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Labels fight the rise of 'Podism'

It had seemed as though the record labels had seen off the internet revolution with their heads still attached to their shoulders, but it now appears clear that their one concession to the uprising – agreeing licensing deals with Apple – has landed them in an all-new power struggle.

While the big five labels (BMG, EMI, Sony, Universal, and Warner) have done a sterling job of wresting back control of the price and distribution of their music from the peer-to-peer networks and the average punter; they lost their focus on the final part of the chain, consumption, and in typical style Apple has filled the gap with a new combination of design and usability – the iPod and its partner software iTunes.

The device has, as the frantic music-related activity of this week demonstrates, thrown an almighty spanner in the works of the big labels. Realising after all that end users matter, the opening straight of 2004 has been a dangerous place as big men scramble to their feet to join a race they didn’t realise needed running.

Just this week, Real revealed its own iTunes, RealPlayer 10, which will be integrated with a new digital music store, while Sony confirmed plans for an online music service that will integrate with its so far stalled MiniDisk devices. In the meantime, Intel, Samsung, Napster, Microsoft – name a company – is planning a new ‘media’ playing device and the battle to prevent the iPod from becoming the new Walkman is on.

Most of them, we are sure, realise the battle is already won – the iPod is the new Walkman and then some. Users of the iPod have a nickname for each other; new versions get coverage on the news; and CD collections are already being seen as a throwback. Once connections between the iPod and the home hi-fi – being made possible through new pieces of kit and home wireless networks – become commonplace, we need never address the problem of CD storage again.

But the record labels recognise that, if a battle is lost, thoughts must turn to damage limitation. Chiefly, this means the labels need to encourage competition to the iPod or face a testing time when it comes to licensing negotiations with Apple. As the former device king, Sony has the most to lose and the loss of its traditional home ground to a US upstart must smart.

But if Sony can persuade the other record labels to help it market its own players through its new Connect digital store service, the five can construct a credible competitor to Apple and once again gain control of the entire distribution chain for their wares. In the past five years, the record labels have had a torrid time coping with the new world, and as file-swapping finally comes under some kind of control, the last thing they want is to hand back power to an outsider.

But the marketplace for music remains incredibly complex. Users are being forced to stump up at least 79 cents per track from all legitimate sources. While the RIAA can hunt each file-swapper down one by one – the issue of value for money will ensure that consumers will continue to opt for free downloads.

There also remains an inherent resentment among music buyers toward the labels – in many cases, buyers sense that every time they download a free track they are achieving a small revenge for the way in which they were duped by the promised cuts to CD prices.

This sense continues to play into Apple’s hands. At once chained and set free by its position as computer underdog, Apple is viewed as the people’s champion and the iPod is sealing its place. While the record labels must accept that they are too late to challenge the iPod in the short-term, they are now fighting to ensure that it goes down in history as a fad and not a catalyst for revolution.

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