The grapevine says some at CES are being told Microsoft will no longer develop PlaysForSure, its proprietary DRM system, a move Microsoft swore up and down it would never make when the company failed to include PlaysForSure support in the Zune line.
According to PC Pro News,"Microsoft will concentrate exclusively on its Zune platform, which is not compatible with PlaysForSure. Microsoft has neither confirmed or denied the reports, which draw on comments made by an executive for one unnamed music service and have been confirmed by others in the industry. Microsoft CEO Steve Ballmer has said that he expects PlaysForSure to continue, although he has explained that Zune was conceived because the PlaysForSure approach had failed to dent Apple's dominance of digital music."
And just when Napster was starting to show new signs of traction. It's unclear yet what all this means for the many PlaysForSure partner companies but, the end of development could put them all in a very precarious place. This could be a good thing for some, as Real Networks and Sandisk seemed to see this coming a while ago, and have created a new, competing subscription-capable DRM format.
Jupiter Research has done some prognosticatin' and come to the conclusion that digital sales are going to keep on growing. In fact, if predictions hold true, digital sales will grow at a compounded rate of 16% per year, to a total of 2.5 billion dollars, or just over 22% of total US consumer spending on music.
Glenn Coolfer astutely observes, "Before you do any math, read a blog post about the survey by Jupiter analyst David Card. He explains something the press release does not: Jupiter did not count ringtone sales as digital revenues. He wrote, "Digital music sales will total 22 percent of US consumer music spending in 2011, and ring tones another 12 percent." Combined with download spending, the adjusted digital figure is actually 34%. That leaves the CD with about 66% of the market."
Subscription services are forecast to keep growing as well, with a staggering 32% compounded growth rate in just that category alone. Napster must be salivating but, frankly I don't see it. Unless some major shift comes along and changes the subscription landscape, or the Major labels relent to an eMusic style model, I just don't see how 32% growth in subscriptions is remotely possible.
When UMG forced Microsoft's hand and extorted gained a deal to get $1 per Zune sold as compensation for what UMG CEO Doug Morris calls "a repository for stolen music", it became a widely held belief that UMG beat Microsoft at the negotiating table. Microsoft, just days away from the Zune's launch _needed_ UMG's extensive catalog -- which includes labels and imprints such as Def Jam, Geffen, Interscope and Verve -- for the Zune Marketplace.
ZDNet's Jason O'Grady offers a different idea, "Why in the world would Microsoft agree to such a dangerous precedent? The obvious reason is that MS needed to get access to the Universal catalog. My favorite (and more dastardly) reason comes from Macalope who claims that Microsoft did it "to try to screw up Apple's business model.""
We're watching the beginning of a slippery slope. UMG won't be the last label to demand a royalty on hardware, and now that the precident has been set, Apple may be UMG's next target. Graver still, O'Grady posits that the movie studio's will be next, and offers evidence that they are already warming up to demand tighter DRM restrictions on movies bought from the iTunes store. How far will UMG go and, what that means for device manufacturers is still up in the air but, recent statements by UMG's CEO show that he's ripe and ready for battle.
Rumors of Microsoft potentially making a play at becoming a part of the major label system though an aquisition of EMI are "odd and unlikely" one analyist says. This comes after some media speculation that the software giant was interested in a takeover of the music giant.
Microsoft has had a tough time with the labels lately. As the Zune nears retail, details are surfacing not only of Microsoft's agreement to pay Universal $1 per Zune sold -- an absolutely ludicris idea that amounts to Universal being paid for its existance, as near as I can tell -- but also of rocky licensing talks for Zune's subscription service. Where label reps have reportedly demanded between $6 and $8 per month in licensing fees for Microsoft to offer subscription music content on Zune, far more than rivals Yahoo! Music or Napster pay to offer a similar service.
