The strange world of digital music

The Wall Street Journal reports today that digital music also-rans RealNetworks and SanDisk are teaming up to launch a proprietary music downloading system to compete with Apple’s dominant iPod-iTunes system. This news comes on the heels of Microsoft’s announcement of its proprietary Zune music system, launched in close collaboration with hardware maker Toshiba. Samsung is also preparing to enter the market with its own proprietary system, in partnership with MusicNet, and Sony, too, is peddling a proprietary system. As Om Malik points out, Apple’s “walled garden” strategy, wherein hardware, software and content are tightly integrated, has long been mocked by competitors, who have argued that an open system based on standardized, interchangeable hardware and software components would ultimately triumph, as it did with personal computers. Now, those same competitors are abandoning open systems, like Microsoft’s “plays for sure” system, and building their own walled gardens.

What’s particularly fascinating here is how the market’s development contradicts the received wisdom about the evolution of technology markets. As Clayton Christensen argues in his book The Innovator’s Solution, complex technologies tend to evolve from proprietary “integrated architectures” to open “modular architectures” as they mature. An integrated architecture, controlled by a single company, is necessary to make a new technology perform well enough to be embraced by customers. But when the performance of the technology becomes “good enough” for the general market, a modular architecture takes over, as it enables lower cost production and greater flexibility and also allows many companies to contribute innovations.

“When there is a performance gap,” Christensen explains, “companies must compete by making the best possible products. In the race to do this, firms that build their products around proprietary, interdependent architectures enjoy an important competitive advantage against competitors whose product architectures are modular, because the standardization inherent in modularity takes too many degrees of design freedom away from engineers, and they cannot optimize performance.” But “ultimately, companies that have excelled in the race to make the best possible products find themselves making products that are too good.” At that point, “nonintegrated competitors,” who are able to “introduce new products faster because they can upgrade individual subsytems without having to redesign everything,” begin to take over the market, “disrupt[ing] the integrated leader.”

In a Business Week interview in January, Christensen predicted that the digital music market would follow this same path, dooming Apple’s integrated iPod-iTunes system. When asked whether Apple could sustain its dominance, Christensen replied:

I don’t think so. Look at any industry – not just computers and MP3 players. You also see it in aircrafts and software, and medical devices, and over and over. During the early stages of an industry, when the functionality and reliability of a product isn’t yet adequate to meet customer’s needs, a proprietary solution is almost always the right solution – because it allows you to knit all the pieces together in an optimized way.

But once the technology matures and becomes good enough, industry standards emerge. That leads to the standardization of interfaces, which lets companies specialize on pieces of the overall system, and the product becomes modular. At that point, the competitive advantage of the early leader dissipates … the same thing will happen in the iPod world as well. Apple may think the proprietary iPod is their competitive advantage, but it’s temporary. [Apple’s current situation is] comparable to the fork they faced when they chose not to open up the Mac in the 1980s, when they let Microsoft become Microsoft.

But that prediction is not, at least so far, panning out. In fact, suppliers are actually abandoning attempts to standardize interfaces and instead building their own nonstandardized proprietary systems. As the market matures, it is getting less modular.

Now, this still may prove to be just a temporary aberration – modularity may still prevail. Or the digital music market itself may be an aberration. It certainly has some unusual qualities. For one thing, it hinges on copyrighted content (songs), and the owners of that content want to control, through digital-rights protection schemes, customers’ ability to copy it. At the same time, most of the systems support an unprotected version of the content – MP3 files – which remains, by far, the most popular version. MP3s, in other words, form the gap in the garden walls – a standard module shared by otherwise proprietary systems.

But even such unusual characteristics don’t explain away the strange path of evolution of the digital music market. What we’re seeing here is a pattern of technological progress that goes against the grain of what’s expected. I think what it shows is that the advantages of standardization may be overrated, at least in certain consumer markets. Given the existing standards in computer hardware combined with today’s flexible global supply chains, a single company, like Apple, may be able to design a proprietary system that is modular enough to counter most of the benefits of open systems while also maintaining the performance advantage that a closed system can provide. At the hardware level, after all, the iPod is constructed of standard modular components like flash drives and USB ports, produced by outside suppliers. It’s the software that makes the system proprietary.

