Trusting the consumer

“It’s called trusting the consumer.”

This was the final quote from Phil Wiser, Sony Music Chief Technology Officer, in a recent Reuters inteview regarding the release of Sony’s own copy-protection format- a format that for now can only be played on Sony portable players.

There are obvious consumer dissatisfaction issues that arise as competitive copy-protection formats evolve. Strategically, from the point of the view of the releasing firm, these formats temporarily lock the consumer into particular formats and music services by putting in place a unique switching cost – convenience. iTunes tracks can only be played on a portable player other than an iPod after you first burn the tracks to CD then re-compress the files into a more open format, like MP3. From the consumer perspective, however, this digital music experience is jagged and uncomfortable. Changing providers elicits a series of hassles.

In the paragraphs preceeding the claim to be “trusting the consumer,” Mr. Wiser went on to describe the elaborate efforts in place to invite the customer to purchase a CD with copy protection. Extra, copy-protected and compressed copies of each track are burned onto the CD. “ConnecteD” access to artist treats, like bonus tracks and concert tickets, are only available to those holding the real CD.

We have to ask the question: In the above scenario, wherein lies the part of the commerce equation through which the consumer is trusted? The CD is a closed experience. The portable tracks are copy-protected. Access to the special website requires the original CD, in hand. Unfortunately, the entire equation is all about not trusting the consumer.

Full on pirates will undoubtedly circumvent the copy-protection and the ConnecteD link. Within hours, these files will be distributed all over the world. Mr. Wiser even makes reference to these curious characters. Even without the special access links, buyers of pirated CDs will still find value in the music on the discs. Thus, the copy-protection in place cannot be aimed at commercial music pirates. It can only be aimed at consumers.

Copy-protection features, as presented by executives, are all about not trusting the consumer. We cannot blame executives for this opinion, becuase their underlying trust has been breached. Consumers already share files over peer networks, IM, email, burned CDs and shared hard drives. These actions run couter to the logic of the commerce contract, as this contract is understood by music labels.

However, by adopting a tone of trust in the public forum, while in fact not trusting the consumer at all, executives are likely to drive an even greater distance between the average customer and the label/artist. It would be much wiser to present the situation honestly, or solve the problem through different methods.

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Bundling the Future of Music

What role within the entertainment experience does a music label play when the marketing equation is not meant to answer the question “what music should I buy,” but rather “what song should I listen to.”

Recent deals involving the bundling of music subscription systems with other services (Napster with Penn State University, Rhapsody with Comcast, iTunes with the iPod) should make music industry executives reflect further upon the future of their industry.

This future is temporarily delayed by the transitional market for downloadable singles. 99 cent singles, and their 79 cent brethren, essentially unbundle the album experience to meet the lower price points desired by consumers in the nearly fixed-price market for albums. But as the number of musical releases continues to rise, the distance between superstars and great musicians widens and the customer service issues associated with DRM-managed files mount, downloadable singles markets will likely shift to music services. Storefronts offering downloadable singles will simultaneously turn the faucet on full flow, no matter how apocolyptic this vision may now appear to proponents of the traditional music industry.

So what role will a music label play when the marketing equation is not meant to answer the question “what music should I buy,” but rather “what song should I listen to.”

Intelligent entertainment firms could very well shift from “investors” in talent to acquirers of catalogs. Megamergers are already in place, putting any one label in a better position to be the rights owner associated with any “listen now” click button hit by the random consumer. Should your label own 1/3 of the music in the system, 1/3 of the licensing revenues are likely yours to keep.

Music marketing departments shift their role to the much more agreeable task of artist awareness. With the openly flowing experience of bundled music services having removed the fear of post-purchase depression from consumers, buying radio play or handing out promotional singles will be a silly exercise for marketing departments. The goal is to get good music into the marketplace and let it flow.

An overture-like world of paid for links within services will likley evolve, much to the disappointment of users if not balanced. Playlists will become a more useful communication tool among fans. Word-of-mouth becomes a dominant marketing force, within a service holding millions of fans with opinions to share.

Perhaps more threatening, for the music retailing industry, is the business models already evolving around digital storefronts and services. To be discussed.

Bundling the Future of Music

What role within the entertainment experience does a music label play when the marketing equation is not meant to answer the question “what music should I buy,” but rather “what song should I listen to.”

Recent deals involving the bundling of music subscription systems with other services (Napster with Penn State University, Rhapsody with Comcast, iTunes with the iPod) should make music industry executives reflect further upon the future of their industry.

This future is temporarily delayed by the transitional market for downloadable singles. 99 cent singles, and their 79 cent brethren, essentially unbundle the album experience to meet the lower price points desired by consumers in the nearly fixed-price market for albums. But as the number of musical releases continues to rise, the distance between superstars and great musicians widens and the customer service issues associated with DRM-managed files mount, downloadable singles markets will likely shift to music services. Storefronts offering downloadable singles will simultaneously turn the faucet on full flow, no matter how apocolyptic this vision may now appear to proponents of the traditional music industry.

So what role will a music label play when the marketing equation is not meant to answer the question “what music should I buy,” but rather “what song should I listen to.”

Intelligent entertainment firms could very well shift from “investors” in talent to acquirers of catalogs. Megamergers are already in place, putting any one label in a better position to be the rights owner associated with any “listen now” click button hit by the random consumer. Should your label own 1/3 of the music in the system, 1/3 of the licensing revenues are likely yours to keep.

Music marketing departments shift their role to the much more agreeable task of artist awareness. With the openly flowing experience of bundled music services having removed the fear of post-purchase depression from consumers, buying radio play or handing out promotional singles will be a silly exercise for marketing departments. The goal is to get good music into the marketplace and let it flow.

An overture-like world of paid for links within services will likley evolve, much to the disappointment of users if not balanced. Playlists will become a more useful communication tool among fans. Word-of-mouth becomes a dominant marketing force, within a service holding millions of fans with opinions to share.

Perhaps more threatening, for the music retailing industry, is the business models already evolving around digital storefronts and services. To be discussed.

The BIG patent over downloadable music

This little patent was enough to bring me back from the dead. In 1992, SightSound was granted a nifty little patent over the crazy idea called “electronic sales and distribution of digital audio or video signals” – basically, the business which is selling downloadable music and video files. The company then sued or negotiated with varied startups over the terms of the license. In 1998, SightSound sued CDNow over the patent license and the issue has been in the courts ever since.  Now a judge in Pennsylvania has passed a summary judgement against the Bertlesmann divisions, permitting the case to move forward in the courts.
Cnet’s Stephanie Olsen has it right; “If a jury decides that SightSound has a right to enforce the patents, it could affect almost any business that sells downloadable music or video online, including the major record labels and music studios.” Interestingly however, the process of subscription-based distribution may be safe from this patent.
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