Music Ally

In the third part of our series looking back at the Decade of Digital (read part one on 2000 and part two on 2001 published earlier this week) we examine 2002: the year that the iPod launched on the Windows platform and Napster made its first, failed, attempt to go legit.

Sign up for a free two-week trial to Music Ally and get access to all our past reports and bulletins plus a suite of research tools including market data, a deal tracker and an analyst forecast tracker. In the most recent PDF Report you can find a rundown of 2009’s big events plus an extensive timeline detailing the key digital music happenings of the past ten years.

And continue reading after the jump to take a look back at the year 2002, as we reported it at the time.

Now, Music Ally comments:

2002 was the year that the renegade Napster tried to go legit and failed. We got a peek at its revolutionary first attempt at a legal filesharing service, but it was never to see the day. Instead, Napster’s sale to Bertelsmann was blocked by a bankruptcy judge and ultimately the company’s assets were bought by Roxio and merged with Pressplay.

This was a fairly bleak year for with piracy high on the agenda and new physical format Dataplay going out of business. But with the iPod taking on the Windows platform it was a definitive stepping stone towards Apple’s mounting dominance of digital music.

January 04 2002

http://www.musically.com/oldarchive/2002/020104.doc

We got a look at the licensed version of Napster – which was never to see the light of day: Napster now resembles a browser-like Internet Explorer, with plenty of room for images and biographical material as well as more familiar tools such as the Hotlist and music player tucked away on the left-hand side of the application. The most obvious sign of Napster’s new-found status as a profits-focused business is the “Paid Download Credits” meter which sits above the music transfers section like a reminder that the MP3s are no longer free. Underneath it all the Napster concept has been radically amended to meet the demands of security-conscious copyright owners. According to Napster “there will be some unrestricted files in MP3″, but most will be in the new .NAP format, “in order to give artists and rights holders choices about how their music is shared.”

We investigated the implications of Google for the first time: Ultra-fast Google.com has in the past year or two become the indispensable search engine of choice for knowing Web surfers. Its technique of ranking each site according to how many other pages link to them has brought an end to the once-frustrating activity of trawling the internet for relevant information. Alongside Web pages, Google now officially covers image searches and newsgroup postings dating back twenty years to the birth of the Net.

January 18 2002

http://www.musically.com/oldarchive/2002/020118.doc

On Thursday, KaZaa stopped distribution of its popular file-trading application as it prepares to fight separate lawsuits in the Netherlands and the United States. The website merely states: “Download of the KaZaA Media Desktop software is temporarily and voluntarily suspended pending Dutch court decision on January 31.”

Reports from Norway confirm that Jon Johansen, the Norwegian teen hacker, who wrote the infamous DeCSS code used to hack DVD movies, has been charged with violating the country’s computer hacking laws

Jupiter Media Metrix has, unsurprisingly, cut its five-year forecast for the size of the online music market by 11.3 percent, from $6.3bn – calculated in July – to $5.5bn by 2006.  According to Jupiter about $1bn will come from subscriptions and $600m will come from single downloads.

The German Financial Times reported that Philips, co-creators of the compact disc with Sony Electronics, see no future in the CD copy protection systems currently being touted by firms such as Midbar and Macrovision and controversially being trialled in the UK, Europe and America. “They are silver discs containing music and looking like CDs, but they are not CDs”, said spokesman Klaus Petri. Once the tale got picked up across the world, the quotes from Philips officials became even more combative:  “They don’t protect against copying,” Gerry Wirtz, Philips’ General Manager of Copyrights told the Hollywood Reporter, “they just prevent consumers from playing them on a number of normal devices

February 01 2002

http://www.musically.com/oldarchive/2002/020201.doc

On Demand Distribution (OD2) is developing its own subscription music services for mainstream brands like MSN, Ministry and Orange. OD2 currently has licensing deals with EMI Virgin, AIM, BMG and Warner Music, as well as a number of independent European labels, as well as a subscription service partnership with the giant Italian ISP Tiscali.

