Two Sides to CD Story

It won't come as news to Fool readers that the international music industry is in dire straits. CD sales are up this year but down over the past four. Internet piracy is definitely up. What may come as a surprise is that the industry plans to add value to its products.

It is called "DualDisc," which will use technology to combine a DVD on one side with a CD on the other side of a single disc. Warner Music Group, Sony (NYSE:SNE) and Bertelsmann's Sony BMG, EMI Group (Pink Sheets: EMIPY), and Vivendi Universal (NYSE:V) have joined forces to market the new discs. At present, however, those plans are pretty unambitious.

One side of each DualDisc will be your plain-vanilla music CD. As for the other side, containing the more advanced DVD technology, it may be stamped with something as value added as concert footage, music videos, or documentaries about the artist -- or something as banal as, well, more music (hey, but on this side it's in surround sound!).

As unimpressive as these ideas (especially the last one) sound, you have to give the industry credit for at long last trying to give consumers a little more for their money in exchange for foregoing piracy. It's really the thought that counts here -- and the promise that this could foreshadow better ideas yet to come. The most obvious, of course, would be to work with the filmmakers, or with the firms' own film studios (several of these conglomerates have both music and movie units), or to license the DualDisc technology for use by filmmakers. DVDs could then be sold with films and all the usual add-ons on one side and, for example, the film's soundtrack on the CD side. By hitching their wagons to the next hit kid's flick from Disney (NYSE:DIS), or a success such as Titanic from News Corp.'s (NYSE:NWS) 20th Century Fox and Viacom's (NYSE:VIA) Paramount, the music industry could please both customers with additional content and investors with increased profits.

There could, however, be a hitch in the industry's DualDisc plans. A remarkably similar technology called "DVD Plus" has been patented for years in Europe, with a patent also pending in the U.S. While the industry says its DualDisc will not violate the DVD Plus patents, DVD Plus' owners appear to disagree. Should a lawsuit ensue, this could derail the industry's plans before they ever begin to bear fruit.

For more Foolish thoughts on the music industry, read:

• Rick Munarriz's review of the BMG-Sony merger.
• Steven Mallas' thoughts on MTV hawking music downloads.
• Jeff Hwang discusses RIAA's success in suing music pirates.

Would you be the first in line to purchase a DualDisc product? What combinations of music and film could make this technology a success? Discuss your views on our Great Movies and Music and Musicians discussion boards.

Fool contributor Rich Smith owns no shares in any company mentioned in this article.