The Rising Tide of Music Distribution

Slowly but surely, the music industry is beginning to face the inevitable – figuring out how to monetise people’s listening habits without restricting them. Vivendi’s Universal Music is currently testing the sale of DRM-free mp3 downloads (the initial test phase is planned to run from August to January), which follows on from a simiar decision made by EMI earlier this year…

As anyone who has an mp3 collection knows, the modern music consumer can access a huge number of tunes online – whether legally or not – and given the choice between an unprotected mp3 and a DRM-laden version, most listeners would opt for the former. The sheer scale and convenience of mp3 ‘piracy’ means that people don’t really see it as a crime, and also feel that they are not going to be detected, much less prosecuted. So, considering that music is already spreading freely, does it make more sense to try and dam the rapids, or to harness the power of the current to generate new cashflow?

Gerd Leonhard has been a staunch advocate of ‘music like water’ for some time now, and the concept was explained in his 2005 book, The Future of Music. Essentially, he proposes an environment where music is as freely available as water – new music on tap. Although this system ‘feels like free’ to the consumer, in reality a number of monetisation options will be in play – either funded through an inexpensive subscription model paid for by the consumers themselves (similar to a water scheme), or the cost of the music will be covered by a third-party (perhaps bundled with another product or service).

Advances in audio/video watermarking also open up new monetisation opportunities; the prospect of direct and accurate user behaviour data that can be gleaned from such watermarking will be immensely valuable to advertisers. Whilst audio watermarking is a jolly clever thing, it does raise some privacy issues. If it is implemented on a large scale, I could envisage a market developing for ‘web-proof’ music players – that is, music software on your computer that prevents what you are listening to from reporting back to base (wherever that may be). This of course would be very anti-social, and potentially damaging to social recommendation music sites such as Last.fm.

For the moment though, Last.fm is doing very well – having grown its market share by 22% this year, and been bought by CBS for $280m, it is now beginning to style itself as a hit predictor. Last.fm has teamed up with Music Week to provide data for weekly ‘listening charts’ – charts based on what people are listening to rather than what they are buying. The idea is that such listening charts will provide an early indicator as to what is going to be big in the standard charts – and some initial observations in Digital Music Wire indicate that this theory may indeed hold some water.