Universal Music Group is playing an interesting game of chicken.
In declining to renew its year-by-year music licensing contract with Apple in favor of an "at will" agreement, UMG is signaling that it may pull all or part of its catalog from iTunes in a moment’s notice.
It's a bold move designed to gain at least some leverage with Apple's "my-way-or-the-highway" approach to selling music on iTunes. But will it work?
On one hand, it's about time that a major label recognized that its content is of critical importance to any digital music service and had the stones to wield that power. Apple's Steve Jobs deserves no small degree of credit for proving the digital music model with his insistence on 99-cent per-track fees and slick UI. But that doesn't mean the music industry should cede to him all say on how their music is bought and sold online.
UMG and other labels are totally within their rights to ask for variable pricing (within reason) or demand an interoperable digital retail environment, and are just as justified pulling their content from any service as part of this negotiation.
At the same time, it's no secret that labels would like to see an end to Apple's dominance of the digital music market in favor of a more democratic landscape of stronger competitors. Providing exclusive content and pricing discounts to other services would be a logical step in the right direction.
Sources at other major labels privately applaud UMG's move and say they would welcome a similar deal when the time comes.
But of course, it's not that easy. You see, Apple has a trump card as strong and as powerful as the labels' content-the iPod.
These aren't the good old days of physical retail when you could just pull music from one store in favor of another. Simply pulling music from iTunes and putting it on a competing service won't do the trick because those other services aren't' compatible with the iPod. And let's be honest, that's all most consumers care about these days.
If UMG's threat is to carry any weight at all, it has to include the willingness to drop DRM protection as well. It's the only way to ensure that music available exclusively on an iTunes competitor -- like, say Amazon.com's pending digital service -- will also work on the iPod. Otherwise, iPod owners will just resort to downloading UMG music from P2p networks.
But taking a step back, its very interesting to see the different tactics the major labels are taking this year. Slowly but surely, each are making separate moves that if taken together could spell out a sensible digital strategy -- EMI goes DRM free and more recently embraces viral sales through social networks; UMG begins leveraging its catalog as part of a "at will" licensing negotiation tactic; WMG is often first to license music to the more experimental services and is pursuing a "mobile album" content bundling strategy; Sony BMG tried (and failed) to lock down the CD and is now focusing on creating dozens of digital products around a release.
No doubt each label is closely watching how the other fares. Where one succeeds, the others will likely adopt. Over time, the industry may finally right its course and begin sailing in the same direction again.
Since it first emerged as an innovative CD trade-by-mail service, Lala has harbored grand dreams of revolutionizing the music industry and garnered no small degree of hopeful press from both mainstream and geek-blog outlets.
Much of the buzz is due to the dynamic personality of founder Bill Nguyen, who in addition to being a bona-fide genius is also one hell of a salesman. His enthusiasm for whatever grand scheme he's working on is infectious, and he's so freaking smart that it's easy to believe he can pull it off no matter how far fetched it may seem.
But this week's revelation that the company has shuttered a free, full-song streaming music site just weeks after launch has tarnished its sheen a bit.
In a nutshell, the service aimed to let users stream complete songs from its Web site at no charge. Lala would eat the licensing fees it pays labels to allow for the service in hopes that users will buy on average one CD a week through its site to cover the costs.
Then there were the confusing bits. Users could stream any song in Warner Music Group's catalog through a licensing deal with the label, the only one Lala had at launch. Music from other labels were restricted to 30-second samples.
The exception being music users already owned and uploaded to a digital locker. Those songs they could stream in full for free. They could also download any of those songs directly to an iPod from any computer (even one without iTunes on it).
Oh, and it also was supposed to have some kind of DRM-free a la carte purchasing element as well.
Lala was never clear on how any of this was supposed to work, and its message was very inconsistent between press outlets. Frankly, I was a bit skeptical from the start.
And now the service is scaled back so users can only stream music they've uploaded themselves, not the entire WMG catalog. The load time remains very slow. I can't find any link to download singles. And I don't own an iPod so I can't determine if the direct-to-download function actually works.
Technology blog Ars Technica prints a quote from Lala PR guy John Kuch who gives some negative-as-a-positive spin:
"Many of our unique, forward-looking features have generated significant consumer excitement but have also generated an overwhelming load on our systems. To avoid falling short of consumer expectations, we're holding off on upgrading and returning some aspects of our offering until we can provide a fuller catalog that meets the demand of consumers and includes music from a broader cross section of the industry."
Maybe that's true, maybe not. I really don't know anymore. The spin coming out of this company is getting to the point where I have to treat everything they say with a great degree of cynicism.
And that's a shame, because it's not often that a start-up digital music service gets the kind of attention and goodwill that Lala has managed to achieve. But by over-promising and under delivering like this, the free pass they've enjoyed to date is going to expire very quickly.
People are so hungry for fresh, new approaches to digital music distribution that they'll eat almost anything. Let's just make sure the food is fully cooked first.