Top 5 Places to Buy Music Online

An update to previous post on the top 5 places to buy music online. Tom Merrit from CnetTV reports. Guess which digital music store is rated number 1. That should be easy. Enjoy.

Top 5 online music stores

CNET Networks Crave Blog, just published a post comparing the Top 5 online music stores. This is similar to one of my posts on the state of digital music stores in the Music Industry Today. The post from CNET list some interesting facts. Check them out.

De Ja Vu - Viacom Vs. Youtube (Google)

In a move similar to what the RIAA and Record companies did to ISP and their users, Viacom has requested that YouTube turn over user data to help Viacom and other plaintiffs prepare their case against what they claim are vast piracy violations on the video-sharing site.

However, a deal was reached where user information was omitted from the data submitted to Viacom.

This sounds awfully familiar to incidents where the RIAA would request user information from ISPs in order to pursue individuals that illegally downloaded songs. There are many privacy concerns here. How private is our information on the web? And will we be entering a stage where video rights management restricts users from using video sharing websites like YouTube? Many questions like these have to be answer in the coming years.

Conclusion

DRM was once dominant, getting the support of the record labels that saw it as a way to protect their copyrighted works. However, with all the features that DRM protection boasted, the most unfavorable was the restrictions it placed on accessing and sharing content. Apple iTunes emerged as a dominant player in the music industry using a proprietary system based on DRM technology. With the record labels behind it, Apple was able to control prices and benefit from the popularity of its portable music players. The record labels complained, as they could not reap many profits from this arrangement, as records sales in the music industry were decreasing, even though digital music sales are increasing. Therefore, in order to keep a pace with their competitors the major labels sought new revenue streams. The most promising of course was to drop DRM from their catalogs to ensure a larger user base. This necessarily does not mean that DRM is completely dead, as the effect of its impact on the music industry will remain in place until digital music distribution becomes the pre-dominant music model and more music stores compete against iTunes using open standards easily accessible by music fans.

Please keep checking back, as I will update the blog as new updates on this research topic are made. Thank you.

The Future of DRM

As we have discussed in this blog DRM refers to any combination of software encryption and hardware, designed to make digital copying impossible without permission (Robert Burgelman and Philip Meza). This was not popular among music fans and as a result DRM is continually being abandoned by the major record labels and as a result consumers have fewer restrictions when shopping for music. In this way customers have much more freedom and more avenues to get music

When DRM was introduced critics contended that the technology, and the framework of the laws that would support it, could erode consumer rights enjoyed under concepts such as fair use and the doctrine of first sale (Robert Burgelman and Philip Meza). It appears that they were right and now we are seeing a shift in the opposite direction. DRM supported the establishment of proprietary software for its distribution such as the many varied DRM technology standards. DRM had the ability to limit the use of digital media on computers, and portable players. In order to keep pace with competition from DRM-free stores and independent music outlets that do not carry DRM tracks, the four major record labels realized that removing restrictions from their catalogs would expose their artists to a larger group of consumers. An as the story goes, DRM is being kicked out the door.

But the battle is far from over. DRM will remain with in the music industry as long as there are subscription-based online music stores (since the technology is built into this business model) and the RIAA is on its side. David Kravets reports that more than 80 percent of the digital music market remains encoded with DRM, despite the announcements from the big labels. This is because of the highly popular iTunes Store, Apple's iPod, and iPhone. Those devices, with more than 100 million units sold, only play music protected by Apple's proprietary FairPlay DRM technology, or music that isn't protected at all. Apple, since 2003, has sold more than 3 billion music downloads, capturing more than 80 percent of the market (David Kravets).

To summarize, DRM was hot, now it’s cold.


References:

Burgelman, Robert A. Meza, Philip. (2004).Finding the Balance: Intellectual Property in the Digital Age. Strategic Management of Technology and Innovation, 4th ed. Ed. Burgelman, Robert, Clayton Christensen and Steven Wheelwright. New York: McGraw-Hill Irwin.

