The conversation is eternal.  In a never-ending quest to out-Apple Apple, Internet music download sites are continuing to invent new ways to attract buyers.  (See article.)  Apparently, the iTunes behemoth represents a market too big to be ignored by the music companies themselves or entrepreneurs with “a better idea.”  New download services seem to pop up all the time, each of them with a better idea about rights management, pricing, convenience, or some combination of the three. 

Better Ideas for Music Downloads?
Just recently, we’ve seen new ideas from Qtrax, Spiralfrog, AmieStreet, Ruckus Network and Lala.  Perhaps more importantly, equally-sized behemoths like Amazon and Wal-Mart are getting into the act as well.

The music industry is warming to these new download models for two reasons: a viable alternative to decreasing CD sales, and a way to gain bargaining clout with Apple and its iTunes stronghold by creating alternatives to iTunes.  But, the same old problems exist.  How do I compete with Apple’s price and convenience, and legally control the distribution of the content so that everybody who has a value investment gets a fair return?

As for price, perhaps Qtrax Chief Executive Allan Klepfisz said it best when he noted “The idea is to make a better version of free.”  Qtrax, Spiralfrog and Ruckus Networks are offering downloads free to consumers supported by advertising sales.  AmieStreet has a new take on the price equation, making songs free at first, but having the price inch up as high as 98¢ based on the popularity of the tune.  In this case, popularity is measured by the number of downloads.  As usual, Wal-Mart has undercut the Apple threshold by offering unfettered tunes free of DRM for 94¢ instead of iTunes $1.29, and DRM-encumbered music for just 88¢ versus iTunes 99¢.  Amazon’s pricing scheme is unclear. 

Are These Ideas More Right?
But price is not the whole story.  Rights management is also key to online music sales; music companies must feel they are getting reasonable compensation for themselves and their artists.  None of the download outlets has access to the full catalogue of music from the major record producers.  Most new outlets are promoting rights-free downloads (with various pricing schemes), but that is a further restraint on the number of tunes that are made available at the price points being applied.  Trust in the technology to give fair value for use remains a stumbling block.  Like iTunes, Wal-Mart is attempting to put a price on rights and give a value to trust for fair use.  For some merchants, control of the technology to create content management (e.g., Apple’s FairPlay) often leads to control of the content rendering devices that can deal with that technology (e.g., an iPod).  So, the value equation for DRM expands to the devices as well as to the value chain for music producers.

Trust, particularly digital trust, is a big factor.  It is at the core of sharing music downloads and, now, even returning them.  Among other things, start-up Lala is planning to allow returns of downloaded songs a user doesn’t like.  Lala’s founder, Bill Nguyen, admitted, “There’s a significant amount of trust involved….But it’s unsustainable if we don’t do it right.”  Volume 3 of the Digital Trust series, “Intellectual Property Protection: Minding Your Mind Power,“ provides a more complete treatment of DRM as a digital trust technology.

No End in Sight
There is no end in sight to this story of fair value return for content.  In fact, the story gets more intricate with the inclusion of media beyond audio.  For example, NBC will begin offering free downloads of its most popular TV shows in the next few months under a service called NBC Direct.  Having appropriate rights management for the shows, which include “The Office” and “The Tonight Show With Jay Leno,” is a key factor to making this breakthrough service work.  The shows, which will be available the night they are broadcast and will contain ads that can’t be skipped, are not transferable to other computers or disks.  After seven days, the shows (files) essentially self-destruct.  So, rights management is a big part of fair value capture for NBC Direct.  An NBC executive emphasized the importance of rights management, asserting that “piracy was and is our No. 1 priority.”

But wait – there’s more!  In addition to the free downloads, next year NBC plans to offer downloads for a fee, without ads, that are transferable and do not self-destruct.  This is a classic example of digital trust, in the form of rights management for content, as a key enabler of new business value.  This kind of value creation through digital trust for intellectual property (IP) is also described in Volume 3 of the Digital Trust series.

Rights in a “Liquid” Form
One of the irritants in many rights management techniques is the need to have rights-managed content transfers to a PC, and then controlled transfers to subsequent rendering devices (players).  As technology continues to advance, the presumption of a specific platform for receiving and rendering content becomes less and less plausible.  One of the main reasons consumers seek to have rights-free versions of tunes is to be able to play them on any kind of rendering device.  Even today, companies like Lala are offering a direct download to the player (in this case an iPod), bypassing the PC altogether.  That doesn’t eliminate the rights management on the iPod (songs cannot be transferred elsewhere), but there seems to be value in eliminating that interim step…especially if the song is somehow “free.”  And, it’s a first step to the ultimate “liquid platform” of players of all types.

As technology continues to make the platform more and more irrelevant (more liquid), rights management technology has to keep up.  Otherwise, the clash between fair value and fair use will continue forever.  In the end, the only thing that will matter is the application itself, not the platform on which it sits.  Volume 5 of the Digital Trust series, “Liquid Security: Digital Trust when Time, Place, and Platform Don’t Matter,” explores the emergence of the liquid enterprise and the digital trust that is helping to capture value in this new model of operations.

The Right Right Will be Mighty
New forms of content, particularly in packaging, distribution and rendering, are possible with digital trust for IP.  When flexible and fair rights management is combined with the liquid security that makes the application pre-eminent (not the platform), then we have an explosion of value on our hands.  This is how enterprises can use digital trust to make the most of their valuable IP.