By Howie Cockrill, Esq.
The music, film and television industries can no longer refer to the current internet era as part of some kind of “revolution.” The revolution is over. Digital won. The internet won.
The tired term “digital content revolution” still gets bandied about quite a bit. Perhaps it is just easier to use this term than to think about what happens next.
This is usually the biggest problem with revolutions – making sense of the aftermath.
No – we currently find ourselves in the post-revolution internet era, where the questions are no longer, “Will digital become the primary format?” or “Will the internet change the rules of the game?”
We know the answers to those questions, and so many others, which were the news headlines and industry panel topics from 1995 to 2005.
The immediate issue is how to survive – or in modern capitalist terms, how to “monetize.”
The urgent question for content providers is no longer whether to offer content on the internet. The question is how to do it.
And so the beating heart of the post-revolution debate has become “download versus subscription.”
CONSUMERS PREFER OWNERSHIP?
The download model for content has been rather successful over the past few years. (Exhibit A is Apple’s iTunes. Exhibit B may end up being Amazon’s mp3 store.)
Advocates of the download model often cite the consumer’s desire to own their content as the primary force driving this success.
The first thing to note in this assertion is the reference to what the consumer desires. One of the biggest changes in the last dozen years in the entertainment industry has been an inversion in the stream of commerce.
For example, before the internet, “it” bands were largely determined and pushed by major label executives. Advertising and marketing projects and budgets were born and died in board rooms.
Since the internet, artist popularity has become more closely linked to the empowered consumer. Music fans in the forms of 15-30 year old bloggers are becoming a promotional force to be reckoned with, leveraging third party web ad dollars into artist marketing campaigns.
And so there has been an inversion from a top-down stream of commerce to a bottom-up stream of commerce. Whether this trend will be temporary is yet to be determined – but for the foreseeable future, consumers are more and more in the driver’s seat when it comes to making and breaking bands, TV shows and movies.
Let’s turn back to the assertion that consumers prefer to own their music rather than rent it or subscribe to it.
Certainly this is not true across the board. Millions of consumers are happy to get their digital content fix from a variety of subscription services, especially music.
Some of these services, such as Yahoo!’s Launch.com, offer streams of songs which leave no discernible copy on the consumer’s computer.
Others, such as the redesigned Napster, offer downloads that “time out” if the subscription is not renewed.
In fact, the subscription model is looking better all the time to major record labels tired of the boilerplate download terms offered by the biggest download juggernaut of all - Apple's iTunes.
The major record labels have learned (are learning) the hard way that direct competition with established download providers is an uphill battle.
Back in the 1990s, the labels' attempts to combat P2P service Napster by providing their own music download sites was a unanimous failure. Today, the label-run download alternatives to iTunes are having the same trouble, with iTunes capturing at least 70% of the U.S. download market.
Switching from the download model (where consumers pay per track, album, episode or movie) to a subscription model (where consumers have broad access to all types of content) could be just the right maneuver for record labels and other content providers.
In other words, major content providers may be shifting away from the "If you can't beat 'em, join 'em" slogan to the "If you can't beat 'em, start your own game" slogan.
Business Week has reported recently on industry gossip about 3 of the remaining "Big 4" record labels teaming up to offer a music subscription service.
Tentatively called "TotalMusic," Universal Music Group, in conjunction with Sony BMG and Warner Bros., are floating a new concept that would tack on an extra fee to cell phones, internet access and hardware (like video game consoles and set-top boxes).
This extra fee, which would probably translate to less than $10 per month, would give consumers access to roughly 75% of major label content.
The advantages to this model are apparent:
The labels could meet consumer demands using "in house" resources instead of licensing the music to third parties like iTunes, and it would provide the labels with a viable competitive content outlet. The "feels like free" service might also be appealing to consumers, who would get access to a wide variety of music.
With all of the major record labels also having outlets in film and television, if TotalMusic prooves successful, TotalMovie and TotalTV would not be far behind.
With the market primed for an explosion in subscription music models, and with millions of consumers already using subscription music services, ownership (or at least absolute ownership) cannot be the driving consumer motivation as they navigate the multi-verse of digital content provider models.
But surely ownership of content (music, movies, TV shows) does play some significant role, and if so – why do some consumer’s prefer to own their content rather than rent it?
Perhaps the reason has to do with the physical goods that preceded the digital file.