Kravets, David. (2008). Despite Move to MP3s, DRM Will Haunt Record Labels. Wiired Magazine. Retrieved July 1st from http://www.wired.com/entertainment/music/news/2008/01/sony_drm

Sandoval, Greg. (2008). RIAA: DRM not dead and likely will make comeback. CNET News.Com. Retrieved June 30th from http://news.cnet.com/8301-10784_3-9939189-7.html?tag=blog.1

DRM Technologies and Digital Audio Formats

There is currently no industry DRM standard in the music industry. MP3 has emerged as the dominant digital music format. However, there are many different DRM technologies that are not compatible or inter-operatable with each other. For example, Microsoft has it PlayForSure certification that was used with online music stores like Napster. Downloaded digital media using this protection are not playable on Microsoft’s own Zune player and the Apple iPod. This made it difficult for music fans to enjoy their music across different platforms. With different music stores touting their own brand of DRM technology; DRM-free stores such as E-Music and Amazon MP3 gained popularity as they posed no restrictions on downloaded media. The added stress caused by this is credited for DRM unpopularity and current status. The image below highlights DRM technology used by popular online music stores.

DRM is directly responsible for the lack of standard digital music format. Though most music stores, if not all support MP3s and other popular audio file formats; online music stores still attempt to impose their technology on users. For example, Apple iTunes uses Advanced Audio Coding (ACC) encoding by default, and Microsoft Windows Media Player uses Windows Media Audio (WMA) encoding. Nevertheless, these applications allow users to select their preferred audio file format with MP3 being the most popular format for downloading and storing music.

Content providers and manufacturers need to work together to ensure digital music players are compatible with different audio file formats, regardless of the DRM technology.

In this video, Edward Zander CEO of Motorola gives his perspective about the many and varied digital rights management standards.

References:

Cha, Benjamin, and Kausik Rajgopal. (2004).Digital Distribution & the Music Industry in 2001: Case II-10. Strategic Management of Technology and Innovation, 4th ed. Ed. Burgelman, Robert, Clayton Christensen and Steven Wheelwright. New York: McGraw-Hill Irwin. 378-398.

CNETTV. (2007). DRM this and DRM that. Retrieved July 6th from http://www.cnettv.com/9742-1_53-22103.html

Wikipedia.org. (2008) Audio file format. Retrived July 7th from http://en.wikipedia.org/wiki/Audio_file_format

Wikipedia.org. (2008). Digital Rights Management. Retrieved July 7th from http://en.wikipedia.org/wiki/Digital_rights_management_rights_management

Wikipedia.org. (2008). MP3. Retreived July 7th from http://en.wikipedia.org/wiki/MP3

DRM Use and Impact

Let us look at the initial impact and subsequent use of DRM technology. Yocha Benkler in his talk about open source economics remarked that P2P technology is an opportunity and that social production is a part of human organization. For some time this opportunity was threatened by the advent of Digital Rights Management (DRM). DRM had a profound impact on the business structure of the music industry. Whether it will have any lasting/staying power in the next 10 years is very questionable. RIAA believes that it will. The effects are dwindling but have led to a better understanding of the needs of customers. Its failures have led to the current changes in the music industry, giving customers more freedom to manage their music collections.

An exception can be seen in the proprietary three tier system that is Apple, that consists of hardware (iPod, iPhone), software (iTunes, DRM system FairPlay), and web access. The packaged combination only works with each other, allowing Apple to establish a dominant position in the music industry with a large share of digital music sales and portable music player sales. Itunes is now the number one music store in America, even though the majority of its catalog available via the iTunes music store has DRM protection managed by their proprietary FairPlay system. Apple also offers DRM-free content via its iTunes Plus service that costed users a little extra at first. It appears that consumers are willing to sacrifice unrestricted access to their music files for high quality devices and applications that function exactly the way they want.

A second reason for Apple’s popularity may be directly because of its popular music devices. For example, I’ve owned a 3rd generation 40 Gb iPod since the summer of 2003. Even though I am forced to use iTunes to manage my music, I have never purchased a single track from the iTunes music store. I have an iTunes account and have obtained free music tracks and videos from the store, but I have never paid a single dime for anything from the store. I still buy physical CDs from record stores as nothing can compare to the nostalgia feeling you get from opening a CD package and indulging in your favorite artist’s lyrics and album artwork. DRM restrictions has also influenced my preference of purchasing CDs from a recrod store. I also add DRM-free MP3 songs that I have downloaded from else where to my iTunes and then sync all these at my discretion to my iPod. However, I am a fan of the iTunes software and will continue to use it. (i.e. adding/syncing my songs and albums). My point here is that I am not the only one doing this. By using the software and promoting it to my friends, I’m contributing to its continued success. In this way I am not restricted from backing up, copying or sharing my music with others because DRM is not an issue; and at the same time I am still able to use the Apple brand.

