Ears On

If you want to predict the future of the music industry, don't just talk like a pirate. Think like a billionaire. According to Mark Cuban, owner of HDNet and the Dallas Mavericks, the music download business may be in for a major consolidation. Forget about iTunes and the Zune Marketplace, he says. Instead look at what Google has just done in the video file sharing realm: Pay $1.65 billion for YouTube and offer the television networks an estimated $100 million for the right to use portions (as opposed to all) of their programming. Cuban likens it to the moment when Microsoft took over the desktop by selling Office as a $99 upgrade back when word processors, spreadsheets, etc. sold for $500 each. Then he crunches the numbers: If Apple sells a billion tracks a year for 99 cents each, and pays 70 cents per song to the music labels, the music industry gets $700 million, and the biggest labels get $575 million of it. But what if deep-pocketed Google offered that same $575 million to the major labels for the right to use just some of their content free--not their whole catalogues, just hot songs and clips? After all, music executives are already openly rebelling against Apple's rigid pricing. Cuban finishes with an intoxicating rush of speculative questions: "Would it be worth it to Google to pay $575 million and up per year to completely turn Apple upside down? To completely pre-empt their ability to sell iPods? To potentially introduce a new hardware device, or partner with someone who has one? To sell advertising around the music rather than the music itself? Is there a traditional Google arb here of 70 cents per song vs. 70 cents of advertising around the song? Could it sell that much advertising online to justify giving the music away?... Could [Microsoft] position the Zune as the de facto winner by spending $575 million per year with the music labels and giving the first billion songs away to Zune owners?"