Resnikoff’s Parting Shot: What Connect Represents

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Universal Music Group wants to build a better playing field, a more competitive arena of paid music alternatives.

Apple has too much power, and therefore has the ability to dictate aspects related to digital content pricing, availability (a-la-carte v. album), interoperability, and promotional placement.

Steve Jobs can resist label demands for variable pricing, album-bundled sales, and non-iPod compatibility in part because the iTunes Store is the only game in town.  Almost every download is purchased through iTunes, and that spells serious leverage.

A healthier marketplace – at least in the eyes of Universal and other majors – features a number of well-matched rivals, and a far less powerful Apple.  Such a landscape would allow the majors to exert far more control over the digital marketplace, and shape the emerging space in their image.

The plan makes sense, especially if paid downloads – and other forms for paid music content – start to take off.  But can this extreme lopsidedness ever be leveled?

The death of Connect offers an indication that it cannot.  Perhaps Connect was the woeful underachiever, a distant laggard doomed to failure.  After all, even healthy markets have their losers.

Perhaps the store could never thrive under the umbrella of Sony, a corporate monstrosity stumbling badly in the digital era.  Maybe Atrac was just a misguided pipe dream, foreign not only to the iPod but almost every other player and a crash-and-burn concept from the start.

Maybe Connect was different.

Perhaps, but Connect actually has a great deal in common with stores like Napster, Rhapsody America, and the Zune Marketplace.  For starters, all of these companies are fighting for iPod+iTunes leftovers, and mostly losing cash in the process.  These are services that exist on the margins, and broker in formats foreign to mainstream digital music fans.

The current lopsidedness is not an accident.  Sure, non-iTunes approaches like subscription-based platforms have gained some traction, though the real action surrounds the 99-cent, a-la-carte track.

More importantly, it also surrounds the iPod.  That trickles into the paid content arena, but why is it that Apple exerts such a commanding lead in both digital music hardware, software, and ecommerce?  What are other players and stores so challenged to compete?

On a broader level, the very concept of selling 99-cent, protected downloads is a speculative endeavor.  Of course, sales levels continue to push northward, but so are the number of music fans grabbing free content.  And year-over-year percentage gains are softening.

In fact, a vast majority of consumers are grabbing their enjoyment for free – and being rewarded for it.  Paid choices are expensive and non-interoperable, and always have been.  Free tracks are totally interoperable, and incredibly easy to discover, obtain, and share. Sure, labels are pushing into open MP3s, and sparking new DRM-free experiments.  But hop onto iTunes right now, and you would barely know it.

Now, it remains unclear just how much juice is left in the paid download game.  Perhaps the story grows by multiples – or maybe it peters into a plateau (or worse).  And if paid downloads are ultimately stunted achievers, then iTunes wins.  There simply will not be enough to go around.

But if a growth story ensues, rivals still face an incredibly difficult challenge related to consumer confidence.  Something more insidious is plaguing the iTunes rival, and it has to do with trust.  The death of Connect represents the ultimate mishap for a committed customer, and underscores the confidence problems that iTunes competitors face.

Connect is gone, or soon will be.  Urge enjoyed a brief reign, and is now being morphed into something different.  What about Napster?  Zune Marketplace?  Or even Rhapsody America?  Will these stores exists in a few years?  Is it worth the risk?

Sure, Connect had its takers.  But the loyal Connect customer was punished throughout – punished on interoperability, and punished by the company itself.  Sony is ditching its own protected format on its latest player releases, and embracing Microsoft instead.  Anyone placing loyalty within the Sony Connect and Network Walkman ecosystem has been subjected to narrow usage parameters, shifting rules and hostile consumerism.

The same is true for those navigating the choppy waters of PlaysForSure.  Microsoft has now abandoned its once-grand vision of controlled interoperability, and shifted instead to a more iPod+iTunes-like architecture.  But what happens if you are the unfortunate patron of a PlaysForSure store?  Is that a good outcome?

Of course not.  Consumers keep getting burned, and for good reasons, music fans are keeping their distance from iTunes competitors.  It is simply too difficult to play on another field – if you are buying, that is.  There is simply too much fine print, and too much potential for disaster.

Perhaps Amazon has it right.  The retailer is planning an MP3-based service that does anything but rope consumers into an ecosystem.  Just download the track to your music folder, and wipe your hands clean.  Any other approach spells commitment, and far too much potential downside.

And if consumers care about paid downloads, they are mostly unwilling to roll the dice on iTunes rivals.  Sure, Apple charges the same price as everyone else, and its downloads are unplayable on rival devices.

But the difference is that Apple offers a trust factor, a feeling that its downloads will work at some nondescript point in the future.  And until competitors can cultivate that feeling, they will always be fighting for scraps – no matter how many exclusives or DRM-free tracks majors toss their way.

Paul Resnikoff, Editor