparked the panel's discussion by addressing what he sees as one of the music industry's hidden roles in music distribution.
"It is really about creating value around copyrights," he said.
While attention has centred on how songs change hands online, Conroy suggested that the promotion of artists by record labels makes music possible and brings bands to the public's attention.
"You don't see anybody going to Napster to get songs from the unsigned artist," said Jay Samit, senior vice president of new media at EMI Group. "Nobody wants them."
Samit backed up Conroy's sentiments with vehement support for bands like Metallica who have supported music labels in their fight against noncommercial music trading Web sites.
He argued that bands appreciate the resources labels contribute toward the growth of their popularity and the expansion of their careers. Samit encouraged the Gavin.com audience to take the view that a record label's gamble on a young artist contributes significantly to that artist's future success.
He gave the example of attending a concert given by a new band who had yet to release an album. The entire audience, however, knew all the words to the band's songs. Samit said they must have downloaded the songs from a Napster-like site and predicted that the audience members would therefore be unlikely to buy the album upon release. "That may be the end of their [the band's] career," he added.
The industry pundits also turned to look at how Internet-based pricing models might become more flexible as a result of better technology.
"In a perfect world, you would charge more for a big hit than you will for the tenth track on a Rick Springfield record," said Larry Kenswil, president of eLabs for Universal Music Group, referring to an actor-turned-musician from the 1980s.
Kenswil added that the Internet could bring about a new pricing model for tunes. While traditional music retail sales place certain restrictions on price fluctuations for an album, pricing for Net titles could change more rapidly and thereby reflect the "true" value of a song, he said.
The major labels may, however, have been a bit tardy in entering the e-music space, he admitted. "I think we have been too slow," Kenswil said. He still expects digital music downloading to take about three years to move into top gear. "I am very bullish on subscriptions," he added. Universal is prepared to take onboard some serious financial losses until the company's Net music strategy takes off, Kenswil said.
Several problems continue to haunt the traditional music players as they move to the Internet. While they claim record sales and support subscription-based initiatives as a new business model, bandwidth-hungry, tech-savvy customers will pose problems for music distribution for some time to come.
EMI's Samit said handheld devices will soon provide users with about 12GB of memory in the palm of their hand. Customers could visit EMI's Web site, pay a subscription fee, and then download a lifetime of music in a matter of hours or days. "People will have more music than they could ever listen to," he said. "It will definitely impact us."
Kenswil added that bandwidth problems will also arise from users hogging a Web site's resources during intense downloading sessions. "In essence, you are trying to discourage people from using the service once they sign up," he said.
The music executives said their interest in the Net continues to grow and that the technology will offer ways to distribute songs which are currently beyond anyone's imagination. The problem, however, is finding the right business model to support the task at hand.