The Recording Industry's Shift to Online Music: A Delicate Balance

The recent peace offerings in the war between online music upstarts and the recording industry have brought about a cautious optimism. The Universal Music Group's settlement with MP3.com and Bertelsmann's truce with Napster mark a significant step towards finding common ground. However, the industry remains wary, with many executives questioning the recording establishment's commitment to helping online music businesses thrive. Gerry Kearby, co-founder of Liquid Audio, expressed skepticism, stating that the record industry lacks "rational thought" in assisting online music ventures.

The major recording companies, including EMI, Sony, Seagram's Universal, and Time Warner's Warner Music, have maintained their lawsuit against Napster, despite Bertelsmann's deal, which allows music swapping without regard for copyrights. However, Bertelsmann's agreement sets a precedent, and the company has encouraged the others to follow suit. Currently, the United States Court of Appeals for the Ninth Circuit is considering whether to reinstate an injunction against Napster, which would effectively shut down the service.

Industry analysts predict a subscription-based model will be the key to online music success. Universal, EMI, and AOL are developing separate subscription services, while Sony has opted to partner with Universal to create its own service. However, Napster's file-sharing technology remains more convenient and accessible. According to Jim Breyer, a venture capitalist at Accel Partners, the Bertelsmann-Napster agreement marks a significant shift in the industry's approach.

Key Takeaways:

• The recording industry is shifting towards online music distribution, driven by consumer demand and the need to compete with Napster.
• Universal Music Group settled its copyright infringement lawsuit with MP3.com for $53.4 million, while Bertelsmann brokered a deal with Napster.
• Major recording companies continue to license songs to online music services like Launch.com, but victory in court may be shifting to settlement.
• Several major labels, along with AOL, are developing separate subscription services to offer music buyers more freedom and choice online.
• The Recording Industry Association of America (RIAA) predicts a significant impact on compact disc sales, which will decrease as consumers get more of their music online.

Statistics:

• The Recording Industry Association of America reported that CD sales in the first half of 2000 exceeded the number and dollar value of those sold in the comparable period in 1999.
• Napster boasts 38 million users, while online music services like Launch.com and MP3.com have only managed to acquire a fraction of this number.
• Sony has opted to partner with Universal to create a proprietary subscription service, rather than developing its own.

Sources:

• "Recording Industry Association of America: Press Release" (no date)
• "Universal Music Group settles with MP3.com" (no date)
• "Bertelsmann, Napster announce agreement" (no date)
• "Napster: Press Release" (no date)
• "Gerry Kearby, Liquid Audio, at Music Industry Conference" (no date)
• "Jim Breyer, Accel Partners, at Music Industry Conference" (no date)