Apple was pressured to apply DRM protection to its online store by the major record labels when it first came into business. Now the record labels are clamoring for songs to be sold without DRM which can directly affect Apple’s three tiered system and allow competitors to catch up, if it were to open up its software and devices. Nevertheless, Apple will still gain from this new movement. Apple CEO Steve Job supports this move, but the details are still yet to be worked out. What does this mean for the music industry? While the most likely result will be an increase in digital music sales, since fans will not have to worry about DRM and will be able to play downloaded music on any digital music device. Therefore everyone benefits with little DRM restrictions. The music industry recognizes this and the labels are moving to take advantage of this new business model.

David Pogue, a New York Times tech columnist summarizes the battle between iTunes and the RIAA in this satirical mini-medley performance.

References:

Benkler, Yochai. (2008). Open Source Economics. Ted.com. Retrieved May 25th form http://www.ted.com/index.php/talks/yochai_benkler_on_the_new_open_source_economics.html

Kravets, David. Death of DRM Could Weaken iTunes, Boost iPod. Wired Magazine. Retrieved June 30th from http://www.wired.com/entertainment/music/news/2008/01/rip_drm

Kahney, L. (2007). Steve Jobs: Apple Would Love to Sell Unprotected Music. Wired Magzine. Retrieved June 30th from http://blog.wired.com/cultofmac/2007/02/steve_jobs_appl.html

Pogue, David. (2007). Ted Talks - David Pogue: A 4-minute medley on the music wars. Ted.Com. Retrieved July 6th from http://www.ted.com/index.php/talks/david_pogue_on_the_music_wars.html

DRM Laws

What are some of the laws and legislation that affected the establishment of DRM?




Digital Millennium Copyright Act (DCMA)

DRM was directly influence by the Digital Millennium Copyright Act (DCMA) . The DCMA was enacted in 1998. The law declared that "no person shall circumvent a technological measure that effectively controls access to a work protected" by copyright. The DCMA made it a crime not only to copy a protected work, but to de-encrypt an encrypted work without authorization. The law also contained stipulations that made it illegal to manufacture, release, or sell any tools, hardware or software designed to circumvent encryption of a copyrighted work. The DMCA contained provisions that gave ISPs and Web hosts "safe harbor" from copyright infringement claims if they implemented notices and removal procedures to eliminate infringing content (Robert Burgelman and Philip Meza). The act delineates the responsibilities of Internet service providers (ISPs) in cases of infringement online. For example, the law formalizes a noticed and takedown procedure between ISPs and copyright owners. It is now clear that when an ISP is aware it is posting or transmitting infringement content, the ISP must act to remove the infringing works or it may be liable for any resulting damages. However, the DMCA protects ISPs from legal action if the ISP gives notice and requests take down of infringing content (Benjamin Cha and Kausik Rajgopal). ISPs would play a major part in cases brought against DRM violators by providing the RIAA with their information.

The DMCA Act of 1998 was a significant overhaul of international copyright law. However, the law had the potential to make it illegal to manufacture and sell much of the software and hardware that technology companies hoped would make media over the Internet a common application and at the same time help pull them out of recession (Robert Burgelman and Philip Meza). At the same time, the DMCA allows "webcasting" (ie the digital streaming of audio content, including music). Companies ranging from CNN to MTV have sought to webcast. Under the DMCA, webcasters are given a statutory license to webcast, as long as they follow certain provisions (eg no more than two songs from the same artist can be played in a row, playlists cannot be pre-published, no user interactivity with the webcast is permitted) (Benjamin Cha and Kausik Rajgopal).

Consumer Broadband and Digital Television Promotion Act

In March 2002, the Consumer Broadband and Digital Television Promotion Act was introduced as legislation. It required that new hardware and software would block unauthorized copying of intellectual property. It allowed movie studios, record labels, and others to attach digital tags to a movie, song, or album that would encode rules about how it could be played, viewed, or copied on devices such as computers or digital TVs. Manufacturers and content owners would have a year to agree on technology to enforce these rules; after that, the Federal Communications Commission could impose a standard. It would then be illegal to manufacture devices that did not implement that standard (Robert Burgelman and Philip Meza).

Other Laws

International Laws are different and vary by country. For example, the European Union follows the EU Copyright Directive (EUCD) or the Information Society Directive (Infosoc). Other laws that affect Intellectual Property and initially DRM include:

• The Audio Home Recording Act (AHRA) of 1992
• Sonny Bono Copyright Term Extension Act (CTEA) of 1998

References:

Burgelman, Robert A. Meza, Philip. (2004).Finding the Balance: Intellectual Property in the Digital Age. Strategic Management of Technology and Innovation, 4th ed. Ed. Burgelman, Robert, Clayton Christensen and Steven Wheelwright. New York: McGraw-Hill Irwin.

