Emergic: Rajesh Jain's Blog

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Cheaper Music and Voice

October 12th, 2003 · No Comments

Two different but related articles in the New York Times – one asks “What Price Music?” and the other on Skype, which offers free calls using a P2P architecture over the Internet. The common theme: digital technology is disrupting two key indsutries.

Music: “Battered by a sales slump it attributes largely to digital piracy and heartened by a limited test with Apple computer owners, this fall the record industry is trying to catch up with its file-swapping customers: the major labels and many independents have agreed to deconstruct the album, allowing anyone with a computer to buy any of hundreds of thousands of individual songs. Soon huge catalogs of every genre of music will be available for sale on the Internet from over a dozen retailers, bearing the blessing and license agreements of the major record labels…No one knows what all the effects will be. But one will certainly be on price; music in the new format will cost at least a little less than it did in the old. The standard charge has become 99 cents a track. Albums that cost between $12 and $18 on CD now sell for about $10 online. The labels have also authorized several services to offer a kind of online lease program for music: subscribers pay a flat $10 a month to listen to as many as half a million tracks as often as they want over the Internet, rather than storing them on a computer or burning them to a CD.”

Skype: “Skype’s software and audio connections are based entirely on the same peer-to-peer infrastructure that powers Kazaa. For example, if two users want to call each other, the call can be routed directly between their computers instead of having to pass through central servers. Peer-to-peer routing also frees the company from having to buy and maintain much equipment, because its system relies entirely on the computers of individual users. The company does not earn any money right now, but is betting that consumers will eventually pay for premium services, like voice mail. This winter, Skype plans to introduce a feature that will enable users to call people on regular telephones – for a fee it says will be ‘substantially lower” than current phone service. That means that Skype wouldn’t just allow computer-savvy users to call one another; it would allow them to call anybody with regular phone service…In a recent report on the telecommunications industry, Daiwa Securities wrote that Skype ‘is something to be scared of, and is probably set to become the biggest story of the year’ in the telecom sector. ‘We think the Skype offering (and whatever may follow it) is akin to a giant meteor hurtling on a collision course toward Earth,’ the report said.”

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