And it surely doesn’t hurt that it’s easier to fine-tune the fashionability of a complex consumer product when you control all of its parts. Elegance matters.

28 thoughts on “The strange world of digital music

  1. Mickeleh

    There are those who make markets, and those who try to explain how markets are made. This is just a iteration on Shaw’s adage, “He who can, does. He who cannot, teaches.”

    I think you’re on to something by noticing that the unprotected MP3 file provided a true plays-for-sure open standard before Apple showed up. Then Apple managed to change the game by creating new customer value that incorporates the open standard and moves beyond it. Who isn’t satisfied by Apple’s offering? Mainly Apple’s competitors. So, they’re delivering variations on the Apple formula. Have they discovered new value that the market will reward? We’ll just have to see how the customers vote.

  2. David Ramos

    Christensen’s analysis falls apart, if one considers the practical considerations of licensing the Mac in the 1980s. Even today, it is difficult to separate the hardware and software components of the Macintosh. Arguably, the most visible differences between Apple Macs and competing computers come from industrial design and hardware engineering.

    But in the mid 1980s, technical limitations meant that it was impossible to separate the Mac operating system from Mac hardware. In those days of expensive memory, Apple engineers implemented large parts of the operating system in hardware ROMs. The very ideas behind the interface depended on high-resolution black-and-white screens, in a period when most computer monitors displayed blocky color images. No other computer in the world could run the MacOS, not even the Apple II series. Even if Apple had wanted to do so, they could not have licensed the Mac operating system for use on IBM PC clones.

    And why would they? After all, Apple was, and still is, a hardware company. No one else made hardware that could match the Mac, in the 1980s; perhaps Apple could have licensed the hardware platform, but why endanger the company’s lifeblood by gambling on software licensing revenues?

  3. Frank Hecker

    The problem with Christensen’s predictions regarding Apple and the digital music business is that he’s ignoring his own theory, which dictates that you have to also account for non-market forces, in this case the willingness of government to bias copyright laws to favor incumbent vendors who want to impose DRM-based restrictions.

    As it happens, I commented on this very issue on one of your prior blog posts. To repeat what I wrote then:

    … the problem with present-day music and media players is that interoperability and standardization are artificially impeded by DRM schemes. This puts a premium on a vendor like Apple that can offer a integrated solution …

    In the absence of DRM I see no reason why the music and media player market wouldn’t evolve to include modular “mix and match” devices, just as Clayton Christensen contends…

  4. Michael Chui

    Part of the reason Christensen’s analysis doesn’t work is because, unlike the other cited industries, the music business has artists. However, that in itself isn’t going to break its back, because he remains ultimately correct: thus the advent of the JPEG, PNG, PDF and MP3. With artist-centric industries, you’re likely going to have a long period of cyclical modularity because the name brand is too powerful to disappear into a standard.

  5. Ben

    It’s easy to analyze Apple’s products through Christensen’s theory:

    Apple has the philosophy that nothing is ever “good enough.”

    Hardware, software, devices – Apple integrates to create better products (and create lock in).

    When desktops became “good enough” for most business users, Apple lost a lot of market share. For those who always demanded top of the line, however (most notably non-gaming computer enthusiasts), the macintosh was always a favorite.

    Right now, portable audio devices/services aren’t yet “good enough.” The true key to the “iPod Killer” won’t be beating it on functionality, but waiting until the iPod does more than people really need. Apple is actively preventing this, as they keep a range of price points and functionality.

    The question is not “will the iPod reign forever” but “when is the iPod good enough?”

