The quickening

The court decision last week throwing out the music industry’s lawsuit against Grokster and Streamcast/Morpheus marks the transition to the next phase of the digital content battle. It’s not the end. Certain content owners will continue to use every means at their disposal to slow the development of digital content distribution. They are suing VCs, suing end-users, and, most important, continuing to withhold content and demand that licensed services impose significant restrictions. They will appeal this decision, and might win. Though by that time, it will be too late.

It’s not that hard to figure out what users want from digital music, and it wouldn’t be hard to get there technically. What’s missing is agreement on the business terms. Legalizing Morpheus and Grokster ratchets up the pressure to resolve that dispute. That’s the key.

Music company executives are not irrational. So far, the costs of fighting a rear-guard action have been far less than the perceived costs of opening the floodgates. The strategic thinkers in the content industries have a logical strategy: delay the onset of widespread digital distribution until platforms are in place to control it. That means shifting from general-purpose PCs to things like home media servers and handheld players with built-in digital rights management. If the Streamcast decision sticks, it will be that much harder to cross the bridge to controlled platforms.

Now the spotlight turns to the licensed services, which are gradually becoming less restrictive and including more content. Two significant developments here: RealNetworks acquiring, and Apple introducing its digital music offering. Both are causes for hope.

So we come to a fork in the road. The content industries will try to use the Streamcast decision to convince legislators that the apocalypse is nigh. They will say this shows the need for even more draconian copyright protections and penalties. Meanwhile, reformers within those industries and entrepreneus outside will argue for a different course. They will urge a reboubling of efforts to build licensed music services that generate significant revenues, because Plan A is failing.