Here's an audio riddle for you. Question: What's erasable but not recordable? Answer: Downloadable music from FullAudio Corporation.The Chicago-based Internet music startup has just signed a three-year licensing agreement with BMG Music Publishing, a division of the German media conglomerate Bertelsmann AG. BMG inked the deal in early June with privately-held FullAudio in part because the company's business model allows subscribers to download a fixed number of songs per month for a fixed monthly fee, but doesn't allow them to transfer the songs to recordable CDs or any other type of permanent storage. BMG and FullAudio reached the agreement after many months of negotiation, according to several reports.Each FullAudio track carries its own internal clock that ticks down to a termination date one month after it is downloaded. If subscribers wish to retain any particular song beyond that date, they must pay an additional fee. It's a business model inspired by the video rental industry, where late fees generate a substantial revenue stream, and one that Bertelsmann executives apparently feel makes a lot of sense, thanks to FullAudio's built-in security. Another big plus for the rent-a-tune model is that it shouldn't interfere with CD sales, said executives from both companies. Not since the advent of the 45rpm single in the 1950s has pop music been such a disposable commodity for consumers, or such a renewable resource for the music industry.
All the major music labels have had many public discussions about the viability of downloadable music, but the BMG/FullAudio agreement is one of the first serious moves into what most observers believe will be a primary channel for music distribution in the future. Bertelsmann competitor Vivendi Universal is also moving boldly into Internet music, having recently purchased San Diego–based MP3.com. The nonexclusive BMG/FullAudio arrangement is "a precedent-setting deal that could speed the arrival of paid alternatives to Napster Inc.," according to the Los Angeles Times. The planned service will offer each subscriber more than 100 encrypted songs per month for a flat fee. The exact cost is still to be determined, but will be in the range of $5–15 per month.BMG owns more than 700,000 copyrighted recordings, according to company spokeswoman Jennifer L. Press. FullAudio hopes to sign other major labels, according to president James Glicker, a former BMG Entertainment marketing executive. The process "could take months," he said. MusicNet and Pressplay are two similar services supported by other major record companies. Their success depends on their ability to recruit and keep subscribers, and on establishing royalty rates that make sense for all involved. Neither factor can be accurately predicted in the present market.There could also be legal trouble ahead for both FullAudio and BMG because their agreement ignores traditional music publishing agencies such as ASCAP, BMI, and the Harry Fox Agency, which are in the business of collecting royalties for songwriters and performers for recordings played publicly. The agencies could sue for their fair share from FullAudio downloads, thereby putting the company's profit margin in jeopardy. Glicker dismissed this possibility, saying, "We don't think there's a performance right because there is no public performance."