  6. Chris Anderson

    Great post, but I think the answer is very simple: DRM. Without DRM, I imagine the market would have taken the usual path of emergent de facto standards. But DRM is so messy that it’s overwhelmed everything else, making it the tail that wags the usability dog. You hint at this but don’t give it enough weight, I think.

    BTW, I’m not against DRM per se. I’m only calling it out here because I think it completely explains the industrial structure anomaly you rightly identify.

  7. Nick Carr

    Frank and Chris,

    Yeah, I think you’re largely right about the importance of DRM, though there’s no reason that you couldn’t have a single DRM standard. Maybe, in giving Apple control over the DRM for iTunes, the record companies replayed IBM’s mistake in giving control over the PC OS to Microsoft: they gave away the keys to the kingdom without realizing it.

    Still, I’m not sure that “completely explains” what’s going on. When you think about it, the proprietariness (if that’s a word) of Apple’s system lies in the software, which has zero marginal production costs. The hardware is actually made up of standardized modular components, and it’s assembled in some dirt-cheap Asian factory and shipped in dirt-cheap containerships. So the traditional cost advantage gained by open systems doesn’t seem as strong here as it would be if you had proprietary hardware interfaces. When Apple lost the PC market, if I’m recalling correctly, it had a lot of proprietary hardware as well as software. That doesn’t seem to be true with the iPod. I haven’t thought this through entirely, but there does seem to be something to it – another anomaly related to the odd economics of software.

    Nick

  8. Sid Steward

    As barriers to entry lower, more junk flows into the market. Observing the transformation of the WWW into the World Wide Wasteland (by spam, fraud and junk), I held that consumers would someday clamor for walled gardens maintained by trusted brands. Dig it? It fits w/ Nick’s observations, anyhow.

  9. Chris Anderson

    Interesting points, but I would have thought that the consumer benefit of an open ecosystem would have outweighed the economic factors for the manufacturers. I think this is a relatively cut-and-dried case of IP demands leading to case of what amounts to market failure. Closed systems are the parallel monopolies that the IT industry falls back on when open systems don’t work.

  10. Sid Steward

    Chris-

    Maybe customers can benefit from proprietary systems? I think so.

    Proprietary != monopoly, since others can belly-up and (with some investment) create their own system — that’s exactly what these Apple imitators are doing.

    And consider: who would invest money in an open system where competitors could poach your customers? Investment money is attracted to the greater returns of proprietary systems, and greater investment means better services, content and hardware. That means happier customers.

    True, proprietary systems can be inconvenient to customers. The increased competition will help, here. Personally, I hate lock-in. I have come to appreciate its relevance in the greater picture, however.

  11. Brian O'Hanlon

    Quite a nice discussion guys.

    It is really funny, because from my own extensive study of Christensen’s model, I think one case from Clay’s own literature, stands out as being very similar to the Ipod product. The IBM personal computer.

    In the 1980s, when IBM was launching its own disruptive innovation – the IBM personal computer – IBM decided to stick to its own competency, the integration of the parts. But what happened, was two more disruptive companies, Intel and Microsoft ended up capturing most of the profits in the personal computing industry. IBM could easily have developed an operating system and computer chip. But it chose to outsource those components, because IBM’s previous history told them, that component suppliers lived a miserable profitless existence. In the same way, Microsoft’s own history has told it the same thing. Apple however, decided to keep many core competencies in house, hardware and software, a vertical strategy which Microsoft is not used to. Apple ended up capturing most of the profits in the market.

    I have to point out to people here, that Clayton Christensen’s real talent, is building the robust models to understand innovation – not implementing them.

    Being very intelligent, Christensen made his own models flexible enough, that they allow a lot of room for discussion too.

    For instance, Christensen can never decide on which side of the fence, the Linux operating system falls.

    Whether it is integrated or modular.

    The Red Hat CEO, and other Linux flavour CEOs will claim, they wipe up some special sause, using Linux as a vanilla base.

    On the other hand, Linux could be seen as a very tightly integrated system, around which many modular components can plug into.

