Downloading the Future 

The MP3 Revolution — the End of the Industry as We Know It

Wednesday, Mar 24 1999

Page 6 of 6

The RIAA sought an injunction preventing Diamond from selling its product. A U.S. District Court granted the injunction, then reversed itself 10 days later. That decision remains on appeal.

Diamond countersued the RIAA, claiming that the RIAA was really aiming not to prevent piracy but to quell the nascent mp3 business.

In the meantime, since the injunction against Diamond was lifted on October 26, Diamond says that it has already shipped upward of 100,000 Rios.

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Jim Griffin was once a leader in the industry effort to stamp out illegal mp3 sites. As an executive at Geffen Records, he sent what he calls "polite letters" to roughly 300 sites that were distributing music without permission. The sites all complied. But even as he was challenging the spread of new technology, Griffin was becoming enamored of its implications.

Last year, Griffin left Geffen and formed his own company to capitalize on his conversion. OneHouse is officed in an imposing building on Wilshire Boulevard between Fairfax and La Brea — an area and a structure that convey corporate gravitas. The company is young enough that you can walk through the door into a vast, empty space and be greeted by the CEO himself. And his cat. It’s a setting that bespeaks nothing so much as potential.

Before launching into his prophecies about the music industry, Griffin offers a demonstration. A couple of clicks on his lightning-fast computer, and mp3-quality tunes come pulsing out of the machine — with no download at all. He seems to have overcome the final obstacle to total convenience in online music delivery. Even mp3s are supposed to take some time to download, aren’t they?

Not when they stream.

"Streaming" is Net terminology for playing audio and video while it is still downloading, rather than having to wait minutes or hours for the whole file to settle onto your hard drive. Streaming is the Net equivalent of a radio broadcast. According to Griffin, at some point not long from now, we won’t worry about CDs or even about storing mp3 files on our computer hard drives. All music will arrive in streams.

In Griffin’s post-download future, music buyers will pay a subscription fee, or put up with advertising, for the right to play songs or whole albums on their computers, on their stereos, in their cars or at the beach — or anywhere — whenever they want. Itradio, but with your personal playlist.

"There was a time when if you didn’t have food in your freezer you starved. That’s not true anymore. The digital bits you need to hear a song will arrive when you want them," Griffin declaims. "You want to hear Van Morrison’s ‘Moondance’? Ask for it! It’s not about having music, it’s about hearing music!"

Moreover, streamed, on-demand music needs no security. If you can get it whenever you want it — why copy it?

Will all of these developments mean the death, or at least the maiming, of the Big Five? With a virtually infinite number of new distribution avenues open — what good are big record labels?

Still good for plenty, says Griffin (who, after all, is a former label exec). No one else can stage the type of marketing juggernaut that a major label can. In Chuck D’s world of "a million bands and 500,000 labels," getting noticed in the crowd becomes more crucial than ever.

"The record company is more powerful in the future than it was in the past," says Griffin, whose firm advises music pro fessionals on how to use the Internet. "It doesn’t cost much to distribute records. But the issue is how to cut through the clutter of the marketplace, not how to get into the marketplace. In future, it’s going to be worse."

To Griffin, Chuck D’s goal of 50-50 profit splits is a fantasy. "I don’t think the future portends dramatically different profit allocations," Griffin says. "If it does, they may be worse for artists, not better. We may actually find that we removed a dollar from the cost of delivering music but find we added $3 in marketing costs. Getting the message across may be more, not less, expensive in the future."

But Chuck D dismisses the big corporations and their antics.

"The majors will say they promote, but they promote through traditional means — means that they dominate," he says. "The average person who wants to get into the recording industry cannot, because there’s no way they can pay $2 million to get their record on the radio. The bureaucracy in radio will be undercut. The retail outlets who are looking for money in order to sell a record will be undercut, and the record companies who think they’ve got all the areas sewn up for themselves will be undercut like a running back who’s been taken out from underneath on the way to the goal line. It means that all these cats have to share."

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