Tuesday, January 20, 2009

A Possible Revolution in Music Downloads

On Monday, the New York Times featured an article describing what could very well represent a paradigm shift in the music industry -- unlimited legal "free" downloads. Really the holy grail for a music fan.

Historically, the music industry has been violently opposed to any sort of unlimited free downloads of music -- and consequently, these sources have been made illegal. This is most evident in the suppression of peer to peer file sharing sites such as the original Napster, Gnutella, BitTorrent and the like.

In response, other business models have arisen. From the buy one song at a time model of iTunes and Amazon. To the subscription based download model of the new Napster and Rhapsody. To the streaming net-radio concepts of Pandora, Last.FM and iLike. Unfortunately, none of these models has managed to stem the steady deterioration in the music industry. The most successful, iTunes, has apparently reached a plateau in sales. The least successful -- the subscription based models -- have not been able to gain traction because of a perceived prohibitive cost. And the streaming net-radio concepts do not even allow you to listen to the songs you want, when you want to listen to them.

The new business model, which is being introduced in very limited foreign markets, has some third party hardware provider paying the subscription price for the unlimited download model. That is, your cell phone handset manufacturer or your cable provider would pay the cost for you to have unlimited downloads from entire music catalogues, on demand and at no additional cost. Likely they would pass some or all of these costs on to the end user, but it would be blended in with the monthly rate. Further, competitive pressures should make it difficult for these hardware providers to exact the entire cost (or even most of it) in additional fees. In competitive markets, this would be a loss leader for other more lucrative product offerings.

The end result to the consumer is that when you buy your new Sprint phone, for example, it would come pre-loaded with software allowing you unlimited downloads. (Perhaps limited only by the memory capacity of the phone.) It is unclear if the song DRM would permit you to play and store the music on your desktop or laptop computer, but it would certainly cover you for your on the go listening needs.

The only thing missing from the article is a discussion of when and where this will happen. However, it is probably safe to guess that it will be rolled out in smaller foreign markets long before we get a sniff of it here in the United States. But, nonetheless, it is an enticing dream.

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Dividends and Preferences by Hank Heyming is licensed under a Creative Commons Attribution 3.0 United States License.