I’m doubtful of that actually happening but I’ve been accused of being a cynic.  If anybody wants to make a wager on what the first-year effects of France’s crackdown, I’m all ears. You know where to reach me . . .

Oh, and from what I’ve heard in my travels, the term one uses in polite company for what France is doing is “graduated response.”

According to this report, for $20 a month, Australian consumers would get DRM-wrapped content and a catalog far smaller than those offered by existing online services.

To which I can say, the Internet is truly a wonderful thing. Anybody, with any idea, can use it to live out their dreams.

Perhaps it’s a bit early for music rightsholders to call this new information a “turning point” in the battle against file-sharing, but it’s interesting. To me, the Guardian story, noting drops in usage of P2P by certain age groups, underscores what we pointed out in several recent documents — How Online Consumers in Italy Find Music on the Internet, What P2P Means to Online Consumers in the U.S., the U.K. and Italy, How U.K. Online Consumers Find Music on the Internet – understanding how people are finding content is the key to future success, not trying to find the perfect lock to control how they consume or share content.

People will always try to get something for free but in this day and age, rightsholders, especially the music labels, have realized that providing a sandbox of sampling, where consumers can check out songs, or preview music videos, in a controlled setting, with no expectation of portability (being able to capture it and stash it on a hard drive) is how you start building a future business.

So news like this is encouraging and appears to confirm the old chestnut we’ve been talking about for years: you fight “free” with choice, convenience and reliability.  Make it easier for consumers to access online and they’ll show you what they’ll pay. Or if they’ll pay.

At some point, the foundations for a 21st century music and media economy will be in place. What will those online service provide that P2P will be hard-pressed to counter (aside from “free” content): online offerings consistently provide breadth and depth of choice for content, simple and effective means of sampling content for consumers, direct links to services or online stores where a consumer can easily buy the content, and/or targeted advertising delivers the targets for advertisers and delivers the relevance consumers will demand (while protecting their privacy). 

We’ve still got a ways to go…

As much as anything, the new agreement clearly underscores the recent willingness of the content companies and rightsholders to take a more nuanced and long-term perspective when negotiating license agreements with online service providers. 

The new agreement, retroactive back to 2006, will have large pure-play (those which make the bulk of their money from Internet radio) ad-supported online radio services, such as Pandora, pay either the newly agreed upon per-stream royalty or 25 percent of their gross U.S. revenues, whichever is greater.  “Large” webcasters are defined as those making more than $1.25 million or more per year. Those making less than $1.25 million can pay 12% of their first $250,000 in gross U.S. revenues, and 14 percent of revenues above that. However, the smaller webcasters have a cap on the amount of music they can stream.  The rates were originally set in 2007 by the Copyright Royalty Board.  The new per stream rates are: $.0008 for 2006, $.00084 for 2007, $.00088 for 2008, $.00093 for 2009 and $.00097 for 2010).

While some might have viewed the Pandora and Slackers of the world as “new” radio, these sites have shown they’re much more than merely the online progeny of Marconi.

In the case of Slacker and Pandora, they are as much as search-discovery-recommendation tools as they are "online radio” providers.  In addition to delivering some revenue back to labels, artists and rightsholders via advertising, these services can help direct-payment transactions by reducing friction in direct-payment transactions. Here’s how. Radio, even with the advent of metadata transmission (which sends info like call letters, song titles etc.), of the past past couple of years, is inherently passive.  Pick a station, listen. Hear something you like? Write down the title, buy it later on. Maybe. And for labels and artists – which do not get a performance royalty for terrestrial radio – getting plays on radio was about marketing and promotion, not revenue

For Pandora and their ilk, they can provide a similar listening experience but can add more value to consumers (by providing data on the relationship between songs, or artists or genres), while also providing multiple benefits to artists/labels (promotion and revenue in the form of royalties). Another benefit these sites have over (most) terrestrial radio: the shortest distance between hearing a song and buying a song.  For example, Pandora’s Music Genome sets up a playlist of related artists and songs – which Slacker has a set of curated playlists, as does satellite radio –  but both usually a “buy” button next to the song which allows a user to iTunes and Amazon’s MP3 store.

So here’s to an agreement on the rates – it appears to be a balanced agreement given that, as Pandora’s founder Tim Westergren noted in a Billboard story, none of the parties got all that they wanted.

