The British ISP industry has spent a small fortune of its customers’ money fighting the people who would, in a saner world, be its business partners – only to suffer a crushing defeat. On Tuesday Lord Justice Richards threw out BT and TalkTalk’s judicial review against the 2010 Digital Economy Act.

Yet as trench warfare goes, they may consider it worth every penny.

It should be remembered that the telcos’ reasons for opposing the Act are very different to those of “digital rights” activists. For the activists, every day is the first day of the Counter Reformation. Every copyright enforcement proposal is fatally flawed: the task is quite simply to say “no” to every one that pops up. But ISPs are in fact a lot more pragmatic.

For the ISPs, it’s all about minimising risk and, at the end of the day, lowering their compliance costs. They don’t think copyright enforcement is spoiling the unicorn’s grazing meadow – they just think it’s going to be scarily expensive. And this concern takes precedence over innovation, the creation of new markets, growth, and ultimately profits. In short, they see more value from keeping the wild west much as it is today than they do from building on it – despite empirical evidence (pronounced “Sky”) that people cheerfully pay for content if it’s convenient and good value.

There is another advantage to the ISPs for pursuing a strategy of prevarication, in that it has successfully delayed the introduction of the 2010 Act. The original timetable envisaged letters being sent to copyright infringers in early 2011 and, should file-sharing have miraculously failed to cease after that, technical measures being imposed against diehards round about now. This is the sanction that copyright-holders wanted – attaching a real consequence to what today is a casual and risk-free grabbing of a bunch of movies and music. The first letters may not now go out until mid to late 2013.

In a shorter timeframe – in under three years, in fact – France introduced the vastly more ambitious (and more bureaucratic) HADOPI framework.

So focus has instead turned to the much vaunted successor to the 2003 Communications Act, and that’s where ISPs and copyright industries have come to blows. Remember that the DEA was a series of amendments to the 2003 Act. The Ministry of Fun says it wants draft legislation by April, and as you read this the Green Paper is being rewritten; the first draft was acceptable to nobody. So MPs will in effect be discussing the DEA’s replacement. Given the foot-dragging from the Mandarinate – our permanent government – it is hard to see how the Act has a vigorous life ahead of it.

In the meantime, private legal cases are filling the vacuum. Last year the Newzbin2 ruling established that ISPs were liable under copyright law – and despite shrill squawks from Consumer Focus and other activists that complying with this would bankrupt ISPs, the cost turned out to be minimal: £5,000 a pop to block a site with the ISP picking up the bill. Sky preemptively halted access to Newzbin2, avoiding the need to reach into its pockets.

But as I wrote when the SOPA hysteria was at its peak, copyright enforcement hasn’t kept pace with the technology; it’s all too easy to evade a web block which means the demand for cheap and effective redress hasn’t gone away.

Mechanisms and agreements must be created to stop the rip-off of creators ranging from you, dear reader, and the wedding photographer bloke down the road to Sony Pictures – and it must scale to encompass all these examples. These agreements don’t have to be legislation if enlightened self-interest prevails. But ISPs remain in a game theory-like trap; the first to move is judged to lose, so nobody budges an inch.

All this leaves the internet looking shabbier than it should be. Britain has a long historical legacy of enlightened private agreements and its citizens pay for movies and music. It should be a testbed for radical market experiments for the world to observe. But can you think of a decent service that’s launched over an IP network since Spotify? The action takes place off the net.

Last week’s alliance between Facebook and Spotify turns out to be a much better deal for Facebook than Spotify. While Facebook declined to anoint any one music company as its exclusive provider, and a dozen are signed up, it has extracted exclusivity from the music companies. Or at least one of them. New sign-ups to Spotify must be Facebook members – the non-Facebook world will have to go somewhere else.

Such is the power of distribution platforms. Facebook has got one, and if you want to be on it, you play by Zuckerberg’s rules. It has always been thus. There isn’t an industry in the world where this ancient rule doesn’t apply. And while people may get misty-eyed about the “open web”, or the “neutral net”, this kind of utopianism was always naive in the extreme.