    Microsoft has gained loads of value, by optomising its operating system – but on the other hand, it will not allow the makers of mp3 players etc, etc to optimise their products.

    They have to fit around Microsoft. I think James gosling refers to it, as ‘reading tea leafs’. That is how Microsoft preserves its position in the value added sector of industry.

    Clay has never wasted too much of his own time, trying to understand the latest new products in depth, to actually apply his own theories correctly.

    The real benefit from clay, is the durability and robustness of the model of innovation that he can build.

    He has merely supplied us with the raw theory, into which we can fit whatever we want. Like a good lego set, is up to us to figure it out.

  12. Thomas Lord

    Isn’t it safe to say that most music sold by any of these services comes from a small oligopoly of major labels?

    The major labels have pretty exclusive access to the main promotional channels like radio and sync-right sublicensing. Cracks are forming in that control but very slowly. Consequently, most artists that people have heard of, most tunes they look for, are and will continue to be from the major labels for years to come.

    The labels (unfortunately) have no legal requirement to allow others to sell their catalogs. They are legally required to allow public performance. They are legally required to allow cover-song performances. (Both for standard, legislated fees.) But they are free to deny a right to sell downloads. This is a legal aberition — it makes no sense — but it is where we are.

    So the labels hold the power of the necessary contract negotiations over would-be music-site developers, at least those who would sell popular music.

    It benefits the labels (arguably, plausibly) to aim, at this late stage, for as many repeat sales as they can. People say that consumers will be pissed in a few years when they want to move all of their iTunes to a new device and discover they have to buy them all again. Some will be pissed, sure, but I predict that most will upload their tune-list to some service, pay a “conversion fee”, and download for the new device.

    Yup, major label margins will go down and down — but very slowly and while volume of sales goes up. And, yup, there will some incremental progress on developing new promotional channels and setting up new labels (have you looked at magnatune.com?) But there are quite a few years left (barring some surprisely sane court decision or legislation) during which they will continue to exercise their oligopoly power over hardware manufacturers and download sites. (Hint to courts: download-for-pay is public performance, not distribution.)

    Microsoft attempted to obtain the same sweet position with respect to software and hardware retailers and that, to a first approximation, is what led to their ongoing brush-passes with anti-trust laws.

    -t

  13. Frank Hecker

    Nick,

    Re your comment that “Maybe, in giving Apple control over the DRM for iTunes, the record companies replayed IBM’s mistake in giving control over the PC OS to Microsoft…”, I think that this is exactly what the record companies have done, as I’ve written previously.

    I should actually say “the major record companies”, as independent labels in combination with services like eMusic have largely avoided the Apple lock-in problem by offering their music in DRM-free MP3 format. In particular, eMusic can compete against the iTunes Store on a relatively even playing field, which is perhaps why it’s now the second largest music service. (I’m a long-time eMusic subscriber, and find it so interesting and useful that I spend a fair amount of my spare time blogging about it.)

    Frank

  14. Nick Carr

    I would have thought that the consumer benefit of an open ecosystem would have outweighed the economic factors for the manufacturers.

    Like Sid, I don’t take it as a given that, in this case, the consumer would benefit from an open system. As Christensen points out, the reason proprietary systems tend to fall victim to open systems is not because they lose their performance advantage but because the advantage loses its importance to customers. So the more efficient and flexible system wins. At the performance level, though, the proprietary system will still tend to be superior.

    It’s important to remember that what consumers really value in music players is the music – the device and its software are in the end just a delivery mechanism for the music. In a similar way, what consumers really value in PCs are the applications – the device and its operating software are just a delivery mechanism for the apps. One of the main reasons the Mac lost share to Windows PCs, along with price, is that there was less application software for Macs. There isn’t the same constraint with music players. Musicians don’t have to record songs differently for different devices (as software makers had to rewrite their programs for different operating systems), so closed and open systems are on equal footing when it comes to tapping into the creativity that really matters to consumers: the creativity of musicians. So if a closed system isn’t at a cost disadvantage (and up to now the iPod hasn’t been) and if it is on equal footing when it comes to running content (songs), then its performance advantage over an open system will tend to win the day. (And in performance I include fashionability.)