OWNERSHIP OR CONTROL?
In the pre-internet “physical” age, the only subscription or rental model for content was the public library.
Of course, there have been and remain other outlets for access to music and video that don’t involve consumer ownership. Consumers have happily listened to radio for free and paid to go to concerts and movies.
But such experiences are fleeting and offer no control to the consumer over what they hear and see and how often they can hear and see it. Even digital subscription radio today doesn’t allow a consumer to hear a particular song at any given time.
More and more, content experiences that offer consumers control over what, when, where, how and how often (“WWWHaHO”) they enjoy their content are proving to be more pervasive than those that do not offer this control.
So perhaps consumers care less about OWNING their content and care more about having CONTROL over their content.
However, to date owning content and controlling content have by and large meant the same thing.
In the case of music, previously consumers had to buy a CD to control WWWHaHO they heard the music contained on the CD. The marketplace supplemented this control by creating portable devices.
This concept of ownership being linked to control has been translated word-for-word into the digital age.
Once consumers got used to the idea of digital music, instead of buying a CD of music, they felt comfortable buying digital files of the music.
And once again, the marketplace provided portable digital music players that have supplemented stationary players in giving consumers control – the same control they demanded in the pre-digital age.
The thread through all of this, and really since the invention of recorded content, has been that if you truly wanted to control your content experience on the level of WWWHaHO – you have had to own or possess some physical or electronic format embodying the content.
CONTROL WITHOUT OWNERSHIP?
What if “control” were unchained from “ownership”?
What if the consumer had complete control over WWWHaHO – without ever actually owning or possessing anything?
This has been the much-heralded concept of the “celestial jukebox.”
Imagine for a moment an ethereal bank of 1s and 0s beaming every song, movie, TV show and talk radio program you could ever want right to your jukebox device, whether you were at work, in your car, in a plane or walking down the street.
You put in your quarter (or the digital micropayment equivalent) and you hear the content, or you put in a lot of quarters (read – “subscribe”) and you hear all the content anytime for as long as your quarters last.
Certain aspects of this are very appealing. By paying a monthly subscription fee, a consumer would not have to worry about buying individual albums, episodes or movies. They are just a click away.
Yet, for all the achievements of the internet, this promise of the “celestial jukebox” has yet to be delivered on.
To be fair, its not the internet’s fault. Or even technology’s fault generally. As usual – the error is entirely human.
Yes, there is a great deal standing in the way of the widespread adoption of a digital content model that would provide absolute control (for a subscription fee) without ownership.
What I am talking about here is the ultimate synthesis between the download model, which offers consumers superior control, and the subscription model, which offers consumers superior access.
Here are just a few “minor adjustments” necessary to for the industry to reach this “celestial synthesis”:
1. The Big Tent. The fractured content catalogs of the major labels, studios and networks as well as dozens of “major” independents would need to be available under one tent, thus creating a one-stop shop for the catalogs of most artists.
If the previously mentioned concept of TotalMusic actually materializes, we may be closer to this than anyone gave the major content owners credit for.
2. Wifi Everywhere. Extremely fast wireless internet access would have to be nearly ubiquitous if this utopian service were providing streaming content.
If the service provided downloadable files with DRM that made the content time-sensitive to subscription payments (ala Napster’s “time out” system for music) – such files would have to be uniformly encoded and uniformly playable on alternate devices.
3. Interoperability. The devices themselves would need to be more interoperable than they currently are. In order to woo users of content download models, the service would need to ensure interoperability between a user’s laptop, work computer, home stereo, television, car, and on the go. Failing that, there would have to be a major industry push for combining many of these devices into one device (i.e., home PC – television – stereo).
4. Consumer Trust. Users would need to be able to rely on such a service in order to popularize it. What good is a celestial jukebox if it is always crashing or if it is slow between 9 am and 6 pm? Or if it only works with iPods?
Essentially, the creation of a celestial jukebox would require the intensely synergistic efforts of:
- content owners
- technology companies and
If you saw the movie “Contact” and remember how it took a message from outer space to get the countries of the world to work together and spend billions on a space/time travel machine – I imagine it would be about like that.
A particularly massive obstacle would be getting the major content owners on board.
The term “content owners” gets used quite a bit in the media, as if they were one all-powerful bloc of cultural gatekeepers.
While there may be some truth to that, content owners are actually dozens of groups of rights holders. These groups do not always have parallel interests and do not always present an allied front.
