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RSS feedsA week after Apple launched its iTunes online music store, you could almost hear a collective sigh of relief from record executives as they realised that not all consumers were criminals.
The million songs sold by iTunes in its first week finally seemed to prove that consumers were willing to pay for music downloads as long as they were presented in the right way.
It's hardly surprising that record executives have been pretty nervous until now. It doesn't take a genius to work out that more and more people are going to get their music online in the coming years.
With a broadband link you can download an entire album of music in under half an hour - a lot less time than it takes to wander down to the local record store and poke around the badly laid out shelves only to discover that the CD you were after isn't there.
The problem has been that ordinary folk just haven't been given access to legal sources of online music. This is especially true in the UK. In comparison to the US there's very little available to the average UK net user because licensing restrictions mean that most US stores can't sell tracks legally to UK citizens.
No wonder the average Joe has been getting his fix of MP3 downloads from file sharing services such as Kazaa, Grokster, Limewire and Direct Connection. Last year researchers Jupiter Media claimed nearly 40 per cent of surfers use their broadband connection for sharing music on the net.
So if ever there was a time that the record companies and online music distribution sites needed to get their acts together it is now. Luckily legitimate music sites do seem to be finally rising to the challenge.
Leading the field is Apple with its iTunes store, but Roxio has already created a buzz with the announcement that it is going to relaunch Napster as a legitimate paid-for service by Christmas this year, although, like Apple's iTunes service, it will be initially available in the US only.
Everyone eating from the same plate
UK users haven't been completely ignored by commercial online music ventures. In fact, on the face of it, they seem to be spoilt for choice with names such as MSN, Tower Records, HMV, iCrunch and Dotmusic all offering commercial tracks for sale.
However, the difference between the UK and the US is that almost all the UK sites offering tracks for download rely on the song library of a single company.
That company, called OD2, was set up in 1999 by rock star Peter Gabriel and IT specialist Charles Grimsdale, and currently has a library of around 170,000 songs. Unlike Apple or Roxio, OD2 doesn't run a music site of its own. Instead it does all the hard work of negotiating rights deals with labels, encoding the music and then handling the infrastructure to digitally distribute the tunes and collect payments.
If a website wants to set up shop as a music seller all it has to do is go to OD2 and buy the service off the shelf. The website then just needs to build a front-end web interface that links back into OD2's infrastructure. So when you purchase music from sites such as Dotmusic and HMV, you are really buying music from the OD2 service.
The system uses the idea of credits as payment for music. Usually a stream will cost one-tenth of a download and a download will cost one-tenth of a CD burn.
The big issue with OD2 music sites is that they use Microsoft's proprietary wma music format. This means that you can't play back the tracks on many solid-state media players because the wma file format simply isn't as widely supported as MP3.
However, the reason OD2 uses wma is because it has built-in rights management, something that MP3 doesn't have, and so we are unlikely to see large legitimate sites offering downloads in MP3. Even Apple's iTunes doesn't use the MP3 file format.
But probably the biggest factor that puts people off the OD2 sites is that the downloads are tethered to your subscription, so if you let your subscription run out then your tracks will no longer play.
Another company offering music to UK subscribers is Wippit. The company was one of the first to offer a legal alternative to Napster, but it hasn't exactly set the world alight.
The main problem has been that Wippit hasn't been able to convince the major labels to allow it to carry their artists' songs. Nevertheless, it has got deals with around 550 independent labels and does include big name artists such as Paul Oakenfold, Stereophonics and Belle & Sebastian.
Wippit is different to many of the other legitimate music sites because it uses MP3 files and is actually a file-sharing service rather than an on-demand service such as OD2's technology.
The difference between Wippit and illegal services such as Kazaa is that a song can only be shared across the service if Wippit has a licensing program in place with the record company that owns the copyright.
However, much of the new hope surrounding legal music downloads hasn't come from these longer running services, but has arrived on the back of the success of Apple's iTunes music store.
Unfortunately, this is only available in the US at present, and Apple says it doesn't currently know when it will be ready to launch the service in Europe.
iTunes seemed to come out of nowhere, yet was one of the first legal sites to launch with a decent selection of music thanks to the 200,000 tracks that were available for download.
Selling one million songs in its first week was the big deal with iTunes and, while demand did tail off a bit after this initial high, the service still managed to dish out a total of five million songs in its first eight weeks of business, making it the biggest online music store.
The numbers are pretty surprising because iTunes is only available in the US and only to those who own Apple's computers. That's a mere four per cent of the total US market.
But perversely this may also explain some of the success. Apple owners are notoriously brand loyal and jump at the chance to support the company when they see it has a good product, so it's no surprise die-hard supporters lapped up iTunes on its launch.
But iTunes isn't exactly cheap and this may prove more of a problem as the service expands. The company currently charges a flat fee of 99c per song. This means that if you were to use the service to fill up the company's latest Ipod with tunes, you'd end up shelling out $7,425.