By declining to hear the content companies appeal from a lower court ruling which held that Cablevision’s planned deployment of a network-based DVR service – allowing customers who don’t have a physical DVR in their living room to record broadcast programs stored on their provider’s network storage systems – SCOTUS essentially told the content companies: “Kids, at some point you have to be able to ride the bike without the training wheels.”

By that I mean instead of relying on the courts – again – to protect what they perceive to be an existential business-model threat, content companies should maybe take THIS lesson to heart and start developing, with the cable providers, to fashion some sort of advertising-supported or even subscription-based model for network DVR services.

Now, content companies and TV service providers have to get it together and figure out some compelling ways to monetize or leverage the capabilities that a network-DVR-approach promises.

Can a network-DVR service become a billable offering to consumers? It will be interesting to see.  One of the key decision points for a provider would be whether or not users would be able to skip advertising.  Or would the cached programs, as stored at the request of user, be served up to consumers with a whole different set of advertising, highly targeted ads for example, that would be dynamically inserted when the user is watching the content? If there are going to be advertisements inserted at playback, or the ads that came with the original broadcast or included, it might be hard to convince consumers that they should be paying any incremental addition to their cable bill.

Either way, the issue of ad-skipping will shape how these services are offered.  I wonder what my colleague, Andrew Frank (http://blogs.gartner.com/andrew_frank), thinks about the decision, especially in light of CANOE Ventures’ cancellation of its first community addressable cable TV advertising deployments? 

Ultimately, it’s the DVR hardware becomes superfluous and, therefore, vendors in that space will feel the pinch as the services roll out.  Much of the promise of the great content jukebox in the sky – a favored metaphor of proponents of cloud-based content services that aren’t bound by a broadcast schedule – is that the actual nuts-and-bolts of how accessing any program at any time are not visible to consumers.  As awesome as a lot of consumers believe TiVO and physical DVRs to be, at some point, the user has “manage” the DVR. You know, do things like delete really old programs, free up storage space etc.

If one considers that a cable TV network’s primary link to a consumer isn’t the cable streaming content into their living rooms but rather the monthly bill, one might be convinced that’s these service providers need to figure out how to get a virtual-DVR line-item on their bills. 

In other news…Pirate Bay’s assets purchased by Swedish Software Co.?

Gee, I think I’ve seen this movie before.  Have you?  Here’s the plotline: globally popular file-sharing technology provider becomes darlings of free-content-movement, taps into a growing cultural meme that stems from consumers who have tired of the constraints of copyright law (and who also really like free content). Copyright owners take purveyors of said file-sharing technology and purveyors are convicted. Four of the leaders of the Pirates Bay were convicted and sentenced to a year in jail and fined 30 million kronor. Their case is on appeal.  

And now, a bunch of investors have purchased the assets of the company that developed and supported the file-sharing technology for just under $8 million (US$).

So now, Global Gaming Factory X AB is apparently claiming to want to embark on a journey that hasn’t been successfully managed to-date: turning a haven of unlicensed, consumer-driven content redistribution (file-trading) into a haven of users who will actually pay for content – despite all the evidence showing that the most important factor in driving people to use file-sharing technology is free content.  (“What P2P Means to Online Consumers in the U.S., the U.K. and Italy,” by Mike McGuire, 11 June 2009 | ID:G00168579.)

It certainly is going to be a challenge, especially when the founders of the Pirates Bay are issuing statements (as noted in the WSJ link) to their existing “customer base” that the service won’t change for them.

The as-yet-unnamed service will allow subscribers – available only to UK residents — to either stream or download as much content as they want and the downloads are going to be open MP3s. Or at least that’s what I’m guessing based on the very chipper and very vague press release issued by Universal and Virgin Media (a so-called “quad play” service provider of mobile and fixed-line communications, broadband and pay-TV service). The service will be launched sometime before the end of the year.  (According to the AP story link, Universal is working to get the other three major labels and the independents to join in.) Notable info: Universal is the largest label, by revenue, and Virgin claims to be the largest residential broadband provider in the UK.

Yes, I agree, it sounds just too good to be true, doesn’t it?

Here’s the catch: Virgin Media is going to keep an eye on things by monitoring users to make sure they’re not taking those open files and putting them up on P2P networks.  According to the release, Virgin is considering temporary disconnects of subscribers who persistently engage in file trading.  Nothing draconian, according to press reports, just a temporary disconnection. According to the release, it’s all about “educating” users about the perils of using file-trading technology.