February 22 2002

http://www.musically.com/oldarchive/2002/020222.doc

After years of haggling between labels and webcasters, the US Copyright Arbitration Panel (CARP) has finally settled upon rates and terms of reporting for non-interactive streaming music on the internet. Whereas the proposed rate of 0.14 cents per track (per listener) is closer to that demanded by the labels’ trade body (the RIAA) than that offered by the webcasters, a secondary rate for radio stations who simulcast their broadcasts over the internet has also been set at 0.07 cents per track – half the fee for non-interactive streams. Non-commercial broadcasters must pay 0.05 cents per song for non-interactive streams and 0.02 cents for simulcasts. National Public Radio had previously negotiated an agreement with RIAA, the terms of which were not disclosed.

March 29 2002

http://www.musically.com/oldarchive/2002/020329.doc

Another physical music format is on its way and looks set to rival DVD-A and Super Audio CD as the key replacement for CDs. Zomba Records is to release titles by its artists including Britney Spears and N’Sync on the new format – DataPlay. This follows earlier reports that Universal, BMG and EMI are all set to try out the format later in the year. DataPlay told Us that the company “aims to release 350 titles by the end of this year.”

Apple’s iPod, fast becoming a bit of an icon amongst digital music devices, has undergone an upgrade, with the latest version of the device able to manage and synchronise contacts as well as music files.  So is Apple making a play to get into the PDA market via the iPod?

April 26 2002

http://www.musically.com/oldarchive/2002/020426.doc

The US tech media has been abuzz with the news that online music site Listen.com has announced it will allow users to burn tracks downloaded from its subscription service onto CDs.  The news has been met with approval by pretty much all sources, the keyword being ‘portability’, and it moves Listen.com’s subscription service, called Rhapsody, alongside Pressplay in terms of functionality.

Having seized the crown of most popular file-trading application (in a coup which saw rival Morpheus lose access to the FastTrack network), KaZaA’s owners Sharman Networks have revealed some juicy details about the company’s future, starting with the fact that it is registered in the South Pacific tax haven of Vanuatu. But while to all intents and purposes Sharman has long been perceived as an Australian company, and surely subject to Australian copyright laws, the incorporation in Vanuatu will not sound like good news to copyright owners.

June 10 2002

http://www.musically.com/oldarchive/2002/020610.pdf

We discover grey-area Spanish site Weblisten. Weblisten.com now offers its users a choice of subscription options and download vouchers. The BonoMusic service which was launched in January 2001 costs Euros29 (£18.80) a month with various discount options up to Euros116 (£75) for 6 months’ access, allowing customers to download unlimited tracks from a catalogue of over 125,00 recordings.

One of the most fascinating events yet for Web music-use monitoring has occurred in the past fortnight, as Eminem’s record company Interscope became the first label to publicly announce changing their release schedule because of statistics picked up online.

June 21 2002

http://www.musically.com/oldarchive/2002/020621.pdf

The US Librarian of Congress, James Billington, has issued a decision on the hugely controversial issue of webcasting rates. Having rejected the original rate proposals set by a Copyright Arbitration Rate Panel (CARP) back in February, Billington’s principal change is to halve the previously proposed internet-only transmission rate of 0.14 cents per track per listener to 0.07 cents – bringing it into line with the previously proposed rate for retransmissions of radio broadcasts. While some of the rates for non-commercial broadcasters have also been decreased, and the fee webcasters and broadcasters must pay for the making of ephemeral recordings has been reduced from 9% of the performance fees to 8.8%, the minimum payment for business establishment services has been increased to $10,000 whereas non-commercial broadcasters will now need to pay a minimum $500 licence. So, does this represent a victory for webcasters? Make no mistake, they won’t see it that way, and with good reason. Despite seeing the net-only rate slashed in half, the labels are still likely to feel privately much more satisfied with the outcome, having avoided the potentially far less lucrative percentage-based option. Just consider the case of Radio IO, referred to by SoundExchange supremo John Simson in Wired, which reportedly brought in $6,800 in revenue in 2001 while its operating expenses rose to $40,000. If webcasters want to blame

Signs of liberalisation in the majors’ download plans: Universal and Sony are nonetheless also showing signs of a more liberal outlook towards digital distribution. Sony is reducing the price of its downloads from $1.99 to $1.49 and will be allowing CD-burning while Universal has teamed up with Californian DRM pioneers Liquid Audio to sell downloads, which will be compatible with portable devices, through a number of online stores including Amazon.com and CDNow. What separates these initiatives from AOL Time Warner’s scheme is that they carry with them at least the outward appearance of being secured, even though a would-be pirate could easily create unsecured MP3 files from any CD s/he burn

Just three weeks after the Recording Association of America and the National Music Publishers Association filed suit against it, file-trading service Audiogalaxy has agreed to a settlement and blocked all works from being shared.