The labels have shown time and time again that, when they smell money in someone's pockets, they pounce. Maybe it wouldn't be a crazy idea for Microsoft to become a part of the music business; They've already mastered anti-competitive practices and would only lack the knowledge required to drain the talent and lifeforce out of underperforming new artists, a skill I'm sure they could develop quickly and inexpensively.
Earnings are in for Real Networks third quarter of 2006 and they're checkin' some Real bank. Reporting record revenue of $93.7 million dollars, and a net income of $42.2 million puts them on pretty solid footing moving forward. I'm not hyped about the prospects for Real's attempt to take down Apple in conjunction with Sandisk and Best Buy but, I'm glad someone with a positive cash flow (whose name doesn't start with M S) is there to give Apple a little competition in the proprietary player+service tethered device market.
A bit more pessimistic Glenn Coolfer would like to remind us, "It should be noted that a generous chunk of that [is] the Microsft impact plus other items -- equity investment gains, stock-based comapensation expenses and tax impacts of the items -- [real] net income was $8.7 million." Gee Glenn, way to rain on our parade with logic, reason and an accurate look into some numbers.
Joining the "usual suspects" in decrying DRM is a new voice, but one you'll recognize. UK manager Peter Jenner (The Clash, Pink Floyd, Billy Bragg) is singing a song that many in the industry aren't going to like hearing. In an interview with The Register, Jenner goes on to explain how the big winners are going to be the indies. "he's [...] optimistic that for almost everyone else - indie labels, musicians, songwriters and budding entrepreneurs - as well as network providers - the future's going to be pretty bright. The Big Four know that the DRM era is nearly over - and within two or three years, he predicts, "most countries" in the world will have a blanket licensing regime where we exchange music freely, for a couple of quid a month."
Jenner is a bit of a legend and, whether what he says holds true, the fact that he's saying it is a pretty big win. He's a brash and uncharacteristic guy, but his points around where the industry is headed are on pretty solid ground. His interview should be required reading for anyone who's trying to divine where this big, lumbering digital music ship is headed thorugh the murky fog of the present.
The EFF take a bit deeper look at the rift between the RIAA and the publishing associations on this issue. The RIAA is overwhelmingly supportive of the new structure, a point which reminds us all that the interests of the record labels are not always in balance with the interests of the music publishers.
"The RIAA argues that extending the compulsory license best serves public policy goals, regardless of the narrow interests of certain copyright holders (publishers) who might want to hold back innovation. Of course, when the shoe is on the other foot, the RIAA is not so quick to embrace compulsory licenses; like the composers who decried the player piano and the compulsory mechanical license in 1909, the major record labels recoil in horror at compulsory licensing of sound recordings for digital and Internet uses. But make no mistake: the RIAA recognizes that a little compulsory licensed "piracy" can get copyright owners and artists appropriately compensated while leaving lots of room for innovation in both new technologies and new distribution channels."
The RIAA has repeatedly rejected any sort of compulsory licensing schemes that would make legal, trackable P2P services possible.
Could it really be that the anti-DRM message is starting to bubble up to the surface? USAToday, a paper not known for sticking its neck out or producing any ground breaking journalism has a feature today on how eschewing DRM might just allow the majors to wrestle control of the digital music market back from Apple.
"Soul legends The Temptations had a 1970s hit called Ball of Confusion, and no song better describes the digital music business in the 21st century. CD sales are in freefall -down 17% since 2003; online song trading is still rampant, big hits are fewer, record stores are seriously hurting. [...] Digital is widely recognized as the future of the music business. Digital sales are up 72% so far this year, and sales are expected to climb to $9 billion by 2009, from $2.8 billion in 2006, according to researcher In-Stat. But first, digital will have to overcome its compatibility growing pains. "You don't have to buy a camera made by YouTube to show a clip online," says Bill Pence, chief technical officer for online service Napster. "The industry is dysfunctional.""
