Music Industry in Flux
Monday, February 24, 2003; 9:25 AM
The seriousness of the threat is plain to see: Industry execs say illegal pirating of songs is the main reason why compact disc sales declined last year. "From 2001 to 2002, some 62.5 million fewer [CDs] were sold -- a decline of 9 percent to 649.5 million, according to Nielsen SoundScan. Online swapping of songs is growing at a crippling rate, forcing almost every corner of the music industry to try to divine exactly what role, if any, the CD will play in a future dominated by Internet delivery and competition from popular new technologies like the DVD," The New York Times reported in an article yesterday. "Most analysts and industry executives agree that selling music online is the future. But they say it will take at least two years for companies to devise a business plan for it that makes financial sense." The industry better figure out its strategy soon. Research firm Ipsos said late last week that despite efforts to thwart peer-to-peer file sharing, its research found that half of all teenagers and one-fifth of Americans age 12 and older have downloaded music of MP3s from a file-sharing site.
• The New York Times: Twilight of the CD? Not If It Can Be Reinvented (Registration required)
• CNET's News.com: Fingerprinting P2P Pirates
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"We are definitely in the middle of a transition. It was always a packaged-goods business, but that is changing. We are slowly moving forward," Doug Morris, Universal Music Group's chief executive told The New York Times. Washington Post technology columnist Leslie Walker wrote recently about online music subscription services offering up deals to get people to pay up for songs at a discounted price, instead of using free Kazaa-like services. Listen.com's Rhapsody service has "announced a six-week promotion that allows subscribers to copy songs to CDs for 49 cents a track -- half the regular price of 99 cents. ... Pressplay, another Web music service (www.pressplay.com) ... now lets subscribers create custom playlists based on songs in their own collections." Meanwhile, Kazaa, whose parent company Sharman Networks is fighting a legal battle over whether its site aids piracy, released a new version of its software that "showcases more content available for purchase on the service," Walker wrote.
• The Washington Post's Leslie Walker: Online Music Sites Seek Paying Customers
RealNetworks chief exec Rob Glaser thinks the music industry can stop online piracy by providing people with alternatives to popular file-sharing sites, according to an article on BBC News Online. "If you just shut services down, like shutting down Napster, others will pop up unless you offer a commercial alternative," Glaser told the BBC. Of course, Glaser is touting one of his company's products: new software that RealNetworks says will let companies distribute music and videos online, without the fear of piracy. Glaser told the BBC that nearly 1 million subscribers dole out an average of $10 a month on the site to listen to tunes or watch video through the site (Kazaa says on its site that its file-sharing software has been downloaded more than 191 million times). Glaser also chairs MusicNet, a paid music service, co-owned by AOL Time Warner.
• BBC News Online: Real Boss Tackles Online Piracy
Speaking of AOL Time Warner, The Wall Street Journal, citing unnamed sources, reports today that the media giant is in talks with U.K.-based EMI Group about the sale of a majority stake in its Warner Music unit -- a deal that could be worth between $3 billion and $4 billion dollars. "While the talks are at an early stage and no deal is imminent, they are the clearest signal yet that the long-anticipated consolidation in the music industry could be nearing. Buffeted by declining sales, largely due to Internet piracy, several of the big music companies are engaged in an elaborate mating dance. Many of the discussions among the companies have focused on ways to save money by teaming up in areas like marketing and distribution. In some instances, as with Warner and EMI, the talks also have encompassed full-blown merger prospects."
• The Wall Street Journal: AOL Is in Preliminary Talks With EMI on Warner Music (Subscription required)
Other companies are also hawking technology to thwart illegal file sharing. A Los Gatos, Calif.-based company, Audible Music, is testing a service through the University of Wyoming's computer network, tracking every song or video trade made online on the school's network. CNET's News.com reports that the company isn't blocking individual file trades yet. "But that's the next step. As the company begins testing its service with more universities, corporations and small Internet service providers during next few weeks and months, this peer-to-peer monitoring and blocking technology threatens to open the next front in the online piracy wars," the news site said.
• CNET's News.com: Fingerprinting P2P Pirates
Meanwhile, Hollywood movie studios are starting to take the online piracy problem more seriously. The Los Angeles Times reports today that the studios "have started a new round of private meetings with high-tech companies and consumer-electronics manufacturers to explore ways to stop unauthorized recordings. This time, the issue is how to preserve anti-copying signals on a digital television show, online video or DVD when converted from digital to analog. That kind of conversion, which has to happen before a digital program can be sent to the vast majority of TV sets, is inherently fatal to digital copy-protection techniques. Years from now, when consumers have digital TVs that connect digitally to set-top boxes and recorders, the potential problem goes away. In the meantime, the studios' fear is that the mixture of analog and digital devices in homes will allow their movies and premium TV programs to be copied digitally and distributed freely via the Internet."
