The Outlook of Digital Music Media in 2009 – Comes With Music Part 2

Before I dive into my personal thought on the current outlook of music industry, here are some interesting facts.

The big four major record labels that Nokia has struck a deal with account for over 80% of total sales worldwide (read previous blog entry for details on “Comes With Music”).  Revenue from CD sales has been heading south.  That is old news.  The big boys blame piracy.  Some disagree.  In 2008, 2 billion dollar revenue was generated via digital music sales.  70% came from Apple iTune Store and the pie is split three-way: 61-29-9 cents between the record industry, Apple, and the artists respectively.

So how does Nokia come into the picture?

Apple’s foray into wireless phone business may have accelerated Nokia’s counter response by setting up the OVI Store to rival iTune Store that currently contains over 10 million song titles.  The new Nokia service “Comes With Music” allows users to freely download any of the 4 million song titles within OVI Store for the first year.  The new touchscreen Nokia 5800 XpressMusic together with the upcoming N97 take aim at Apple iPhone covering both high end and mid segments.  And Apple’s response?  All tracks sold in iTune Store will be free of DRM (digital rights management) and will be encoded to 256 kbit/s.  The game is on.  It is round one in year 2009.

In layman’s term, what Nokia says is this: look, just buy our phone and you can download all you like for a year (but you can only play them in your PC or your phone).  And Apple’s reply is: you pay for a higher quality music that you can’t find it anywhere (except CDs) and your music is for you to play in any device.

Tricky situation we have here in Singapore.  There are still a group of people who balk at the Comes With Music’s comes with DRM (digital rights management).  And the discussion on Apple iTune Store is purely academic because, well, it is still not available in Singapore.  Nokia has provided us a legal channel to download music online here at home.  Apple has not.

DRM is a thorny issue – both in music industry and in PC gaming industry.  It is a last ditch effort for the big boys to battle piracy (the very last resort is prosecution).  Without going into the nuts and bolts of DRM, its original intend is to deter piracy.  Well, it doesn’t work.  What DRM hurts most are the legitimate users who pay for the products.  At best, DRM inconvenience paying customers.  At worst, it makes the products unusable for the unfortunate few – the ones who paid.

I talk to those who constantly download music illegally and I have the following observations.  Most don’t see anything wrong with their action.  Most have lots of honorable reasons such as “I will buy the CD later if the music is good”, “I can’t find the music in the local market”, “It is for personal use and not for distribution”, “The music industry is evil and they don’t deserve my money”, and more.  Most tend to massively download music round the clock and I always ask them in puzzlement, “Can you really consume all that you download?!”

Maybe the world has changed.  It is the way we consume music.  I have difficulties in thoroughly understanding and internalizing each music album with my average purchase rate of one CD a week.  How could those who massively harvest all the the tracks out there illegally get to appreciate the artwork within the 24 hours we have a day?  What happens to the days of us listening to the album again and again till we memorize all the lyrics, till we can sing along with the tracks, till we can interpret the messages the artists are trying to convey?

To be fair to the old dinosaurs like I, there are still quite a few friends who purchase and collect albums, go back in time to appreciate certain tracks from an album published a decade or two or more ago.  Maybe these days, there are more and more listeners out there who would briefly listen to some tracks within an album and stick to a few tracks they like.  And then they move onto the next album.  To me, paying for a music album knowing that I would listen to it again and again seems worth it.  To some, maybe not.

Personally, I don’t think it is right to download music against the will of the owners.  If you expect people to work for free, would you too work for free?  Having said that, the business model of the music industry needs an overhaul.  Using revenue generated by sales to fund lesser known artists, to fund all the middle layers in the name of music promotion needs to be changed.  Awareness on respecting the intellectual property of others needs to be raised within the mass public too.  One can never fight greed [of the music industry] with greed [of one’s illegal download action].

In 2000, horror book writer Stephen King published a serialized novel “The Plant” online.  It cost $1 to download each installment.  But here is the deal.  You could download the installment without paying a dime.  Or you could pay the nominal sum of $1.  120,000 paying readers downloaded the first installment.  By the fifth installment, only 40,000 were paying.  Most no longer paid.  I did pay for all 5 installments and after such a disappointing result, Stephen King stopped the series briefly.  Paying readers cried out loud as we wanted to read the ending.  If my memory serves me right, King did publish the remaining installments free.

So, what’s the morale of the story?

In an online world, honor exists, but is rare.  The fact that digital media can be duplicated poses challenges to the art creators, the publishers, and the paying consumers.  The key to success, in my humble opinion, is to give the mass public what they want, their most preferred mode of accessing the media.  Consumers are willing to pay if the experience enhances their lives, and not to cause inconvenience.  The Amazon wireless reading device Kindle and the new Kindle 2 is a good success story.

Nokia’s “Comes With Music” has taken a major step to the right direction.  Even with the cost of music factored into the phone, having the entire music collection at our disposal 24×7 is as close to what some are experiencing today.  As a market leader having a market share of close to 40%, the first year result of “Comes With Music” is expected to be spectacular.  People would still buy their new 5800 touchscreen phone or the high end Nseries phones anyway with or without “Comes With Music”.  I am keen to see that one day Nokia stripping the DRM technology away to give the consumers total freedom to play the downloaded music in any device.  Whoever – be it as Nokia or Apple or any other brand – able to grant the consumers a complete freedom while having a sustainable business model will be the ultimate winner.  But till that day – since my N96 and N95 are still in pretty good condition – I will stick with CDs and stay away from illegal download like I always do for now.