Future’s So Bright? Music on the Net

Future’s So Bright? Music on the Net

A few weeks ago, Jupiter Media Matrix held a teleconference on the current state of the much talked about (but as of yet little heard) Internet music subscription services. The heads of MusicNet, pressplay, FullAudio, Listen.com, and Rioport were all on the line to discuss the development of the industry and offer a few projections about what’s in store.

“Every day the future looks different,” said Mark Morradian, VP and Senior Analyst for Jupiter. While many aspects of Internet development have slowed from their initial frenzied pace, music distribution issues brought up in the wake of Napster litigation just seem to keep coming down the pipeline-from rights issues to finding consumers willing to pay for it.

Confused Yet?

The players and a brief explanation of what they are trying to provide, based on mission statements posted on their Web sites:

MusicNet describes itself as “a digital distribution platform for streaming and downloading music” which combines “RealNetworks’ Internet media delivery technology with the music catalogs of major and independent record labels – which now include Warner Music Group, BMG Entertainment, EMI Recorded Music, and Zomba. As both a technology provider and a music clearinghouse, MusicNet will license its “private-label” platform to companies seeking to sell music subscription services under their own brands.”

pressplay is “an online music service company led by an executive team with deep music, programming, technology and business experience with offices in Los Angeles and New York City.” A venture of Sony Music Entertainment and Universal Music Group, pressplay “offers consumers on-demand access to a wide variety of music that can be streamed, downloaded or burned onto a CD, through affiliates that currently include MSN Music, Yahoo!, MP3.com and Roxio.”

Listen.com markets itself as “a music service provider that creates, bundles and distributes world-class music content and media delivery applications online.” Rhapsody, their featured product, is “an interactive digital music subscription service powered by the company’s patent-pending media delivery technology. Rhapsody integrates free Internet radio, artist discovery, and rich music contextual information with streaming music on demand. Listen.com will license its applications to distribution partners seeking to offer co-branded music subscription services, both today on the desktop and extending to wireless and Net-attached devices in the future. Listen.com has financial backing from all five major record labels and a number of top-tier venture capital firms and CEOs.”

FullAudio is a “provider of subscription-based, personal music services that deliver the best in digital music content from industry leading record labels and other content providers. Our pioneering Music Services enable e-tailers and web portal companies to seamlessly sell music subscriptions. For content partners, our platform facilitates the promotion, marketing, and secure distribution of music. FullAudio is the first music subscription service to establish partnerships with both major record labels and music publishing companies. Because FullAudio believes music content owners should benefit from their works, we have integrated our business infrastructure with the consumer interface to guarantee that artists and publishers receive appropriate royalty payments.”

RioPort, Inc. defines itself as a “music application service provider (ASP), delivering breakthrough digital media technologies and services that enable its network of partners to bring the world of digital content to their customers in a simple, secure and easy-to-use manner. RioPort is a pioneer in the digital media download market and powering one of the first digital media download Web sites, www.rioport.com. The core of RioPort’s business is its private label PulseOne Service™. This market-leading service provides RioPort’s partners, including e-tailers, broadband and wireless service providers and consumer electronics companies, with an outsource music content delivery service that, in turn, enables them to let their customers try, rent, buy and access digital music anywhere.”

Alan McGlade, President and CEO, MusicNet; Andy Schuon, President and CEO, pressplay; James Glicker, President, FullAudio; Sean Ryan, President and CEO, Listen.com; Jim Long, CEO, Rioport all put out their pitch during the Jupiter meeting. FullAudio and Rioport are oriented towards offering wholesale digital content to businesses for resale to their consumers. MusicNet (partnered with labels such as BMG, EMI, Warner, and Zomba) and pressplay (Sony and Universal) offer subscription packages directly to the general public. Listen.com presents both types of service. Their site offers a downloadable player for consumers, but the service has also partnered with companies like Naxos to distribute their content on the Web.

Surprisingly, the discussion ended up not being all that contentious and the services sounded a lot alike. It makes one wonder how the consumers of these products will distinguish one from another and decide which to buy in to. In reply, the services pointed to the reputations of their partners, their own technology development, and the cosmetic and “extra” content they offer as part of their package-different features and degrees of sophistication depending on the consumer’s wants

All the services agreed that the technology is likely to stay pretty level across the field, however. What will set the players apart, they all felt, is program content and ease of use. The services will also compete on portability-whether you can access music from the services on multiple computers or take it with you on portable devices.

On the programming point, Ryan noted that with physical sales of recordings down, it was “in the labels’ self-interest to cut deals now.” McGlade also encouraged them to “redefine the way they conduct their business.” A lot also remains to be seen with legislation such as MOCA still on the table.

On the ease of use end, Long chimed in that Rioport (yes, they used to make the Rio Player, since discontinued) hopes to be as invisible to the consumer as it can be, delivering content in a way that consumers trust but don’t necessarily understand. “Kind of like the Intel label,” he said.

Ultimately, all five companies are in unexplored territory, and they feel it. Rioport, Listen, and FullAudio hit the market before MusicNet and pressplay, but the latter two are now trying to stand above the fray on the shoulders of the established labels and companies backing them. Needless to say, the namedropping got heavy around the table.

Morradian and the panelists discussed expectations for how the market will evolve over the next few years. At this point a lot seems to depend on future legislation and the consumer’s willingness to adopt the product and the related devices in the coming years.

Jupiter made some of its own predictions for the future. Though much ballyhooed by organizations like the RIAA, they expect digital music to ultimately aid in the restoration of the market once licensing and format issues stabilize. Meanwhile they wondered about the labels’ ability to adapt to these new markets while maintaining the current ones and to link retail sales with the new subscription services.

For the time being, no one is doubting that brick and mortar stores still control the vast majority of sales. Jupiter predicts that hold will last for the next ten years during which a transition to the Internet market will occur.

In a survey, Jupiter found that consumers would most likely be willing to pay $9.95 a month for a subscription service if it could guaranteed file quality (46%), guarantee virus-free files (40%), or offer high speed transfer (40%). Portability issues are also at the fore, with consumers saying that the ability to copy songs and to transfer them to other devices are important features to have in a paid subscription service.

The panelists estimate that it will take around a million subscribers for a subscription service to be commercially viable, a number that will not realistically be achieved for a few years yet.

NewMusicBox provides a space for those engaged with new music to communicate their experiences and ideas in their own words. Articles and commentary posted here reflect the viewpoints of their individual authors; their appearance on NewMusicBox does not imply endorsement by New Music USA.