Music downloads: Dancing to a different tune

A mystery EU source told Reuters this afternoon that the deal will be cleared on Wednesday, as long as a raft of concessions are made.

For one, German giant Bertelsmann will have to "progressively exit" from AOL Europe, in which it has a 50 per cent stake. This will sever any potential tie-ups between Warner's music interests and Bertelsmann's BMG.

AOL has also agreed that AOL France, a joint venture with Vivendi, will be similarly restructured.

Vivendi itself is already under scrutiny from the EU legal beagles over its planned merger with Seagram, which owns Universal Music.

According to Reuters, Time Warner has also said it will not discriminate against non-AOL affiliated internet service providers for the provision of online music for five years, and will make its music available on other internet systems. It will also have to make its music compatible with at least three software music players not owned or controlled by it or AOL.

If you're still with us (and interested), AOL has also (if those sources are to be trusted) committed not to force content providers wanting to sign a deal with AOL in the US to sign an exclusive deal in Europe for three years.

This all begs two rather important questions. One: why would they want to go ahead with the merger if some of its biggest benefits cannot be realised - at least in the short term?

And two (and more fundamentally): where precisely is all this lovely online music lucre going to come from? The music companies seem terrified of Napster and are willing to spend millions closing it down, and the regulators are very twitchy when it comes to the meeting of music and online interests.

Call us luddites if you want, but in an era when there's still considerable doubt whether Napster really has dented record sales, you have to say that the long-term success of music downloads is less than assured. Napster has a headstart, but who's to say that it will remain the platform of choice? Besides, how does it intend to make money going forward?

Sure, online music will be a massive business - but big enough to warrant the sums associated with Napster? Big enough for the regulators to know for sure that a deal between AOL and Time Warner will lead to anti-competitive practices?

Maybe the regulators have got it right. We'd rather they acted now than let a significant part of cyberspace be dominated by a monopoly. The internet will revolutionise the music industry - somehow.

But it seems that the crux of this argument has been lost in the rhetoric. Shouldn't we be asking exactly how - and how much - money is going to be made from online music?

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