Music distribution is going digital

November 28, 1994|By Alice Rawsthorn | Alice Rawsthorn,The Financial Times

Digital jukeboxes are set to have a big impact on the music industry.

Yet it was only about a year ago that Rob Lord and Jeff Patterson, a couple of Californian computer-science students, launched their digital jukebox, IUMA, the Internet Underground Music Archive.

IUMA has since used the Internet to send samples of alternative rock music from Arizona to Australia.

It charges each band $20 to $75. Listeners tune in for free. All they need is access to the Internet to download the music on to their computer sound cards before transferring it to an ordinary cassette.

Mr. Lord and Mr. Patterson are cyberbuffs who used their skills and a $20,000 computer system to reach out to fellow music fans. Their concept has since been copied by hundreds of other digital jukeboxes all over the world and is attracting the attention of the $30.4 billion music industry.

The major record companies recognize that digital diffusion is a serious phenomenon that will, eventually, account for a significant chunk of music distribution. What they do not know is how quickly it will take off -- or how to approach it.

"We're working in the dark," says Sara John, director of legal affairs for the British Phonographic Industry (BPI) in London. "There's no doubt that at some stage digital diffusion will become a major part of the music market. My personal opinion is that it could happen very, very quickly."

At present the industry is in the unenviable position of not knowing whether digital diffusion is a golden opportunity to boost profits, or a threat to its financial stability.

The global music market is dominated by six companies -- Sony, Time Warner, Matsushita, Bertelsmann, Thorn-EMI and Polygram.

Bypassing the record shop

If a record company can deliver a compact disc directly to the consumer's home, it will save the money previously spent on distributing it to the record shop.

In short, it will be able to sell the same product for the same price much more profitably.

Such calculations have encouraged the major groups to dabble in digital diffusion.

Warner Bros., part of the Time Warner group, now offers on-line access to some recordings through America Online and CompuServe.

Geffen Records, a Matsushita subsidiary, also releases material on CompuServe. This summer it became the first major record company to produce a CD-Rom game.

Geffen joined with Jasmine Multimedia, a small California software house, to create Vid Grid, a visual jigsaw that enables the user to assemble videos from artists including Red Hot Chili Peppers, Aerosmith and Jimi Hendrix.

These projects are still seen as experiments. The current generation of on-line music services is not sophisticated enough for mainstream use. It can take as long as 15 minutes to download a three-minute song from IUMA on the Internet. The sound quality is patchy -- more like FM radio than compact disc -- and the visuals limited to black and white.

Some of the new digital diffusers -- such as pHreak, a dance music format run by Intermedia, a multimedia consultancy in London -- deliver their services by computer modem rather than the Internet. This means pHreak has a more limited market than the Internet's web of 25 million users, but it can make the most of computer graphics' vivid colors and sharp definition.

The Internet will become progressively more efficient. Digital junkies will also soon be able to transfer music to compact discs, rather than cassettes, with the launch of recordable video-CDs.

Digital cable

The expansion of digital cable radio, now a fledgling medium in the United States and Great Britain, which relays dozens of specialist music stations to the home on cable TV connections, will provide another digital delivery system.

However, there is a risk that, rather than benefiting from digital diffusion, the record companies will be pushed out of the spotlight by it. At present, their major artists need them to secure access to their vast retail distribution systems.

If digital diffusion became a major medium, the artists might be tempted to break away and handle their own distribution. And there's the threat that digital diffusion will continue to develop in its fragmented form as an underground movement with devastating consequences for the music industry's revenue.

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