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DRM, Statutory Licensing, Broadcast Flags, and Satellite Radio
by Rattle at 1:37 pm EST, Feb 7, 2007 |
I wrote this for a class last week, before Steve Jobs made his comments. I should have posted it then, as it appears my predictions are right on target. From the cold winds blowing down K Street, to the rains of the Pacific Northwest, one thing is becoming clear. The perfect storm the nay-sayers have long said was coming may be looming on the horizon. For those sailing the waters of digital music distribution, the visibility remains low. Undoubtedly, at least a few ships will sink before the clouds dissipate. The 110th Congress has potential to hold a few watershed moments for the industry. The two big issues being ridden hard down K Street by industry groups such as the RIAA and CEA include changes to Section 115 of the Copyright Act, and the return of the push for the Broadcast Flag. The problems resulting from the technological change of the past decade have long passed the point where lasting solutions could be reached solely through court litigation. It’s become clear to all parties, that this is not simply a copyright enforcement problem, as much as it is architecting a paradigm shift within the industry. The first steps into legislating digital distribution were very cautious, and the time has come to tweak the law so it enables more players to get into the game, while still protecting the interests of the majors. It’s a very hard balance to strike. Section 115 covers statutory licensing, which badly needs an upgrade to the digital age. If the statutory licensing regime is changed to cover digital downloads in the form of blanket licenses, a large number of players will jump into the scene. Many are poised and ready, and have their people on K Street too. Amazon is the perfect example. They have backed out of launching a music downloading service at the last minute several times now. The Broadcast Flag has until recently been an issue associated with HDTV. The goal of the Broadcast Flag is to give content providers the technical means to stop consumers from time-shifting or making recordings of certain content with PRV/DVR devices like the Tivo, by making any devices that don’t obey the technical standard illegal. There has been no shortage of controversy over this, which has managed to tank all efforts so far to get a bill passed. The arrival of the next generation of XM and Sirius players has made this a music industry issue. Pioneer and Samsung now both make iPod like players that can record blocks of satellite programming and allow users to save individual songs. Like a standard MP3 player, users can also create playlists and transfer the songs back to their PC. The satellite providers have just entered the digital downloading game, and the RIAA is not amused. The lawsuits have already begun. This issue will undoubtedly become tied with proposed changes to Section 115. If there is a thread that ties all of these issues together, it’s Digital Rights Management. T... [ Read More (0.4k in body) ]
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RE: DRM, Statutory Licensing, Broadcast Flags, and Satellite Radio
by noteworthy at 1:01 am EST, Feb 8, 2007 |
Rattle wrote: So far, there are only three technical implementations of methods for securing digital downloads: Apple’s, Microsofts, and Real’s. Real can be written off, as Rhapsody is completely failing in the marketplace.
Do you have good data on that? A year ago, they were still growing: Forbes says that Real now has 1.4 million subscribers compared to its 700,000 customers at the end of 2004. "Real executives argue that consumers are warming to the notion of subscriptions, arguing that the success of satellite-radio offerings from Sirius Satellite Radio and XM Satellite Radio prove that people are willing to pay a monthly fee for music. But to date, Internet music subscription offerings like those from Real, Napster and Yahoo! have yet to take off-–there are perhaps 3 million subscribers to Internet music services, compared to 9 million for satellite radio."
For more recent figures: As of the September quarter, RealNetworks (Nasdaq: RNWK) claimed 1,650,000 subscribers to its Rhapsody music service ...
That's from a few months ago, so clearly they have leveled off. But note this: Rhapsody subscribers, who pay $10 a month for unlimited access, today listen to about 130 million songs per month.
So Real is pulling in $200M annually, whereas Apple pulled in (less than*) $1B last year. So in terms of cash flow, Real has about 20% of the market. That isn't winning, but it's a far cry from "completely failing." Also, Jobs says iTunes now sells ~150M tracks in a month. That's comparable to the number of plays that Rhapsody sees from a much smaller user base. Lately, they are moving beyond PC-based services; see their recently announced partnership with TiVo, for example. Don't get me wrong, I am no fan of PlaysForSure -- it is incredibly flaky code -- but I think the business model is still full of potential. Fortune magazine recently commented on the future of music. Here's their senior editor: Rhapsody, not iTunes, in my opinion, is the future of music. ... RealNetworks is way ahead of Apple in navigating the complexities of licensing and software for a streaming music service. Maybe the two companies will somehow get together. Until they do, or Apple otherwise gets the music subscription religion, the iPhone won't be what it should be.
I tend to agree. The Rhapsody experience is so remarkably different from that of the iTunes Stores, it's hard to communicate effectively. I might draw comparisons to the way that the new/upcoming Netflix streaming service will change the way you watch movies. (*) Jobs says that iTunes sold a billion songs in 2006. Considering discounts for album sales, this is less than $1B in revenue. |
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RE: DRM, Statutory Licensing, Broadcast Flags, and Satellite Radio
by k at 12:59 pm EST, Feb 8, 2007 |
noteworthy wrote:
Lately, they are moving beyond PC-based services; see their recently announced partnership with TiVo, for example. ... Fortune magazine recently commented on the future of music. Here's their senior editor: Rhapsody, not iTunes, in my opinion, is the future of music. ... RealNetworks is way ahead of Apple in navigating the complexities of licensing and software for a streaming music service. Maybe the two companies will somehow get together. Until they do, or Apple otherwise gets the music subscription religion, the iPhone won't be what it should be.
I tend to agree. The Rhapsody experience is so remarkably different from that of the iTunes Stores, it's hard to communicate effectively. I might draw comparisons to the way that the new/upcoming Netflix streaming service will change the way you watch movies.