Deals are made. It’s business, folks.

The Facebook music deal also opens all of your Spotify listening to Facebook users – your listening habits, playlists and history are all shared with a billion others, and you must turn this off manually to regain your privacy.

Spotify users are upset about this, and upset about being herded onto the Zuckerberg Reservation.

Spotify has put out an official explanation using recycled tweets from co-founder Daniel Ek yesterday. And from these, Ek seems serenely oblivious to the implications.

“There’s been a big barrier to sign-up, we wanted to remove that and make it a seamless experience,” he said in one tweet, apparently indifferent to the criticism that Spotify had just erected a barrier where there wasn’t one before.

“We want to remove barrier to sign-up and create a more seamless experience…” he confirmed in a follow-up.

And Spotify collated these into a formal statement, adding this:

Think of it as like a virtual ‘passport’, designed to make the experience smoother and easier, with one less username and password to remember. You don’t need to connect to Facebook and if you do decide to, you can always control what you share and don’t share by changing your Spotify settings at any time.

So what’s in it for Spotify?

Well, Spotify obviously needs the attention that Facebook’s distribution channel can bring. Spotify’s business is selling subscriptions, and to get people into the paying habit, it needs them to try the service first. And Spotify’s new users, who wander in from Facebook, will get six months of free streaming. Universal Music’s digital boss Rob Wells reckons it takes six months of free before users see the value of paying – after which they don’t get bombarded by adverts and enjoy higher bit-rates and mobile access.

(Although in my case, the opposite was the case: after six months of paying, I gained a Zen-like awareness that I could save a tenner a month by cancelling a service I didn’t really use. You can hear almost anything for free anyway, and then decide to buy it or not.)

While Spotify has paid a price for its prominence, it may argue (once it gets its shambolic corporate communications into gear) that, in the long-term, excluding competitors is more than worth it. Those rival music companies will have to work much harder, spending far more on marketing, to match Spotify’s profile.

Already, Spotify claims 1m new users from the deal in just a few days. The gains for the other services are much more modest: just a few thousand a piece, according to reports. So the dominant position is becoming entrenched. So far, so good.

But in the short to medium-term, this is an expensive gamble. Remember the most important aspect to the deal I highlighted last week: there’s no new money coming into the system. The pot does not become larger.

And there are other problems ahead.

Power follows Platforms

In the long-term, the deal confirms Facebook’s dominance over content providers. Remember it has the luxury of dumping Spotify and anointing a new best friend. That patronage is powerful and can make or break them. You can bet that Rdio or Soundcloud or Deezer or Mog (also Facebook music partners) would make the same kind of deal.

But they all face a future in which they’re squeezed, as a commodity supplier. They save Facebook an awful lot of work dealing with music licences and bearing the bandwidth costs. But at the end of the day, they’re less of a platform and just another interchangeable component supplier.

And look what else is emerging, slowly. Facebook is becoming the web’s de facto identity system – the Cabinet Office is mulling using Facebook IDs for authentication to Government services, as we exclusively reported back in June. Attaching credit cards to Facebook accounts will take longer.

Entire business sectors have only come to the realisation that digital distribution platforms matter very late, if at all.

Perhaps because they’ve been smoking the “open web” bong pipe for so long. Remember that the web can be technically “open”, while access to markets is tightly controlled. And doing the “open” thing with your angle brackets doesn’t auto-magically open those doors for you.

With this deal, we see the platform company already “picking winners”, and playing the upstream providers off against each other. Apple is already playing this game – because it can – and we must now add Facebook to the list.

Facebook is well on the way to being able to control the terms on which entire creative industries supply their goods. And these terms will always favour Facebook.

The games industry was smart enough to realise that platform control was important. It developed distribution platforms early, and now favours Steam (a vertically-integrated content company and channel), but not exclusively.

Hollywood’s UltraViolet is a platform play whose debut we’ll see quite soon. But the music industry has pointedly failed to develop its own. Hula is the exception, but that’s it’s just music videos.

There’s little point chafing about conditions on the Zuckerberg Reservation if you’ve handed him the future through your own inaction.