    So, in short, you’re going to have to convenice me that there would indeed be a consumer benefit to an open system.

    Nick

  15. Brian O'Hanlon

    Apologies here guys, I am just racing to catch up with this discussion properly.

    I have already posted up some thoughts above. But then I zero-ed in, on a statement above, about Apple being a hardware company, which I think needs to be addressed. So I penned some of my thoughts together quickly, over here:

    http://

    http://www.cooperationcommons.com/

    cooperation-commons/

    small-world-effects-keystone-strategies-and-cooperation-1

    Thanks, and apologises for stuffing in these slants of mine, but trying to play catch up here in reading the various comments, and arguments.

  16. Al chang

    It’s working out exactly as the mac and pc did.

    But there’s nothing inherent about what needs to be open and closed to deliver the most value. Commodity hardware, much end-user software, and music retailing have all become low-margin businesses.

    In the 80s and 90s, with PCs, proprietary hardware gave way to modularity to drive down integration costs. The software side stayed proprietary with 85-90% market share for an API owned by one company and allowed publishers to provide a variety of software on a single platform.

    In 2006, the hardware side (ipod) has commodity costs on the manufacturing side with all the cost advantages. The highest cost parts in the BOM are essentially commodities (disk, flash ram, displays, d/a chips, etc). Flexible manufacturing figures out the interfaces to the parts. That’s why hardware teardowns emphasize the component costs. The assembly/integration costs are negliable (or at least similar for everyone). The value moved to the design. And when a wide product range confuses a public who want to be trendy (trendy=owning the same thing as everyone else), it’s not clear that more modularization in this part of the chain achieves anything.

    The software side is iTunes and WindowsMedia, the publishers are the music labels.

    The platform is thin though, essentially a DRM wrapper. As a hardware manufacturer (ipod), they’re thrilled there’s also an open platform (MP3) with literally identical software (music). As a retailer (itunes store), they’re irritated but the store doesn’t really make money and works as a hedge for the day where they’ll need to lose control of the hardware. But not today.

    The dock connector and compatibility logo is simliar to what intel/amd essentailly owned with CPU/BIOS/Chipset to control. This is probably the easiest piece to assault if you could ever get tens of manufacturers to agree on specs and royalty payments.

    iTunes is a already is a combination of licensed software components (GEAR for the burning, Gracenote for the database, Dolby/Fraunhofer for audio, Whitecap for visualization).

    There’s also the implementation failure explanation. Apple software (iTunes) and hardware (iPod) are made out of commodity parts and working interfaces exist for products at that level. The interfaces for a complete digital music system are either broken or non-existent. WindowsMedia is burdened with the responsibility of being the system media player, as well as the least common denominator API for any of hundreds of hardware devices requiring media interfaces for Windows. No widely deployed common dock connector exists. After that’s solved, a competitor would need to address the most important choke features of apple’s 70-80% market share: compatibility with the growing number of iPods, iTunes DRM’d music, and high-price accessories (read: cars) with dock connectors.

    Microsoft and Intel owned choke points with high market share in an eco-system which fuctioned for decades. There’s no inherent reason simliar choke points can work in 2006 owned by a different company.

    When Windows APIs gets traction, or flash for cell phones is so cheap that it overwhelms any convenience advantage of the apple solution, it would take a microsecond to license iTunes to hardware manufacturers while including a restriction on competing systems. At which point it’ll probably be a good time to own a solid IP portfolio and a music retailing platform, but I suspect music margins will still remain terrible.

    Christensen could eventually be proven right. It could all be an implementation issue.

    Until then, the customer (and Apple’s shareholders) seem best served by a proprietary system.