Perhaps Virgin Media ISP customers won’t mind their online usage being monitored. Perhaps UK citizens have grown accustomed to being monitored, what with all the CCTVs deployed around England etc.

But more than anything, a whole class of tech-savvy users is going to wonder why they’re bothering with the monitoring at all. After all, if the files aren’t DRM’d and the user is paying a monthly access fee—and I presume the download-to-own version will be more expensive than the streaming-only option, what’s the point? Being able to have a “teaching moment” online when somebody is allegedly using P2P software? And if the disconnections are merely temporary, wouldn’t a clever user merely build that into their operating mode?  And according to this news story, there might be some EU legislators who will argue that any disconnect by an ISP has to be accompanied by a court order.

Yet, here I am dwelling on the negative, so let me say this: it looks like a grand plan on paper.  It would appear to map to how consumers want to acquire content and by providing a monthly subscription service without the DRM entanglements that have bogged down previous efforts, the service might actually be able give iTunes and other legitimate services a run for their money in the UK.

Then again, for it to really shine and to really provide competition to iTunes, the monthly fee’s going to have to be very reasonable, the catalog of content will have to be equal to or better than iTunes and the experience is going to have to be pretty compelling.

So, far be it from me to wax nostalgic about just about anything, but letting the 10-year anniversary of Shawn Fanning’s single-handed destabilization of the media industry go by without mention doesn’t seem right.

In short, my feeling about Napster requires me to paraphrase TV critic Tim Goodman of the SF Chronicle: Everything we know today about the music industry, we owe to Fanning and Napster.  Some shout-outs:

To Shawn Fanning I say, “thanks.” Never have so many media industry analysts owed so much to a single individual.  If it weren’t for Napster, we’d all be writing reports about the battle between SACD and DVD-A’s for market supremacy as replacements for the Redbook-based CD.  

To Hank Berry (and to some extent the Bertelsmann AG and BMG Entertainment groups), I bestow the You-Were-Dead-Right-Award for actually seeing the commercial possibilities of online music/content distribution. Too bad the music labels, movie studios and others couldn’t get in agreement faster to create a paid version/alternative.

To Apple and Steve Jobs, you know you owe a nod of the hat to Napster and Fanning, right? Without Napster, and ultimately Hank Berry’s undoing by the courts and the content companies, you might not have the market dominance you have now because, frankly, the tethered download options and subscription services might have been the ONLY online alternatives supported by the labels.  But most of all, if it weren’t for Napster, the labels would probably have had little if any reason to license any alternative to the CD. 

Second, my personal observations and about Napster and history:

• It wasn’t just Napster and file-sharing that brought the media sectors to the point where they are now. Consumer expectations regarding portability and being able to control the programming of their media experiences were taking shape the minute the first set of non-techies figured out how to program the VCR and how to rip a music CD.
• Why did SDMI and all attempts at encrypted DRM have to be the alternative? I know the literal answer – the labels wanted a level of control over the content they had with CDs and wanted a way to block consumer redistribution of the content once it was digitized.  However, straight-up monetization of P2P, as Hank Berry and countless others argued at the time of Napster’s court cases in 2001 and 2002, seems so obvious eight or nine years later.
• Besides underscoring an obvious fact – people like free stuff – Napster’s popularity clearly pointed to other important benefits that took several years to catch on: there was a perception that a much wider variety of content was available at Napster than was available in music stores or other online offerings (of which there were essentially none).  This benefit took several years to manifest itself in technology and services such as iMeem and Pandora, and recommendation engines such as EchoNest an Media Unbound. 
• As for the “legal” version of Napster now owned by CE retailer BestBuy, Chris Allen and crew have been able to keep the legitimate version of Napster up and running in the shadow of Apple and the iTunes’ success. There new offering which has offers consumers a month of free streaming if they buy a certain number of DRM-free MP3 downloads is probably the closest thing to a real challenge to iTunes that the market’s seen in quite awhile. The music discovery opportunities enabled by the free streaming capability (of Napster’s entire catalog) with a simple payment capability might seem like a bit of a throwback but it’s actually quite a powerful alternative to the iPod and iTunes.

Nobody can honestly believe that this conviction will have any more deterrent effect than the others, do they? Not sure how you could argue that this case will as it appears there’s no corresponding order to shut down the Pirate Bay.