There were many other clever things about it, such as a very slick integration of music news. But the killer feature, one that made it unique, was that you could also drop songs you liked into a little box, and keep permanently. This was genuine P2P file sharing. There were no strings attached – no DRM, no expiry, no locker (your stash was your hard drive) and no additional fees for this feature.

And it was all legal.

The truly remarkable thing was that it wasn’t some UI designer’s fantasy, a mock-up created in his bedroom, but a real service backed by one of Britain’s biggest ISPs. This was the original Virgin Media Music Unlimited. Virgin had invested millions in it, with dedicated servers installed around the UK to bring this world-beating British innovation to the masses.

And then, weeks before it was due to go live, two of the suppliers in the music industry got cold feet, obliging Virgin Media to put the project permanently on hold. As with News International’s Project Alesia, the original VMMU was a great glimpse of the future from the vantage point of the present. It’s a future that will certainly come, but currently it seems a long, long way away.

Last night Facebook unveiled shared music streaming, so friends can listen to the same stream and comment on it. But that’s it. The deep music integration that Virgin Media valued is still missing.

As is something else rather important.

There is no new money is coming into this system.

The potential income available to Facebook remains the same as before, but it’s now divvied up between one more tier of suppliers, who, in turn, divvy it up between lots more people. Analyst Mark Mulligan writes today that “Facebook has made itself into a cable company for music services”, which is quite astute; it’s a platform, of sorts. But if business means creating value, and value creation means getting people to open their wallets for something new, then this really isn’t a “business” at all. It’s a pretend one.
Engineering works

This week Rory Sutherland, in his ever-excellent Wiki Man column in the Speccie, laments that the media is obsessed with communications technology at the expense of highlighting engineering innovation in the physical world.

“Steve Jobs has sometimes been described as the 21st Century’s answer to Edison, but perhaps we need a 21st Century answer to Brunel,” he writes.

He’s right – and it’s actually a lot worse than he thinks. For years I’ve been lamenting the lack of engineering values on the web itself – which many moons ago I described as “a bunch of presentation-layer people attempting to solve infrastructure-type problems”. The result today is the Shoreditch “tech scene”, in which nontrepreneurs stroll between endless “meetups”, avoiding the nasty particulars of creating value, being original, or ever solving a technical problem.

A step in the right direction would be Brunel-type thinking for how to make digital networks better, because half of the internet we need is still missing. It hasn’t been written. The net currently lacks the convenience of many aspects of every day life – and the half that’s missing are payment platforms, credit systems and deep supply side reform of businesses around these. These in turn address lots of deep problems, such as risk and liability and pricing, and allow people to create something with a lot of consumer convenience.

But what Rory really identifies, I think, is more than just sociological, a case of the wrong people being employed across Shoreditch and beyond. What he highlights is a desperate lack of optimism and ambition across capital investment, entrepreneurship and engineering. To make VMMU work required enormous challenges to be met. And a lot of cojones by almost everyone involved, from music suppliers (labels and publishers), the service provider MSP, and the retailer Virgin, who had to worry about liabilities and was ultimately unable to overcome them.

That ambition seems to be absent.

And in its absence, we still have to coo and gasp about how marvellous it is to have music streaming from a widget on a social network. ®

We all know why Facebook has such astronomical valuations. It is already as ubiquitous as Tesco. It is a place a billion people go to: whereas they only ever leave Google search, to go somewhere else. But people hanging around, poking, throwing cows, ignoring the adverts and goofing around doesn’t pay the rent. To increase revenue, Facebook needs to sell more stuff: products and services.

A Facebook music “dashboard” has long been rumoured: it would be a way of tying together disparate offerings such as eavesdropping on what friends are playing, streaming music yourself, or buying songs, ticketing or merchandise. A music dashboard is a subtle and relatively unobtrusive way of turning Facebook into a grown-up retail and services platform; an approach which borrows from the classic (Porter) Tesco philosophy of taking a tiny margin from a large volume of transactions.

