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Advert-supported music? Spiral Frog struggles, and DRM last rites are read at Midem

The Sony/BMG rootkit debacle "was perhaps the last nail in DRM’s coffin, said IP law expert Rolf Auf der Maur said. The rootkit was a piece of software installed at users’ PCs when they played BMG CDs. It not only allowed Sony/BMG to look into the respective PCs, but also made them vulnerable to hacker attacks. The company since has settled in several countries with complainants against the manipulation.

Read more in the Intellectual Property Watch  report from Midem  in their report: "Window Of Opportunity Closing For Digital Rights Management"

“Without putting too much salt in the wounds, industry has made a lot of mistakes during the last ten years,” said Rolf Auf der Maur, who works at Vischer in Switzerland.

Rightsholders had underestimated the impact of digitisation and Internet in the first place, he said at a forum of the International Association of Entertainment Lawyers (IAEL) held at the Midem, which ran from 20 to 25 January.

They failed to make attractive legal offerings, and failed to agree on standards for DRM and technical protection measures (TPM) systems, he said. They also were pricing excessively based on calculations for physical media, charging consumers twice for online content and storage media and they had misused DRM to spy on consumer behaviour.

If you can't sell direct because DRM is broken, can you sell on the basis of advertising? That may be a dead duck, too, say experts

Most sceptical: The Age, which says

SpiralFrog sent its attorney to the Midem music industry gathering in Cannes to replace former CEO Robin Kent, who was ousted late last month _ when the service had been set to go live.  

"There's been a management shake-up," Marc Jacobson of lawfirm Greenberg Traurig told a conference at which Kent had been due to speak.

SpiralFrog still plans to launch, Jacobson said, but has no firm date. He declined to elaborate and made no comment on speculation that the company had been unable to sell enough advertising to meet royalty fees.

But the music industry's scepticism about any new technology may have killed it. "In short, the SpiralFrog idea is as dumb as the name " said p2pnet

Meanwhile founder and CEO Robin Kent has been purged from SpiralFrog.  The Times of London reported on Tuesday that Kent was ousted at a board meeting on December 26, prompting at least five directors and eight senior executives to resign in protest, summarised Yinka Adegoke from Reuters.

No such report from SpiralFrog sources, but the new "board of directors" page on the web site no longer includes Robin Kent; and January 24th saw the announcement of Jordan Levin as director.

This report was confirmed by a Cnet staff writer this week, casting serious doubt on whether SpiralFrog will survive:

SpiralFrog planned to sell advertisements that would be shown to users as they downloaded songs.

The privately held SpiralFrog wasn't the first to try this business model, but what was different about the start-up was that it could boast a powerhouse partner. The company said that when the music store launched--rollout was expected by the end of last year--customers would find songs from Universal Music Group, a label featuring artists such as Gwen Stefani and Eminem.

But December came and went without any such launch. Also missing were any follow-up announcements saying other top labels had signed on.

"I haven't seen anybody else sign on other than Universal," said Mike McGuire, an analyst with research firm Gartner. "One of the things you must have when you're challenging Apple or the other sites is that you've got to have all the content."

 With SpiralFrog under a cloud and legitimate DRM in question, things look bleak for everybody except iTunes. Pollstar reports:

 It's because of DRM that tracks purchased from iTunes play only on iPods. What's more, major label music purchased from other online stores will not play on iPods. If you can picture a world where compact discs only play on specific players, then you'll have a pretty good idea of what DRM has wrought. 

So what about the future of mobile phone music downloads?

It's a sore subject. In a recent Round Table with France Telecom, several analysts sat -apparently entranced - while a senior FT executive burbled excitedly about the boost to revenue provided by music downloads, following the decision by Orange to go with Sony Ericsson's Walkman range.

After ten minutes of this  sort of thing ("..and revenues from phone users who download music are now running at three times the rates from those who do not!") I had the bad grace to ask the obvious question: "Yes, revenues are up, but what about profits? I don't know anybody in the mobile phone business who is able to make a profit out of music downloads..."

And I don't. And indeed, neither does France Telecom know anybody who is able to make such a profit, and, faced with blank scepticism, the executive climbed down: "This sort of enterprise requires substantial sponsorship and investment and subsidy from the carrier in its initial stage," and sadly, could not be drawn on when, or even if, a profit was anticipated.

Watch out for Part II of this analysis...