Is Breaking The Law the Secret to Success in Digital Music?
As you might expect, piracy is one of the hottest topics of debate here at the Digital Music Forum in New York.
Can companies distribute music legally while still attracting a large enough audience to be successful? A rather heated exchange over this very question occurred onstage during one of the panels this morning. Gerd Leonhard, CEO of Sonific ---a company that makes widgets to distribute music through blogs, profiles and Web sites---made the observation that many successful digital music download firms found success by offering pirated files or copyright-violating mp3s. Look at services like Napster and Limewire, he said, which built up a following by offering a vast library of illegal material. Even a company like iMeem, which has become a popular music sharing social network that streams ad-supported music, amassed millions of users by breaking the law before a law suit brought by a major record label forced it to change its ways, he said.
As it happens, Steve Jang, who handles iMeem's content and technology partnerships, was sitting a few seats away. He quickly disagreed. He did not dispute the company's previous problem with copyright infringement--Warner Music sued iMeem last year for building a large base of users by hosting copyrighted music. But he argued that iMeem achieved success by striking early licensing deals with smaller indie labels and then forging partnerships with larger labels. (In December, Universal Music Group agreed to license its catalog of music to iMeem for a share of the advertising revenue). "Next time you try to rewrite our company's history...maybe you should ask me first," he shot back.
Leonhard brought up an interesting point, though. He said big labels won't strike licensing partnerships with Sonific because it doesn't have millions of users and a large pot of revenue to share. Is this a barrier to entry for some music-distribution start-ups?
A member of the audience then posed an pointed question: Isn't simply being cool the secret to success? Consider Apple, for example. Napster became popular because it was considered "cool." Now iMeem is benefiting from its cool factor.
So at the end of the day, how do you decide where to find your digital music?
February 27, 2008; 11:09 AM ET
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