Wednesday, June 08, 2005

Poo in the sandbox

Loudeye, which serves as packager of white label music download services for ISPs and telcos, as well as a professional polluter of P2P networks, today announced that it has acquired a patent which will further enhance its ability to taint P2P content. US Patent 6,732,180, discussed on Zeropaid last year, has been acquired for an undisclosed sum.

Personally, I'm skeptical, given the resiliency and resourcefulness of the P2P developer community. Moreover, we see here another example of the industry focusing on sticks rather than carrots (reasonable pricing, flexible DRM, incentivization of "good behavior"). Loudeye's share price tanked 24% in a single day last month when Yahoo! Music Unlimited was announced, suggesting that perhaps the true threat to the kind of legal download services which Loudeye specializes in will come from other "trusted parties" rather than from piracy.

More fundamentally, while the majors like Universal and EMI are currently seeing digital music accounting for around 3% of sales (in cases where the label owns the mechanical publishing rights, it's safe to assume that most of this revenue falls straight to the bottom line) and growing rapidly, the growth of long-tail publishing/consumption options points to issues of A&R pipeline and market awareness which may prove more difficult over time.

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