Some see this 99c charge as a little excessive, given that the record companies no longer have to swallow the cost of physically creating and shipping CDs.
Spurred on by the initial success of iTunes, Apple is planning to update the service to support Windows users and so tap in to a larger market.
Rumours suggest that the company will develop a version of its iTunes media player to work on the Windows platform, but all Apple will say is that the iTunes shop will be open to Windows users soon; it won't give details of how those users will access the service.
However, Apple needs to move quickly if it is to really capture the Windows audience, because Roxio is gearing up to relaunch what remains probably the best-known name in the online music world.
Yes, Napster is on its way back. Roxio isn't a brand you'd immediately associate with digital distribution of music, given that most people know it as the company behind the Easy CD Creator software, but the company has out-foxed many of the large media conglomerates with a bit of smart bargain hunting.
First, it picked up the remains of Napster for a song at $5m, and then it went on to buy the Pressplay music download site from Sony and Universal, giving it rights to the catalogues of all the major music labels for just $39.5m.
The end result is that when Napster goes live again in the US at Christmas, it is expected to offer the largest range of songs for download of any of the current legal services. It will also allow users to transfer songs to digital music players and burn tracks to CD a certain number of times.
Unfortunately, UK users will have to wait until a year after the initial launch before they can test the service for themselves.
Back where we started
In fact the buzz around the relaunch of Napster has many people already tipping it as the most likely to really succeed where many others have failed, an irony that isn't lost on many industry insiders.
"Closing down Napster was the most stupid, shortsighted thing that the industry has done in many, many, many years," said Martin Goldschmidt, MD for independent music label Cooking Vinyl. "It's cost them hundreds of millions, if not billions of pounds."
In fact Napster was on the verge of relaunching as a legal site when its then owner BMG pulled the plug. The problem was that the other labels wouldn't co-operate with BMG and so it had no real option but to close down the service as it knew it couldn't run it without the back catalogue of the other big record companies.
"You had Napster trying to take the online community to a legal music subscription service - and they could have done it in months if they had the support of the majors - but they shut it down and then after that Aimster, Morpheus and Kazaa all went nuts," said Goldschmidt.
"I think in about a year we'll go back to where Napster was when it was shut down. But the thing is you've lost all that time selling music online so you've lost loads of money.
"You've encouraged all these people to look into weird peer-to-peer things and you've encouraged this idea that the way to get music is to get MP3s for free. They could have stuck with Napster in the first place because it was trying to pull that whole community into buying MP3s."
The fact that the big labels' refusal to license their artists' material to online services is one of the biggest reasons it has taken so long for viable paid-for music download alternatives to appear.
Napster and the other illegal services that followed it were able to offer masses and masses of content from every record label on the planet because they didn't have to negotiate licensing deals.
However, it took years for the record labels to accept that they needed to offer a similar amount of content on legitimate services to prise people away from the illegal offerings.
Finally things are really starting to change. "Content is king," said Scott Marx, European communications director for Roxio, the company that now owns Napster.
"If you go online and search for a song and find it's not there then you're going to go somewhere else to look for it and so our goal is to have the most comprehensive catalogue available."
But it's not just a case of having the tracks available; it's also a matter of coming up with the right pricing structure. In the past, music services tended to be subscription only, but the success of iTunes has shown that many users don't want to pay out a large subscription free but would rather pay on a per-track basis.
"The record companies said 'we can't compete', but they hadn't tried to compete. They hadn't given people a viable option," said Marx. "Pressplay was an option, but one of the problems was that it came out with a subscription model - people couldn't just buy individual tracks."
Giving users what they want
In fact most within the industry agree that the legal sites, until now, have been making a pretty poor fist of offering consumers what they want.
"This is where the record labels have been screwing up," said Marx. "Instead of fighting in court they should have been giving people a legal viable option and they would have started going that way."
Goldschmidt of Cooking Vinyl couldn't agree more. "When they've got a really strong legitimate model that consumers are embracing, then fine, start to have a go at people, but you've got to use the carrot before you use the stick and if there's no carrot then you should not use the stick," he said.
However, even on the latest services users are struggling to come to terms with the Digital Rights Management technology being used. Most people hate the restrictions it places on how they can listen to their music.
For example, one user we spoke to was pretty disheartened after paying for a downloadable single by rock band Muse from BT's Dotmusic site.
The promotion involved the user texting a premium rate number which charged £1.50 to his phone bill and then sent him a code to unlock a download on the Dotmusic website. The problem was that once he got hold of the track, which was in wma format, he found he could only play it on his PC.
"It seems to have been deliberately messed with so only PCs will play it, whereas part of the deal says you can export it to portable music payers and burn it on to CD up to three times," he said.
Complaints about DRM issues like these are still all too common. A quick scan of internet newsgroups will throw up user complaints about pretty much all the current services. For example, a newsgroup user called Jeremy bemoans the fact that songs from iTunes can only be installed on three Macs, which stops him streaming tracks across his home network.
