Vivendi Universal, one of music's Big Five, will acquire Mp3.com, the first of the online free-music outlaws, for $372 million — $5 a share for a stock that once saw the 70s — in what's becoming quite a scramble by the Big Five to get in on the business that Mp3.com started and Napster made dangerous: Online music distribution.
In a TIME.com Q&A, TIME Silicon Valley correspondent Chris Taylor takes a look at the latest phase in the battle for virtual tunes.
TIME.com: This is getting complicated. Why doesn't Vivendi just sell its music at Vivendi.com? Or Duet.com — the name of the project they're already partnered in with Sony?
Chris Taylor: First of all, most Americans aren't going to be able to type Vivendi.com, much less remember that it's a music site. The reason why these companies are buying rather than creating distribution channels is about brand name — names like Napster and Mp3.com have a built-in brand awareness — and about time. Why take the trouble to build your own music-distributing web site when you can get one for $5 a share?
Where do the players stand now?
Well, Warner Music, Bertelsmann, and EMI are partners in MusicNet, which is the RealNetworks venture that CEO Rob Glazer's is out trumpeting these days. Sony and Universal are partners in Duet, which Yahoo already has a stake in, and Bertelsmann has a side deal with Napster.
The plus for Universal is to get that distribution channel. MusicNet has AOL behind it, and although Yahoo is involved with Duet, this gives Universal an experienced, in-house distributor that already has a brand presence out there. And as a bonus, Vivendi Universal basically owns about 150,000 titles that Mp3.com already owned.
That's right. Weren't they trying to be a music label?
It's sort of sad. A lot of independent-minded artists had signed on with Mp3.com because they wanted an alternative to being on a big label — now they're all basically Vivendi Universal property, and another Web maverick is gone.
Now we've got sort of a three-and-two division of the Big Five, with MusicNet and Mp3.com. Is anybody going to shop for music by label?
This is probably a temporary Balkanization. The big labels will be very stupid if they don't get together eventually, and I think that's inevitable, even if there are separate distribution channels. If people have to shop by label, they're going to go to Gnutella. I think this acquisition by Vivendi is probably just strengthening their hand for the big negotiations to come.
Ironically, sites like Mp3.com offered the labels the chance years ago to do exactly what they're doing now: getting into online music. The Big Five spent years suing, then they settled, now they're just buying them up.
At least they're getting them cheap.