The purchase of MP3.com by Vivendi Universal centers on the issue of control, and it sets the stage for the Duet music-subscription service in which Vivendi is participating.
The music industry has a formidable body of law it can use to protect music from unauthorized reproduction and distribution by consumers. Typically, music companies sue very few consumers, preferring to use litigation as their weapon of choice against "businesses" engaged in large-scale misappropriation of their property, such as Napster. Conversely, it is impractical and financially impossible to pursue every consumer who illegally copies and distributes music.
That being the case, the music industry has preferred to "deter" such activity by working with consumer electronics manufacturers to build playback devices that make it difficult to reproduce music in large quantities at a quality comparable to that of a master recording.
The advent of digital recording greatly undermines this strategy. In 1992, the U.S. Congress passed the Audio Home Recording Act (AHRA), under which manufacturers and importers of digital audio recorders and blank media are required to make royalty payments.
This legislation dramatically limited the popularity of digital audio recording devices, such as digital audio tape (DAT) and MiniDisc machines. However, this act was passed before PCs became powerful enough to record music and CD writers became affordable to consumers, and as a result neither device is covered by this law. Given the penetration of PCs in the consumer market and the increasing popularity of CD writers as a standard peripheral, the music industry has effectively lost whatever control it had over consumers' ability to digitally reproduce music.
MP3 has become the lingua franca of electronic music distribution. However, MP3 programs merely encode and compress music. They do not embed encryption or digital rights management technology into the files they create. Equally important, the Internet views MP3 files as just another type of data file, so there is no practical way to block their transmission.
As long as record companies distribute music on CDs and MP3 recording and playback software remain available, people will be able to make digital copies of music. And as long as computers and Internet-connected MP3 playback devices proliferate, consumers will be able to reproduce and distribute music at will.
The era of the personal music server
The emergence of Internet-enabled, MP3-based home and automotive audio systems will only serve to encourage this behavior. Therefore, the industry is witnessing the dawn of the personal media server era. The "convergence" of MP3, the PC and the Internet will enable individuals to create personal music repositories, which they will use to feed the various stationary and portable devices they own.
The notion that consumers will embrace software-enabled playback technology that inhibits them from reproducing and redistributing music they have
See news story:
MP3.com buy: The taming of a generation
The music companies behind Duet--a partnership of Sony Music Entertainment and Vivendi's Universal Music Group--and its rival MusicNet (backed by Warner Music Group, EMI Recorded Music and BMG Entertainment) believe they can defy this trend. The purchase of MP3.com by Vivendi will accelerate the development of the critical back-end systems that Duet needs to launch its service.
More importantly, the purchase gives Vivendi control of the largest distributor of MP3-based music. Ultimately, that control will extend to requiring MP3.com users to employ Duet's playback technology.
Since software development is not a core competency of the music business, $360 million or so may be a fair price to pay for an infrastructure technology system that shortens Duet's time to market.
(For related commentary on policing MP3 file downloads, see TechRepublic.com--free registration required.)
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