Another newsgroup user going by the name of Vedge slams Buymusic.com, an iTunes-style site for PC users, for not looking after its customers properly.
"It's just too bad Buymusic.com sucks due to uneven licensing, uneven pricing, horrible digital rights management and bad tech support. When people see how horrid Buymusic.com is, they'll be running back to Kazaa," he said.
Nevertheless most people agree that legitimate music services have now become easier to use and are not clamping the shackles on downloaded file formats as tightly as they once were.
Looking after the little guy
But it's not just users who have more reason to be cheerful about the new wave of paid-for services. Independent musicians who don't have big record contracts with the major labels also seem to be getting more of a look in with digital distribution.
In fact the race to increase the numbers of songs on the new legitimate sites may end up helping many independent artists, at least in the short term.
"If you look at digital distribution the cost model is different," said David Millar, corporate affairs manager for Apple.
"You've still got to publicise yourself so people have to know where to go and get your music, but I think it could be good for more specialist acts and there is a section on iTunes for up and coming bands."
In fact Tom Fox, a UK soul singer, is one artist who's feeling pretty happy with the way things are developing. Previously he had been getting himself heard via the MP3.com website which promotes new music from unsigned acts.
He says that as a result of having songs top the MP3.com charts above established artists such as Craig David, Alicia Keys and Norah Jones, he's had radio stations pick up on songs from his debut album Midnight Rain resulting in them being played in over 30 countries.
But more recently he's been able to get his music onto the iTunes site through a deal Apple has with CDbaby, an online CD store that only sells music by independent musicians.
"Apple has already opened the doors for independent labels to distribute their music via iTunes," he said. "As I'm a member of CDbaby.com in the States, I've now signed up to offer my music on this service. With over 3.5 million songs sold so far, the iTunes facility is an incredible opportunity for independent artists."
If at first you don't succeed
Despite renewed optimism from users, record company execs and artists after the success of iTunes, most people within the industry remain cautious as to whether legitimate services can be as popular as Napster was in its prime.
At least now there is a belief that everyday folk are honest and will pay for downloads if the service offers a big enough library of songs and is easy to use.
It's accepted within sections of the music business that, if the industry had concentrated more on giving users what they wanted, rather than preventing them getting what they already had access to, record companies would be in better shape today.
After all, the blueprint for what the public wanted was there from the start. It was a service that offered a massive library of music covering everything from Kylie Minogue to obscure dub reggae, all searchable with fast downloads and good-quality encoding. The sad part is that a 19-year-old student working on his own put it together.
Since then the music industry has spent obscene amounts of money trying to come up with a legal alternative and only now, four years later, are we on the brink of seeing services that could prove as popular.
Keeping the lawyers in expensive suits
Ever since Shawn Fanning launched Napster on an unsuspecting music industry, the Recording Industry Association of America (RIAA) has been trying to fight against the growing number of file-swapping services on the net.
In the beginning, the RIAA sought to take action against the actual companies producing the file-sharing software, but after losing a court case in April against the peer-to-peer services of Morpheus and Grokster it has been forced to change tack.
"I think this court ruling was really pivotal in that now they are forced to go after the individual people who are running servers on the network. I think that protects our business," said Mark Gorton, CEO of Limewire, a company that produces a popular client for the Gnutella decentralised file-sharing network.
The RIAA has indeed turned its legal attention to users and has put in around 1,000 subpoenas to US ISPs and universities demanding they hand over the names of users. The association is claiming payments of between $750 and $150,000 per track against anyone deemed to be sharing files.
One of the names it has been able to get hold of is that of a 14-year-old boy, leading to fears that his parents could become bankrupt and lose their home just because their teenage son was swapping files on Gnutella.
Until recently these heavy-handed tactics were confined to the US, but in the last few weeks it has been announced that Landwell - the law firm that represents Pricewaterhousecoopers - is planning to file suit against 4,000 Spanish peer-to-peer file-traders on behalf of unnamed clients.
In fact this lawsuit may have been made possible in part because Spain has adopted a controversial directive from the EU called the European Union Copyright Directive.
This hands over huge powers to copyright holders to defend their rights. The UK is also obliged to incorporate the EUCD suggestions into its laws, but so far law makers in this country haven't agreed on how to go about this.
There have been reports that the British Phonographic Institute is waiting for these new laws to come into effect before it decides whether to take legal action against users, but Andrew Yeates, director general of the BPI says that this isn't necessarily so.
"You have to look at the circumstances in each individual case," he said. "We are looking at the realities of the marketplace and we are very keen to try and work with the consumer in the UK.
"One of the issues has been that there haven't been a huge number of legitimate online services out there for people to go and get their music in a way in which money flows back into the industry."
See also:
The music industry has finally worked out how to make money out of internet music downloads. But will legal online music services be as popular as P2P sites? 18 Jun 2004
The US trade body is now bringing the full weight of the law to bear on individuals who dare to download a track or two from the web. But the users are fighting back ... 01 Aug 2003All Online
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