Using the CD Carrot

Record companies are having a tough time making new friends these days as they toy with ways to restrict consumer use and distribution of their products. Amid sliding sales, mediocre new releases, high prices, and failed attempts at implementing restricted-use CD technology, the big labels clearly need some advice on getting back on track.

Consulting company Jupiter Media Metrix's analysts recently put on their thinking caps to develop a set of recommendations aimed at furthering consumers' acceptance of restricted-use CDs. The company is suggesting that record labels should experiment with lifetime guarantees, permanent streaming access, and subscription-library integration.

According to JMM's latest findings, the three major CD restriction technology providers, Midbar, SunnComm, and Macrovision, have released millions of copy-protected major-label CDs into the market. But all three companies decline to say how many CDs are encoded in any given market and which albums are affected, "perhaps because they fear scrutiny from the press and ire from consumers."

JMM says these companies are right to worry. "In some cases, the technology fails to prevent ripping; in more publicized cases, copy-protected CDs simply don't work in consumers' CD players. Newer versions of the technology supposedly address many of these problems, but technology companies and record labels still lack the confidence to reveal which CDs have copy protection and in what markets they have been released. Even if the technology works flawlessly, the real hurdle will come in convincing consumers to accept value-subtracted CDs at the same price point they pay for normal, unprotected discs."

So what's a label to do? "Drive acceptance with a carrot, not a stick," says JMM. "Once a critical mass of discs hits the market, copy-protection solutions that strike consumers as a detriment to normal behavior will result in a groundswell of resistance and product returns. Instead of trying to slip limited-use CDs under consumers' radar, labels should add new functions to copy-protected CDs and effectively market them to consumers."

JMM suggests several ways to do this. First, the labels need to find an acceptable method for registering users and their discs: "Consumers may become amenable to registration if added benefits accompany it." Next, the labels might consider offering a "lifetime guarantee." The report says, "Consumers will still differentiate between their permanent/owned and temporary/rented music libraries. Accordingly, record labels should differentiate copy-protected CDs, which fall into the permanent/owned category, with lifetime guarantees. Registered consumers should have the ability to trade in old, worn, or broken CDs for freshly pressed versions of discs."

Labels could also offer streaming access to songs on discs that customers pre-order. "This is a twist on the now classic music-locker service first pioneered by MP3.com, myplay, and Musicbank. Labels should consider offering consumers permanent, ongoing access to streaming versions of songs contained on copy-protected CDs."

Finally, JMM says that as consumers begin experimenting with subscription services and aggregating large libraries of temporary/rented music, "increasing demand will surface for integration of these new libraries with consumers' existing libraries of permanent/owned music, providing maximum flexibility within a single interface." As an added incentive to buy restricted-use CDs, the company recommends that record labels should add tracks on these discs to consumers' subscription libraries through streaming, "tethered download," or both.

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