Cha, Benjamin, and Kausik Rajgopal. (2004).Digital Distribution & the Music Industry in 2001: Case II-10. Strategic Management of Technology and Innovation, 4th ed. Ed. Burgelman, Robert, Clayton Christensen and Steven Wheelwright. New York: McGraw-Hill Irwin. 378-398.

Wikipedia.Org. (2008). Consumer Broadband and Digital Television Promotion Act. Retreived. July 3rd from http://en.wikipedia.org/wiki/Consumer_Broadband_and_Digital_Television_Promotion_Act

Wikipedia.Org. (2008). Digital Millennium Copyright Act. Retreived July 3rd from http://en.wikipedia.org/wiki/Digital_Millennium_Copyright_Act

Wikipedia.Org. (2008). EU Copyright DirectiveRetreived. July 3rd from http://en.wikipedia.org/wiki/EU_Copyright_Directive

DRM Alternatives

DRM involved building security into digital formats of music and other digital media using digital containers with keys and encryption technology.

Intellectual Property Protection by the music industry entailed many stipulations that support DRM. Music produced by record companies was considered protected intellectual property. Once it is released, competitors could not copy it. These restrictions protected profits and record label value chains. DRM referred to all assets or “copyrights” (ownership given to the creator and unauthorized duplication prohibited) and fell under “licensing structure” (works are used for performance and royalties go to the copyright holder) (Burgelman).

Some DRM alternatives include:

• Filtering bandwidth/Traffic Shaping has been reportedly used as an alternative to protect Intellectual Property Rights. Recent reports over the last months indicate that Internet service providers (ISPs) were limiting the bandwidth of users who used Bit Torrent Technology. This act has been dubbed traffic shaping, which is the practice of disruptive P2P traffic to conserve bandwidth. There are many issues that come with this practice if supported. For example, the FCC and FBI is closely looking at these incidents to see if ISPs have violated any privacy laws.

This news report from CNETTV quotes the FCC chairman telling Comcast to stop blocking traffic. View the first 30 seconds

• Watermarking, a technology that tailors digital media to customers, using personal information such as credit card information on tags. A major advantage is that content will be playable and compatible on most devices, as the formats will be and open standard. as oppose to proprietary. Companies such as Streamburst have pioneered this technology combining it on most video formats. Many debate that this is a type of DRM and not a separate technology.

Alternatives to DRM protection, such as the ones mentioned above have not gained much attention from content providers. This is because there are many considerations that have to be debated before there are adopted for wide use. Altogether, a complete elimination of restrictions on digital media appears to be the general consensus from service providers and consumers alike.

References:

Burgelman, Robert A. Meza, Philip. Finding the Balance: Intellectual Property in the Digital Age. Strategic Management of Technology and Innovation, 4th ed. Ed. Burgelman, Robert, Clayton Christensen and Steven Wheelwright. New York: McGraw-Hill Irwin, 2004.

Del Conter, Natali. (2008). Loaded. CNETTV. Retrieved July 1st from http://www.cnettv.com/9742-1_53-50001953.html

Wikipedia.Org. (2008). Digital Watermarking. Retreived July 3rd from http://en.wikipedia.org/wiki/Digital_watermarking

Wikipedia.Org. (2008). Traffic Shaping. Retreived July 3rd from http://en.wikipedia.org/wiki/Traffic_shaping

Current Trends & Related Blogs

Current Trends

The four major labels have turned away from DRM over the past year as they try new business strategies for digital music distribution. They have supported online music stores in offering DRM-free content to consumers. Naspter, Amazon, iTunes Plus and Rhapsody are among some of the places you can get DRM-free music purchases from the four major music labels. The music industry is concerned with satisfying consumer demand for online access to music. There is no cost to the consumer for digitally encoded MP3 songs obtained illegally.

The paid digital download medium scarcely existed five years ago and now it's the biggest growth area in the music business. (It may be the only growth area in the music business.) Billboard reports that album sales in the first half of 2008 totaled 204.6 million, down slightly from 229.8 million in the first half of 2007. Digital track sales for the same period totaled 542.7 million, up substantially from 417.3 million
(Grein).

