Major-Label Uncertainty Holding Up Online Music Services

A panel of independent service providers made it abundantly clear that major-label content is key to building robust businesses, but the labels remain reluctant to relinquish control of their product.
Two years after Napster started a revolution that's changing the way consumers access music, the industry still is stuck in neutral when it comes to developing the Internet as a distribution channel. With apologies to the oft-delayed major label-backed services, MusicNet and pressplay, a panel of independent online music executives told an audience at the Webnoize 2001 conference in Los Angeles that they've seen very little progress in trying to get the labels to recognize the value third-party online services can bring.

To the contrary, they described music-industry efforts to further limit consumer choice by introducing "protected" CDs--which prevent consumers from copying music they've purchased through retail outlets--as a uniformly bad move. "It's less functionality for the same amount of money," observed Jeremy Miller, the panel moderator and a former exec of defunct music playlist service Uplister. All of the panelists expressed a degree of frustration that efforts to get licenses to use major-label content haven't panned out. senior VP Steve Grady said the subscription service provider assumed from day one that it wouldn't be able to obtain major-label content and instead focused on developing an inventory of music from independent labels. While that has prevented Emusic from attracting a huge user base, Grady said it's let the company offer consumers what the major labels seem reluctant to deliver: the flexibility to use music downloads in a variety of ways, from burning CDs to loading files into MP3 players.

James Glicker, president of music services for FullAudio, which is developing a service that will compete with MusicNet and pressplay, said the labels simply want more revenue assurances than budding service providers can provide. Right now, Glicker said, "There's no business there. Once there is a business, once they can see revenue there, then they'll be more flexible." Sean Ryan, CEO of, agreed that the labels have to be convinced that third-party online services can generate enough revenue to offset the labels' concerns about losing control of their product. Said Ryan, "As we show that we can do that, the rights will start to clear out."

Webnoize analyst Lee Black cautions, however, that licensing giant swaths of music isn't a simple matter for the major labels. Black says that the labels' contracts with artists don't specify royalty payments for digital distribution, and thus the contracts have to be revisited before music can be licensed to online outlets.

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