The music industry used to refer to music as 'product', implying something tangible, but the time is near when music will be called 'content' - intangible, and entirely apt for something that exists only as digital code on the Internet.
In two quick steps, the two most risk-averse and bureaucratic of the big five music goliaths - Warner and EMI - have captured the high ground in dictating how a future Internet-based music business will look and work. They have also struck what may be a death blow to traditional music retailing and to the free-wheeling, copyright-lacking model of digital music distribution presented by the likes of MP3.com.
Last week Richard Branson's Virgin chain acknowledged as much when it threatened to shut up shop unless record companies cut retailers in on the action. At the other end of the spectrum, MP3.com, the San Diego-based company that distributes music by largely unknown artists, was slapped with a copyright lawsuit from the Recording Industry Association of America that could shut it down if potential financial damages of $6.75 billion are awarded against it.
What a digital music business will look like is still anyone's guess. An AOL-Time-Warner-EMI colossus appears to be leaning towards the 'pay-for-play' approach, under which consumers pay a subsciption and listen to music on demand. In theory, the EMI and Time-Warner catalogue (2 million songs from the Beatles to Missy Elliott) should ensure public acceptance of the music computer file as an alternative to the CD. The potential payoff is enormous. Last year, sales of online music amounted to roughly $1 million, according to Boston-based Forrester Research. They are expected to rise to as much as $4bn by 2003.
But all this depends not only on the acceptance of common standards of transmission, copyright protection and storage, but on the adoption of 'broadband' pipes and the marriage of the hi-fi and the computer, all elements that, in theory again, the muscle of AOL can help facilitate.
But the future is still hard to predict, as companies such as AOL, Microsoft, Real Networks and Sony all vie to have their technologies to settle the format and piracy problems. The conflict is well illustrated by the divisions between Sony's music arm and its electronic side. Sony's Internet music player, the Memory Stick Walkman, has been fiercely opposed by its own music labels until piracy issues are resolved.
The AOL-TW-EMI deals have been welcomed by the RIAA, which represents the major labels, as having the potential to lead the industry out of this thicket. 'What this brings together is a tremendous wealth of music assets and a group of people who have mastered the art of making things simple on the Internet,' said Hilary Rosen, president of the lobbying group.
But what the Time-Warner-EMI deal will mean to music itself is unclear. Many fear the ongoing consolidation of the music industry will suffocate diversity. In other words - Beastie Boys and Whitney Houston or nothing.
