Music biz fears play Apple a compliment

Industry can't see wood for trees

Analysis Apple has won an unusual vote of confidence from the European music industry. The major labels are so convinced that the Mac maker's iTunes Music Service will successfully dominate the online music market over here, they are allegedly playing hard to get in Apple's content licensing negotiations.

According to a report in the Independent newspaper, industry insiders claim the labels fear giving their songs to Apple for too little. They cite the example of MTV, which grew on the back of the promo videos the industry provided it for next to nothing.

"The older record executives don't want that again, where they're over a barrel with one big provider," a source said.

Maybe not, but why then are they willing to license content to other suppliers? It's by no means a monopoly, but On Demand Distribution - aka OD2 - is arguably Europe's dominant player thanks to the licensing support it has been given by the major labels. If they're worried about Apple achieving dominance, why were they never to fearful for their relationship with OD2?

With OD2 already serving a number of reseller customers, Sony bringing the European version of its Connect on stream in June, Napster launching in the UK "before the end of the summer" and Virgin Digital on its way, the music industry must have some very high expectations of Apple indeed, if it collectively thinks iTMS can trounce such big-name rivals.

Napster today announced a partnership with UK high street consumer electronics retailer Dixons to promote its British launch, so it's not like Apple is going to have an easy time of it in any case.

In the US Apple claims to command 70 per cent of the music download business, but that's against some less sprightly and marketing-savvy rivals. Its main competitor, Napster, hasn't been going for as long, and key threats from Sony Connect and Virgin Digital have yet to establish themselves.

Here in the UK, Napster has also spoken of its "frustration" with the labels over their willingness to come to an agreement on music licensing. Smaller UK player Wippit has so far signed two major labels for its fledgling download service, EMI and Bertelsmann Music Group (BMG), but both have put in place very different licensing terms over what Wippit can sell and to whom.

No wonder the European Commission is investigating whether the application of different licensing terms for different European countries runs contrary to the terms of the open market for goods and services across the continent. The EC has called for a single licensing regime backed by a unified DRM scheme.

The irony here is that the music industry complains about falling sales and increased illegal download activity, yet clearly is so worried about losing control of the retail chain that it's apparently willing to hinder the development of a legitimate download business, if the Independent's source is to be believed.

Does it matter if Apple dominates? If you're Napster, Sony or OD2, yes - but not if you're a label. If your business is recording music and selling it through whatever channels are available, it doesn't matter who does so as long as they sell the stuff. Yes, the industry might not want a key player to become too powerful, but with the download market so immature, particularly in Europe, now's not the time to worry about such details. Smart labels will allow download sellers to get in business now and oblige them to negotiate licensing deals further down the road. ®

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