Digital Music Cracks, and Croaks

David Card | August 29, 2006, 12:28 PM

Intriguing juxtaposition of digital music stories making the rounds today. Apparently, Microsoft's DRM was hacked, making it possible to strip the copy protection, etc. off of both paid downloads and subscription "rentals." And biggest-label-on-the-block Universal Music has announced it will support an ad-based music service from an unknown startup, SpiralFrog.

As Michael and Mark note, DRM will always be hacked, and people who want free music will always be able to steal it. Sadly, the only thing that can beat piracy is prosecution. DRM is to dissuade casual piracy (college students and crooks will never be stopped), but there are aren't really any casual music subscribers. Engadget's argument that signing up pirates at least gets you $15 (for one month) that you wouldn't have gotten otherwise is amusing, but ultimately pretty weak. Most that would do this will not spread the gospel of paid subscription services, although some might convert (see Figure 7) But that's what free trials are for. (We have our new music survey results in and I'm working on updating the analysis as we speak.)

Reportedly, SpiralFrog will support PC-tethered (not portable, not burnable) downloads via advertising. The difference to a consumer of streaming on-demand vs. tethered dowloading is minimal, though real, and the highest royalties usually kick in for portability or burnability. Still, someone -- either SpiralFrog, or Universal, guess which one -- is taking the risk that it can generate $5-$7 a month in ad dollars per user. Rhapsody and Napster both have more restricted ad-supported services (that offer a pretty good experience), but they're primarily for customer acquisition...at least for now.