Digital Beat: Plenty Are Profiting From Online Music – Feature

By | August 6, 2003 at 12:00 AM

Times are getting ugly in the music world. Fans are getting subpoenaed for digital downloads. Internet Service Providers are getting muscled into handing over suspected pirates’ names. And parents are worried about having to spend their kid’s college fund on defending him for downloading one too many Michelle Branch songs. It seems like no one is winning the amorphous battle over music online. But, contrary to the rising red tide, there are plenty of companies heading into the black.

There’s no question that digital music is here to stay. As a result, the companies who will benefit most directly are the ones providing the tools and services required for this new consumer experience. Case in point: Roxio, the leading developer of digital media creation software. Based in Santa Clara, California, the company’s tools make it possible to do everything from copy a CD to create desktop videos.

The creators of the MP3 players are also doing well. Apple made a critical and commercial splash with its sassy iPod players, and now its acclaimed iTunes subscription service (another company, Buy Music, has already been launched that attempts to one-up Apple by charging even less for digital music downloads). Another company, SONICBlue, has also been a consistent winner in the MP3 hardware arena with its Rio family of MP3 players, as well as the set-top recording boxes Replay TV.

And don’t count the retailers out any time soon. They have a large role to play in distributing digital music wares. Though Best Buy and Wherehouse have had rough times of late – Wherehouse filed for bankruptcy and Best Buy closed over 100 stores – they’ve joined forces with four of the nation’s largest music retail companies, Tower Records, Trans World Entertainment, and Hastings Entertainment, to ensure their collective future. The answer: a brand new retailing group called Echo, aimed at selling digital music online and in stores.

As this distribution channel grows, Josh Bernoff, an analyst for Boston-based Forrester Research, suggests that another winner could be Microsoft, which has the momentum among consumers with its Windows Media Player. Record companies also like that software because of its built-in digital rights management software. And Microsoft has been actively creating new consumer software, such as the Windows XP Media Center Home Edition, tailor-made for PC-based music and video entertainment. Ultimately, there’s little the record companies can do to put a dent in the economy of hardware and software and retailing that’s forming around digital music. No matter how many lawsuits they threaten to file, the war against consumers is flawed. There are many ways to get around being sued. Every file-sharing program has a means through which you can decline to share the files on your computer. Also, the copyright laws in the U.S. have no bearing on what people are swapping around the world. In the end, the more the recording industry fights against file-trading, the more forward-thinking companies are laughing all the way to the bank.

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