Is there life after Napster? Until recently, the subscription-based digital music business looked like it was headed for a we-told-you-it-would-never-work collapse. One big problem was corporate rivalry between two major services. For more than a year, MusicNet, backed by RealNetworks, AOL Time Warner, Bertelsmann AG, and EMI, didn't offer any music from Universal and Sony. Likewise, Pressplay, owned by Sony and Universal, lacked any music from Warner or Bertelsmann. The standoff helped explain why music fans failed to register in large numbers with these fee-based services.
Along came Ellie Hirschhorn, a former MTV.com senior executive who joined MusicNet in time to help break the stalemate with rival Pressplay. In October the two services announced that each would begin offering tunes from all five major labels by year's end. We asked Hirschhorn, MusicNet's general manager and executive vice president, to give us the skinny on the deal.
Why did it take so long to cut this deal?
The digital music industry is at the early stages of formation, and it's a learning process. The labels needed to have the case made to them. And there are many hurdles to actually getting the music online, including rights clearance. Now they're stepping forward and embracing this and are very much in the game.
How important is this deal to the success of the digital music biz?
The more music we get, the more viable a consumer offering we can provide. We've got great rights now, and we're adding thousands of songs every week. We're not going to stop.
How do you persuade people to use MusicNet and not a free service like Kazaa?
We have to make an exciting user interface that allows music fans to connect to bands they love and discover bands they don't know they love. It has to be easy, fun, fast, and secure.
Did you use Napster back in the day?
Sure. I think Napster was an amazing phenomenon. It proved the consumer demand for digital music. But we offer a different proposition. Napster was free, and MusicNet is not. We've created an easy-to-use service I think consumers will pay for. We're also interested in making sure artists are compensated for their work.
Who's your favorite artist at the moment?
Fatboy Slim, Beck, Elvis Costello. I have kids, so I've been sucked into Dan Zanes and Laurie Berkner.
Are the days of the CD numbered?
I don't think CDs are going to go away for a long time. Our forecast is that digital music will take an increasing share of the music revenue pie, but the pie is going to get bigger. Subscription services allow you to do what CDs can't -- you may want to try out an artist before you plunk down the CD purchase price. What's the killer app: burning or streaming?
We don't know 100 percent what the consumer wants because the services are so new. There is a demonstrated demand for burns, so copying songs is very important. Streaming addresses the more passive side of music entertainment. Our approach is whatever the consumer wants, we will offer it.
There's MusicNet, Pressplay, Listen.com, and FullAudio -- is a shakeout coming?
This is not a zero-sum game; there will be a handful of winners. We are all creating an industry, and to the extent that we have competition, that's good. We have a different approach. We are a business-to-business model. Our business partners are the brand, and they speak directly to consumers, but they look to us for expertise on what consumers want.