July 5 2002

http://www.musically.com/oldarchive/2002/020705.pdf

We predicted last week that either Full Audio or Listen.com would become the first (still-operational) firm to gain online music licences from all five majors. Listen.com has come out the winner, picking up the Universal online music catalogue and adding to a pool of 175,000 tracks for its Rhapsody subscription channel.

July 19 2002

http://www.musically.com/oldarchive/2002/020719.pdf

Universal Music became the second major to announce that it would be selling tracks in the easy-to-copy MP3 format. The venture will promote some of those harder-to-shift back catalogue acts such as Ringo Starr, the Four Tops, Jimmy Buffett and BB King, with tracks sold through Universal’s subscription music site Emusic.com. Since long before its ownership by a major label, Emusic has held a strong philosophy about digital music, discarding the idea of digital rights management in favour of the MP3 format (which can be downloaded, burned to CD, moved to portable players and copied freely) and eschewing complex pricing to adopt a simple $9.99 monthly all-you-can-download package.

August 16 2002

http://www.musically.com/oldarchive/2002/020816.pdf

In a surprise announcement at the Macworld trade show, Apple’s Steve Jobs revealed that the company is launching new Windows-compatible versions of the hugely successful (and rather sexy) iPod. This means that the funky device that is able to transfer up to 1,000 songs in just 8 to 10 minutes can now be used on PCs as well as Apple Macs.

SDMI dies: It’s now four years since SDMI – the Secure Digital Music Initiative – was formed. A bold attempt to unite computer equipment manufacturers and rights holders, to create a standard for delivering secure and robust digital files to consumers without impairing quality or creating barriers to entry, it was clearly ambitious from the start. And now it seems all but forgotten, a victim to both the politics which has plagued both sides of the table, and the lack of any real consumer demand for DRM as a whole.It is all but officially dead. There are a number of reasons for this: CE companies will always be reluctant to share any developments they may individually make with rival manufacturers. But this alone is not sufficient, for without consensus there can be no standard; and without standards, consumers back off from a confused marketplace. However, the one standard which really seems to work is to sell products with no DRM at all. As demonstrated with Apple’s iPod, consumers like this the most.

TV studios in the US sue SonicBlue, maker of a Tivo-like personal vide recorder: SONICblue, maker of the ReplayTV personal digital video recorder (DVR), has been ordered by a California judge to track the viewing habits of its users and deliver the resulting information to the major movie and TV studios – including Paramount, Fox and HBO – which are suing the company.

September 13 2002

http://www.musically.com/oldarchive/2002/020913.pdf

Napster’s sale to German media monolith Bertelsmann AG has been blocked by the bankruptcy judge overseeing its case.

September 27 2002

http://www.musically.com/oldarchive/2002/020927.pdf

A coalition of record company groups led by the Recording Industry Association of America has launched a multi-million dollar anti-piracy media campaign featuring pop stars such as Britney Spears. The promotion, under the banner “Who Really Cares about Illegal Downloading?”, has commenced with full-page adverts in the New York Times and Los Angeles Times and will continue with TV commercials in forthcoming weeks. According to reports, the ads’ sponsors, collectively known by the unlikely recursive acronym Music United for Strong Internet Copyright (MUSIC), include all the major labels, ASCAP, the American Federation of Musicians and the Association for Independent Music (ASIM) – but, tellingly, no international societies whatsoever.

Writers wishing to evaluate new albums from Tori Amos and Pearl Jam were not sent standard discs, nor were they invited to a plush ‘listening party’. Instead they were sent Sony CD Discman players containing the CDs, but with the lid glued shut and the headphones glued tight into the socket

October 11 2002

http://www.musically.com/oldarchive/2002/021011.pdf

Liquid sells its patents to MS: Liquid Audio has gone from being a darling of the new media revolution to one of the last remaining major digital music independents, more in the press for its struggle to survive than its groundbreaking licensing deals or profit announcements. Then last week it was announced that Microsoft is to pay $7m for all of Liquid’s patents. Not only is this a small amount for what is effectively the sum total of the company’s technology efforts to date, but it also suggests that cash is more important than developing a business model – the very issue that has been dividing Liquid’s shareholders for the last year.

