Saturday, August 18, 2007

This is the sound of the future. Continued from page 2

And beating the file sharers is nowadays done more with the carrot than the stick, according to Adam Liversage at Universal Records. Some companies, including BMG, use "copy protection" on CDs, to make it harder to "rip" them to MP3s. (Dido's latest album is copy- protected.) "The trouble is that you tend to get a PR backlash when you do this," notes Mr Liversage. "We think it's better to offer something extra to people who do buy - like special access to websites, or early chances at concert tickets, or even prizes." The most outrageous example of the latter is the Willy Wonka-style "golden tickets" in four copies of the latest single by the rapper Obie Trice: the winners will get a $12,500 piece of jewellery (which they'd probably prefer over a tour around a chocolate factory).

Mr Liversage makes one other point, in response to another Seal suggestion - that online distribution will cut out record companies. "That's not going to happen. It's easy for him to say, but he's an established artist. How did he get established? People spent money on him, promoting him. Record companies these days really do provide the capital and expertise to pay for the record and videos. It's a marketing exercise."

But what about the losers? Though record companies are still going to be running what Joni Mitchell called the "star-making machinery", it's clear that traditional retailers will be hurt by any move to online distribution. While Apple and OD2 are not yet undercutting them (they're actually more expensive, since you have to provide your own blank CD if you want to have the music in physical form), the arrival of new competitors such as Napster, reborn as an industry- blessed downloading-only service, and Dell, the biggest seller of personal computers in the world, is sure to push down prices for online tracks.

"The catalog we have, 220,000 tracks, is about what you'd find at a big HMV store," said Mr Smith at OD2. "But in a year's time we'll have a million tracks. It's just a question of logistics and operations."

Quite how the big retailers will react is unclear. Virgin has been the most proactive here, with a downloads service (hosted, again, by OD2). But if the predictions of Seal and Forrester come good, then it's hard to see how they will continue to benefit from selling CDs. If it's cheaper online, then as more people get connected (and in 10 years' time, you could expect half of Britain to have broadband) there will be little point going to the shop.