Fergus Cassidy

Sympathy for the devil

IT'S really ironic. The CDs which come inside newspapers represent one of the most popular ways people can get music without paying a cent for it. Print, the oldest of all modern media, has not only managed to distribute music but has used it to add big increases to circulation figures.

Magazines in particular, are very impressive at doing it, offering previously unreleased or hard-to-find tracks. And yet the music industry itself has spectacularly failed to find new ways of distributing music, other than retail over the counter.

The existence of a digital counter culture, however, means that the music industry has only a limited amount of time to save itself. The last waltz, followed by a fat lady who most definitely will sing.

Whatever it is about the music business, it is one of the most conservative and uninnovative industrys around. Even the dinosaurs in telecommunications manage to put on a smile and pretend everything is just fine and dandy.

Whatever the full potential of the internet has in store for telecoms - at this stage unfathomable - at least telecoms has the excuse that it never found itself in this position before. The same can't be said for the music industry.

Technological invention has always posed a great threat to the entertainment business in general and whether it was cassettes, tape recorders or video, the response was always the same - resort to the law.

Videocassette recording saw one of the biggest legal challenges mounted to stop what it referred to at the time as a mortal danger to the movie industry. If it had succeeded in blocking the use of videocassettes Hollywood would have shot itself in the foot (PG18). According to recent figures from the US, revenues from video sales exceeded box office receipts by $2bn last year.

The only thing which changes in the music industry is that it doesn't change, and last week the head of the International Federation of the Phonographic Industry said that "today we are announcing a wave of legal actions against illegal file-sharing in several [European] countries. ...This is the start of an international campaign against online copyright theft".

The high moral ground that the industry takes is astonishing. These cases, mostly against people who share and/or sell large amounts of music, are designed to reinforce in the public eye that downloading music without paying may be against the law.

This nanny culture really masks the underlying reality that the music industry hasn't a clue what to do to save itself. Article after article appears telling tales of woe about an industry in serious, maybe terminal, decline.

In Denmark, where 120 are being prosecuted, piracy is being blamed on a 50% drop in CD sales over the last four years. A Danish recording industry spokesman pointed out that "people are losing their jobs, record stores are closing down and artists find it increasingly difficult to get their music released".

And yet the one obvious solution is the one that threatens so much - the internet. Digital distribution should be a boon to music, opening up whole new markets and bringing manufacturing and distribution costs down to negligable levels.

While the telecoms companies bleat on about there being "no demand" for new services, there is no way the music industry can sing that particular tune. There are now over 130 different downloading applications available.

It is estimated that over 5bn music files were downloaded in the US in 2002. Roughly 5m video games were downloaded in the same year. It is also estimated that 3m television programmes are downloaded from one file-sharing application each day. Demand for digital material is at tsunami proportions.

For an industry which pioneered the use of digital technology, it finds itself today living in terror of it. Selling music as bits could leave the industry in pieces, so it's sticking with the atoms until something safer comes along.

But risk-taking is what innovation is all about. The book business feared the internet but has found new ways of diversifying and while new books can take a hit to online sales, purchases of books from back catalogues has increased.

The music business has an enormous back catalogue that is invisible inside record shops. New releases are called "front catalogue" and receive most of the marketing push. Yet it is estimated that up to 40% of all sales are from back catalogue, and that figure is expected to rise sharply.

New ways of playing music have also emerged to offer opportunities for the music industry. Portable players with hard drives (such as Apple's iPod) or memory cards are gaining a foothold in a market that wasn't suppose to exist. Apples iTune online music store has sold over 50m tunes to date.

That doesn't mean the music industry's problem is solved though. An Apple senior vice president said last year that "the iPod makes money, the iTunes music store doesn't".

There is now so much music and movies out there that the format in which they come is ceasing to be relevant. Portability, interoperability, the ability to store and classify, search facilities and preference-based recommendations will all be part of the new order.

The crossroads the music industry finds itself at is whether its 'product' exists primarily to help others sell theirs. Music becomes the software which sells profitable hardware such as the iPod. Or can it stand on its own two feet and survive yet another technological realignment?

I hope it's the latter.