Lots of good stuff coming out of this week’s Midem Conference in Cannes, France – in particular, Kate Holton’s Reuters article titled “Music industry tries carrot after years of stick” where U2 manager Paul McGuinness comments that music could be provided as part of a subscription service for an Internet service provider. Holton writes:

“…the time had come for new thinking on how the music and technology sectors worked together, saying their ‘snouts have been at our trough feeding free for too long’. He touted the idea that music could be provided as part of a subscription service for an Internet service provider in the same way that some mobile phone companies have worked, with the revenue being shared…”

Below is the video from McGuinness’s speech that is posted on the MIDEM blog.Also coming out in support of this bundled sub model is International Music Managers’ Forum secretary general Peter Jenner in his blog titled “Thoughts on the Challenge of the New Digital Reality for the Recorded Music Industry“. Jenner notes:

“…this fee could be low…and be introduced as part of the bundle of features offered by the networks. The price should be negotiated by the music industry with the broadband and telecommunications companies and subject to renegotiation from time to time. A ‘feels free’ solution such as this makes sense for all parties and has the added benefits of making piracy economically unattractive as well as making the consumption of music free to consumers at the margin…”

For those keeping notes, this model was first suggested and implemented by Beijing’s very own Feilio.

We’ve been mouthing off for a long time (okay, a couple years) that eventually the stars will align and content providers (music labels, studios, publishers) with wake up to the benefits (and inevitability) of blanket licensing (BL) for digital content over the Web – we believe 2008 is the year that you’ll see BL jet in from obscurity and become “mainstream” in the digital content (music, video, and text) space.

Below are three articles/industry guys calling for the same thing:

Subscription Question Goes 2.0, Theoretical Possibilities Abound is from Digital Music News (thanks to Eric for emailing this to me) where leading music attorney Kenneth Hertz notes that…

“…this is the year that labels will embrace blanket licensing.”

Music Lessons is Seth Godin’s post where he lists 14 rules to live by in the music business – note that it takes him about 12 rules before he finally concludes that blanket licensing is the now but he gets there, and thus makes our list. Seth writes,

“The music business has thousands of labels and tens of thousands of copyright holders. It’s a mess. The biggest opportunity for the music business is to combine permission with subscription. The possibilities are endless.”

Last Major Label Gives Up DRM Related Issues, posted on Electronic Frontier Foundation by Fred von Lohmann knocks the covers off the bed with his posting and states:

“Next step (and I hear that at least one major label is considering it) will be a blanket license for music fans — pay a small monthly fee, and download whatever you like, from wherever you like, in whatever format you like. This is the inevitable end-game in a world where file sharing remains hugely popular and the labels want to prevent new retailers (like iTunes) from controlling distribution.”

Look, there are hundreds of content sites in China offering very similar experiences and content, all driving for that same advertising dollars – and yes, one or two of the free sites will remain, but by and large the odd US$200 million that has been invested in China’s user-generated/file sharing start-ups over the past couple of years will be earn a very low return (if anything at all).

Indeed, the business that learns (and is capable) to fully integrate blanket licensing, and thus can roll-out a legal digital content subscription model (on the back of fighting for those advert dollars, as an added revenue stream) is going to dominate this industry as they will have a sustainable business model.

And what’s more, think of the blue sky business opportunities (i.e. think lightweight applications running on top of this infrastructure) that present themselves once a developer/user has unrestricted access to 100% legal digital content – we’re talking virtual goods meets physical goods meets a online/off-line experience. To wit, this is the sort of excitement blanket licensing brings to the mix – to a digital content platform.

2008 is going to be a significant year in the content space – we’re expecting this year will kick-off several years of significant consolidation and flame-outs across the start-up board – putting premiums on ventures, such as Feilio, that have fully integrated blanket licensing at the core of their business models, and thus are positioned to weather the coming storm.

What’s missing from this excerpt of an article by Diane Garrett in Sunday’s Variety?

“…Warner Bros. will throw all its weight behind Blu-ray later this year, a decision that could serve as a death blow to the rival HD DVD format…”

I think something along the lines of “…Warner is doing Toshiba a favor by killing off their dinosaur…Sony should only be so lucky.” Indeed, Warner, in selecting Sony, just saved Toshiba over US$150 million in inceptive and junket fees – i.e. pay-offs to studios to adopt the HD DVD format – money that can now be used to invest in any number of content/community related start-ups/enterprises seeking to monetize digital content in such innovative ways that would never be possible in a clunky electronics behemoth.

