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Why Starting a Legal Online Music Vendor Is Tough
Hodejo1 writes "Former MP3.com CEO Michael Robertson offers commentary at The Register saying any attempts to build a sanctioned digital music site today is doomed from the outset. 'The internet companies I talk to don't mind giving some direct benefit to music companies. What torpedoes that possibility is the big financial requests from labels for "past infringement," plus a hefty fee for future usage. Any company agreeing to these demands is signing their own financial death sentence. The root cause is not the labels — chances are if you were running a label you would make the same demands, since the law permits it."
FTFA: "The root cause is not the labels - chances are if you were running a label you would make the same demands, since the law permits it."
Unless, of course, you didn't. The law also permits playing a guitar exclusively in a soundproof booth in the middle of nowhere so that no one will ever be able to hear your music, much less consider purchasing it, which seems like the business model the major labels are moving towards.
You could, for instance, start your own label specifically to avoid this, avoid DRM, allow anyone to stream your catalog as much as they want, offer a variety of formats and purchase options, etc. I think the law permits that too.
As for viability, it might have some issues, but Magnatune has been doing that for five years now and doesn't seem about to stop.
http://www.magnatune.com/
Any label is not a monopoly.
Any copyrighted work is a government protected monopoly on its own, which makes the distinction harder to make.
While an airline (or two different airlines) and a bus may get you to your destination, the fact is, despite the significant attempts to make everything sound the same, different songs are not the same destination. And you can't (generally) buy the same song from different entities.
they're allowed to collude all they want and nobody bats and eye.
See, the trouble is they don't really need to collude. Monopoly pricing is set in relation to available disposable income; it's a function of what the consumers will spend. You maximize your revenue when you raise prices to the equilibrium point where higher prices mean lower income (as the higher per-unit revenue wont be outweighed by the lost sales), and not a cent below. (This point tends to be at a level where a significant number of customers cannot afford the product, and is also the main reason for things like region coding and parallel import prevention in other similar product areas)
As the monopoly pricing is set as a function of the same thing, all the players will end up with very similar price points. After that, the main competition going on is exposure and channel control (well, apart from friendly copying).
In essence, monopoly rights are irreconcilable with a free market economy. The business logic when you have a protected monopoly simply doesn't work the same way as competitive industries, so there's a permanent conflict of interest between the bigger players and everyone else. A conflict that is unlikely to be resolved until monopoly rights are restructured as non-exclusive revenue share rights, which simply is unlikely to happen any time soon.