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Why The Big 5 Labels Can’t Stop The RIAA’s Crusade Against Downloadable Music Or Agree On DVD-Audio Print E-mail
Thursday, 23 May 2002
One word sums up why the big five media conglomerates cannot stop the crusade by Hillary Rosen and the RIAA against downloadable music: antitrust. Sources close to AudioRevolution.com say that the big mistake by the major labels in regard to downloadable music was made when the old school executives failed to realize the potential of the insane marketing possibilities a few years ago when Napster was gaining underground popularity. The conservative thinking at the music companies was, "Ignore Napster and it will eventually go away." Younger execs disagreed then, but even today, AOL-Time Warner and BMG are still trying to harness the power of downloadable music more than two years after the fact. As an empowered voice for a characteristically defensive industry, the RIAA took a "We’ll break it before you (the consumers) can have it" attitude, which ultimately killed off Napster but gave birth to the even more dangerous and more anonymous peer-to-peer Gnutella network due to a lack of any competitive, legal downloadable music site.

Fears of antitrust force the media conglomerates to be extra-careful when working as an industry on hot topics like downloadable music or even high-resolution audio (SACD vs. DVD-Audio). Imagine what would happen if execs from Warner Bros., who back DVD-Audio, tried wooing support from, say, EMI (which initially released both DVD-Audio and SACD titles) for the DVD-Audio format with the intention that AOL-Time Warner would ultimately buy out EMI (a rumor that surfaced twice in the past year). Sony might file an antitrust action, which would result in a legal mess of epic proportions that could both ruin a possible acquisition and/or the natural progression of either new format. It is easy to see why the music industry is playing its cards so conservatively.

The result is that the music industry is still selling the same undervalued and overpriced stereo compact discs to the music-buying public, while the recording industry scratches its collective head as to what to do next without a group effort. If they had it to do over again, the decision-makers would likely have wanted to avoid the black eye they have received over downloadable music, but with antitrust fears and the need to try to protect their copyrighted material, it is difficult to call off the RIAA.

One possible solution is for one group (Universal Music Group would be best, because they have the biggest catalogue) to step up and actually choose sides – SACD or DVD-Audio -- and release a solid number of good, new and back catalogue titles to increase the number of DVD-Audio or SACD titles to a point where a consumer might take notice. It might get the other big labels off the fence. With a compelling selection of high-resolution and surround titles in either format, consumers would have a legitimate reason to buy their music – especially their old favorites – on a new format. The model of adding value to excellent content works – just look at the post 9-11 home video market. Universal Studios Home Video did over one billion dollars in sales in Q4 2001 alone.

A real solution for the downloadable music crisis is seemingly in the works. Jimmy di Castro, the former CEO of AM-FM radio, was hired by Bob Pittman, the CEO of AOL, to run his Internet radio program. Pittman got his start in radio before founding MTV. Count on him wanting to do something even more elaborate with downloadable music to keep AOL’s subscribers loyal to the service and maybe even get some new users at $22 per month. In fact, sources inside the radio industry say they wouldn’t be shocked to see AOL-Time Warner take a run at acquiring radio and concert giant Clear Channel in the next year or two, enabling AOL to tie radio, concerts and downloadable music into their Internet service to take an even bigger claim in the overall entertainment business. AOL-Time Warner has the market cap to pull off such a feat, as farfetched as it seems. BMG, another of the big five, is still trying to revive Napster and, with 54,000,000 former users and a brand name loved by Internet users worldwide, don’t count BMG out from the pay-per-download game.

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