Vertical Integration in Digital Music
Is vertical integration a prerequisite to successfully selling digital music? While we may not know the answer to that question for some time, it is clearly becoming a growing trend in the industry. The clearest example was Apple's iTunes Music Store which touts the integration between its online, software and hardware products to deliver a seamless entertainment experience.
Now Roxio, the leading provider of CD and DVD recording software, has announced its purchase of pressplay from Universal Music Group and Sony Music Entertainment. While the move reinforces Napster's marginalization to simply a brand name, it illustrates a growing perception among both the tech and music industry executives of the benefits of vertical integration in competing with file sharing systems. More importantly, it is an implicit acknowledgment that the major labels are neither positioned nor have the know-how and corporate culture to sell digital music.
The acquisition will extend Roxio's wide scale presence on consumers desktops ("global customer base of over 100 million digital media consumers") into the OMD sector through pressplay's technology infrastructure platform and rights to the major labels catalogs. This last piece is, at the moment, a significant hole in Apple's offering of 200,000 tracks and what is fueling rumors of computer companies replacing media conglomerates as the labels' new parents.
But vertical integration is no substitute for a good business model and service, something Apple has clearly understood and others such as Puretunes are still testing. The licensed Spanish OMD announced a new subscription service that provides consumers with unlimited access to its music catalog for set time periods, starting at $3.99 for 8 hours. Of note is the service's lack of even Apple's soft approach to DRM as its catalog "consists of nothing but totally unrestricted high-quality MP3 audio files," an astonishing accomplishment for a company claiming "one of the world's largest and most complete online music catalogs."
Nor are labels devoid of the urge to experiment as illustrated by Kviar Music's free downloadable release of heavy-metal band Hipnoid latest album, "Chaos." The weeklong giveaway by the online Brazilian label allows consumers to download and directly burn the album's tracks directly through their CD-R instead of their desktop using Immediatek's "Net Burn" technology.
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