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You Should Ride it Out

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By lfasulo
July 23, 2002

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I've been in the 'Internet business' for a long time (currently with another ISP) and, having personally started a streaming music ASP that bet on technologies yet (2 years later!) to reach any real level of maturity, I would say that AOL's promise is still the same as it ever was - we're just early for a number of reasons:

The real problem is that we all expected the company to be able to launch media services (such as subscription streaming music and video services) soon after the merger.

- Broadband is (still) not ubiquitous

- Getting the licensing straight for these properties is a rats nest (Harry Fox, ASCAP, BMI, etc) and consolidating enough media from different sources (TW's media alone will not really suffice) complicates this matter further.

- There are seriously thorny issues around DRM solutions (digital rights management). Will consumers be ok with just listening/viewing on their PC's? Of course not. But, when the consumer is offered a portable solution that also meets the media companies' requirements for security (and they loosen up a bit) than we'll have new revenue streams.

Can you imagine the value of a user's listening pattern data? For example, I've been listening to Red Hot Chili Peppers recently. An intelligent agent can then recommend music to me based on my preferences and that music be paid recommendations (ads based on preferences). TW will know how long a 'hit' lasts based on how much you play a song and they'll know how many times you need to hear it to become 'addicted'. TW will be positioned to charge other labels for pre-release promotions where consumers can listen to a new song 5 times - just enough so they really want it and are willing to buy it at release time. This creates interesting privacy issues and great new opportunities for music companies.

AOL is probably having a hard time getting other media companies (Universal, EMI, Sony, BMG, etc.) to embrace the AOL service and provide their media for a complete music subscription service, for example, but, when it happens (and the digital rights management is worked out in a way that consumers feel is reasonable then we're on our way to an additional $100-$150 per year for each subscriber, maybe more as more media becomes available. Have no doubt, the day of physical media is limited, its just that we've been eagerly waiting the revenues before the services have even had a successful test...

So, if you can see this future, which I can, having participated in the building of it on some level, I think you need to be prepared to wait it out - people won't really be forking out serious money for digital media for 12-18 months, but, when it happens, these industries should be worth more than they are today as piracy will be reduced and media will be consumable in the 'portion' that suits your wallet - ideally allowing you access to just the amount you're willing to spend.


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