Retailers join zero-profit DRM ‘gold rush’

MP3 fever

By Andrew Orlowski in San Francisco, 11th November 2003

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"The gold rush is finally beginning," an Insight researcher called Phil Leigh told the San Jose Mercury News this week, commenting on the decision of Comcast and Best Buy to begin commercial MP3 download services.

Comcast will sell a version of Real's Rhapsody subscription service, and High Street chain Best Buy will promote a 99 cents per song download service, modeled on Apple's iTunes Music Store, in almost 600 shops.

Of course, commercial MP3 downloads have been available for years from pioneers such as MP3.com, but these have failed to attract the back catalogs owned by the copyright cartel. For the past five years the technology industry and the entertainment pigopolists have been engaged in a stand-off. When the PC industry attempted to introduce measures that restricted computer users' freedom, they were shot down in a hail of fire. Compromises came and went, but the PC business wouldn't capitulate, and Silicon Valley's traditionally gubbment-phobic tech executives even threw their weight behind proposed fair use legislation. But it was Steve Jobs who gave Hollywood and the RIAA what they wanted: insidious copy protection, gift-wrapped in the sweetest smelling package he knew how to market.

(When people come face to face with the consequences of DRM, they really don't like it very much.)

The problem with this gold rush is, as Jobs himself reminded us last week, there's no money in it for the retailers themselves. The difference between Apple and the arrivistes (and, for that matter, the 800lb gorilla Sony, which will enter the business next year), is that Apple makes money from iPod sales. Sony will outflank Apple thanks to its huge vertical integration advantages: it owns the content and has a historic presence as a consumer manufacturer. But for the others, it's hard to see where the money comes from.

The dot.com bubble was famously described as a 'gold rush', too. In a gift to headline writers across the world, it took place around San Francisco, a city founded on a real gold rush, that's been a boom-bust town ever since. Perhaps there's something in the water here, that attracts native sons such as Jobs to such short-lived opportunities.

But in the gold rush, it was only the pick and shovel vendors who ever made any money. (Oracle spun this into their marketing literature, we remember, in 1999). While an EMI senior VP called Ted Cohen felt confident enough to tell the Merc that this gold rush "shows that we're approaching the normalization of the business", who really makes money here?

The answer is in the question. The RIAA has achieved a home run. It's got a computer company to mass market share denial technology and all those 99 cents go back to the copyright cartel.

No wonder they're looking pleased. 'Normalization' has been achieved. ®