  17. Jeff Schrock

    mac and pc history is a bad analogy.

    both pc’s and mac’s are general purpose devices. you can run lots of applications which often require continuous innovation at the subsystem level. in this market, open systems with best of breed components built on standards rule the day.

    mp3 players are primarily single purpose devices. you listen/watch personal media. Nobody is buying ipods for video, photos, or podcasts eiter….those are free features. In this consumer market, simplicity rules the day. Consumers don’t need music from another store because the DRM content is all the same and all priced at $.99. It’s good enough for the mainstream.

    I think it’ll get tricky if (when?) Apple tries to leverage it’s market position into new profit streams. It would be fairly simple for Apple to allow artists to upload their content into iTunes for a 50/50 rev split instead of the current 75/25 split in favor of the music oligarchs.

    Opening up / standardizing on DRM would have ZERO impact if content prices remain low. For now, proprietary DRM benefits Apple considerably.

  18. Thomas Lord

    Nick, you miss the point. The consumer benefit — a true and technologically trivial freedom to move music around — is real. The problem is on (a) on the supply side of known recordings and (b) on the demand side of new recordings. Factors external to distribution and player technology give the major labels control of (a) and (b) for many years to come. The death of that control is clearly on the horizon but will take years to achieve absent changes in things ranging from FCC licensing to compulsary licensing regs to out-of-left-field surprises from minor labels. Basically, the major labels get to retard culture for another decade, plus or minus a few years, and there’s a lot of money to be made in the process. That’s all that’s going on.

    -t

  19. bunkerbuster

    Culture is not all that’s being retarded. Sony’s manufacturing technology base could put Apple’s to shame, yet its Walkman franchise was obliterated by the I-pod, simply because Sony initial insisted on proprietary control of music formats for its devices.

    The same pattern emerges in video games, where Sony sees its PlayStation 3 game as much as a vehicle for establishing its Blu-ray format and priming sales of its HDTVs as a device for use in playing games.

  20. Nick Carr

    The consumer benefit — a true and technologically trivial freedom to move music around — is real.

    Well, I’d say it’s real in theory. In actuality, I see no evidence that the mainstream of customers consider the current usage restricitions a constraint. With iTunes, they can play DRM-encoded tracks on their iPod(s), they can play them on their computers, they can play them through speaker/amplifier accessories, they can stream them to their home stereo, they can play them (increasingly) through their car stereos, and they can burn them onto CDs. With slightly more effort, they can turn them into unprotected MP3s to share with friends or put on non-iPod players. And if they want still more flexibility, they can avoid the iTunes store and just use MP3s from the get-go (as most people do, in fact.) That degree of flexibility in use is more than enough for the great majority of human beings.

    I’m not making an ideological case for copy-protection. I’m just looking at the market in practical terms. And in practical terms, I don’t think people feel oppressed by the current regime, and if tomorrow Apple stripped DRM off all the songs it sells I don’t think the vast majority of customers would even notice.

    Nick

  21. Anthony Cowley

    While I’d like to make an argument about the difference between the software industry and those that are rooted in tangible goods, I think this case is quite possibly rather more straightforward: relevant market forces are swamped by the power of licensing restrictions, and modular implementations of the technology still aren’t good enough. The first point has been brought up a lot here, but I think it’s quite possible that the open, standards based, modular architectures just don’t work yet. Today, Wired posted a review of a new SanDisk player. The conclusion?

    “And while I object intellectually to being locked into Apple’s system, at least it works.”

    So maybe this market isn’t so different, it’s just that Apple’s competitors rushed to play the modularity card before it was technologically reasonable to do so.

  22. Nick Carr

    Sukumar Rajagopal has alerted me to an excellent post that he wrote on this subject in May. It’s well worth reading, as is a comment posted last year by Adobe’s Bill McCoy, which Sukumar links to. Both believe that Christensen is mistaken in seeing iPod-iTunes as a proprietary system, arguing that in crucial respects it’s modular. It may be that, in the computer business today, there is rarely a clear divide between open and closed architectures; the distinction has become academic. What’s most interesting now may be the way they blur.