So Facebook is expected to unveil many of these, including the dashboard, at its f8 developer conference next week. So far, so predictable.

The most interesting detail to emerge is that in addition to transactions there may also be an arbitrage opportunity. Facebook will apparently permit competing streaming music services (Spotify, Rdio and Mog in the US) to pipe music to users, and “reconcile” the content. So if your chat buddy is playing a song via, say, Spotify and wants you to hear it, you can hear it via your choice of streamer. This has been something of a Holy Grail for service developers – not helped by the music industry’s inability to get its metadata story correct. Facebook can even play one service off against another, driving the costs even lower.

But there’s also a downside.

One is that Facebook’s decision to open itself up as a platform, while this contributed enormously to its popularity, also has a downside. Supermarkets succeeded by putting everything you wanted under one roof. They created ersatz deli counters – but did not host rival delicatessens. Facebook’s willingness to use rivals raises long-term margin issues.

But the bigger problem is that there’s not enough money coming into the system. Three years ago, the conventional wisdom insisted that people would never pay for anything on the web. For some people, that’s going to be true now and forever. But that was before the App Store, and the successful (and porous) New York Times paywall. Facebook absorbs an enormous amount of people’s time. If a fraction (say 20 per cent) of them paid 99 cents a year, then the revenue picture would look quite different. If 10 per cent paid even more for premium services then Facebook wouldn’t be thinking about chiselling fractions of cents from its existing partners.

For all the talk of the web being the font of innovation, it’s clear to me that it lacks some really basic features – paying for things is extremely tedious. These are innovations other businesses have put into the practice. And supermarkets have perfected the trick of making you quite pleased with the transaction. Maybe that’s on the whiteboard for Web 11.0, but I think most web companies haven’t given it a moment’s serious thought.

A Facebook that received predictable subscription income wouldn’t be thinking of selling your data, either. The phrase that best sums up the web today – “You Are The Product” – would become less relevant.

I once proposed this idea on BBC radio, in a debate about privacy. My interviewer looked quite startled by the prospect of money changing hands in the beautiful Garden of Eden that is the web.

“Wouldn’t this violate net neutrality?” he mused.

I demurred.

Then a blessing of unicorns charged into the studio, and I was carried away to be re-educated.
Read the original story at The Register.

More hysterical shrieking reaches us about Apple’s new music feature, I’m afraid.

Earlier this week a lone lawyer said that iTunes Match, which populates an online store with songs you already have, encourages infringement. Well, this one is even nuttier.

It’s actually so spectacularly muddle-headed, I thought it might be is a good time to examine what did and didn’t happen this week, briefly – so we can see through the hype to the reality.

Bob Lefsetz, the shouty publisher of the eponymous industry newsletter, is normally very critical of record labels – often for the right reasons.

“His intense brilliance captivates readers from Steven Tyler to Rick Nielsen to Bryan Adams to Quincy Jones to EVERYBODY who’s in the music business,” he says modestly, on his own site.

This week finds Bob barking furiously up the wrong tree. He thinks the labels have sold out the future record industry, in return for a one-off payment of a few dollars from Apple.

Writes Lefsetz:

“For approximately $40 million to the bottom line of each recording company, you know they’re not going to share the revenue with artists, the labels sold out their future.

It’s like Nintendo being paid a bunch of money to never develop the Wii.

It’s like Electronic Arts being paid to never develop mobile games.

It’s a denial of the future.”

Silly Bob.

Paying for Apple’s iCloud doesn’t get you any music you don’t already have – as we have pointed out a number of times already this week. If you want to hear a song you don’t already have access to, you have a number of options. You’re going to have to buy it, or rent it via a subscription service, or wait until it comes round on the radio, or find an unlicensed (aka “pirate”) copy from the Torrents or Rapidshare, or a blog, or some other unlicensed source.

Or borrow a copy off a mate.

In other words, these are exactly the same choices you had before Monday’s iTunes Match service was unveiled. The supply side is unchanged.

