August 18, 2004
Today, Real announced a campaign to support interoperability and an amazing, if temporary, 50% price cut on all songs and albums at the Real Music Store. Let me take each issue in turn.
1. As for the Freedom of Choice campaign, it still doesn’t answer any of the questions I had before. Why did Real use the proprietary Helix if it wants interop? Why did it sue Streambox? But, all things considered, not speaking to these points doesn’t surprise me.
What surprises me is Public Knowledge’s support for the Freedom of Choice campaign. Yes, Real happens to be supporting interop in this narrow instance and, yes, PK only addresses that narrow point. I still don’t see why Real deserves such pronounced support for this. These are the same guys who sued Streambox, and it’s not like I’ve seen them at the forefront of DMCRA campaigners (which is not to say they haven’t contributed; I don’t know what/if they’ve contributed). At the very least, PK’s support should have been qualified with a statement that broader issues are at stake here and the DMCA is at the root of the problem. I know PK has the best of intentions here and I respect them a great deal, but I strongly disagree with the manner in which they have supported this campaign.
If you look closely, Freedom of Choice’s goal is not really the same as Public Knowledge’s in this regard. Freedom of Choice urges companies to license their DRM standards. PK, in advocating for the repeal of the DMCA, argues that you shouldn’t even need a license. Real shouldn’t have to beg Apple to license and then put themselves in legal jeapordy; neither should Streambox or 321 Studios. Legitimate circumvention and reverse engineering for interop should be allowed in general. But in the press release, PK merely states that interop is necessary to create a better alternative to P2P and tech companies and copyright holders should work together on this issue. Nothing whatsover is said about the DMCA or DMCRA. PK ends up sounding like just another group that supports the mythical “open” DRM standards.
That’s too bad, because they’re far more than that. They are concerned not just with making tech companies shake hands in this narrow instance, but in creating a generally better legal environment. Instead of patting Real on the back for this, PK should have told them to put all that marketing money into ensuring the DMCRA gets passed.
Maybe PK thinks that by pushing this narrow campaign along others will eventually buy into the broader point. Perhaps other tech companies will also become born again interop believers. I suspect that many will simply pursue whatever is in their immediate interest, as I believe Real is doing now.
2. On the pricing front, I think this could be an interesting turning point in the market. If Real actually throws some marketing muscle behind the discounting, we may start to see some limited price competition. Wal-mart’s lower pricing is basically insignificant because hardly anyone even knows about their site, I suspect. If Real’s buyers increase by several multiples, it will put pressure on every other Store, regardless of the fact that Real will be losing money on every sale.
Remember, Real pursued a similar price drop with Rhapsody. Burns originally cost 99 cents, and then Real temporarily dropped them to 49 cents. Burns tripled, and Real subsequently set the price permanently at 79 cents.
Which is not to say that Real’s move will vault them ahead or will enhance the long term prospects of the downloads market. Subscriptions still have the best prospects. This price drop will simply be interesting as a real world test of what consumers might be willing to pay for online music. It can lay the foundation for strategies and biz models that may help lead to price competition and drops generally.