  23. Thomas Lord

    Well, I’d say [the benefits of removing technological barriers to copying and playing are] real in theory. In actuality, I see no evidence that the mainstream of customers consider the current usage restricitions a constraint. [….]

    I’m not making an ideological case for copy-protection. I’m just looking at the market in practical terms. [….]

    Oh, well, heck then, we agree. For example, when we get to a stage where lots of customers want to migrate large personal collections from one DRM regime to another, services will appear that do the conversion for a fee, collecting demographic information in the process, and paying off the big labels and possibly the respective music platform vendors. For the consumers, that will just feel very convenient and cheap.

    Some things that will bring about change:

    The big labels are in a very strong position in all aspects but one and a half. Their start-up costs for new artists and new recordings are way too high and will be so indefinitely (that’s one). The value of the MSM as the primary promotional channel is, thanks to this interweb thingie, slowly fading (that’s the half). Those weaknesses add up to what we see going on:

    Minority labels are working hard at novel, low-cost A&R and at redefining the product.

    Low-cost A&R starts as simply as having a web site and getting musicians to submit distribution-ready recordings. You can find several labels that will publish essentially all comers and a few that emphasize editorial selection. All of them are taking advantage of the now near-0 technological costs of producing decent recordings and of the rapidly ramping-up capacity for on-demand, just-in-time production of even very small runs of physically embodied recordings. It used to be that bands had to lay out thousands just to have decent CDs to sell at shows or in a few shops or on-line — now they *can* do it for a very few hundred. Of course, music purchased by download has a very low marginal cost of production.

    Small labels are redefining the product (and the promotion channels) in a few ways. For one thing, there’s a lot of interest in selling sublicensing rights (for use in films, etc) as one of the main moneymakers. For another, obviously the net creates alternatives to radio networks for gaining audience — a common and key element is licensing that permits non-commercial sharing. Finally, there’s increasing interest in moving away from the album format — e.g., DGM’s fondness for selling from a huge catalog of recordings of live performances.

    The net effect is to build up DRM-free catalogs at a faster rate than the big labels can grow their catalogs. So the market power of big labels is doomed, under their current business models, but looks to fail quite slowly (with plenty of money on the table between now and then).

    As new catalogs get larger, think about, for example, college students. Given their druthers it seems they’ll collectively pay a bit into the system, they’ll be culture-leaders that cause others to pay more into the system, and they’ll share a lot. The big label models (and associated hw, etc) need to actively interfere with those impulses — even to the point where schools are enrolled to help squelch sharing. The small label models, taking revenue from commercial distribution and sublicensing but needing promotional channels, actively encourage those student impulses. So it looks to me like there is some tipping point on the horizon where we move to a situation where, sure, you maybe can’t grab and share Hendrix or the latest Boy Band but, so what, there’s all this other great music to serve as a replacement. At that point, slicker player technology, with fewer obstacles to using your personal collection, will seriously take off.

    Make more sense now? Current generation players and distribution mechanisms are basically a jukebox consortium controlled by a clique of friendly goodfellas. This arrangement will pass into history because it can’t afford to develop catalogs fast enough and monopolize promotional channels well enough to keep up.

    -t

  24. Gilbert Pilz

    While it may be true that it is DRM that is driving the trend towards closed systems, there’s an opposing reaction as well. Namely the desire for open systems is the primary driver for breaking the current DRM systems. Both PlaysForSure and iTunes have been broken (by FairUse4WM and HYMN respectively). I assert that the primary motivation of the people developing and supporting these pieces of software (and others like them) is the desire to use online music services in conjunction with devices that do not support the DRM mechanism mandated by those services. If there were a single DRM standard (or a set of standards) that was ubiquitously supported across all media devices I doubt if most people would go through the extra step of stripping the DRM from their music files. Apple et. al. are making things more difficult for themselves by creating a need to break the DRM that underpins their services.

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