• The Los Angeles Times: Studios, Firms In Piracy Talks (Registration required)
• The St. Louis Business Journal: 321 Studios Targets Illegal Use of its Software
Dean Kamen, father of the much-hyped Segway Human Transporter, is pushing to get the federal government to buy some of
the electric super scooters -- "so U.S. Special Forces can scoot into battle
and rangers can zip through national parks," The Washington Post reports. "The inventor, a proponent of free markets, also wants Congress to help him sell more Segways to consumers by funding projects that would create paths for the scooters in cities, and by providing environmental tax credits to people who buy them. It's all part of a broader campaign by New Hampshire-based Segway LLC to boost sales of the ballyhooed transporters, a product that Silicon Valley venture capitalist John Doerr once called 'bigger than the Internet.'"
• The Washington Post: Lobbying To Put the Segway on Profit Path
The invention has not hit the big time as so many predicted. According to Wired: "Segway's breakout year wasn't even a few months old before bad news started to hit. Kamen was pushing the scooter to corporate customers amid a period of belt-tightening that has yet to let up. Supposedly obvious buyers like Federal Express said no thanks, and others offered nothing but mushy maybes. A smattering of government agencies and corporate clients are testing the vehicle, but none have agreed to any
bulk purchases. Kamen's largest customer last year was Walt Disney,
which ordered four dozen machines for its theme parks and cruise ships. Meanwhile, the company decided to delay offering its überscooter to consumers until safety and training issues could be ironed out."
• Wired: Segway's Breakdown
Big retailers and most states are building a consensus on how to collect sales taxes on e-commerce transactions, a prospect that worries lots of small businesses that sell over the Internet. "This is really going to put the hurt on the little guys," Reyne Haines, founder of JustGlass.com, an online sales site for glass collectibles, told washingtonpost.com. "With the costs and all the paperwork that would go into that, I could see where this could get to the point where many of our
vendors feel it's no longer worth it for them."
• washingtonpost.com: Small Businesses Wary of Internet Sales Tax Plan
Retailing heavies like Wal-Mart don't think the new online tax will slow
down sales. In fact, last week Walmart.com's president John Fleming said his unit had not lost business after it started applying sales taxes.
• Reuters: Walmart.com Says No Slowdown From Web Sales Tax
Meanwhile, big retailers who hope that by collecting sales taxes now will excuse them from failing to do so in the past may not be out of hot water. The New York Times reported Saturday that "Illinois has joined lawsuits against Wal-Mart Stores, Target, Office Depot and three smaller retailers, accusing them of failing to collect taxes on Internet and catalog sales." Illinois Attorney General Lisa Madigan said, "These are companies that should be paying online tax for their sales in Illinois. Here in Illinois, we're looking at a $2.5 billion to $5 billion budget deficit. We have to bring in revenues where we can. Potentially, there's a lot of money owed to the state."
• New York Times: Illinois Joins Suits to Collect Taxes on Internet Sales (Registration required)
Microsoft's legal battles with Sun Microsystems continue. The company on Friday filed a counterclaim against Sun, claiming that Sun broke an earlier settlement over the Java programming language that gave Microsoft
the ability to distribute its own version of Java. A federal judge recently Microsoft to distribute Sun's version of Java in its latest Windows versions. That order is on appeal.
• InfoWorld: Microsoft Files Counterclaim Against Sun
• CNET's News.com: Microsoft Fires Back At Sun In Java Case
Meanwhile, Microsoft is about to secure some new Manhattan office space. The
New York Daily News reports that the software giant is negotiating a lease
for 100,000 square feet of space on Sixth Avenue. The lease could be inked
within a month, unnamed brokers told the paper. Microsoft's current New York
digs are on Eight Avenue, but its lease expires in August.
• The New York Daily News: Microsoft Expanding City Space
Bloggers pride themselves on keeping their Web logs up-to-date. But surely bloggers can't stay at their keyboards 24-7, so the latest trend is using mobile phones and wireless handheld devices to update blogs. Programs like FoneBlog, Manywhere Moblogger and Wapblog allow bloggers to
post details about their lives from anywhere, not just from a computer. There are an estimated 500,000 people who run blogs and analysts say a quarter of them may eventually update their sites on the go, " BBC News Online reports.
• BBC News Online: Blogging Goes Mobile
• Forbes.com: Blogging By Wireless