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Forget that thus far, consumers have shown no inclination whatsoever to pay for downloads. All the polls in the world about what people would pay for in a perfect world don’t mean dick.
FORRESTER’S $2 BILLION REPORT:
BACK TO THE BUBBLE?
Will Digital Music Yield Fat Profits By 2007? There’s Reason to Doubt

Forrester Research, Inc., a company that analyzes new media, is trumpeting its new report, which contains the prediction that digital music revenues will reach $2 billion by 2007. I just have one small question.

What planet are these people living on?

A release announcing the report argues that while downloading is not responsible for the downturn in music retail, it can help spark a recovery. Furthermore, the Cambridge, MA-based company asserts, consumers will demand full access to and control over all music by digital means—and that these demands will form the basis of a "Music Bill of Rights."

Of course, the Forrester peeps draw an implicit distinction between the rapacious free downloading of music via decentralized, post-Napster services (like KaZaA, LimeWire and Morpheus) and a wonderful, revenue-generating form of downloading that will save our sorry butts.

Turns out they have this crystal ball, see. Apparently the labels will "endorse a standard download contract" by 2005, and artists will jump on the bandwagon, and consumers will pull out their credit cards, and everyone will get rich. "Downloading will start to soar" during that year, the release insists, "as finding content becomes effortless and impulse buys easy. Labels will make content available on equal terms to all distributors, while online retailers become hubs for downloading."

Forget the conflicts between artists, publishers, labels, management and others over just about every aspect of digital distribution. Forget the battles for control of digital distribution. Forget retailers’ concern that downloads will not only cannibalize physical sales, but could deprive them of a role in the new food chain. Forget the attempts to legislate copy protection, to prosecute excessive file-swappers, to shut down non-compliant ISPs. Forget the growing antipathy between the content and technology industries, both of which are grappling for political, legal and logistical advantage.

Most of all forget that thus far, consumers have shown no inclination whatsoever to pay for downloads. All the polls in the world about what people would pay for in a perfect world don’t mean dick.

Why do I have the nagging feeling that these issues will not be resolved satisfactorily by 2007?

Just look at Napster, kids. Once the hottest thing in the online world, the service—paralyzed by litigation, neutered in its attempt to follow the corporate directives of suitor Bertelsmann, which now looks set to abandon it—now finds its assets up for auction. But who’ll shell out the megabucks for it? What does the Kitty’s "brand" mean anymore? Centralized servers can’t skate around the liability issue, while a completely authorized version would all but prevent subscribers from actually trading anything. Meanwhile, P2P fans have found plenty of other places to grab MP3s without these difficulties.

Perhaps someone will peel for Napster, but its worth is dubious, to say the least.

The company’s research suggests that heavy downloaders are in fact also avid buyers of CDs, which is good news—if it’s true. And maybe this points a way to the future.

It seems feasible to imagine that some version of digital distribution—as easy, addictive and compelling as, say, TiVo—will emerge to capture a large consumer base. But a great many hurdles will have to be cleared before then.

The blithe thinking behind Forrester’s predictions brings to mind the big media mergers of the last few years. Synergy makes sense! Consumers want easy, integrated access to all media! Vertical integration will cut overhead and increase revenues!

But such equations work on paper precisely because they’re free from the clashes of culture, ego and self-interest that happen when existing industries believe themselves to be threatened by emerging ones. Combine such complexities with grotesquely overvalued new media and you have a recipe for calamity.

Then again, what do I know? I don’t have a crystal ball.

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