[PlanetCCRMA] Online music transforms experience

[brad stafford]

Simple downloads, complex change
Online music transforms experience for fans, industry 
By Michael Coren
CNN
Friday, August 20, 2004 Posted: 2:30 PM EDT (1830 GMT)  



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Digital music players allow a
listener to take a personal music
collection almost anywhere.




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(CNN) -- For tens of millions of people listening to digital music,
there is no going back.

David Hollevoet drifted away from new music after college, but he logged
into the file-sharing program Napster in the late 1990s. From there, it
was not long before he became a fan again and, eventually, broadcaster
of his own award-winning Internet radio station -- 80's Obsession --
from his kitchen.

"The whole digital music thing just clicked for me," said Hollevoet, a
web designer from Palo Alto, California. "I loved having as much music
as my hard drive can hold."

As music transforms to ones and zeros from physical albums, the way in
which it is produced, sold and heard is changing forever. The
consequences for musicians, fans and businesses are profound.

Millions of songs are now available -- for free or for sale, legally and
illegally -- over the Internet. The emergence of this audio landscape
has delighted music fans but undermined the business model of the music
industry. Major record labels are squeezing less profit out of fewer
bands and attempting to ward off losses by a frenzy of mergers.

Four corporations -- EMI Records, Vivendi Universal, Warner and Sony BMG
-- control about 80 percent of the shrinking $32 billion global music
market, according to the International Federation of the Phonographic
Industry. That is down from five since Sony Music and Bertelsmann AG's
BMG merged on August 5. That trend does not show signs of improving.

"There is a major disconnect between the music industry and the reality
of the way most Americans relate to music," said Michael Bracy, lobbyist
for the Future of Music Coalition, a nonprofit group advocating
political and technological reform for digital technology. "There is an
effort to commodify music which is fundamentally impossible to do."

CD sales have steadily declined, as consumers like Hollevoet have been
reluctant to pay up to $17.99 per CD, often only to get one or two
songs.

"One thing that really angers you is the way you feel really stifled.
They don't sell the things you want to buy," said Hollevoet. "I do
respect the artists. I do think they should be paid, but at the same
time, I want to know who they are."

But musicians and distributors are tapping into the consumer anger to
rewrite the rules of the business amid financial turmoil.

GarageBand.com is one of them. Once just an online community of
musicians, it is now becoming the Internet's answer to a record label as
well, one that leaves much of the power -- and the selection process --
in the hands of musicians.

"We think a big part of what's wrong with the music industry is while
the trends over the last 10 years have reduced the cost of music
production, the music industry has not figured out how to change their
model," said Ali Partovi, CEO of GarageBand.com, who describes the
formula as, "Invest first, test later."

The Recording Industry Association of America (RIAA) acknowledges that
most of its new releases -- about nine in 10 -- fail. That means much of
the cost of a new CD covers albums that never took off. (An example in
the Wall Street Journal described a $2.2 million marketing campaign for
an Irish singer whose album sold 378 copies in its first few months).

Global industry numbers are also dire.

Recorded music sales dipped 7.6 percent world wide in 2003 following
three consecutive years of worldwide declines in music sales, according
to the IFPA. At the same time, pirated music boomed. Global sales of
illegal music discs rose to its highest level at 35 percent in 2003.
According to the IFPI, one in three CDs sold is an illegal copy.


Artists' double-edged sword
But the digital format allows Internet labels like GarageBand.com to
reverse record companies' losing formula. GarageBand.com uses its
community to review each other's songs in exchange for posting their
music in the hopes that the best music rises to the top.

Eventually, the company hopes to claim an economic stake in musicians.
Fifteen bands from the site have already been signed by major labels and
one -- Drowning Pool -- has gone double platinum, Partovi said.

But, so far, the digital music movement has been a double-edged sword
for artists. Struggling musicians find the Internet a revolutionary way
to produce and distribute their own music, bypassing major record
labels.

story.cd.digital.music.jpg


But some artists reacted negatively to online music, especially at
Napster. Napster's popularity exploded in 1999 after founder Shawn
Fanning released software that made it easy for Internet users to find
and download songs.

At its peak in 2000, Napster had more than 50 million registered users.
The music industry, including some established artists, such as
Metallica and rapper Dr. Dre, objected vehemently, saying Napster was
allowing users to steal copyrighted music.

"If (file-sharers) want to steal Metallica's music, instead of hiding
behind their computers in their bedrooms and dorm rooms, then just go
down to Tower Records and grab them off the shelves," said Lars Ulrich,
the drummer for Metallica, in 2000.

Napster was shut down after the five largest record companies
successfully sued the company for copyright infringement. Its Web site
is now a legitimate subscription-based music service.

However, other, less centralized file-sharing programs have sprung up in
Napster's wake. Even a battery of lawsuits by the RIAA has not stemmed
the flow of illegal downloads.

So if production and distribution is increasingly in the hands of
artists, what role do record labels serve?

The answer, ironically, is increasingly important: marketing. Attracting
attention has become even more difficult in the digital age. Major
record labels are well positioned to exert their ability to secure
extremely expensive airtime on radio and concert venues.

"The marketing muscle that the big labels have can't be underestimated,"
said Jim Donio, president of the National Association of Recording
Merchandisers, a industry group representing retailers, distributors and
record labels. "The power of the Internet can't be underestimated. If
you put the two together, they can't be underestimated."

Partovi agrees. However, he says the days of monopolies between
multimillion-dollar radio broadcasters and record labels are numbered.

"The primary role of the music industry is to have artists be heard
above the rest," Partovi said. "It's a big needle in a haystack problem.
The Internet has the service and tools to find the needle in a
haystack."

While the major legitimate online music services like the iTunes Music
Store and Napster 2.0, with deals from major record labels, carry
between 700,000 and 1 million songs, Internet upstarts like
GarageBand.com already claim a rapidly expanding archive of 1.8 million
songs available for free.

"Over the last five years, musicians outside the major label system have
created three times as much music (as held by the major record
companies)," said Partovi. "And I think that's just the start."

The availability of that music -- though the Internet or at
brick-and-mortar stores -- promises to explode and it is going to be
delivered in new ways, say industry representatives.

"Consumer retailing is moving from primarily physical product to a
combination of physical and digital," said Donio of the industry
association. "It's really not just limited to the changeover from
physical to digital. It's the full breadth of products."

Despite the ease of the Internet, customers continue to visit physical
stores despite predications about the demise of record shops. As a
result, music stores are expanding beyond traditional genres of music
into movies and games.

The racks of plastic wrapped albums, or the stores that have
traditionally stocked them, will not disappear. But customers are
expected to buy as much of their entertainment -- from music to video
games -- from computer kiosks as from a cashier.

"It's a really creative way to capture consumer fancy," said Donio.
"It's all about choice."