All iTunes Match offers us is a universal, multi-directional synchronisation option for our music collections, rather than the bi-directional PC to mobile option common today. Spotify already offers something similar today, but for around six times the subscription fee, you also get access to millions of songs you don’t already own. (Which is then sync’d across multiple devices).

Why is Bob not complaining that Spotify is destroying the future of the music industry? Because it would be silly. But that proposition has more merit than positing that nobody will ever buy another song they don’t already own. That’s the only way Bob’s argument can stand up.

I can’t quite see why this would happen, or how iTunes Match would cause the greatest, and certainly unprecedented, shift in cultural demand patterns in human history.

Plus ça small change

Rather than selling out the music industry, the labels’ decision to license iCloud merely gets them off the hook, prolonging the agony a little longer.

As I argued here, the music business needs to be experimenting furiously, trying all sorts of pricing tests with new services, and giving us new ways of getting to the stuff. These include new kinds of bundles, vouchers, even alternative currencies – all of which reward us paying punters.

If it fails to experiment, and we’re stuck with per-song downloads and rental (of music that disappears), then the value of music will continue to diminish, just as an uncultivated garden gets filled with weeds. And that’s not fair to the people who create it – who will be obliged to adopt what I call PBBMs: Pity-based Business Models.

Bob has great faith in mobile subscriptions, and castigates the industry for being seduced by the Cloud. But this misunderstands the one tiny technological point of the cloud services worth knowing. (And it is fairly tiny, and offers very little to consumers overall). If multiple-device cloud sync takes off, then mobile will cease to command a premium.

Whether the iTunes Match feature takes off is far from certain, though, and really depends on how many people think the multi-sync it offers is worth paying for, over the bi-sync (or no sync) we use today. Some will undoubtedly find instant value in it. For others, it’s a ‘so what?’ feature.

I can see the appeal of all my music being accessible to all my devices too, but I’m not somebody who needs every song on every device at any time. It strikes me as a bit anally retentive. The deal-breaker for me is that I really don’t want my music, much of which was encoded very carefully, chewed up and spat back at me in AAC format. For me, rsync across my home network does just fine. ®

Each year UK record labels send out 25,000 promo CDs. In new research released today it is estimated that the manufacturing, packaging and transportation of these deadly items creates 1,686 tonnes of carbon dioxide. That’s 10 times as much CO₂ as is generated by distributing the music electronically. But only a quarter of promo music is distributed electronically, today, and music groups the British Phonographic Industry (BPI) and the Association for Independent Music (AIM) have called for that proportion to be increased – for all our sakes.

(The research estimates a digital file “emits” 62g of CO₂.)

Former EMI chief executive and current BPI chairman Tony Wadsworth said today that the new research “provides clear evidence for a responsible way forward for all labels big and small. We will be encouraging everyone involved in promotion – labels and media alike – to reflect on these findings and consider how they can speed up the move towards digital distribution.”

Switching all promos to digital delivery would save 240 tonnes.

Just to put that in perspective, underground wildfires in China produce up to 450 million tonnes of CO₂ a year. The amount of CO₂ produced by new build coal power stations around the world, which help millions of people out of poverty, is around 500 megatonnes a year. Total CO₂ emissions from coal are 5,814 billion tonnes of CO₂ , rising to 6,820 in 2035. In other words, we could turn all the world’s coal power stations off for about twelve milliseconds.

Every little helps, though.

The research was carried out by Alison Tickell for her music business environmentalist group Julie’s Bicycle. Tickell is a member of a global warming dynasty. Her brother Oliver earns royalties from carbon offsetting, while her father, the former diplomat Sir Crispin Charles Cervantes Tickell, is credited with convincing British PM Margaret Thatcher of the hypothesis of catastrophic man-made global warming in the late 1980s. By 2003, Thatcher appears to have recanted – and in her memoir Statecraft doubted the warnings of politically-motivated “doomsters” and described their anti-industrialisation policies as “costly and futile”.

Tickell Snr is a patron of the Optimal Population Trust and made an ominous prediction to an interviewer last year: “It’s one animal species out of control,” he said – meaning us, “and the awful thing is that if we don’t control it then Mother Nature will do it for us.”

