Music, Set Free

In light of a stunning showing by Janet Jackson (and the local football team) at the Super Bowl last weekend, it’s unsurprising that little mention has been made of a short Pepsi spot that aired during the second quarter. Still, Pepsi paid something on the order of $2 million for the 30-second slot, so it deserves some of our attention. In question is an ad featuring five or six of the teenagers who were sued by the recording industry for illegally sharing copyrighted music files on the internet and who settled out of court. To the tune of “I fought the law (and the law won),” they each defiantly proclaimed that they would still download free music online, and they would do so legally. They owe their defiance to a joint promotion between the soft drink company and Apple Computer: one out of every three bottles of Pepsi’s beverages now sold wins a free song download from the latter company’s wildly popular (though thus far not terribly profitable) iTunes Music Store. If iTunes’ flow of publicity and technology awards hasn’t convinced critics that this unique business model represents the future of the music industry, a creative partnership like this one should still turn a lot of heads.

When Pepsi and Apple announced their plan for the joint campaign last October, as the iTunes software first became available to Windows users, it seemed a particularly bold and risky venture: Pepsi is placing 100 million of the free songs under its bottle caps, and yet Apple had only sold a small fraction of that number to its devoted Mac user base. At that time, the software’s profitability when it reached a larger and more competitive market was very much uncertain. As of early this year, while it’s still difficult to tell, the numbers are looking good. Thirty million songs have now been sold, nearly doubling in three months what had been sold to the Mac-only community over the six months prior, though still a pale shadow of the massive number of free downloads Pepsi is about to offer up. The promotion seems well poised to succeed—after all, what better way to sell soda than with useful free stuff? This seems a substantial improvement over past promotions, which have featured prizes with less broad appeal (say a sports jersey or concert tickets) and with much poorer odds. And what better way for Apple to increase the consumer comfort level with their new business model than by allowing the consumers to try it out risk-free? Apple wins because they gain an even larger head start over their competition from “Napster 2.0” and other similar pay-per-song services. Pepsi wins because we buy more Pepsi. And we win because we get free music without the risks and hassles of Kazaa.

The realization of the potential for the profitability of online music sales, and the win-win-win mentality being adopted in the process, is a real shift in the way people are thinking about the distribution of intellectual property, and it’s the right kind of shift. The way to make people stop illegally acquiring songs is to balance out the cost of that practice with the cost of obtaining the files legally. The recording industry has sought to do this by driving up the expected cost of downloading music from peer-to-peer networks through lawsuits, essentially scaring people into shaping up. But this task is daunting (or even impossible) both because of the sheer volume of music traded illegally and the challenges of litigation. These challenges were compounded in a powerful December ruling against the recording industry by the U.S. Court of Appeals in the District of Columbia: The court asserted that Verizon, an internet service provider, could not be compelled by subpoena to release the names of users suspected of illegally downloading music. Apple and Pepsi will make a winning team because they circumvent these difficulties, instead attacking illicit file-sharing by offering legal music downloads to consumers at low cost, thus dissuading them from breaking the law.

Whether or not this particular attempt at jump-starting the online music industry takes off with its full potential is almost irrelevant: We’re now seeing real spending on the part of major corporations (including those without a prior vested interest in the market) on digital music sales, and so it seems that the iTunes model is here to stay. The parties involved are demonstrating that they are ready to make a commitment to sell the idea to consumers not by threatening them but by enticing them and embracing them, and they aim to show their critics just how successful this strategy can be. Apple’s commitment to its ideals, much like Janet Jackson, has been laid bare, and the prospects are exciting ones.

Matthew A. Gline '04 is a Physics concentrator in Quincy ouse. His column appears on alternate Wednesdays.