Here’s a story that brings up the sharp contrast between the way labels are starting to treat digital music and the way publishers have been handling digital books.
On TechCrunch, Mike Agovino, an executive from digital media company Triton Digital, discusses the royalty license situation around digital radio that has limited its wider adoption. Companies like Pandora have picked up many users and are increasing overall revenue—but due to the high royalties charged for streaming music over such a service, it is hard to find profitability that way.
By comparison, traditional radio does not have to pay one cent in license fees for the music it transmits over the air—which means that they can broadcast the music for free, but they have just as hard of a time taking advantage of digital opportunities as Pandora, because the moment they transmit their stream over the Internet, they have to pay the same license fees.
However, Agovino reports, Clear Channel, owner of 850 US radio stations, has managed to swing a license that allows royalty-free broadcasts from its stations over the air, which could make it easier to compete with subscription-based services, especially as those services still labor under the royalty handicap. Of course, radio stations will still have those things that have led people to flee them in droves for services like Pandora—rampant commercials and no control over what music they get.
Of course the major publishers of e-books have slapped their own fee increases on their e-books, in the form of agency pricing price increases. Though ironically, this has actually made it easier for small startups to compete with bigger e-book stores in some ways, since Amazon can no longer discount them under the table. Meanwhile, the music industry continues to handicap new business models just because they can. It’s a bit ironic, because there’s one way the music industry is being a lot more open and forward-thinking than the publishers: in streams or downloads associated with on-line physical purchases.
Thanks to the deals it’s cut with the labels, Apple offers a service that allows users access to their iTunes libraries remotely, and Amazon has reportedly just closed license deals of its own that will let it do the same thing: rather than forcing users to upload any music they want to access via their cloud lockers (as they do now), Amazon will scan the user’s music library and make available its own versions of that music for streaming, whether it was purchased from Apple or Amazon or not. Apple offers this service for $25 per year; Amazon has already added the ability to upload unlimited amounts of music to the 20GB Amazon Cloud storage plan it offers for $20 per year, and will undoubtedly add the upload-free streaming ability the same way.
And Amazon already offers free MP3 access to the music on eligible CDs purchased from Amazon: order the CDs to be shipped to you, and you can download or stream the music immediately, combining the future-proofing of having physical media with the instant gratification of being able to listen to it right away. (It also offers a similar service for some movie DVDs.) That’s quite a change from the old days, when one of the “benefits” of introducing a new music or movie format was that it would force people to have to re-buy all their favorites.
By contrast, as I pointed out in a Quora answer I wrote this afternoon about why Amazon hadn’t been able to offer bundled paper-plus-e-book packages yet, the major publishers have always insisted that every single format of an e-book is tantamount to a separate edition of the book, and since you don’t get a free paperback when you buy a hardcover, you shouldn’t get a free e-book when you buy a paper book (or even a different DRM-bound format of e-book) either.
To be fair, it’s nowhere near as easy to “rip” a paper book as it is to rip a CD or a movie, so most people who want the separate formats do either have to buy them or put in the extra effort of scanning and proofing. (Or pirate them.) So the publishing industry hasn’t been under the same sort of pressure that the music and movie industries have to turn the behavior that people engage in anyway into a competitive advantage (“buy this CD and we’ll rip it for you as soon as you pay us!”).
If publishers were to allow this sort of bundling, would they see the same sort of uptick in sales from people who want archival paper copies but also want to read it right away? Or would they look at it as losing out on the extra money from forcing someone to purchase the e-book separately? (If the DoJ settlement with three of the Agency Five holds, and it is able to force the other two into a similar settlement in court, we might see that sort of experimentation anyway as Amazon is allowed to try more experimental offers like that.