The report slammed record companies for ignoring MP3 and warned they did so at their peril. Jupiter analyst Lucas Graves advised record labels to embrace MP3 or "pay the price" when downloadable music goes mainstream.
According to Graves music labels' obsession with rights-enabled formats means they are missing the opportunity presented by MP3."The music industry is beginning to come to terms with the MP3 phenomenon, which has been at once overhyped and underappreciated," he said. "However, the music industry's best efforts still fall short when it comes to preparing for the day when digital music distribution is commonplace. Companies that focus on strict security measures rather than maximising the value proposition will lose out," he warned.
Graves advises the labels to take advantage of MP3, both through promotional offers and tapping into the huge MP3 music community. "The stigma attached to MP3 should not prevent the labels taking advantage of what is the most established digital music format," he said. "While it would be foolish to port their whole catalogue onto MP3, while they wait for the final specifications from the SDMI they should take advantage of the MP3 community," he said.
MP3 is here to stay, according to the survey. Questioned on which format they used on a regular basis (more than once a month)12.8 percent of online respondents cited MP3, compared with just 1.3 percent for Liquid Audio. "MP3 will continue to be a power and will continue to mean free music until a format comes along that gives people the same freedom," said Graves.
Adrian Strain, communications director of record industry body International Federation of Phonography Industry (IFPI) believes the industry's position on MP3 remains unchanged. "I cannot comment on this particular survey as I haven't seen it but the record industry's position is that, over time, the majority of consumers will be on the side of protected formats," he said. Defending the SDMI's (Secure Digital Music Initiative) attempt to create standards, Strain denied this was holding back the uptake of digital distribution. "On the contrary, it is not being held back but is being enabled by what the SDMI is doing," he said.
Internet manager for record company BMG Rob Wells believes the MP3 bandwagon is "full of hypocrisy". "It is all very well for small artists to embrace the format, but when they get bigger they are going to want to get paid for their music," he said. Admitting MP3 was a big problem for the record industry, he hit back at MP3 aficionados. "If consumers think we are doing things wrong, my answer is that they are damaging the artists they claim to be fans of. We are a rights owner and people who sign to us do so because we protect their rights," he said.