Gartner says the record companies must have a model that
utilises effective Digital Rights Management (DRM), and they should
form their own music portals, or sign distribution licenses with as
many internet music distributors as possible.
In this scenario, Gartner analysts said the consumers could go
to a site and sample music off a new or old CD and decide on a
track-by-track basis if they want to purchase. The portal could
have a signed licensing agreement with the music labels and/or
individual groups and artists to be able to distribute their
individual tracks.
"Digital distribution models will morph through several
iterations. The cog behind each of the models is the content
keepers — the record labels," said P.J. McNealy, senior industry
analyst for Gartner's e-Business Services group. "With
technological developments, such as MP3 file formats, consumers are
becoming more familiar with digital music formats and 'ripping'
CDs. Many of these consumers don't want a full album but instead
are looking for three to four tracks from a CD."
"For a record label to recoup the same
amount of money as it would if a consumer purchased a full CD, the
labels would need to charge around $4 to $5 per track, but we think
that's too high. We think consumers may be willing to spend between
$0.99 to $1.99 per track, so the labels will need to find
alternative revenue opportunities."
Downloading MP3 files was embraced on Friday by the chief
executive of German media group Bertelsmann. Thomas Middelhoff said
at a media trade fair in Cologne: “One thing we have to realise is
that, regardless of whether Napster is outlawed or not, the
file-sharing idea is here to stay. Now it is up to the music
industry to turn it into a legal business.”
Another model that Gartner puts forward for the record labels to
consider would be an inverse of the traditional model where someone
buys a hardcopy CD and then rips the CD into digital format.
Instead, the consumer could buy the full digital download first and
then receives a hardcopy for an additional payment. The portal
would have a signed licensing agreement with the music labels
and/or individual groups and artists to be able to distribute the
CD. The service would have two prices: one for just the digital
download of the songs and another price to receive the CD as well.
Because many consumers listen to MP3 files on their computer and/or
handheld devices, they may be willing to pay extra to have a CD for
their other electronic devices.
