Music services want easy licensing, death to pirates

In the new world of digital music, it turns out that many of the major players are singing the same tune.

When the presidents and chief executive officers of rival online music services MusicNet, Pressplay, FullAudio Inc., Inc. and RioPort Inc. got together for a panel discussion on the future of their business Thursday they tended to agree on the main issues: pirate music swapping sites need to be eliminated, music licensing should be fair and painless, and portability is fast approaching.

In fact, the panel of industry big wigs assembled by Jupiter Media Metrix Inc. for their Plug In, The B-Sides online music industry teleconference more resembled a chummy meeting of business partners than a quarreling group of industry competitors.

That is not to say that the company heads weren't vying for best of show in their industry, which is expected to rake in revenues of US$5.5 billion by 2006, according to Jupiter. But many of the services the group offer are in fact similar, as are the challenges they face.

Among their similarities, most of the online music executives agreed that the affiliate business model was the way to go. By licensing their services to established online media outfits, the music services gain access to an established audience of users. Furthermore, the big online media players usually have more experience with how to market to an online audience, the group said.

"It's an enormous task and great cost to brand directly to the consumer," said MusicNet President and CEO Alan McGlade. MusicNet, the music subscription service backed by AOL Time Warner Inc., Bertelsmann AG, EMI Group PLC and RealNetworks Inc., launched in December through RealNetwork's RealOne content subscription service.

Andy Schuon, president of the Vivendi Universal SA and Sony Music Entertainment Inc.-backed service Pressplay agreed, noting that the affiliate model allows his service to stick to its core business.

"Our winning strategy is our people. We aren't a tech company," Schuon said.

And despite the services' various licensing agreements with record labels, all of them agreed that the licensing process should be simplified. They noted, however, that the negotiations have gotten easier in recent months, as the record labels see a need to support legitimate online music services, as well as make up for the recent lag in offline retail sales.

"It's in (the labels') self interest to cut deals," said President and CEO Sean Ryan.

A main reason why it's important for the labels to back legitimate players is because the pirate services are still thriving. All of the panelists agreed that although they doubt that pirate peer-to-peer file swapping services will be done away with completely, they need to be marginalized so that the legitimate services have a chance to gain market share.

"Faster adoption will come when people can't get the music for free," said McGlade, who predicted that his service would need at least 500,000 to 1 million paying subscribers to be a viable business.

"I encourage all copyright holders to defend themselves," said Pressplay's Schuon in a call to arms against music pirates.

While creating a legitimate market for music is one challenge, so too is offering consumers a service that they consider to be worth paying for.

"At the end of the day (the services) need to be convenient and reliable," said MusicNet's McGlade.

All of the panelists agreed that part of the convenience will come in the form of offering portability - whether that means allowing consumers to download music onto their handheld devices or play it in their cars.

"Portability will be solved this year," predicted RioPort CEO Jim Long.

FullAudio's Glicker agreed, saying that a number of electronics manufacturers are planning to support the digital rights management (DRM) platforms that the services are using in handheld devices being rolled out over the next six months.

And while the panelists conducted an amiable discussion on the future of the nascent online music market, they also underscored the fact that the market is changing at lightning speeds. Perhaps by the time the next conference takes place, the competition will have heated things up significantly and the panelists will be more fiery.

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