Big Music Labels Have Digital Trust Issues
As they fight in court to clamp down on piracy, the major record labels have also tried to coax music fans to switch from free downloading to paid services.
But when music fans go shopping for hit albums online, their money buys them something less than what they get on most CDs.
The music is the same, and the sound quality is hard to distinguish. But there is a wide gap between what buyers can do with a CD and what they are allowed to do with a legal download.
With most CDs, buyers can make unlimited copies, transfer the songs to any portable electronic device and post samples to their blogs. By contrast, all of the songs sold online by the major record companies are wrapped in electronic locks that restrict copying, deter sharing and limit portability.
The restrictions are intended to be tight enough to discourage piracy but loose enough not to crimp the average music fan's behavior. Still, the variety of incompatible protection technologies being used by online stores, music services and manufacturers means that music fans might buy tracks online that their portable devices cannot play.
The disparity between CDs and downloadable songs is "a manifestation of how challenging the digital media transition is" for the major record companies, said analyst Michael McGuire of GartnerG2.
The major labels are not forced to use electronic locks, also known as digital rights management technology. A number of online outlets sell songs as MP3s, an unrestricted format that millions of music fans have been using for several years.
But MP3s offer the labels the least amount of control over how the songs are put on the market and what people do with them. They can only be sold, not rented, and they cannot be kept from a wide array of uses that the labels neither authorize nor profit from, including file sharing and podcasting, in which audio files are downloaded into portable devices.
"You've got a bunch of people who've set up businesses based on total control, and you've got a bunch of parts of the chain saying, 'We're giving up revenue,' " McGuire said. "They have to adjust to think about, 'How do I monetize this world now beyond the initial transaction?' "
Some record companies, most notably Sony BMG and EMI, are starting to close the gap between CDs and downloads. Aided by technology firms such as Macrovision Corp. and SunnComm International, they have found a way to put electronic locks on their CDs that are even more restrictive than the ones on their downloadable songs.
