I have long been very supportive of the digitalizing of music but have been vary wary of the *distribution* of music digitally. I think that the subtext of this article makes my point. The record industry is going to "force" people to go digital and try to control music consumption and listening habits far more than they can with current formats and standards. I don't know how successful they will be but I am at least somewhat worried. But then again what to management consultants *know*. They only seem to project their fantasies onto a future and try to steer us toward it.
MP3z may be a great thing for pirates and copyleftists now but I think they may be paving the way for the more restricted formats that the "music industry" wants to shove down our throats. Of course, it won't be all bad--you can make custom CD's, have access electronically to music out of print, etc. Its just that the big lure now is that is free and that is the first "feature" that will be closed.
Also, I just think that custom CDs like cheap compilations dilute the strength of broader connections an artist might want to make on albums or theme compilations.
I am so sick of the media keeping score on everything in society by stock prices.
Peace,
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Net Music Firms Struggle
Everybody knows music's future is online, but nobody knows how to make a Net profit now.
by Reuters
August 4, 1999, 3:52 a.m. PT
Moving from a "Stairway to Heaven" to a "Highway to
Hell," Internet music companies that delighted Wall Street
with recent stock debuts are playing a more somber tune
as investors take another look at their plans to reshape
the music industry.
Take what many consider to be the industry's flagship
company, MP3.com. The San Diego-based start-up lets
visitors to its Web site download more than 100,000
songs for free.
The company's stock, originally priced at $28 a share, hit
a dizzying high of $105 in its first day of trading last
month before closing up 126 percent. But the price has
steadily eroded since then, shedding $6.375 on Tuesday to
close at $33.25 on Nasdaq.
Other Internet music stocks tell the same story.
Liquid Audio, which makes a secure format for
compressing music files and is building a network to
distribute digital music, fell $2 to $24.625. Its high was
$48. Custom online CD compiler Musicmaker.com, which
peaked last month at $28.125, fell $1 to $12.56 on
Tuesday. EMusic.com, which also offers an online song
collection, shed 87.5 cents to $15.625, down from a
recent high of $35. And Launch Media, whose Launch.com
site offers streaming music videos and music news, has
fallen from a peak of more than $36 to $9.875 on
Tuesday, down 87.5 cents.
Show Me the Money
What is happening?
"The rhetoric is so far in advance of the financial reality
that some stocks go out like Fourth of July fireworks, but
anyone who does their homework finds the economics just
aren't there," said Mark Hardie, a senior analyst with
Forrester Research.
Indeed, none of the listed companies are so far turning a
profit. That's nothing new in the Internet space, but it
seems to be hitting music companies especially hard.
That may be because consumers are used to getting
digital music for free, thanks in large part to the lack of
anti-piracy features on the popular MP3 file format that
has let people make near-perfect copies of CDs and post
them to the Internet for anyone to download.
"When people get used to free, it's hard to make it not
free," said Travis Kalanick, vice president of strategy for
Scour.net, a search engine that seeks out video, audio and
radio content on the Web.
While financial details are scant for the sector, companies
are measuring quarterly sales in the hundreds of
thousands or millions of dollars, while enjoying market
capitalizations of hundreds of millions to billions of dollars.
"Nobody's buying a lot of music, and we're early in the
market and the infrastructure is not built; there's not a lot
of personal digital music players," Hardie said.
Losses Mount
Liquid Audio, which reported second quarter results on
Tuesday, said total revenues were $745,000, compared to
$500,000 in the year-ago period. MP3.com last week said
its second quarter revenues rose to $1.9 million from
$247,000 a year earlier. Both companies posted widening
losses: $6 million for Liquid Audio and $6.3 million for
MP3.com.
"I can't say what the business model is going to be that
leads to profitability in the digital download world,"
Edmond Sanctis, chief operating officer of search engine
Snap.com, said at a conference recently.
Music Labels Ready Counter-Attack
Moreover, the big music labels, slow out of the gate to
embrace the Web's potential, are taking it more seriously.
With their deep pockets and vaults holding decades of
popular music, analysts said they will pose a threat to the
start-ups.
"The majors have woken up and they can still bring
strengths and capabilities formidable in this market," said
Geoffrey Sands, a vice president of management consulting
firm Booz-Allen & Hamilton.
"There's no question we're going to see more
consolidation, outright consolidation. I think that's the next
wave," Sands said.
Digital Downloads Will Still Rule
Despite the uncertainty, analysts agree that the Internet
will radically change the way people buy and listen to
music. Store shelves will soon be stocked with an array of
cute portable devices that store CD-quality music on a
chip or card. New formats to rival MP3 are delivering
better sound quality and pleasing record labels with
guards against illegal copying.
"I am extremely optimistic about digital distribution--it is
the future of the business," Hardie said. "We're not at the
inflection point yet, and we won't be until early next year,
after a year of promotion and an installed base of players
in the hands of consumers."