Rights concerns limit distribution

Rights concerns limit distribution
Imagine yourself in the following scenario: You drive out to the mall on a Saturday afternoon to buy a pair of the latest Air Jordans. As you enter the mall, you see a scruffy-looking guy in the parking lot selling some that "fell off the back of a truck" for $20. Do you buy them or head inside to the store? Like most people, you probably pass up the opportunity to save a few bucks and legitimately buy the shoes from a retailer, packaged in a box, fully guaranteed and without the accompanying guilt.

Now consider an alternative scenario. As you prepare to hand $200 over to the guy in referee stripes, he mentions that this year, Nike has some new rules about the shoes. You are permitted to wear them only in your house. You can't wear them in your car, at the gym or to work. If you'd like, you can buy three more pairs for those locations. By the way, he's only offering size 12 today. Suddenly, that guy in the parking lot isn't looking so bad.

Essentially, this is the dilemma that digital-music customers face today. Customers want to purchase Internet-based digital music for new consumer products like the Rio, but the experience of buying it is extremely poor. Through a myriad of rules, limited selection and miserable usability, the owners of most commercial music have driven customers away toward other solutions, whether that involves file swapping or, more commonly, buying old formats like CDs and creating unrestricted MP3 files.

When we introduced the MP3 player, we learned a great deal about how unique music is as a product. Customers are emotionally attached to the music they buy. It's not at all unusual to keep an album for your entire life. Consumers regularly listen to an album 10 or 20 years after they purchase it. Few products are so intensely tied to our self-image. Because of this, people want to own music, and the voracious desire to acquire more and more of it has driven an abundance of available content. The downside of that personal attachment to music is that customers are highly intolerant of anything that reduces the quality of the buying or listening experience.

A viable online music industry requires a product that meets all of the current expectations of consumers. These include:

• Selection: Customers expect to have access to the complete music catalog of every major label.
• Ease of use: Buying and using online music must be at least as easy and as satisfying as buying a CD is today. Any security mechanisms need to be invisible to customers who are not engaging in piracy. Listening to music should be no more complex than pressing the play button.
• Portability: Music you buy should be usable on every digital music device you own. Current digital-rights management (DRM) technologies support device portability if content owners allow their customers to exploit it.
• Quality: Even in compressed digital formats, customers expect to see the level of pride and workmanship that artists have traditionally demanded for their products.
• New capabilities: Consumers understand that advanced digital devices and services provide advantages over traditional formats, including the ability to better organize, search and manage content; more information about the music and the artist; and links to tools and communities that enhance the experience.
• Sustained value: Customers consider music to be a lifetime purchase. Music I buy still needs to be usable if I get a new PC or a new Rio music player.
• Respect: Consumers expect to be treated as valued customers throughout the process, not as potential thieves.
• The good news is that technology is no longer a barrier to creating an online music economy. There has been an explosion of digital-music devices since the first Rio was introduced four years ago.

Today, I can rip my CDs onto my computer and listen to them there, or I can rip them onto my Rio Central home music server and listen on my stereo. From there, I can stream the music over my home network to my Rio Receiver in my bedroom. I can burn a 200-song CD-R for my son to listen to on his RioVolt Portable CD in his room. I can copy a dozen or two songs onto my Rio 800 flash-memory player to take to the gym, or I can copy all 4,000 songs in my collection to my Rio Riot hard-disk portable player to take with me on an airplane. I listen to the same 4,000 songs on my Rio Car system on my way to work each morning. I can enjoy my digital-music files in as many places and in as many ways as any previous music format. In fact, it is a better experience since I often have my entire collection with me away from home.

Security is also no longer a barrier to online distribution. DRM technology is available from Microsoft, Real, Audible and others that effectively limits illegal distribution of content. This technology is already supported on many of the music devices from Rio and others and can be effectively applied to all of the devices described above. Every major record label has deployed one of these technologies to some extent.

Format compatibility is often mentioned as the final barrier to online music infrastructure. Content owners insist that a single standard format and a single standard DRM must be adopted before a market can be established, just like for CDs or DVDs. This is an obsolete argument. Modern music devices are software-based and can easily support multiple content formats and DRM mechanisms without any impact on the user. Even a typical DVD player today supports almost a dozen different disk formats.

Huge impact
The impact of "getting it right" will be huge, driving growth in music devices, semiconductors and content. When music becomes more useful and more enjoyable, people buy more of it.

Digital distribution also creates great new opportunities for artists and labels. New music can be promoted quickly and cheaply. Distribution costs are lower, resulting in increased profit margins. Digital distribution systems also provide huge opportunities for collateral marketing. Many music fans will opt into fan clubs, online communities and other affinity groups. Digital-music systems allow consumers to enjoy their music more conveniently and in more places. Perhaps most important, labels get sustained, direct relationships with their customers.

The music industry has made great progress in the past year toward this model. The PressPlay music service has a broad selection, allows users to build collections and permits burning CDs of some content for other devices. Now is the time for the industry to deliver a high-quality consumer-oriented music service.