Bootnote

The music business has done its bit already. Sales of physical CDs have fallen by 20 per cent from the 162m units shifted in 2004 – more than cancelling out the entire promo effect. Or, another few milliseconds of coal-fired power carbon emissions.

Spain provides a case study in how to balls up a levy.

Under EU law, member states may provide an exemption for a person making a copy of a work for private non-commercial use, “on condition that the rightsholders receive fair compensation”.

The Sociedad General de Autores y Editores de España (SGAE) asked for and got a levy imposed on blank media and consumer electronics goods, which has swelled its coffers by over €20m – a 72.9 per cent increase. But it had been applied indiscriminately and set too high.

For example, businesses were charged for making CD backups. Naturally this led to an enormous consumer backlash. Punters felt they’d paid for the work twice – and freetardery became rampant.

The case covers royalties from 2002 to 2004. The Court ruled that only devices or media that can be shown to potentially harm authors may qualify.

The Court agreed that “the person who has caused harm to the holder of the exclusive reproduction right is the person who, for his own private use, reproduces a protected work without seeking prior authorisation from the rightholder. Therefore, in principle, it is for that person to make good the harm related to that copying by financing the compensation which will be paid to the rightholder.”

However: “The indiscriminate application of the private copying levy to all types of digital reproduction equipment, devices and media, including in the case expressly mentioned by the national court in which they are acquired by persons other than natural persons for purposes clearly unrelated to private copying, does not comply with Article 5(2)(b) of Directive 2001/29.”

It bounced a further question, whether the Spanish law was consistent, back to the national courts.

Unlike most EU members, the UK has no private copying exemption. Home taping has never been legal here.

In 2008 composers and songwriters asked for consistency with Europe in 2008, stating that consumers should allowed by law “to transfer music they have purchased on to a portable device, while ensuring that a fraction of the value is enjoyed by those who create music and invest in in its creation”.

You can find the ruling (dated 21 October) here.

Jim Griffin’s bold plan to take P2P file sharing out of the black economy, and into the one that deals with green folding stuff, flopped because it couldn’t explain to songwriters how they’d get paid.

That’s president of the Songwriters Guild of America Rick Carnes’s view of Choruss‘ demise and he says it’s why the songwriters didn’t back the plan. Similar blanket licence proposals have been made by the Electronic Frontier Foundation, and others; but for Carnes these are little more than a rhetorical fig-leaf.

“The EFF doesn’t have a plan, they barely have a theory,” he says on the MusicTechPolicy blog.

Could a similar plan to take P2P legal work? Well, in 2007, the Canadian songwriters proposed a similar blanket licence – creating a “right to remuneration for music file sharing” – one backed by a tax. In their scheme, both end-users and songwriters who don’t like the terms could opt out.

It’s hard to find any other organisation that backs such a proposal, because few volunteers would be found – and the small amount they pay would not compensate for the possible destruction of other online businesses, such as Amazon, iTunes and Spotify. Nor would overseas artists take kindly to a unilateral step.

Nevertheless, it’s won tentative support from US songwriters.

“The SGA will continue to support the initiative as long as there is an opt-out included. Without the opt-out we cannot support them without more discussion about the details of the system. One of the things we tell songwriters is never sign a contract without understanding all the details. We adopt that same attitude in supporting legislation,” says Carnes.

Paul Sanders whose company came within a whisker of launching the first legal P2P service with Virgin last year, says Choruss fell down on the issue of liabilities. A legal P2P offering can’t hope to get every licensee in the world signed up – every owner of master recordings, every publisher and every song writer.

So there will be an exposure to infringement litigation. That’s fair enough if you’re a network owner – an ISP – or a service provider; you can reasonably claim good intentions. Instead, Choruss revived the old client/server model of Napster, this time with a revived AudioGalaxy.

“Once they went to the client model they became potentially liable, in my opinion. You can deal with what you can’t see in a free flowing network much more easily when your software does not actually hold an infringing copy in managed storage,” he told us.

You can read the Carnes interview at MusicTechPolicy.

