When it comes to the peer-to-peer (P2P) file sharing of digital content, the post-Napster and Gnutella era is here for good. Once hard-core consumers—especially the wired ‘tween to ‘teen demographic—had tasted P2P’s interactive, comprehensive experience for the digital download and streaming of music, there was no turning back. Traditional album formats have been abandoned in favour of custom burnt CDs or personalized playlists of digital singles, enriched by online chat groups, streamed events, and community features. Progressive artists, record companies, music retailers, and service providers are now turning to the next wave of music exchanges—but business models and technical capabilities must be built to create legitimate online markets. The music industry has succeeded in controlling the offline manufacture, promotion and distribution of music but has struggled with collecting revenue for their digital content and managing digital rights amidst the growing, global network of “free downloaders.” The industry’s legal battle with Napster, and its subsequent takeover by industry giant Bertelsmann AG, has brought the original P2P renegade under control—and it may yet emerge as a legitimate player as the online music market matures. But the file-swapping technology that enabled Napster and its siblings is still widely available. Rather than fight the P2P trend, the music industry is now moving to embrace it, as major labels are moving to launch their own exchanges, even as they face scrutiny by antitrust attorneys at the U.S. Justice Department. Vivendi Universal and Sony have teamed up to create Pressplay.com, which was recently bolstered by Universal’s acquisition of MP3.com. With the merger, Pressplay.com will benefit from a strong business model—MP3.com brings with it not only a broader range of content, but also the ability to charge for content, maintain control over content use, and manage rights and royalties. A number of other services are also in the making, including offerings from MusicNet (a joint venture of RealNetworks, AOL Time Warner, Bertelsmann AG, and EMI Group), and a partnership between MTVi and Rio Port. These offerings appear ready for prime-time, but challenges remain for other companies that are still at the mercy of free downloaders, but want to make money from their own music or digital content. “Legitimizing” peer-to-peer networking and file-swapping calls for a new way of thinking for both consumers and the industry—from the sharing of titles across labels, to payments that help support the future success of popular artists. It also calls for the creation and adoption of new tools to track, manage and monetize digital content. These are not insignificant issues. In some cases, they reach deeply into a company, affecting its artist relations, operations, sales, legal, and financial organizations. Embracing an online distribution model raises critical issues of content quality, ownership, payment and royalties; issues that mean success or failure for a record company, its labels, and fledgling acts. Digital music companies need to have a sustainable business model and while a variety of basic models exist in the industry—including subscription; pay-per-download; pay-per-listen, -view, or stream; advertising; and data mining—they have had only limited success to date. Consumers clearly want more for their money. In addition to the music itself, they have shown a keen interest in value added services (i.e. chat, tour schedules, lyrics) and context around the very content they are downloading (such as news about bands, chart data, etc.). To be successful, online distribution models will likely need to provide a rich and compelling environment around their content to engage, inform, and retain their customers. Several new models are beginning to emerge that address these needs and act as entry points to ease media and entertainment companies, as well as other corporations, into new flexible models of doing business online. These new models represent the beginning of a powerful transformation of the business side of the music industry. That’s the idea behind the Accenture P2P Music Exchange, a prototype online distribution system for digital content. The P2P Music Exchange provides a secure platform for P2P file swapping—without compromising the ability to manage the rights and content of the digital assets. The P2P model grew out of the desire to develop a prototype that could monetize content by tracking usage, creating subscriptions, billing users, and paying royalties to artists and content owners. Available as an application service provider (ASP) offering, the P2P Music Exchange lets entertainment companies buy online distribution services “by the drink” so they don’t have to commit to an expensive development project in order to enable online distribution. The Exchange uses the latest content tracking and rights management technology to specify who can use digital content and how it may be used. It’s also highly flexible, so a record company can control a variety of subscriber parameters, and it’s scalable. This offering differs from other exchanges in that it operates within a well-defined revenue model that clearly addresses the content owners’ concerns about rights and royalties. Moreover, while other exchanges typically rely on advertising and cross selling for the bulk of their cash flow, the P2P Music Exchange allows media companies to generate revenues directly from the use of their content. It does this by enabling innovative, new revenue models to deliver a compelling consumer experience while transparently handling the billing, content commerce, and settlement functionality within a secure framework. While this prototype addresses many online music distribution challenges, there are still other hurdles to overcome before the industry can claim victory online including: content pricing, cable vs. radio models, effective digital rights management, and cross-brand distribution. Major record labels may also want to keep an eye on new entrants. Although their reach is limited because they don’t hold the contracts with content creators, new entrants still have the potential to be service intermediaries. For example, communications companies, eager to offer new services to their customers, may be able to join the fray and successfully cater to an existing demographic. Then, they could leverage their strengths, services, existing pricing network, channel partners and relationships to extend consumer offerings. For the music industry, P2P is a technology that isn’t going away. Consumers have overwhelmingly endorsed it and record labels, artists, and executives must come to embrace it and make it their own. The music market has changed dramatically in the past five years—and technologies such as the P2P exchange will provide record labels with valuable insights from their customers, and extend new and innovative opportunities to their artists. While the music industry has focused awareness on the benefits and challenges of P2P networks, this knowledge will inevitably be extended into other industries. In these days of shrinking budgets and corporate restructuring, P2P technologies hold the promise of cost effective solutions that can impact knowledge sharing and productivity while decreasing the load on a company’s IT infrastructure. And, in the long run, those results could be worth singing about. About the author: Rick Colbourne is an Experienced Manager with the Accenture Media & Entertainment Industry and Accenture Digital Content Services groups. Talk to someone about this topic  To Top
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