Out of the Box

Sirius and XM have convinced the Department of Justice that its merger won’t create a monopoly in the radio, or more broadly, music playback, space. While the FCC is expected to follow suit with the DoJ, there is a rush of parties that are looking to add terms and conditions to the merger. Censorship on satellite radio? What would be the point of a premium alternative to terrestrial?

It’s certainly true that there are far more options available for high-quality digital music playback since the time that XM started broadcasting from space. The iPod is frequently brought up as a competitor, but I’ve never really thought of it as a major one. First, the iPod accelerated its move into the vehicle rather late in its rise to popularity and many of the solutions are primitive or awkward.

I’suspect that I, like many MP3 player owners, have music on their players to which they’ve never listened. Mostly, though, particularly for Apple’s ecosystem that has never been as aggressive about music discovery as, say, Rhapsody, iPods are about playing back what you have, not what you don’t. And keeping them fresh requires round-trips between the house and car. So, what satellites really buy the companies better than any competing technology today (save terrestrial radio, which was around at its launch) is direct and unfettered access to the vehicle

Wireless technologies such as 4G and WiMAX have the potential to present a credible no-hassle alternative to satellite radio, but the cost structures don’t support the infrastructure required to deliver it for the foreseeable future. One could argue that they didn’t for XM or Sirius, either. But with a reduced customer acquisition marketing burden, their expenses should become more manageable. In the meantime, the Slacker Portable satellite add-on looks like it will be promising alternative when it arrives.

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There’s a pretty exciting report coming from the Financial Times that Apple is negotiating with the major music record labels to build in access to their catalogs into the price of the device. Such a move would be consistent with rumors of an Apple DVR in that it would show that Apple is intent on keeping the value on its hardware products, the roots of the company. As many have speculated, while Apple has sold over four billion songs, the iTunes store hasn’t been a major profit center.

According to the FT, the labels want $100 per device, which would be prohibitive for where popular models such as the iPod nano are today. Also, I’m not thrilled with the idea of the license being tied to a device. That seems like a step backward from the trend of DRM-free music sales; even DRM tracks can be used on an unlimited number of iPods.. Nevertheless, if Apple (or any other company, for that matter) and the labels can pull it together, it would represent a digital music renaissance, taking us full-circle back to the early days of “free” digital music and the explosion in discovery that went along with it.

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