The proposal had been pending EC approval, which has now been granted in the name of “preserving pluralism and cultural diversity”.

Good news for downloaders, no doubt, and a delight for record companies and publishers. But is it good for the music business in the long run?

A lack of business innovation plagues the music biz, where supply side reform is long overdue. Licensing music is tedious and territorial, and the mentality is stuck on unit shifting rather than licensing. So instead of trying to create new markets, with new and innovative products and services that we can’t even imagine yet – the industry may be tempted to view the taxpayer-funded boondoggle as a permanent handout. From Mystery Train to Gravy Train, if you like.

You also may feel a shudder when a cultural industry starts to rely on bureaucrats and politicians for its income. That’s not very rock and roll – nor is it very healthy for its independence in the long run.

But then this is France.

Google has always linked to other people’s stuff, and stayed out of retailing bits itself. Over time it’s blurred that line, without ever really crossing it. This was a line that Microsoft never really crossed either, although Windows Marketplaces were announced, then came and went phut, as regularly as Service Packs.

Now we can confirm that Google is gearing up for a Music Store – CNet’s Greg Sandoval hears this could be upon us as soon as the autumn, it may decide this high-minded distinction is no longer one worth preserving. The rumours strongly suggest Google will be integrating music into search – no surprise, there – but there’s plenty of speculation that it will go the final step, and retail the music directly.

Let’s put aside for a moment the China experience, where Google – with the full blessing of the major labels – launched a free MP3 download service, entirely supported by ads. This was a very unusual situation, where China’s dominant search portal Baidu was serving up MP3s without a license, hosted on an ever-changing network of obscure domains that nobody else could reach. Rights holders aren’t about to repeat the experience here – and with a market of willing buyers, there’s no reason why they should. So disregard it as a precedent.

The reason for Google’s reluctance to sell digital bits is pretty obvious: its market dominance as a search engine puts it directly into competition with online retailers, and puts them at a potentially crippling disadvantage. If Google is the first port of calling for getting to stuff on the web, why would anyone find a second? Google takes you directly to the checkout. It spells the end for any online retailer without massive scale, and the brand and resources to match.

But you can see the thinking, here, even if you don’t approve. For some time Google has eyed the rise of price comparison sites with some irritation. What value do they add, a Googler might ask? Most are little more than crummy pseudo-editorial sites, in the pocket of the largest vendors. Surely a classic case for intervention by algorithm. Well those price comparison sites are already earmarked for extinction and few will mourn their passing – they don’t really add much value. But then again, that doesn’t mean Google will be pushing out the bits itself. It may simply subsume price comparison into its existing apparatus.

And once again, a Googler might ask – why on earth go the extra step? It’s not as if the Chocolate Factory wants to sell you lawnmowers or TVs, the high-margin end of Amazon’s business. It’s only an MP3. In terms of scale, the world’s music is somewhere between 25 million and 35 million MP3s, but then only a small proportion of that really matters to a mass market retailer – you’ll recall the study that showed that of 12 million songs in (what we assume to be) the iTunes catalog only 3 million sold a copy in one year. Google has plenty of capacity and bandwidth – why not remove the extra step and sell it directly?

It has demonstrated how. Three weeks ago Google unveiled a section of the Android Market that sells music. (Yes, the Android store is Google’s only example of selling bits itself.) From the China experiment, Google knows who to call. Whether it wants to is another thing. For any global operator acquiring rights is a world of pain – the music business is still territorial, and the fragmentation of music publishing rights means it can take weeks or even months of work simply to find who owns what. This is not a problem an algorithm can answer.

Google is now so large it could probably buy the entire sound recording industry for small change – certainly less than a quarter’s revenue. Even if it does, the licensing headache doesn’t go away. So it will certainly be more effective for Google to employ an intermediary to sort this out.

If Google were to employ the same ruthless approach to music as it did with books, Google Music could be a serious challenger not just to every music retailer on the planet, but every producer and rights owner too. We’ll have to see if the company has been chastised by the experience, in which governments eventually turned against the landgrab. I suspect it hasn’t.