MANHASSET, N.Y. Heeding the wake-up call placed by millions of users of MP3.com and Napster.com, the major record labels are moving their musical catalogs online and are crafting business models involving digital music files. The companies hit the ground running with digital distribution services, tools and products at the Midem 2001 international music conference this week in Cannes, France.
"The record labels realized they must take action and are opening the vaults and digitizing their content assets to harness the power of the Internet and turn it into profitable businesses," said J.P. Bommel, vice president of digital music at Madge.web (Wexham Springs, United Kingdom), a digital music service that debuted at the Midem conference.
Central to artists' and recording labels' rising faith in the Internet is the advent of digital rights management technology that protects digital content.
Bommel's company provides a Web hosting and digital content distribution network that distributes audio, music videos, artist information, interviews and live streaming video over a global private network. The content is protected via digital rights management software from InterTrust Technologies Corp. (Santa Clara, Calif.) and Microsoft Corp.
Madge.web will provide the digital infrastructure for jazz great Herbie Hancock's new interactive Web site and will host Hancock's new jazz recording label, Transparent Music. Beginning in May in Europe and midsummer in the United States, Hancock fans will be able to download digital files of music from his upcoming Future to Future CD, create and post remixes, and chat online with the musician.
Meanwhile, independent label Road Runner Records (New York) has signed a deal to make its hard-rock and heavy-metal catalog available for digital download in the United States via Liquid Audio (Redwood City, Calif.), which uses an internally designed content-protection scheme. And Zoom-zic.com (France) announced it will be the first digital music provider to allow customers to download music to PCs, Macs or portable MP3 players using a DRM-based subscription model or prepaid cards, starting in the second quarter. Zoomzic.com will use the DRM technology of Digital World Services (New York).
"The labels have demonstrated a high degree of confidence in DRM technology," said Ken Colgan, vice president of partner development at InterTrust Technologies, which claims to have hundreds of partners in the entertainment sector. The DRM software provider this week announced a deal with Virgin Records (London) and French band Daft Punk to pursue a business model that bridges the purchase of physical media (CDs) to downloads of digital content via the Internet. Colgan said the move proves that record labels want to "embrace, rather than alienate" customers.
Virgin Records and Daft Punk will use InterTrust's DRM software to develop an infrastructure for a combination online fan club and customer loyalty program. Fans who purchase the band's new CD will receive a Daft Club ID card and digital wallet software that will give them access to music, chat rooms, special photos, video clips and information posted online.
New technologies and the entrance of major companies lend legitimacy to Internet music distribution. IBM Corp. (Armonk, N.Y.) this week added a peer-to-peer distribution feature to its electronic media management system (EMMS) that enables superdistribution of content over the Internet while protecting the rights of content owners.
EMMS can protect digital content and still allow labels to implement "viral marketing," whereby retailers and consumers can legitimately pass music or other media files to multiple users over the Internet. Content owners may specify how many plays multiple users are entitled to and when consumers would need to return to a central server for their own licenses.
Joshua Duhl, an analyst with International Data Corp.'s document and content technologies service, thinks the superdistribution feature is significant because it lets content owners implement a protected form of "word of mouth" distribution that can be effective for promoting and selling music.
Until recently, the major labels had hesitated to release content, not only because of security concerns but because they were uncertain whether the Net could sustain profitable business models. Now, protected superdistribution models are joining digital downloads and subscriptions as viable ways of promoting, selling and distributing digital content profitably.
The enhanced EMMS platform also enables content protection, which the recording industry believes will be key to promoting music and artists over the Internet, Duhl said.
IBM aims to support EMMS across multiple devices, from PCs to portables, and believes superdistribution will one day be used for wireless and Internet devices that access music content, said Scott Burnett, business development executive for IBM Global Media and Entertainment (Santa Monica, Calif.).
This spring, NTT Docomo and Sony Music will use the technology to deliver music over wireless networks in Japan. Sony Music already uses EMMS to allow consumers in Japan to download content and write it to a Walkman or other personal device.
Other licensees of EMMS include Real Networks Inc. (Seattle) and MusicMatch Inc (San Diego), for digital music jukebox software; BMG; Liquid Audio Japan; 100 members of Sony Corp.'s Open MagicGate consortium; and 100 licensees from the Secure Digital Memory Card Association.
EMMS will be available in the first quarter and will be upgradable to include support for new audio formats and security technologies, such as the proposed Phase II screening technology under consideration by the Secure Digital Music Initiative, according to Burnett.