It's been three months since Vivendi (NYSE: V ) unplugged its MP3.com site and handed the domain name over to CNET (Nasdaq: CNET ) . For the more than 250,000 artists that had made the music site their hub to be heard, they better not be sticking around this long in the dimming hopes of an encore.
MP3.com isn't coming back. Well, at least not literally. Vivendi wiped its servers clean. While CNET plans on launching a new site for musicians later this month, it will be doing so on its music.download.com subdomain. It has earmarked MP3.com to serve as an informational site the way it has groomed news.com into a news haven for technophiles.
That doesn't mean that Vivendi has rid itself of the strolling musicians. Complaints fill the CNET-manned forum it has set up until MP3.com's transformation is complete. Many artists and listeners who paid Vivendi for CDs just before the site went down are still waiting for their music. Thousands of artists who paid Vivendi nearly $100 for a year of premium services and were promised a pro-rated refund back in November have also been left with empty pockets.
Poor CNET is the one stuck with the rants because the previous tenant ran away without much in terms of a legal forwarding address. Yet CNET's waiting game may ultimately be the best way to distance itself from the resentment toward Vivendi.
Where's the beat?
Digital distribution has become a tantalizing notion now that companies like Apple (Nasdaq: AAPL ) and to a lesser extent Roxio (Nasdaq: ROXI ) are showing the major labels that it can work.
The overprotective, pirate-weary purveyors of pre-recorded music hamstrung their initial efforts to make a difference in the digital space by putting out a product that was less desirable than what was being swapped at peer-to-peer file-sharing networks. How do you compete with free? How do you compete when your product is inferior? The five major labels, under the guise of the Recording Industry Association of America, went after the MP3 traders.
With tens of millions of home-based pirates swearing off rich rock stars and their greedy labels, illogically or not, this should be the era of crowning achievements for independent artists. So why does the headpiece feel like it's layered with cubic zirconium?
As the uncola to commercial pop swill, this should be the golden age of garage bands. Instead, it has been as stifling as carbon monoxide. Home-recording software like Apple's new iLife '04 has made quality digital recording affordable and accessible. Satellite radio upstarts Sirius (Nasdaq: SIRI ) and XM (Nasdaq: XMSR ) have broadened the radio dial, including stations playing unsigned artists around the clock. The Internet should be arming clever marketers with ways to drape cyberspace with lawn chairs to enforce their grassroots efforts. Well?
Bought for a song
The playing field has never been this level. Yes, music sites have an uphill battle. Mark Cuban was a genius for cashing out his Broadcast.com puppy to Yahoo! (Nasdaq: YHOO ) for billions because the chunky broadband required to deliver song files doesn't come cheap.
Text-based content sites can carve a cozy living offsetting free access with advertising and enhanced services, but the dynamics aren't as compelling for music sites. Even at $0.99 a track, Apple isn't exactly rolling in the iTunes money from the downloads themselves. After paying the content providers and dealing with the micropayment transaction charges, there just isn't much left for Apple. That's fine. Taking a 180-degree spin on the razor and blades model, Apple's making the money on the razor instead of the blades as it sold nearly as many iPods as it did iMacs this past quarter.
Others like Roxio and RealNetworks (Nasdaq: RNWK ) have software to move. That's the key. If you don't own the content, the feasible distributors will be the ones willing to take a hit for the sake of improvement elsewhere.
That's why the original MP3.com never stood much of a chance. Where was the razor? Where were the blades? It could have subsidized the site by promoting Vivendi's own catalog of Universal content, but it lacked conviction in doing so. It could have made an effort to acquire a stake in its most promising resident artists, but it never stopped to consider the merits of vertical integration.
So long, CD
The entire pre-recorded music industry can afford to get leaner because the CD is dead. I mean, beyond it serving as a flawed disposable medium for portable mix tapes, what's the point? While it has been a noble effort to pack CDs with enhanced features and DVD footage to make the physical purchase more practical and worthwhile -- something that should have been done en masse years ago as a proactive move to deter file sharing rather than as a late reactive move today -- it's played. The savings in an inventory-free digitally distributed future are huge, and third-party outlets for distribution like Apple's iTunes store are more motivated in making it work than the layered labels themselves ever were.
Which may make it surprising to note that Apple never made a play for Vivendi's MP3.com site and has not taken an active role in recruiting unsigned artists.
Everything that has happened in the music industry over the past few years points to a fragmented sector that will ultimately reward smaller sums to a greater number of artists. Even a niche will have a niche to serve as the experience is further specialized and personalized.
So, yes, these are exciting times in music. If you don't hear it, you're just not listening hard enough.
Rick Aristotle Munarriz was one of those 250,000 artists on MP3.com. His band's music streams on at ParisByAir.com. He owns shares in RealNetworks. Rick's stock holdings can be viewed online, as can the Fool's disclosure policy.
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