Honestly, in a couple years, drawing hints from the performance of CD music sales (2007 Christmas shopping season saw CD music sales dropped 21% over last year) and the growing industry wide movement towards DRM free music tracks, where can the DVD industry go but down…down…down. (Rock Lobster, anyone?)

Hey, I get it, DVD sales still generate billions of dollars (about US$16 billion) in annual sales for studios…so, yeah, they’ve got to figure out a way to mellow the inevitable revenue erosion but is the solution Blu-ray and DRM?

No way…you can just smell the mindset of studio honchos…it just reeks of 2001 all over again (and yet, maybe we never left 2001). Isn’t it evident by now (after all the carnage from the music industry) that the solution is not new packaging or delivery format/technology but rather the solution is a complete 180 degree shift in the existing business model – or am I missing something?

Over the next couple of days, I’m sure the wires will be burning with chit chat from pundits, portals and web jockeys about a regulation that has been re-approved by State Administration of Radio, Film and Television (SARFT) and the Ministry of Information Industry (MII) that will ban (effective 31 January 2008) Internet Service Providers and portals from broadcasting video that, according to a Canadian Press article, involves:

“…national secrets, hurts the reputation of China, disrupts social stability or promotes pornography…providers will be required to delete and report such content…those who provide Internet video services should insist on serving the people, serve socialism…and abide by the moral code of socialism…”

And by re-approved, we mean that some form of this regulation has been on the books for several months but it was only this week that SARFT and MII decided it was now time to set about enforcing it.

The market is a bit unsure how this will play out and/or how this will impact existing user-generated video hosting services, such as Tudou.com (which claims to hold 22% of China’s vlogging market share) and 56.com (flush with US$20 million in fresh capital from Adobe Systems, CID Group, Steamboat Ventures, and Sequoia Capital).

Indeed, much of the uncertainty (as is the case with most, if not all, policy initiatives spun out of SARFT and MII) rests not in how closely these sites comply to the new regulations (as they won’t necessarily have a choice whether or not they want to work with a state-owned license holder – they just have to or close-up shop) but rather in the government’s interpretation of what “…hurts the reputation of China, disrupts social stability…”.

I’m guessing SARFT will move relatively quickly to provide the market with a “test case” so that they can frame their interpretation, sending a shot across the bow of some of the more adventurous entrepreneurs, especially in light of this summer’s Olympics.

We’ll get more viability on this over the next couple of weeks as more information is made available on the back of several meetings organized between the major portals and SARFT/MII.

Regardless, I’m pretty sure this puts the kibosh on any short to medium-term plans user-generated video hosting services had for raising additional (or seed) capital as investors’ will surely start dragging their feet – not so much because of the blue sky regulatory risk but rather because momentum seems to have been sucked out of the market (at least for the time being).

But…what about those sites legally distributing and hosting content directly from copyright owners (e.g. StarTV, Disney, and Tianyu)…how will this impact the one or two ventures operating in the legal content space? And by the “one or two” I think its obvious I’m talking about one specifically, Feilio, the Beijing based digital content services supplying Chinese ISPs with legal content (MP3, video, educational material).

If anything, SARFT and MII’s new policy places a premium on services which not only guarantee the authenticity of content but also complies with China’s existing content import regs. To wit, if I’m an ISP or a network in China (between now and summer) I’m not walking but running to legal digital content services – why leave anything to chance?

As a parting thought, it is important to note that we’re not advocating tighter regulatory controls as, way more often than not, aggressive regulatory regimes strangle innovation (boo) but you’ve got to adapt to the business environment your operating in…or risk becoming irrelevant…

2008 Game Developers Conference (GDC) organizers have announced that renowned futurist Ray Kurzweil (pioneer in speech recognition technology) will give the GDC’s keynote speech in February titled “The Next 20 Years of Gaming” – a look at the next two decades of video games and what the landscape may look like come GDC 2028.

Honestly, I’m looking forward to Kurzweil’s speech but, with that said, I started thinking about other keynote speeches I’ve heard over the past year and how the gaming related talks have all kinda started to sound the same.

I almost thought about summarizing the top three common themes when I came across a post titled Five Short Video Game Industry Keynote on the Magical Wasteland’s blog. These guys have done a much better job pulling this together than I would have done, for example gaming keynote theme number one:

Let’s think about the future for a second. You probably don’t understand the kids that make up the bulk of our audience, but I do. I call them the network MySpace remix 3.0 social generation. Unlike any other people before them, young people today like to interact with each other. They also like music. YouTube is the perfect example of whatever point it is I’m making. Everything should be online and customizable.

You’ll have to click on the link above to read of the other four keynotes – they’re really funny (and spot on).