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Digital
News Corp back start-up operating in blanket digital levy space
By CMU Editorial | Published on Wednesday 28 April 2010
Rupert Murdoch dominated News Corp is backing an interesting if, arguably, slightly flawed new digital start-up which is playing around in the all-you-can-eat and blanket licence download space. Sort of. It’s all a bit complicated, to be honest.
According to the Financial Times, Adam Kidron’s Beyond Oblivion company is aiming to set up a new service which will have some similarities with existing all-you-can-eat download operations like Nokia’s ComesWithMusic, though mainly in the way a consumer pays for it – a subscription fee is bundled in with the cost of a phone handset, PC or digital media player, or an internet service provider or tel co account.
The business model behind Beyond Oblivion would, however, be different. The service’s software would scan a customer’s PC and log all digital music already stored there, oblivious of its origins. Users would be able to add to their digital music collections by downloading additional tracks free of charge, possibly from a Beyond Oblivion platform or, in theory, from any source on the net, including unlicensed file-sharing networks. The software would then monitor when any of that music gets played, and pay a nominal per play licence fee back to the content owners. That licence fee would be billed to the hardware manufacturer or tel co or ISP who charged the initial subscription fee to the consumer.
Of course, in many ways this is not a new principle. Some have long predicted the ultimate future of the record industry is that a levy will be applied to ISP accounts which will allow a user to access all and any music files from all or any source for free, with technology monitoring what tracks are downloaded and shared, and paying a cut of the overall levy fee to each content owner based on how much their music is used. Kidron’s system is slightly different in that royalties would be paid based on play rather than download.
Such systems are, however, rather complicated to implement, both in terms of developing technology that can genuinely recognise and track digital content that is mainly stored as MP3s without digital rights management embedded, and in terms of how money is redistributed to record companies, music publishers and collecting societies, and artists and songwriters, and how accurate automated reporting would really be. Although some in the indie community have long advocated this as the ultimate aim for the digital music market, arguably such a system will favour the bigger catalogue owners.
The all-you-can-eat download services, like ComesWithMusic, are sort of a halfway house between the current a-la-carte download/subscription streaming services and the grand one-levy-gets-you-everything-forever system. As much previously reported, ComesWithMusic’s great weakness is that, outside China, music sourced via the platform comes with DRM locking it to the device it is originally downloaded to. Apart from Universal, most major and key indie labels remain nervous of DRM-free all-you-can-eat MP3 download services, such as that proposed in the UK by Virgin Media.
Which brings us to the first of three flaws with Kidron’s proposal. He is currently in talks with record companies, but it is likely most of them will be rightly nervous that the Beyond Oblivion system, while on one level possibly monetising the billions of MP3s that have been illegally downloaded in the last decade, might destroy those digital platforms that are already making the music industry money, such as iTunes, and those which have real potential to be good future earners, such as the subscription versions of Spotify and We7. And all on the dubious promise that ultimately Beyond Oblivion could pay billions into the music industry.
The second flaw is that the makers of digital music players, and providers of ISP services, might have to take the hit if it turns out users download and play a lot more music than the predetermined subscriptions accommodate. That’s an issue for all all-you-can-eat systems. The all-you-can-eat business model is based on the principle most consumers will actually only download or play a relatively small number of tracks a month, even though in theory they could download every song ever, and play songs 24/7.
But if content owners receive a unit price for every download or play, even if that price is nominal, what happens if users access a lot more music than expected, who takes the hit? Tech companies and ISPs will be nervous of taking that risk. And even more so of paying out on tracks in a user’s digital music collection that may have been legitimately bought via iTunes and on which no further licence fee is actually due.
The third flaw is Kidron’s optimistic revenue projections, which seem at least partly based on those IFPI stats that say that although the digital music industry is currently worth $3.7 billion a year, 95% of downloads are illegal. Some combine those stats to say the digital music market should be making $70 billion a year and therefore the music industry is missing out on $66.3 billion. Kidron told the FT: “Our job is to collect as much of that as we can. To collect $66.3bn would be something of an achievement, but to collect $10bn of it would make people very happy. Those figures are completely within reach”.
But, of course, the IFPI figures ignore the fact that if all illegal downloading stopped tomorrow, while digital revenues would likely rise, the rise probably wouldn’t be huge, file-sharers would just have much smaller record collections.
Still, it’s an interesting idea, and the News Corp’s backing will boost the start-up’s credibility. You can read the FT’s interview with Kidron here.