OD2 Digital Download Da: Last week the promotional brainchild of distribution company OD2 received a large amount of column inches, with national papers, TV and radio stations largely pitching the story as a positive attempt by the major labels to fight piracy by marketing secure alternatives. Digitaldownloadday.com was the slightly odd-looking destination for anyone wishing to grab a fiver’s worth of free but legal music from the licensed offerings of HMV Music Club, Tiscali, Ministry of Sound, Freeserve and MSN Music Club. OD2 services these five online music sites and from the early hours of the promotion claimed that they had been swamped by unprecedented levels of demand thanks to hundreds of thousands of eager visiitors. The official press release will come after the project’s conclusion on Sunday (13th October).

October 25 2002

http://www.musically.com/oldarchive/2002/021025.pdf

Proving that it’s not just net-based music distributors that find it hard to survive, Dataplay, the company that hoped to revolutionise physical distribution for digital content industries, has filed for Chapter 11 bankruptcy in the US.

November 22 2002

http://www.musically.com/oldarchive/2002/021122.pdf

Nearly two years after its pay-per-download experiment Bluematter fizzled out, Universal Music has announced its intention to sell 43,000 individual digital tracks via a host of online and offline retailers. Secure music distribution will be provided by Liquid Audio and listeners will be able to choose between either the Liquid or Windows Media Audio formats, in the first release since Microsoft bought Liquid’s patents. Showing signs of progress since the dark days of Bluematter, the files can be burned to CD or transfered to DRMcompliant portable devices (for example the Creative DAP or Nomad Jukebox, but not Apple’s iPod).

The mystery bidder who has been negotiating to buy Napster’s assets was this week revealed as Roxio, the software company responsible for CD-burning applications Easy CD Creator and Toast. Assuming that by November 27th no other bids are received and approved, Roxio will purchase the assets of Napster, including its technology, patents and domain name, for the knock-down rate of $5 million in cash and 100,000 warrants in Roxio stock.

As reported in MusicAlly, Universal recently revealed its plans to update the rates it offers artists for digital downloads, bringing them in line with the sums offered on traditional album royalties. Now it seems that the first rumblings of widespread contract modernisation are underway, as BMG announces new accounting policies aimed at simplifying financial practices and improving its relationship with artists – with an LA Times article suggesting that a standard BMG contract will drop from 100 pages to 12.

6 December 02

http://www.musically.com/oldarchive/2002/021206.pdf

Music and videogames: Another development, which is of more comfort to rights owners, is the release by Epic Records of seven soundtrack compilation CDs to accompany the latest Grand Auto Theft Vice City game. As mentioned in the last issue of MusicAlly, the compilation CDs are based on several different stations that users are able to tune into during the course of the game via their virtual car stereo, reflecting different genres during the 1980s in which the game is set. But the bigger picture development for music is the whole move towards linking up games players via the internet, throwing up both the potential for moving music filesharing away from the computer and onto the games console and thereby presenting interesting licensing and marketing opportunities for music. From the point of view of subscription services such as MusicNet and Pressplay, the games console offers one strong advantage over traditional PCs: that it takes pride of place not in the office, but in the living room, next to the hi-fi and underneath the TV where much of the family’s entertainment usually takes place. This shift of emphasis would be crucial if the legal music sites are to gain the same widespread takeup as paid-for cable TV channel

December 02 2002

http://www.musically.com/oldarchive/2002/021202.pdf

A new paper from intellectual property law expert Neil Weinstock Netanel, a professor at the University of Texas, argues that peer-to-peer file sharing in America should be legalised by government via a “Non-commercial Use Levy” similar to compulsory licensing. The concept also somewhat resembles the “Intellectual Property Use Fee” posited by p2p network KaZaA together with ISP Verizon earlier the year

Browse past reports from across the decade

Sign up for a free two-week trial to Music Ally and get access to all our past reports and bulletins plus a suite of research tools including market data, a deal tracker and an analyst forecast tracker. In the most recent PDF Report you can find a rundown of 2009’s big events plus an extensive timeline detailing the key digital music happenings of the past ten years.

Tags: 2002, Digital music history, digital music timeline

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