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Digital flatline looks ominous for music labels

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It may be slightly premature to declare the DRM-era dead. But the signs are that it may be entering its final days.

Forrester and Nielsen's figures merely confirm that what the industry is losing in falling CD sales, it isn't gaining in DRM downloads.

Forrester Bernoff's attributes some blame on the technological restrictions - iTunes' DRM songs only play on Apple's iPod player.

At the In The City music convention held in Manchester in October, Columbia UK boss Mike Smith predicted music would be DRM-free within 12 months. Sony BMG UK, which owns Columbia, has declined to elaborate on the comments - which were not widely reported at the time. Perhaps more significantly, recent personnel changes at Universal Music, the 800lb gorilla, also suggest a more pragmatic strategy.

So if not DRM, then what?

In the UK, the major labels, represented by the British Phonographic Institute (BPI), have joined discussions on a blanket license for digital downloads in the UK. Discussions are taking place under the Chatham House rule. Although much of the infrastructure for a blanket license has yet to fall into place - the counting mechanisms and collection agencies have yet to be agreed upon - the UK makes a potentially promising experiment for a digital music blanket model.

UK consumers can take up free broadband offers from Sky and Orange, among others. This potentially removes one of the key objections to a flat fee - the fact that it's a compulsory payment for broadband users. It's increasingly feasible that a blanket license would be absorbed by UK consumers at little or no extra charge - simply becoming part of a competitive monthly tariff, only allowing the consumer to share music freely, and not be sued for copyright violations.

And while Andrew Gowers, whose Treasury report on intellectual property was published last week, passed on giving the blanket license moves his specific endorsement - he said it was too early to judge - he certainly helped the cause in one important way. Gowers advocated the establishment of a database of copyright material. Such a database is essential to managing how the pot of money raised through a blanket license is eventually distributed.

Two years ago blanket license advocate Jim Griffin predicted that 99 cents per song was "both too high and too low".

"It's too low to pay for the burden of a developing artist, and it's too high to fill an iPod," he predicted; while the approach wouldn't catch on with the public, it would cause significant harm to the industry.

It's significant that so many music stakeholders are now discussing Jim's long-favoured approach - a bundle - rather than placing any more faith in a route that relies on technological counter-measures.

Peter Jenner, Billy Bragg's manager, recently reflected here on business models that would arise after a blanket license. It's well worth a read. ®

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