Nevertheless, content owners generally have a couple of things in common:
1. They want to control their content. (Ironically, just like consumers.)
2. They want (and feel entitled to) a piece of whatever pie is getting cut up.
Unfortunately, these commonalities are usually the exact things keeping any significant number of content owners from agreeing about anything.
If done right (and content owners would make sure that it was before signing up), a celestial jukebox could give content owners a great deal of control over their content.
At least until 6 months in when hackers figured out a way to subvert that control.
Even so – content owners have proven time and again the old adage, “If the money is right, much can be overlooked.”
Ok - I just made up that adage. It is true, though, that fear of being hacked has not prevented content owners from embarking (if sometimes reluctantly) on new methods of offering digital music. The bottom line for doing so is usually their own “bottom line” and the hope for a nice return on investment.
Thus, if the major content owners are to be convinced to rent their catalogs & rights out on a massive scale – the money has to be right.
Put another way – once you establish the size of the pie, you have to determine how to cut it up.
This will be difficult at best in a scenario where everyone knows that all parties are not going to end up with equal pieces and everyone believes they deserve the largest piece.
The TotalMusic concept of subscription service fees being tacked on to already existing devices and services is great, but once that money is collected - will the parties be able to agree to divide it up?
For any given song, reproduction royalties (for timed-out downloads) or performance royalties (for streams) must be paid to Harry Fox, ASCAP/BMI/SESAC, SoundExchange, artists/record labels and songwriters/publishers.
If this service offers video, which is set to be the new industry online standard – even more parties are implicated. Unions and guilds for directors, actors and screenwriters, not to mention producers, studios, and networks, will all want their cut.
Paying all of these parties will have to be done in way that does not make the price of subscription prohibitively expensive.
Even assuming that enough content owners climb aboard to make the prospect appealing to consumers – the resulting jukebox would be little different than many of the subscription services that exist today.
What would set the celestial jukebox apart would be its accessibility.
If consumers had access (without ownership) to all their favorite songs, TV shows or movies, not just at home or at work, but also in their cars, on the subway, at the gym or walking down the street – this would be an advantage not just over the current stationary subscription services. This accessibility would also make the celestial jukebox competitive with the download model.
Achieving this would mean towns, cities and states across the
U.S. rolling out blanket wireless internet access in their area. Many
towns and cities have done just that, with hundreds more in the
However, many issues remain to be worked out with municipal wireless, such as how best to structure the economics of these models and how to deal with privacy and free speech concerns.
Once municipal wifi is available in most state capitals and major metropolitan areas, there will be a sufficient foundation for the celestial jukebox. Consumers and technology companies will no doubt follow.
For now, though, we are still operating in a world where digital music and video consumers must choose between the download model, where they purchase their content song by song & album by album or episode by episode & season by season in order to exercise full control, or the subscription model, where consumers rent entire catalogs of content to enjoy broader exposure.
The celestial jukebox would be the synthesis of these models in many ways. But we’ve got a long way to go to get there.
One thing that may help speed the arrival of the celestial jukebox is the fact that major labels and studios no longer have the market cornered on popular content or the distribution of content.
As the Web 2.0 phenomenon has borne out over the past couple years, every individual is a potential musician, director, actor, author and reporter. With an internet connection, every individual is also potentially their own distributor.
There is extremely popular music and video content online that has been wholly created without the help of major record labels or film studios, and that content has reached millions of people without the help of major or independent distributors.
While this content would certainly have to get licensed for distribution on a celestial jukebox platform, the rights issues would be far less entangled without the involvement of bottom-line oriented content corporations with massive and expensive catalogs.
But would consumers flock to the celestial jukebox to watch user-generated video and hear true independent music – if they’re favorite mainstream music and video was not also available?
It seems unlikely that the jukebox could ever become the “standard” digital distribution format without the classic and popular content currently owned and controlled by the major labels, studios and networks.
This is not to say that a celestial jukebox for user-generated content would be unpopular.
The “YouTube” functionality on the Apple iPhone seems to prove that consumers are interested in accessing user gen content where and when they want. And note that they are paying a tacked on “subscription fee” for this access.
But for this jukebox model to take root as the popular distribution stream for popular content, it will need the best, most highly in-demand content.
By and large, that content is owned by record labels, film studios and television networks. When the money and demand right, these groups will make it work.