Music industry trying new ways to profit from downloads

It's been a tumultuous start to the year for the digitally down-at-heel global music industry. First Robbie Williams went on strike from his label, protesting at the "EMI bean counters"' plans to restructure the ailing company. Then the figures came in from international music body, the IFPI, revealing CD sales fell about 10 per cent last year, a decrease only partially offset by the 40 per cent increase in digital music sales.

In Britain, the industry attacked internet providers who they accuse of allowing the public to download pirated music willy-nilly. It's pushing for EU law to make internet service providers responsible for monitoring traffic on their network and to cut off members downloading music illegally. Amidst the acrimony, there are some companies trying to come up with innovative ways to stave off the collapse of the music industry, although it's far too early to tell if they'll be successful.

A significant deal went down last week when web radio station Lastfm.com, bought last year by American broadcaster CBS for US$280 million (NZ$361.7m), signed a deal with major music labels to allow Lastfm to stream their songs on the web, free to access worldwide. It's a big move for Universal, EMI, Sony BMG and Warners, who favour paid-for digital downloads along the iTunes.com model over emerging business models - such as advertising-supported downloads and on-demand streaming services.

There's also the risk software will become widely available that will allow people to record high-quality versions of the tracks being streamed from Lastfm, making music piracy even easier than it is now. But the labels have built some conditions of use into the service to avoid making it too sweet for free-riding listeners. When the labels' 3.5 million tunes become available "in the coming months", you will only be able to listen to each song three times.

Lastfm says it will make a premium service available for people who want to pay for repeat playback of songs. The premium service and advertising on the Lastfm website will provide revenue and is immediately available to listeners in Britain, the US and Germany.

Taking a different tack is rock icon Peter Gabriel with We7.com, his music download venture which has just received a US$6m injection of venture capital. We7.com lets you download music tracks for free - but there's a catch. Each song has an advert at the start. You have to listen to the ad for the first eight times you listen to the song. I gave it a go, downloaded a zipped-up version of Ocean Colour Scene's single Make the Deal and ran it in Windows Media Player.

A five-second advert played before the song, a not very memorable melodic rock number. I like the model, but Gabriel and his fellow financiers have a bigger battle making We7.com work than getting people to listen to these short ads. None of the big labels are on board. So you can't even download Gabriel classics such as Solsbury Hill from the website he helped found.

But the key to the long-term future of Lastfm and We7.com may lie in a generation of emerging musicians. They comprise a good deal of the listings on We7.com. They share in advertising revenue, while Lastfm has a system so unknown artists can upload their songs to the website and receive a tiny royalty each time the song is played. Small steps, then, towards tackling issues facing an industry that grew fat on the CD.

By Peter Griffin