Dear Music Biz: Unchain My Melodies!

Don't put absurd limits on how I use the CDs I buy. Instead, check Europe's cell-phone industry for creative use of digital technology

By Stephen Baker

Every now and then, when I have a hankering for something quaint and nostalgic, I put on a CD and listen to the whole thing -- every single song. It's a change in pace. That's because for the most part, like many music lovers in the Digital Age, I now listen to singles, either on my MP3 player or on rewritable CDs I compile myself. For me, the purpose of a new CD is simply to add more tracks to my singles collection, which resides on the computer.

These days, I'm feeling cruelly betrayed by the music industry, however. Several companies, including Sony, disclosed this month that they're selling piracy-proof CDs -- miserable disks that cannot be played on the computer. As luck would have it, they've unleashed this plague where I live -- in Europe.


  Let's imagine that I take a lunchtime detour to the Virgin Megastore on the Champs Elysées and plunk down $16 for a CD. Later, I come back, plug it into the computer -- and find to my distress that it doesn't work on my PC. It'll only work on my music CD player. No tunes while I finish my column! That's a letdown. Far worse, the tracks on this CD will not mingle with the rest of my digital-music collection. The disk will just sit there, near the stereo, waiting for one of my retro moods. It might as well be vinyl.

How much would I pay for a CD that doesn't work on the computer? Oh, maybe a couple of bucks. But assuming the music companies don't lower prices dramatically, digital-music mavens like me are much more likely to spend zero.

The question, of course, is whether the business the recording industry loses to angry customers like me is offset by the business it gains by discouraging piracy. As far as I can see, they're just losers -- until they devise a way to exploit this technology.

Here's an idea. Let's look at the three reasons why Europe's mobile-phone industry has grown into the world's richest:

• Massive compatibility. Every phone works on every network.

• Effective roaming. Phone companies across borders found ways to sell services to their competitors' customers. They charge a premium, both sides make money, and the customer is willing to spend more for the convenience. What's more, the confidence that the phone will work everywhere dramatically increases usage.

• Innovative subscription models. The Europeans pioneered prepaid phone cards, which are now spreading worldwide. Instead of paying a monthly bill, backed up by a bank account, new subscribers simply buy more expensive talking minutes in advance. This brought millions of young and frugal users into the industry, turning the mobile phone into a standard-issue item for much of humanity.

Now, take those three concepts, and transfer them to the music business. Start with compatibility. The music industry must sell songs on formats that work on everyone's machine. No way around it. Customers want to own music -- and play it on whichever machine they choose. The customer is always right.

Next is roaming. If I buy a monthly subscription to Time-Warner music, I should get access to that music at reasonable rates. But even with a Time-Warner subscription, I should still be able to buy Sony tracks -- just the way I can use my French phone subscription to make calls on the Vodafone network when I'm in Britain.

This is vital, and it blends into the point about subscription models. Paid music services must offer at least as much as the Net's free song-swapping services. If Napster and its progeny offer everything, music companies cannot create a business offering less.


  Given the paranoia that seems to reign in the music industry, nailing down compatibility and roaming will be enormously difficult. All sides appear more interested in using technology to protect themselves -- not to extend their markets. Instead of yielding to their own paranoia, they should appeal to ours. Fact is, the neo-Napster music services can be dangerous. I avoid using them because they teem with viruses and insidious agents. Users who tangle with them are exposing their top-dollar computer systems -- not to mention the information they store on them -- to hackers and other digital lowlifes.

The music industry can offer a safe and secure service. And if they take a page or two from phone companies, who knows? Maybe they can turn it into a profitable business.

Even as I write this, I can hear the questions coming. Why in the world would the music business copy a business plan from the cell-phone industry, where many companies are loaded with debt and barely clinging to solvency? True, true, they're in trouble. But in Europe at least, the voice business is thriving. The towering debt comes from massive investments in the mobile Internet.

And you know what? If the mobile Internet ever pans out, the phone companies will be concentrating on music, marrying the Walkman, the MP3 player, and the cell phone -- and selling music downloads and streaming audio through their gold-plated networks. If the record companies don't get smart, the phone companies might end up making off with the music.

Baker covers the European technology scene from BusinessWeek's Paris bureau

Edited by Thane Peterson

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