The article cites Yahoo Music Chief Dave Goldberg, who may be the highest ranking anti-DRM voice available. It also takes serious AIM at Microsoft and it's new closed DRM strategy launching with Zune. ""Microsoft is thumbing its nose to its partners and millions of consumers," says Richard Doherty, an independent analyst with the Envisioneering Group. "I can't think of anybody doing anything like this in all the years I've covered consumer electronics.""
In the end, ease of use is winning customers easier than open formats but, will that always remain the case? Thinking back on the dawn of the PC age, most consumer complaints had the same root; Interoperability. Apple, Atari and Commodore couldn't compete in a world of compatible clones but it took a very long time for the battle to play out. Relatively speaking, we're still in the very early stages of the digital music revolution. The reality is, without government assistance in the form of pro-DRM legislation, the pro-DRM forces have a much tougher battle over the next decade than I think even the most anti-DRM among us realize.
The IFPI has gotten off their duff about releasing some sales figures for the year to date. What a shocker, digital downloads are up 106% over the same period last year, and CD sales are sliding for the 6th straight year.
"The explosion in digital music services, spurred by consumer demand and a widening array of delivery channels, has seen online and mobile music sales grow from $US134 million in the first half of 2004 to US$945 million in the first half of 2006," according to an IFPI statement.
What is a little shocking is that the US actually leads worldwide in digital downloads as a percentage of total unit sales, with 18 percent of this year's US tally so far belonging to digitally delivered tracks. CD and cassette (They still make those things?) sales are off 10%.
Postal mailing rates aren't exactly sexy, and they're certainly not digital music. However, BMG-ColumbiaHouse have been bilking selling customers CDs through the mail since CDs came into existence, and were quite happily mailing tapes through the mail long before that. So, postal mail actually does have a place in this digital music menagerie.
According to the PostalNewsBlog (there really is a blog about everything), "BMG Columbia House VP Clifton B. Knight Jr. says that the proposed new Postal rates and regulations "will make it impossible for us to remain in the business of selling music and video products by mail". Knight asserts that his company will face increases of "62% to 115%" in its product shipments. And if the company is "constrained to stop using the mail for product shipment", it will "inevitably reduce, if not entirely eliminate" its "use of mail for marketing and promotional purposes"."
Is this just a heavy postal mail using company pleading its case for special rates? Maybe. The fact remains that if you're looking for who's got the advantage going forward, the answer is digital delivery. With fuel costs rising, the obvious winners are the digital distributors who have no need for the USPS.
I've not seen many press write-ups of the Defective By Design Day of DRM but, the photosets on Flickr are great. Here's the Day of DRM highlight reel, but remember, you can fight DRM every day by sticking to the DRM free indie distributors and staying away from DRM crippled media. You may not get to listen to the new Christina Agulera, but at least you'll have your dignity.
A couple of weeks ago I told you about Real Networks hooking up with SanDisk to take on Apple and iTunes, with SanDisk cranking out the players and Rhapsody selling the tunes in an integrated lovefest.
Today BestBuy has announced it will join the two crazy kids in love by becoming their retail partner. The chain will begin selling the SanDisk e200R model, specificlly made for use with Rhapsody on October 15th. The 2GB e200R will retail for $139, a full ten bucks cheaper than Apple's 2GB Nano with roughly the same specs.
I'll have to say, a Sandisk e280"R" model (as yet unconfirmed) that put 8GB of space in my hand in conjunction with a subscription service and all you can eat downloads would make even my DRM hating knees a little wobbly.
Glenn Coolfer points to a great article in New York Newsday about Looney Tunes, a "mom and pop" run record store. How has Looney Tunes survived as others around them have failed? Focus and effort.
"When [the owner] first saw signs of people getting their music elsewhere, he joined in 1999 the Coalition of Independent Music Stores, a Birmingham, Ala.-based trade association of 28 independent record stores from around the country that have banded together to compete with bigger competitors. As a member, Looney Tunes gets more advertising packages, promotions, giveaways and exclusive products, such as band concert CDs."