Only three albums topped 1 million copies in sales (CDs and digital downloads combined) in the first six months of 2008, the lowest total since Nielsen/SoundScan set up shop in 1991. Six albums sold 1 million copies in the first six months of 2007. Fully 16 albums hit the million mark in the first half of 2006. (The business hit its peak in 2001 when a whopping 37 albums reached the 1 million mark in the first 26 weeks of the year.) (Grein).

What does all these figures and numbers mean? Digital music distribution is going strong even though sales of physical music items are dwindling. Today the record label have created a viable and large user base for digital music distribution. Revenue streams from a digital subscription model are substantial. Apple iTunes has been able to maintain a competitive advantage by being a the leading distributor of online music infrastructure

We can therefore conclude that the music industry has found ways to successfully invest in digital infrastructure keeping in mind the many capabilities, drawbacks and implications of digital standards and distribution. However, there is no standard digital music format with MP3 being the dominant and preferred format. I will examine this point in a later post.

A very hot Topic now is the digitizing of TV and film content. This is a growing area and companies are working to add security to their digital video formats. Expect much heated discussion and a war over prospective digital video standards. Entertainment executives want to stay away from creating a Apple iTunes power house in the video and movie industry, so that they can sell or distribute their content widely and have more control over the cost to consumers.

Related Blogs

Somewhere in the middle of preparing this blog, I thought to myself, that there must be a tons of similar blogs out there that offer insight on DRM. The answer is definitely yes. There are many blogs that entirely focus on or touch upon one or two of the topics and issues that are being discussed in this blog. For instance, just try using Google Blog search and type in any of the terms or headings in the search and you'll see the many return results that cover a wide arrange of topics. My blog does not even come up in the top 20 search results.

Noteworthy blogs include the Recording Industry vs The People that documents various instances where the RIAA has pursued cases against ordinary people.

Digital Restrictions Management (a play on DRM which stands for Digital Rights Management) offers you everything you need to know about Digital Restrictions Management.

There are a thousand of other blogs out there, waiting to be read. As I mentioned in my first post, I have added the news feed section to display updated new stories as they are published.

References:

DRM.info. (2008). Retreived July 3rd from http://drm.info/

Grein, Paul. Week Ending June 29, 2008: Viva La Download Or Death And All His CDs. Yahoo Music Blog. Retrieved July 3rd from http://new.music.yahoo.com/blogs/chart_watch/9716/week-ending-june-29-2008-viva-la-download-or-death-and-all-his-cds

Kahney, Leander. How Apple Got Everything Right By Doing Everything. WIRED MAGAZINE: 16.04. 03.18.08

Recording Industry vs The People. (2008). Retreived July 3rd from http://recordingindustryvspeople.blogspot.com/

Rose, Frank. (2008). Dear Hollywood Studios: Let My Video Go. WIRED MAGAZINE: 16.03

RIAA Response

So how has the Recording Industry Association of America (RIAA) responded to the failure of DRM in diminishing the threat of illegal downloading of music? Executives at the RIAA still believe that DRM is needed in certain types of online music store business models. For example, subscription service or limited play-per-view or advertising offer services still require DRM. Therefore they proclaim that DRM is not dead and is likely to make a comeback.

According to the Recording Industry Association of America, billion of dollars are lost each year to pirates. The RIAA has sued over 20,000 people for illegal downloading and sharing music. Such individuals as Patricia Santangelo who is being sued by the RIAA for allegedly illegally downloading and sharing music.

The RIAA is not taking this sitting down and will continue to pursue users who obtain music illegally.

What lengths are they willing to take? This video below sheds some light.

However, some question whether illegal downloading is directly responsible for the decline in music sales. The video below pinpoints some interesting figures.

References:

Kravets, David. (2008). Death of DRM Could Weaken iTunes, Boost iPod. Wired Magazine. Retrieved June 30th from http://www.wired.com/entertainment/music/news/2008/01/rip_drm

Sandoval, Greg. (2008). RIAA: DRM not dead and likely will make comeback. CNET News.Com. Retrieved June 30th from http://news.cnet.com/8301-10784_3-9939189-7.html?tag=blog.1

Wood, Molly. (2006). BuzzReport - The RIAA ain't Listening. CNETTV. Retrieved July 1st from http://www.cnettv.com/9742-1_53-18807.html

Wood, Molly. (2006). BuzzReport - RIAA Thugs on Your Right! . CNETTV. Retrieved July 1st from http://www.cnettv.com/9742-1_53-29452.html