MP3.com CEO snubs record labels’ pricing schemes

Embattled MP3.com chief executive Michael Robertson criticized the music industry for its online sales strategies, saying efforts to charge customers several dollars for digital downloads will not work.

In an address at a streaming media industry conference, Robertson said that selling songs one at a time is not the way to go on the Internet. He said the industry would do better with subscription services, in which consumers gain access to large libraries of music for a monthly or yearly rate.

“People are not buying things for $2 each on the Internet,” Robertson said during his keynote at the Streaming Media East 2000 conference. “What they will do is ‘all-you-can-eat’ buffets for 10 bucks, for 5 bucks, for 20 bucks.”

Some analysts agree that there needs to be a new system for selling music online. “There’s no doubt that major labels are being myopic about pricing schemes,” said Mark Mooradian, an analyst at Jupiter Communications. “Pricing online music the same way as physical music will not work.”

Robertson has been a leader in using new technology to distribute music and promote artists. But his innovative ideas have yet to prove themselves in the marketplace. Robertson’s comments came just days after his company settled a lawsuit with two of the “Big Five” record labels — Warner Music Group and BMG Entertainment — over copyright infringement related to its My.MP3.com service.

Brought by the Recording Industry Association of America, the suit took a bad turn for the company when a federal judge sided with the recording industry in a key ruling in April. In addition to settling the lawsuit with the two companies, MP3.com will license the record labels’ music libraries for its My.MP3.com service. My.MP3.com allows people to listen to full CDs online through any computer with Web access.

When the company launched the service in January, MP3.com bought tens of thousands of CDs, created a database of MP3-encoded downloads, and offered access to people who could prove they had bought the CD by placing the disc in a computer. Major record labels — such as Sony Music, Universal Music Group and EMI Recorded Music — have inched toward offering their music libraries online.

Most have outlined plans to offer access, but they are slow in opening their vaults. In May, EMI said it would make 100 of its albums and 40 singles available for download from undisclosed online retail sites this summer. Sony Music has unveiled ways to offer its music using secure digital formats and its memory sticks. And Seagram’s Universal Music said it plans to launch a secure download format that will eventually allow people to download most of the label’s songs.

But attempts to rein in control of copyrighted music remain a challenge. The meteoric popularity of the Napster software has become a thorn in the side of major labels and even artists themselves. Napster allows its members to trade songs encoded in the MP3 file format over the Internet for free. Even though the freedom of Napster has caught on like wildfire, online music fans may be warming to paying for song downloads or subscription services.

A study conducted by market research firm CyberDialogue showed that 29 percent of online music users would buy albums off the Net for $10 a piece. Further, the study said nearly 11 million online music buffs would have an “interest” in paying monthly subscription fees to download their favorite songs. While protecting copyrighted material is important, the end result may be a turnoff for consumers, Robertson said.

Eventually, the question comes down to what makes the most money for music companies, he added. “To maximize the value of content with security, and wrapping it up around digital barbed wire, is that the way to make the most money? I’d say absolutely not,” Robertson said.

He is not alone in this sentiment. Earlier, RealNetworks chief executive Rob Glaser noted that excessive copyright protection could sometimes turn people off to Net content and possibly hurt sales. Glaser called for a “middle ground” in protecting copyrights and offering appealing services.