The Swedish court announced the guilty verdicts Friday and immediately sentenced the group to a year in jail, and to pay 30 million kronor ($3.6 million US) in damages to the copyright holders. According to press reports, the defendants are planning to appeal the decision. As in U.S. courts, the appeals process could drag this case on for years.

So, another court case that will wend its way through its process, all while the online music market moves …where, exactly??? Let’s hope the experimentation we’ve seen in the industry for the past year or so – licensing agreements with social media sites, online stores agreeing with the labels to try tiered pricing – remain at the hallmark of the industry’s strategic efforts.

Sigh. This old story line again. This would appear to be the latest version of a music label trying to brand a piece of online property and claim it as theirs. Or rather, find an aggregated audience online and try to co-opt to a site of their own. A few years ago, one would wander the halls at music conferences and hear a discussion or a rumor about the labels considering the idea of building destination site. The operating notion in that construct being that the label or labels could get online fans to come directly to sites they control.

So while Universal’s channel on YouTube is quite popular, Universal executives, at least the CEO Doug Morris who is quoted in the Billboard story, wants to set up a separate channel. Morris’ statements in the article indicate that the belief is higher value advertising inventory would be created because the site would be tightly controlled. (To be completely clear, many important details about have not been released and nor has any real date for the service’s debut.)

So why create a separate channel – and Morris is apparently responsible for getting the other three labels to eventually sign on – for the labels? Money, obviously.  But why push a new channel when Universal, at least, is getting money from the existing online video channels?

Here’s a possible reason: one of the signature strategic reaction of the Internet-traumatized music labels is the 360-degree-deal. In these deals, a band agrees to cut the label in on a almost all revenue streams a band or artist generates. In the past, revenues from things like tours or merchandise generally were kept by the band or artist. It is natural to think that the label, having started these 360-degree deals would be on the hook to show that their ability to discover, groom and promote artists – because that’s pretty much all they have left as value-adds – is so strong that it would be worth it to the band or artist

What would the label have to show to convince any farsighted musician or artist manager to continue such an arrangement, let alone sign one in the first place?

I would think they would have to show the ability to aggregate large monetize-able audiences on the label’s property or a property over which the label has a significant amount of control. Think about it. Because if it’s YouTube, or iTunes, or somebody’s MySpace page, aside from making content or information available, the label has very little to do with driving an audience.  Why would a band or artist hand over what is potentially a significant amount of revenue, and control, to an entity which can exert very little control, hence have almost no ability to deliver any measurable performance or value?

Thus, we have Universal Music and Google’s special music video channel.

That’s my theory.

With the revamp, Yahoo! Music is looking to become the Internet’s mass aggregator of music information (like lyrics), free streaming music services (like Pandora and Last.FM), links to online music stores (like iTunes and Amazon’s MP3 store) and, well, gosh you name it. If it’s got something to do with music and online music, it might be there on the Yahoo! Music pages.  Besides serving ads, Yahoo! Music will also generate revenue by getting bounties (“affiliate fees”) for driving customers to iTunes and Amazon’s download stores.

A key feature of the new revamp, user customized artist pages, is by no means complete and isn’t real easy to find, at least for me. One types in an artist or band name and what appears to be a conventional set of Yahoo!Music search results pops up. Only when one hits the link to, say, “Stephen Malkmus” that one gets to the revamped artist page.  To my way of thinking, if I type in Stephen Malkmus, why wouldn’t I be taken straight to his homepage? Disambiguation? I think not. Granted, he’s played in Pavement and the Silver Jews, but if the searcher’s spelling is close enough why present the user with a generic search-result page? Same with searches done on Neil Young or Johnette Napolitano. 

In the past three years, we’ve seen multiple iterations of Yahoo! Music from the LAUNCH days where one could watch music videos online, to the Yahoo! online music subscription service. While the subscription service fell victim to the dominance of iTunes and subscription-model DRM challenges (as in Microsoft decided to launch its proprietary Zune music service and device family soon after hardware OEMs started building portable devices based on Microsoft DRM for service providers such as Yahoo!), Yahoo! Music persevered.

Yahoo! Music’s managers are essentially following the company’s strategic mantra’s of “open” and making any Yahoo! property an important “starting point” for online consumers. And that’s probably not a bad move.  Given that Yahoo! averages somewhere around 280 million visitors a month, and that the company’s primary revenue stream comes from advertising, becoming the “starting point” for some percentage of those 280 million monthly visitors, while getting some bucks from driving sales to Amazon or iTunes is probably not a bad deal for a Yahoo! property.