Data processing: financial – business practice – management – or co – Automated electrical financial or business practice or... – Discount or incentive
Reexamination Certificate
2000-01-12
2003-06-10
Rice, Kenneth R. (Department: 3627)
Data processing: financial, business practice, management, or co
Automated electrical financial or business practice or...
Discount or incentive
Reexamination Certificate
active
06578008
ABSTRACT:
FIELD OF THE INVENTION
The invention relates generally to online business methods, and more specifically to a method for implementing an online record business whereby large numbers of unknown artists can have their music made available to the public and wherein the public votes on which artists they like and whereby the online record business enters into recording contracts based on the public voting.
BACKGROUND OF THE INVENTION
Music is one of the most popular forms of entertainment in the world, but it is also a big business. According to the Recording Industry Association of America, domestic sales of recorded music were $13.7 billion in 1998, or more than one-third of worldwide revenue.
Of the $13.7 billion in revenue, “rock” remained the dominant genre, with 25.7% of the market in 1998. The next most popular category was “country,” with 14.1%. Rhythm and blues (“R&B”) came in next at 12.8%, with “pop” and “rap” coming in at 10.0% and 9.7%, respectively. As can be seen, these five categories of music are responsible for over 72% of all sales, and it is these genres to which the present application is directed. Moreover, the buyers of these categories of music are also the most Internet-aware.
The compact disc (CD) became the dominant format for recorded music in 1992, the year in which its market share (in terms of dollars, not units) barely exceeded that of cassettes (46.5% vs. 43.6%). However, in terms of dollars, CDs now outsell cassettes by a 5-to-1 margin. The shift to this new format did not take place overnight, but it did take place. It is Applicants' belief that the same transformation from CDs to a purely digital format is inevitable.
The sale of prerecorded music is mostly of interest to the younger consumer, and over 73% of revenue is derived from buyers aged 10-39. The importance of this is the fact that, except for the 18.1% market share attributed to buyers 45 and older, the next greatest demographic segment is buyers aged 15-19, with 15.8% of the market; and it is this category of buyer that is among the most Internet-aware.
In 1998, 85.2% of music sales took place in retail stores, with record clubs having a distant 9% share of the market. By contrast, the Internet was in distant last place at only 1.1%. Given that the market for domestic music is almost $14 billion, each one-percent of additional market share translates into $140 million in sale, assuming no growth in the market as a whole.
The music industry has not changed very much during the last few decades. Record companies typically require artists to sign exclusive contracts, and in exchange, the record labels develop, distribute, and promote the music. Additionally, the major record labels (as well as several “independent” labels) control, to a great extent, the type and quantity of recorded music that consumers can buy.
This existing system limits artists and consumers in the following ways:
Few artists can sell enough music to cover the high distribution and promotion costs. These costs include producing CDs and tapes, inventory and retail chain management as well as television, print and radio promotions and public relations efforts.
The majority of artists can only reach limited audiences due to finite shelf space at retailers and limited air time on radio and television stations, thus limiting the choices available to consumers.
There is very little communication and exchange of information between artists and consumers. For example, artists do not readily know who is buying their music or how to contact them, and consumers often do not have an opportunity to interact directly with their favorite artists.
Because of these limitations, the number of artists served by the existing music distribution system is small compared to the universe of musicians with commercial aspirations. According to a recent Gallup poll, over 25% of the U.S. population over the age of twelve, or 53 million people, are active music-makers. In addition, according to the National Association of Music Merchants, approximately 62% of U.S. households contain an amateur musician. These musicians represent a broad spectrum of artists including hobbyists, amateurs, semi-professional and professional musicians.
The World-Wide Web is also emerging as an important source of music, dramatically altering the way consumers discover, listen to and purchase music. According to Jupiter Communications, domestic sales of recorded music over the Internet are projected to grow from approximately $327 million in 1999 to $2.6 billion in 2002. The Web offers music fans major advantages over traditional media, such as unprecedented interactivity and access to new and archived music content on demand. Since music initially appeared on the Web, the number and types of music Web sites have expanded to include content, e-commerce and downloadable music sites. As a result, both consumers and artists have embraced the Web as an attractive medium for exploring and distributing music content. Forrester Research estimates that approximately 50 million individuals will be capable of downloading and playing digital music by the end of 1999. In addition, a number of artists, such as Public Enemy, Green Day, Hole and Todd Rundgren, either sell CDs directly through their Web sites or allow visitors to purchase and download digital music.
In recent years, consumers have increasingly used their computers to play music. Dataquest estimates that in 1998, 30% of U.S. households had multimedia PCs with a sound card, speakers and either a CD-ROM or DVD-ROM drive. Consumers can now play CDs on their computers with the ease and fidelity formerly associated only with stereo systems.
However, music files can be very large. For example, a three-minute song can occupy more than thirty megabytes of storage. Storing and transferring audio files can be expensive and slow. To address this problem, compression formats have been developed. One of the first widely accepted standards for the compression of music was “mp3”, adopted by the Moving Picture Experts Group (MPEG). There are also competitive formats that may receive more widespread industry and consumer acceptance. These formats have different and additional features including SDMI (Secure Digital Music Initiative) and proprietary audio formats from companies like Microsoft Corporation and AT&T Corp. The mp3 standard offers at least 10:1 compression and audio integrity at near-CD quality. Mp3 playback is currently available on most operating environments including Microsoft Windows 95, Windows 98, Windows NT and MacOS, most major versions of UNIX and many other operating environments.
Capitalizing on the growing popularity of mp3, Diamond Multimedia Systems, Inc. introduced the Rio, the first commercially available mp3 portable player, in November 1998. Over 250,000 units have been sold to date. Several other manufacturers, including Creative Labs, Thompson Multimedia's RCA division, LG Electronics and Samsung, have recently released or announced plans to sell portable mp3 players.
The development of compression formats like mp3 has made it practical to transmit music over the Internet. However, until recently there have been few legitimate sources of downloadable music on the Internet.
The distribution method of recorded music has changed very little over time. Until recently, a typical arrangement required solid relationships between recording companies and distributors. It is believed that eventually, recording companies may distribute digitally their music directly to the consumer.
The following discussion relates to currently-available online promotion and distribution of music and music-related products.
Traditional music industries companies, including BMG Entertainment, a unit of Bertelsmann AG; EMI Group plc; Sony Corporation; Time Warner, Inc. and Universal Music Group, a unit of the Seagram Company Ltd. have recently entered in the online commercial community and are currently backing the SDMI security format.
Examples of providers of online music content are Emusic.com Inc. (formerly GoodNoise
Caesar Rivise Bernstein Cohen & Pokotilow Ltd.
Rice Kenneth R.
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