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If the recording industry has its way, the day of the music download may soon be dead.
Or at least on life support.
Record companies continue to use their financial muscle to slow the growth of file-trading networks and to acquire digital-rights management technologies that limit what people can do with MP3s and other files.
To meet the growing demand for digital music, labels have turned to streaming services because they offer the one thing entertainment conglomerates want most: control.
"Labels want to maintain as much control as humanly possible, and with streaming they can keep people coming back for more," said GartnerG2 analyst P.J. McNealy. "But the labels want to protect their content and generate revenues, so this means ultimately they want to keep selling CDs."
Record executives have been loath to support downloads because they feared the practice would eat into the $14 billion CD retail sales market.
Pressplay, FullAudio and MusicNet have been pushing for liberal download plans that allow consumers to grab any file they want, but with a catch: The downloaded files have an additional cost and come with restrictions that prevent unlimited mobility.
Meanwhile, companies like Listen.com and MusicMatch are attracting users by offering interactive streaming services. Labels more readily license content to such services because it's housed on private servers, making it more difficult to copy and distribute over peer-to-peer networks.
Even EMusic.com, which built its business selling downloads as a subscription service, is being forced to reconsider its business model after some users started downloading 2,000 tracks per month -- roughly 165 albums -- according to general manager Steve Grady.
"That is one of the reasons the labels continue to push streaming," Grady said. "The success with streaming comes because the use is controlled by the company, and theoretically they don't have the same kind of control when it's offered as a download."
That isn't to say that commercial downloads are going away.
EMusic's solution was to limit the number of tracks users can download. If it hadn't instituted a cap, it would have lost money on the most frequent downloaders. EMusic subscribers pay $120 a year. But a subscriber who downloads 2,000 tracks a month costs the company $140 in licensing fees to music publishers, Grady said.
Both Pressplay and MusicNet are expected to offer download options that allow customers to pay for individual tracks, McNealy said. And Roxio, which makes software for burning CDs, must believe some people will pay for downloads: It recently put in a bid to purchase Napster's assets.
But those download services must go through the labels for licensing, and that means the tracks will likely be copy-protected in some way. It's file-trading networks like Kazaa and Gnutella, which facilitate millions of transfers a day, that bother the labels.
Record labels, musicians and publishers launched a public relations campaign to discourage people from downloading files.
In case that doesn't work, other solutions are on the way.
Recently, copy-protected CDs, which prevent people from making MP3s, have hit store shelves.
The idea was to keep songs from being copied and posted on file-sharing networks, so that people would have to use commercial services -- or buy CDs at a store.
McNealy said this trend may continue now that Sony Corporation -- the parent company of Sony Music -- and Philips Electronics ponied up $453 million to purchase InterTrust -- one of a small handful of digital-rights management companies.
