Watch the Online Music Business

It’s been fascinating to watch the music industry wrestle with the implications of digital distribution. Initially, the music companies stuck their collective heads in the sand while average consumers traded MP3s. Then they seemed to think that a flurry of lawsuits against Napster, Kazaa, et al would solve their problems. The industry’s first efforts to sell music, song by song, over the Web were lousy. I called them “rent-a-song” services because you could download music but not have the same rights (to make tapes or CDs) that you get with other forms of purchased music. But finally, the music industry seems to be “getting it,” and the implications of what they’re doing extend far beyond music. There are now five different music-subscription services supported by the music industry, and the prices (US$4.95 to $17.95 a month, with the more expensive options offering more rights to “burn” music to CDs) are in the right ballpark.

These services should be interesting to all kinds of publishers, because their success rests on “digital rights management” technologies that give users different rights based on the different prices they pay. If it works for music, it’s a step forward for subscription content services of other kinds. But don’t underestimate the uphill battle the music industry faces now that so many people are used to free music sharing. I surveyed a class of 28 undergraduates last week. Two-thirds had used Napster, over half currently use Kazaa, and none are using these new music services. In fact, most didn’t even know they existed.