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May 2004 News
Sony's SonicStage software is used to manage the user's digital music library and to encode CD's and other digital files to their proprietary ATRAC3/ATRAC3+ format. SonicStage, similar to iTunes but only available on the Windows platform, has direct access to Sony's new download service where users can purchase music quickly and easily. The Future: Clearly the Achilles Heel of the VAIO Pocket is its ATRAC proprietary format since all music files must be converted to ATRAC to play back on the unit. ATRAC is a lossy format, meaning that the sound degrades during compression. This is fine if your ripping a CD to ATRAC, but if you have to convert a lossy format such as MP3 to ATRAC, then your going through two lossy conversions before playback. Not good.
Read more about Sound Tribe Sector 9 in this month's Music Trends.
Following Universal's move last fall, Warner hopes to spark sales of older titles from Prince, Rod Stewart and Madonna with the new formation. Universal has tweaked their new price configuration by lowering the catalog prices even further when they received positive feedback from retailers. Initially many retailers were wary of Universal's plan since it mandated specific shelf space and display requirements. Universal has since softened their conditions, and retailers are pleased with how the initiative has translated into spurred business. Warner was also making news by continuing to slim down their operations. Atlantic Records, which recently rolled up Elektra and Lava into the marquee label, is slicing its artist roster by as much as 50%. Attempting to slash $250 million dollars in operating costs, Warner has already chopped 20% of their work force and has asked their top employees to take pay cuts. By the end of the year about 80, of approximately 160 total artists, will be dropped by the label. Troubled act Third Eye Blind whose infighting has hampered their momentum is one of the acts to get the boot. The Future: Now that the other major labels have reviewed the results of Universal's price cutting "experiment," expect BMG, EMI and Sony to launch programs in the near future. Bronfman is moving quickly to get Warner into fighting shape for a planned IPO next year. Once the public offering takes place, look for a quick sell off by the initial group of investors led by Thomas Lee.
Dubbed the "Walkman of the 21st Century" by Sony's marketing team, the new portable is attempting to be the high water mark for a variety of new portable entertainment devices that are going to hit the marketplace in the next year. The sexy PSP contains a MIPS R4000 32 bit processor with 8 MB of built in RAM and an advanced graphics engine for smooth 3D graphics with a high refresh rate. It has a 7.1 channel, 3D sound system and can play ATRAC3 (compression technology used in Sony's MiniDisc systems), AAC and MP3 files. It will utilize 60mm Universal Media Discs with 1.8 GB capacity for video, game and music storage. The unique 16:9 (movie format widescreen) TFT LCD display will be in full 24 bit color and have a pixel resolution of 480 x 272. Other features include a memory stick slot, USB 2.0, Wireless LAN (802.11), an expansion port, and infrared technology for multiplayer action. The PSP will be released in Japan later this year and is scheduled to hit Europe and the US in early 2005. The Future: Portable entertainment convergence is in full swing with the PSP. In addition to the PSP, Microsoft's Portable Media Center, set to debut in time for Christmas 2004, will be able to play video, music and take photos. Nokia attempted to bring it all together with their N-Gage system, but didn't have the gaming brand equity to sway users from Nintendo's GameBoy platform. Sony is in position to hit it out of the park with the PSP, but with all the hype riding behind this new offering they have to get everything perfect. Now if they can just incorporate a comprehensive PDA, phone and portable email solution into the system, I could get rid of my "Batman" digital device utility belt.
The major labels have been in talks with Apple for the last couple of months to systematically increase the price of individual downloads and complete albums on the popular service. It appears that the consumers shift to a digital singles market continues to take a major toll on the big five's online revenue and they are trying to compensate by increasing their wholesale take. It was rumored that the Major's initially wanted to increase the price of a single download to $2.99, but many feel that was a bargaining device to get Apple to negotiate. Some complete albums may rise to $16.99 from $9.99, an increase of almost 70%. Apple denied that they were raising prices. An Apple spokesperson responded that Apple has solid multiyear contracts in place with all five major labels, and that singles would remain at 99 cents. The Future: It's only a matter of time before prices on the leading download services increase. The consumer market has fully accepted the dollar per song rate as a fair price for a desired song. However, this "sweet spot" price is clearly just an initiation to potty train consumers into paying for their downloads. In addition, it's not only the record labels that would want to increase prices. Many of the download services, including iTunes, are operating at a loss. Any increase in the price of a single or a complete album would significantly help their bottom line.
The settlement comes after a two year investigation by Spitzer's office who delved into the shady accounting practices of the music industry after an outcry by several prominent artists and their managers. Royalties are often a very sticky issue with labels and their artists. Many equate labels to insurance companies who's philosophy is "the less we have to pay out, the more we get to keep." According to the settlement, publishers and labels must make "good faith efforts" to find artists who are due royalties. If they cannot be located, the royalties revert to the state - a legal procedure dubbed "escheatment." The Future: First off, does Eliot ever sleep? The guy's involved in more investigations and law suits then Johnny Cochran. Look for a new, specialty web site to debut by the major labels and publishers that will list artists who are owed royalties.
This provocative business model offers two new paradigms that will surely cause dynamic discussions within the music industry. First, AllofMP3.com charges by the megabyte (MB) - One MB of data transfer costs 1 cent. The customer buys a bulk package by depositing money into their account and then downloading the music files in their format of choice. So for $10 you can purchase a Gig of music or approximately 250 Pop songs in the AAC format, which comes out to about 4 cents a song. The format of choice is the second paradigm that will make other download services take notice. AllofMP3.com allows the customer to select their preferred type of music encoding and bit rate: Uncompressed (no encoding), MP3, AAC, WMA, etc. This translates into the higher quality the music file, the more expensive the download. On the other end of the spectrum, the more compressed, and thus lesser quality, the music file is (since music compression schemes are "lossy" - meaning the quality of the sound deteriorates as the file size goes down) the less money it is to download. The site's disclaimer states that users are not allowed to download music from AllofMP3.com "if it is in conflict with legislation of your country." However, there was plenty of music from the major labels including Usher's latest release, "Confessions." The Future: If AllofMP3.com turns out to be actually legit, record labels and their lobbyists outside of Russia will strong arm AllofMP3.com to only allow access to its online library if visitors truly originate from Russia by screening IP addresses and/or insisting that only credit cards billed to a Russian address be allow to purchase downloads from the site. Although, iTunes will never allow the customer to specifiy a preferred compression scheme and bit rate, the other major download services, that are actually trying to be profitable, will adopt this model.
Subscribers to the services that employ the latest version of Microsoft's Windows Player will be able to fill up their portable player to the brim and listen as long as they remain members of the service. The DRM will mandate that the Windows Media encoded music files loaded in the portable player be renewed by connecting to the base computer for authentication (usually at least once a month) or else they will time out and not be playable. Napster, Rhapsody, AOL's Music Service and several others have already agreed to use the new version and Dell and Samsung have signed on to use the new software in their hardware devices. The Future: The major flaw in subscription services has been their limited personal use rights. By allowing subscribers to transfer their "rented" music to portables players, the services have lifted a major hurdle in the public's adoption. If the usability of these services can also be significantly improved, companies like Rhapsody may have finally found a way to make their online music concerns a truly compelling and rewarding experience.
Copyright 2004 Futuremusic. All Rights Reserved.
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