Digital Music: Worth Buying Yet?

It's strange to feel sorry for the billion-dollar music industry. But I do. I'm embarrassed for them because collectively they've spent millions of dollars on digital online music subscription services nobody in their right mind will want to use.

Okay, maybe that doesn't draw pity--it's more like astonishment at the world's largest record companies for making their products harder to use. One could even argue that their current digital online music subscription schemes do more to promote online piracy than prevent it. The inconvenience of the legit services may send music seekers back to the black and gray markets.

After a successful industry-wide copyright lawsuit that knocked Napster into limbo, the recording industry's top companies went to work creating their own online music subscription services. Their aims: to protect their copyrighted works from freewheeling swapping on the Internet, and to pick up a few extra bucks for making the music available digitally (even to people who already own audio copies).

Pressplay is the newest copyright-friendly music service, making its debut in December on Yahoo, MSN Music, and Roxio. Pressplay is backed by Universal Music Group, Sony Music, and EMI. Its chief rival is MusicNet, which launched in December. Financed by Warner Music, BMG and, again, EMI, MusicNet is available from RealNetworks and America Online. And last week, Napster invited 20,000 people to test its upcoming fee service.

You'll also find Listen.com, Rhapsody, Streamwaves, and Emusic, rival services backed largely by independent record labels.

None of these music services appear to be luring music pirates from the dark side in volume. Despite the recording industry's efforts, a number of Napster alternatives and black-market file-swapping programs like KaZaA, Morpheus Music City, and Audiogalaxy are prospering. In fact, use of these programs has steadily increased from 1.2 million in March 2001 to 7 million in August, according to Jupiter Media Metrix. Kazaa says more than 30 million copies of its KaZaA Media Desktop have been downloaded since its debut in early 2001--despite a recent shutdown order.

And yet, Jupiter Media Metrix expects digital music subscription sites will dominate by 2003. Researchers estimate subscription services alone will generate $1 billion for the sponsoring music labels by 2006. They predict single-paid downloads will prevail, racking up some $600 million in 2006. The accuracy of those predictions remains to be seen, but clearly the music labels think they're onto something hot. But do customers agree?

Of the subscription services, the newest entry is Pressplay, which charges subscribers $14.95 monthly for the rights to listen to 500 low-quality streams of songs each month. You can also download 50 select audio tracks to your PC, and can burn ten tracks to a CD that will play on any audio CD playback device.

It sounds like a fair deal until you read the fine print. Not every song on Pressplay can be downloaded, and not every downloadable song can be burned to a CD. Of those you can burn, you can't choose more than two tracks from a single artist each month.

Compare that to RealOne Music, where subscribers pay $9.95 monthly for the right to listen to 100 streamed songs and download another 100 tunes to their hard drives. Like Pressplay, RealOne's MusicNet service has catches. Downloaded files can be played only on the same PC, using the RealOne player. And you can't burn audio tracks onto a CD to play on an MP3 player or a home stereo.

Both services use digital rights management software, a kind of encryption that limits how the music can be used. With MusicNet, each downloaded audio file can be played for only 30 days, then the digital rights system locks it up. If you want to listen to the song again, you have to renew access to the file--which counts against your next month's 100 downloads.

Pressplay also uses DRM, and as long as you pay your monthly dues, you can download and listen to as many digitally protected files as you like.

MusicNet insists that you use the RealOne player for access. This can be a problem because RealOne takes over your audio file associations. If, for example, WinAmp was your default digital audio player, RealNetwork automatically takes that role. In my informal tests, I couldn't stop RealOne from becoming my default audio player, even after carefully following RealNetworks' direction to switch it back to WinAmp.

But the real shortcoming of these services isn't their draconian restrictions on the use of their music. It's the limited selection of music in each of their collections.

Neither service has the rights to all the music in its backers' catalogs. That means no Beatles or Bruce Springsteen. With roughly 100,000 digital tracks each, neither has great depth in their offerings. That selection may seem like a lot, but it's a mere fraction of the catalogs owned by these mega-music labels. It's also a smattering compared to Morpheus or the old Napster network, which carried ten times that number in its heyday.

The initial beta version of Napster's new service offers no streaming, just downloads of mostly unfamiliar bands, according to reports about the service (Napster is banning press from the ranks of testers). In keeping with the file-swapping tradition of Napster's original service, audio tracks are swapped between users--not downloaded from a central server.

Napster's peer-to-peer approach has its pros and cons. It's a plus when you can find a PC that you can connect with quickly. It also makes it easy to find collections of music from like-minded Napster users with similar musical tastes.

Peer-to-peer is also great for Napster as a business, because it doesn't have to pay to store the files you swap. It just sits back and counts who's got what and collects a check each month. However, although a song may be approved for distribution on the Napster network, there's no guarantee that it's available on a member's PC. If I can't find the song, I'm out of luck. The revised Napster hasn't announced fees, but they're expected to be a flat rate ranging from $5 to $10 monthly.

Consider this: Napster wants to charge us, the customers, a monthly fee for our uploads of files from our own PCs. Shouldn't Napster pay me for tying up my modem?

Analysts insist digital music will be big business someday. But they acknowledge that the corporations are still learning the tune.

"Over the last five years the music industry has moved at a glacial pace online," says Mark Mooradian, analyst at Jupiter Media Metrix. In the past 12 months, it has been moving to the beat of a different drummer as the companies developed and launched their subscription services, he notes. Jupiter estimates the subscription services overall will reach an aggregate 1 million users in late 2003--still a pretty slow adoption rate.

Online sales may also be slow. Not until 2006 does Jupiter expect the U.S. music industry to hit $5.5 billion in online sales. That would comprise about 30 percent of the entire market, and the figure includes sales of CDs through online stores.

Suspicion about their practices seems to be tripping up the music industry. Last October, antitrust investigators at the U.S. Department of Justice began growing apprehensive of record labels' increasing power. The DOJ began to invite start-ups to closed-door discussions to determine whether the labels are violating antitrust laws with their online music distribution projects.

Meanwhile, 28 states have joined to pursue an antitrust suit against the labels, claiming price fixing of CDs at retail outlets.

What's an aficionado of digital music to do in the meantime? The Web can be an inexpensive marketing opportunity, as many independent artists have found. For musicians, it's a chance to introduce at least a sampling their recordings without traditional distribution costs. For customers, it's a way to try before you buy, via your PC instead of donning headphones at a local music store.

Still, even people who are willing to pay extra for digital versions of CDs they already own may not want to go through a lot of extra hassle to get them.

Music industry restrictions that make CDs unplayable on PCs, coupled with high CD prices, are already pushing consumers away from retail stores to online alternatives, says Jon Iverson, online news editor for Stereophile Magazine.

"CD prices are too high," Iverson says. With their online restrictions, "the music industry has awakened resentment in consumers that never should have been awakened." He says the harder the music industry tries to control legitimate purchases, the more consumers will push back--and either not buy CDs, or turn to downloading copyrighted music free from pirate sites.

Online music subscription sites someday may be a viable alternative to pricey CDs. But in their current form, these for-pay services feel more like "restricted use" services rather than copyright-friendly services, Iverson says. The likely result? Music piracy could remain as popular as ever, as an alternative to jumping through the music industry's hoops.