[ You can't communicate the difference between the iTunes experience and the Rhapsody experience? That sounds to me like hyperbole or else admission that the experience is too complicated. Look, I'll admit from the start, I'm wary of subscription-based services because they work, essentially, on the backs of people that don't use the service to it's potential, meaning that I'm always concerned that if I'm not using it enough, i'm subsidizing the company, or the other users. I don't like that because my consumption rate is necessarily variable. Some months I listen to a lot of music... some months I'm busy and listen to a lot less. That means I'm wasting money sometimes. Further, I don't like the notion that to continue enjoying my music, I will have to continue paying for access to it. Forever. I still prefer CD's, so I'm not a full iTunes Store Kool-Aid drinker by any means. I've picked up some singles that were hard to locate and I buy a couple of shows from them that I can't get on my basic cable because it's vastly more cost effective than upgrading my cable service. Forgive me if I don't see TiVo support as moving away from the PC model... the TiVo's just a PC in a different part of the house. Now they claim iPod and other portable integration, so I'll leave off commenting on that until I can assess how well it works and what limitations there are... if they support portability that's good. Finally, i want to call into question your comparison between Rhapsody "plays" and iTunes "sales". That's not apples-to-apples, if you'll forgive the pun. Those iTunes sales represent 1 or more listens. In general, they probably represent dozens to hundreds of listens each. The numbers aren't even close to comparable. -k ] |
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RE: DRM, Statutory Licensing, Broadcast Flags, and Satellite Radio
by noteworthy at 2:09 pm EST, Feb 8, 2007 |
k wrote: You can't communicate the difference between the iTunes experience and the Rhapsody experience? That sounds to me like hyperbole or else admission that the experience is too complicated.
It's a matter of being able to do it concisely. Other people have already written about it; those writings are available online. Here's one from Joshua Quittner: Those two technologies paired—Sonos running Rhapsody—turn out to be about as perfect a music experience as I've ever had. I also use both satellite radio services, XM and Sirius, and Rhapsody is far and away the better experience.
The best I can do at the moment is to point at the Wikipedia cartoon recently posted here. Rhapsody can be like that every time you 'visit'. Look, I'll admit from the start, I'm wary of subscription-based services because they work, essentially, on the backs of people that don't use the service to it's potential, meaning that I'm always concerned that if I'm not using it enough, i'm subsidizing the company, or the other users.
This is the wrong mental model. It's not about the volume of consumption. That's the the wrong metric. Trying to make direct comparisons to a direct-purchase model is not going to lead to insight. I'm not really interested in apples-to-apples comparisons. HBO (and pay cable more generally) does not work "on the backs" of people who subscribe but do not in fact watch it, or who watch it only rarely. The costs are dominated by content creation and licensing, not by distribution. For decades, people have been quite willing to adopt this model for audio/video content. Why is audio-only content so different? Going forward, "portability" is not something that is "supported" or not -- it is the basic service. Any song, any time, any where, for a low flat rate. In general, they probably represent dozens to hundreds of listens each. The numbers aren't even close to comparable.
This starts to get at the difference in the services. At iTunes, the price is the same whether I want to hear a song once or ten times. This is an economic barrier which inhibits exploration. Consider if iTunes adopted a model where I could pay five cents per full-length, full-quality listen, for the first 20 listens, after which time I can keep the track forever. That would be a nice blend of the models. You could also generalize the model so that I earn one credit for every 20 listens. One credit enables me to purchase one track; it could be one of the tracks I'd listened to along the way, or another track altogether. |
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RE: DRM, Statutory Licensing, Broadcast Flags, and Satellite Radio
by k at 12:13 am EST, Feb 9, 2007 |
noteworthy wrote:
This is the wrong mental model. It's not about the volume of consumption. That's the the wrong metric. Trying to make direct comparisons to a direct-purchase model is not going to lead to insight. I'm not really interested in apples-to-apples comparisons.
Ok, I'll bite. Volume isn't the metric because it's not a measure of actual value. 1 hour of quality music is worth more than 10000 hours of garbage. Fair enough. So now I need to be convinced that the service offers me value in giving me access to more good music. As you argue, the lowered barrier to exploration makes it more likely for me to find good music and enjoy it. Of course, to some degree, especially for real music lovers, the search itself is valuable... we enjoy listening to and thinking about new stuff, even if it's not so good, perhaps. I'm very interested in this notion. I've had to re-examine why, as you say, I don't feel the same way about music as I do about film (though I do own a couple hundred DVD's, it's not the ones I love the most, but rather the ones I'm most entertained by, which is a different thing). My desire to possess music that I love is perhaps a sort of collectors instinct. The necessary outlet of my desire to catalog my explorations and keep what feels like a permanent record thereof. I'm incapable of treating music like a mandala, to be enjoyed ephemerally. Further, I like knowing it's there. The bits on that hard drive and the backup I know that I made, are comforting. The idea that I won't be able to listen to my music because, sometime down the road, some record label changes their license with the service is not one I can countenance. Going forward, "portability" is not something that is "supported" or not -- it is the basic service. Any song, any time, any where, for a low flat rate. It's that "going forward" that gets me. The possibility that my ability to listen is predicated on the availability of a digital network is even more nerve wracking than what I discuss above. Internet access is not the robust public service that, say, electricity is in this country. I don't have it everywhere. Ubiquitous networking is a noble dream, and I support it. When "Any song, any time, any where" happens, my mind almost certainly will change. For the moment, capacity in the US is a fucking joke, and I will not settle for shitty quality music so that Sprint can fit it over their barely capable network when I happen to want to hear music someplace that's not my house. The day I get that Qwest commercial, for real, I'll be all over subscription. Until then, it's just a dream to me. An engaging one, but a dream nonetheless. Of course, I'm leaving out all discussion of DRM, which changes the landscape somewhat, but probably in similar ways for any service model.
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