The store promotes local artists, holds in store events and concerts, and generally does all the things you'd expect from a thriving local indie store. The article gives some fantastic ideas for competing with the majors, and frankly, a ton of advice that Tower Records could have taken to heart any time in the last 5 years and exponentially increased it's life expectancy.
Brick and mortar record stores aren't dead. It's not an easy task to keep one alive, but it's obviously more than possible given the right combination of management and creativity.
Business Week isn't the most likely place for tech gadget reviews, but they take the SanDisk Sansa to task in today's web edition. The review makes me wonder how many Apple fanboys are employed by Business Week.
Nailing SanDisk on a few nonsensical things, namely lack of iTunes compatibility (see tired, old, and not-SanDisk's fault) and a too-small-for-video screen (still larger than Apple's 1st gen Nano). The review isn't so much a review of the Sansa as it is a list of reasons why you should buy a Nano instead.
I'll have to admit, I've been watching the Sansa extra close as I prepare to throw for a new Mp3 player to replace my not-so-gracefully aging Creative Muvo2. The level of acrimony that SanDisk receives in print only goes to prove that Apple's iPod, like so many other things in life, is popular simply because it's popular.
Wonder-twin powers activate, form of, excessive DRM! Sandisk and Real have announced a partnership to deliver the next entry in the DRM market. The deal will couple a modified version of the Sandisk e200 device to Real's Rhapsody, just as Apple's iTunes and iPod are irrevocably linked.
Rhapsody is currently based on the (now vulnerable) Microsoft PlaysForSure system, and will apparently remain so for users of existing devices. However, with Zune showing a strategic shift away from PlaysForSure by Microsoft, it's anyone's guess how long the platform will continue to be viable.
"This is kind of a way for both Rhapsody and SanDisk to say, `Well, if you're gong to compete with [us], guess what, we're gong to compete with you,' " said analyst Phil Leigh of Inside Digital Media.
Hypebot says of the deal, "The stated goal of all of this may be ease of use, but the hidden demon is that purchased and rented music could be stuck within a single company's system and consumer choice limited to those offered by that provider."
The grapevine says some at CES are being told Microsoft will no longer develop PlaysForSure, its proprietary DRM system, a move Microsoft swore up and down it would never make when the company failed to include PlaysForSure support in the Zune line. 
Jupiter Research has done some 
When UMG 
Rumors of Microsoft potentially making a play at becoming a part of the major label system though an aquisition of EMI are "odd and unlikely" 
Earnings are in for Real Networks third quarter of 2006 and they're checkin' some Real bank. Reporting record revenue of $93.7 million dollars, and a net income of $42.2 million puts them on pretty solid footing moving forward. I'm not hyped about the prospects for Real's attempt to take down Apple in conjunction with Sandisk and Best Buy but, I'm glad someone with a positive cash flow (whose name doesn't start with M S) is there to give Apple a little competition in the proprietary player+service tethered device market. 
Joining the "usual suspects" in decrying DRM is a new voice, but one you'll recognize. UK manager 
I wrote last week about the 
Could it really be that the anti-DRM message is starting to bubble up to the surface? USAToday, a paper not known for sticking its neck out or producing any ground breaking journalism has a feature today on how eschewing DRM might just allow the majors to wrestle control of the digital music market back from Apple. 
The IFPI has gotten off their duff about releasing some sales figures for the year to date. What a shocker, digital downloads are up 106% over the same period last year, and CD sales are sliding for the 6th straight year. 
A 
Business Week isn't the most likely place for tech gadget reviews, but they take the SanDisk Sansa to task in 
Wonder-twin powers activate, form of, excessive DRM! Sandisk and Real have announced a partnership to deliver the next entry in the DRM market. The deal will couple a modified version of the Sandisk e200 device to Real's Rhapsody, just as Apple's iTunes and iPod are irrevocably linked. 
