Future of digital music delivery is….

There is a lot of talk about the future of online music, specifically whether music we be file based or stream based. And it seems that in general people are in one camp or the other.

The streaming folks say that with increased broadband speeds and penetration of mobile broadband that users will no longer need or want digital files. The digital files people say that consumers will always want to ‘own’ their music and that with the decrease in storage costs (and the consequent increase in personal capacity) and increases in download speeds, that consumers will demand better file quality and therefore files will still be the medium of choice.

rVibe falls mostly in the files camp, but we’re hedging our bets and going for streaming too.

But here is the real issue as I see it. For the consumer, broadband is currently all you can eat for a fixed rate, but for media hosting businesses, it’s charged by the GB. That means there is no penalty to the user for downloads or for streaming, but for any standard centralized service (ie iTunes or last.fm) there is, and as it scales, the issue grows dramatically.

This problem will hit both streaming companies and download companies. For streaming companies the problem is offsetting that charge (infrastructure and royalty) with advertising or subscription fees, while for download companies it’s doing the same with subscription fees or per track purchases. And for both the problem increases if file size/quality increases or bandwidth costs increase.

The iTunes take on it is to charge more for the files (of course there are other reasons for that, but margin on bandwidth/storage must be in there), but it seems last.fm is not yet accounting for that charge (that I can tell anyway – other than getting purchased).

Our view (and I think Joost shows we’re not alone) is p2p as the preferred delivery mechanism for both mediums (since in the end the only difference is whether the receiving end keeps the file). However, you run into (and this is what Joost is finding out too) service availability probems with p2p, when users with long tail content don’t keep their computers on.

Our current answer is to have a central backup repository, but I don’t think that’s really the right solution. I think the right answer is in further monetizing distributed consumer storage to drive incentive for hosting content. That’s of course where we’re headed – and in gen 2 when we port to mobile, we’ll be able to leverage the always-on storage of mobile devices to broaden our service redundancy.

(btw – this is my first post from my motorla q, please forgive the mistakes)

Posted on June 18, 2007 in Market

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