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Piracy apart, this tune heralds the massive transformation of the music industry.
The brick -and- mortar outlets were the first to feel the winds of disintermediation. Like their cousins the bookstores, they were dethroned by e-tailers such as CDNow who offers discounts, 7*24 hrs service and interactivity. And at Amazon.com, music is also auctionable. Next, with the advent of streaming audio, fans could listen to free music at broadcasting sites that generate their revenues from advertising and affiliations with music e-tailers. With over 100 channels and 150,000 songs in its repertoire, Spinner.com is positioning itself as the first and largest Internet music service. While the impact of the Internet was being felt in the industry, the alarm bells did not ring as new entrants paid their dues in the form of royalties and licensing fees. Enter MP3 and panic spreads out in the ranks of the Recording Industry Association of America (RIAA). First, it was the illegal Internet sites offering free downloads of pirated music in MP3 format. Then, it was Rio, the MP3 portable player by Diamond Multimedia, which made the RIAA sue Diamond claiming that its player violated copyright laws governing digital recording devices. The RIAA's concern about pirated music is certainly valid. But as others observed, the real threat of MP3 is not piracy but the potential disintermediation of the recording industry. That's why Charles C. Mann calls MP3 the only true revolution of the Internet. But what is MP3? It is just a format for significantly compressing a music file without loss in sound quality. This makes for fast music downloads. The format also enables the conversion of a CD into digital files that can be uploaded to the Web. This is at the heart of the piracy concern of the RIAA. But most importantly, MP3 enables an artist to record a musical creation with relative ease and publish it on the Web hence, bypassing the recording and distribution companies represented by the RIAA. While the RIAA lamented the advent of MP3, others were quick to capitalize on the new technology bonanza. MP3.com, a leading new entrant and recipient of the prestigious MIT Sloan Re-inventor Award, allows musicians to upload their music for free in return for providing a free song to the public. The audience can download an MP3 player for free, listen to the song and if it likes it, the CD purchase is just a click away at a significantly lower cost. The savings from bypassing the supply chain are passed to the public. |
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