Digital Music Gains Legitimacy

The Emergence of Legal Digital Music Downloading Means More Competition for Listeners' Ears
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The Emergence of Legal Digital Music Downloading Means More Competition for Listeners' Ears

The Emergence of Legal Digital Music Downloading Means More Competition for Listeners' Ears

There's been a lot of press lately on how Steve Jobs and his crew at Apple Computer are changing the face of the company from a computer hardware manufacturer to a "digital lifestyle organization," and in the process are helping awaken the music industry from its current commercial nightmare.

In fact, it has taken an entity with the clout, know-how and legitimacy of Apple to bring together the disparate players and call the first lasting truce in the music file-swapping wars. What Napsterization has wrought, Appleization may solve, and the giant sucking sound of recent music-industry revenues could soon be silenced, as iTunes and other similar services reseed the market with legitimate revenues, a dollar (well, 99 cents) at a time.

The primary stimulus for this movement was the music industry's own refusal to adapt its granularity of delivery to meet obvious consumer demand. Record companies' stubborn insistence on providing their product only in ~$15+ full-length CDs that might contain only one or two desirable songs is a classic case of wearing corporate blinders and sticking to outmoded traditions long after they have lost their value and appropriateness. No one should be surprised that at least some consumers sought alternative means of acquiring such content in ways that met their needs conveniently. The fact that early peer-to-peer file-sharing was essentially free certainly fueled the trend, but "stealing music" was not the initial motivation for most users.


This process has served as the best object lesson to date of the power of the digital economy (legitimate or otherwise). One need look no further than the recent bankruptcy of Tower Records to understand the depth of the record industry's miscalculation, and the dangers of denial as a corporate response. A business model that cannot or will not adapt to such forces is seriously at risk.

So it's important to understand that such music-downloading behavior also indicates a trend away from radio listening. If you want to hear music, why put up with commercials and other clutter when you can access a far wider and more personalized selection, in high fidelity, even with programmed crossfades and the like, making it almost like your own private radio station?

Sure, it takes more work than just turning on the radio, but for many digital natives such efforts are fun and empowering, and the results certainly more satisfying in most cases. The added conveniences of a good user interface and a broad selection of content provided by the new breed of legitimate music portals like iTunes further lessens this burden, and increases the pleasurable "shopping" aspect of the process.

Once these users initially shift their behavior to digital music downloading, they are likely to expand such activity and thereby increasingly reduce their radio listening. (In fact, some observers have actually blamed terrestrial radio in part for the original movement toward file-sharing, given listeners' dissatisfaction with the ever-narrowing playlists on most commercial stations today.)

But as good as file downloading and media players get, it's not radio, and when news, sports and other immediacies - or simple "live" human voice contact - is desired, radio is still there for these listeners. Nevertheless, most people only listen to one audio service at a time, so usage of iPods and similar devices is likely contributing to the continued overall decline in TSL of commercial, music-formatted radio stations.

Reviving commerce

The legitimacy that Apple - and the other major players that currently or will soon offer similar services - add to the trend is accelerating the movement and expanding such behavior significantly by making more people feel comfortable about downloading music. The more pervasive mass-marketing message that such big businesses can bring to bear will undoubtedly also expand the market. The expected emergence of more competitors to iTunes will likely provide product and service differentiation, and possibly some competitive pricing pressure, making the business even more visible and attractive to consumers.

So just as the VCR once feared by Hollywood became one of its biggest profit centers by enabling video rentals, these previously dreaded digital music portals may restoke the ailing music industry, bringing on a renaissance that revives the sector with fresh revenues from previously disengaged audiences. But how will radio benefit from this white knight?

First, note that these audiences were never really disengaged from the music industry's product; in fact, quite to the contrary, they were highly motivated users. But they were not enamored by the associated retail process, and therefore primed to explore alternatives. The industry was slow to respond to this movement, and when it finally acted, it attempted the route, almost always unsuccessful, of stick instead of carrot (or in this case, Apple) to solve it.

So what routes can radio use to re-engage its disenchanted users? Here again, these audiences are still interested in the product - it's only the form of its delivery that turns them off.

One classical solution is the provision of exclusive, compelling content. Early windows of availability to new music prior to commercial release continue to fit this model, but consider that artists and record labels are increasingly moving such offerings to the Internet, having been discouraged by radio's limited accessibility to airtime.

Other exclusive radio offerings popular in many quarters are the shock-jocks and morning zoos that are being threatened by the current indecency purge. Consider also that both of these types of content may find warmer welcomes on satellite radio channels. So while this concept remains viable and important, broadcasters will be challenged to find new and better ways to provide appropriately exclusive content to their listeners in cost-effective ways.

Another approach is the expansion of a station's online services, and the exploitation of new on-air services that HD Radio (and recently revitalized RBDS) could provide. Here, too, the record industry has provided obstacles, successfully adding performance royalties to music Webcasts, and now seeking copy protection on digital radio broadcasts (as evidenced by the FCC's recent notice of inquiry on the subject).

Nevertheless, a music-formatted radio station's brand value still has some worth, and could be used to drive traffic to a music download portal or alternative streams (online or on-air) to provide more appeal and congruence to digital music users. Even artist and song-title data displays alone have value here, since they make radio more like the services that digital music users frequent.

Digital music downloaders quickly are moving from a fringe to a mainstream demographic. In order to survive, radio must find new relevance to this consumer profile. Next time, some ideas for using HD Radio's supplemental audio services to serve this purpose.


Charting the Digital Music Changes

In case you haven’t noticed, there have been a number of groundbreaking moves in digital music of late. The traditionally close business relationships between the music and radio industries have prompted some to ask how these changes might affect the emerging digital radio market.

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Turning Partners Into Competitors

First, recall that there has been plenty of posturing lately on Digital Rights Management (the "other DRM" to those in the radio technology business), much of it generated by an open letter by Steve Jobs a few months back in which he called for the music companies to drop their demands that digital music downloads be protected by such technologies.