mp3.com and Universal Reach a Settlement
Universal Joins Pigs Dining at the mp3.com Trough
But Will Consumers Slop the Hogs?
UPDATED: November 15, 2000, Originally filed: November 14, 2000
On Tuesday, November 14, 2000 New York district Judge Jed S. Rakoff ordered online music service mp3.com to pay $53.4 million in damages to Universal Music Group, ending the copyright infringement suit that has captured the attention of everyone from Wall Street to the darkest corners of hackers hideaways. For complete analysis of the lawsuit and related issues see the Wizard, fkap article below and earlier articles found in the archive.
Universal agreed to license its entire music catalog to be used as part of My.Mp3.com, the service that allows any user to store music digitally and then access it via any computer.
The pact removes what was likely the final hurdle before mp3.com can restart the service, originally launched about a year ago. This past summer, mp3.com inked agreements with the other four major music companies: BMG, which is the music unit of Bertelsmann AG; EMI Group PLC; Warner Music Group, and Sony Music Entertainment.
Mp3.com Inc. plans to restart the My.Mp3.com service by the end of November and, for the first time, will charge a fee for the service, the company's chief executive Michael Robertson told Reuters on Wednesday. An advertising based limited storage free service is also being considered.
In a move remarkably similar to the Napster agreement with Bertelsmann, Universal, a unit of Seagram Co. struck a deal to buy "a significant amount" of MP3 warrants. Universal hope to profit from the ongoing success of mp3.com. Shares of MP3.com rose 68 cents, or about 19 percent, to $4.68 a share in after-hours trade Tuesday evening.
ANALYSIS
Clearly Universal wanted a piece of the pie. It is very likely that the Napster deal with Bertelsmann helped pave the way for this creative settlement. It's time for the big record companies to put there money down on the digital music roulette wheel. But just how good a bet is mp3.com?
On the positive side of the ledger, mp3.com had put aside $170,000,000 to pay for the lawsuits. There will be no bankruptcy and everyone will get paid their initial settlement.
But, now the real chore begins for mp3.com. They've got to make a profit in a sector where the competition has been dying like wild flowers in December. The service has agreed to huge ongoing fees to stream consumer's music back to them via the Internet. And Michael Robertson, Mp3.com CEO has announced that consumers will have to foot the bill.
But why would a consumer pay to listen to music he already purchased and had to PROVE he purchased before up loading it into mp3's locker?
Convenience? Well, he already has the Compact Disc. He already has his homemade mp3s. He has one or more mp3 players (Nomad, Diamond Rio et. al.). He already has a ZIP disk or CD-R with zillions of real mp3's copied.
Quality? The streaming real audio quality of my.mp3.com is pathetic compared to a real mp3 recorded at 128.
Novelty? Give me a break.
The ultimate question someone at Universal should have asked is "Exactly how many times do we really expect the consumer to pay for the same piece of music he already purchased?" If the answer is "Only Once!!" then Universal made a poor investment.
A terrified music industry continues to bet on the wrong horse. The Wizard never understood the lawsuit against mp3.com. The industry should have loved a service that
a.) forced you to actually purchase the music first (and prove it beyond a shadow of a doubt)
b.) absolutely prevented any copying of any kind for any reason.
mp3.com was never any threat. If the service had worked, it might have actually benefited the industry.
But the Wizard also never thought the service would work. Why? It's a really dumb service. It won't gain an audience because it keeps rightfully purchased music in a straight jacket. Even if wireless access actually brings Internet audio to automobiles, the service is too complex for easy use. Consumers will just slip their CD-Rs into their AIWA automobile mp3 player or load their tunes into their NOMAD MP3 Player and be on their way. Leaving my.mp3.com where it belongs, in the dustbin of history.
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