Nine things the record industry should note about the future of music

Nine things the record industry should note about the future of music

2003.

1. It’s the pricing, stupid.

Okay, it isn’t just the pricing. Fans also want choice and convenience. They want real choice in the artists, albums and songs they can purchase, they want the ability to purchase just the 3 or 4 songs on modern pop albums that really catch their interest, they want the convenience of getting their choice in multiple formats to play on any device they own.

2. The Genie is out of the Bottle. Advice – let it go.

No amount of prayer, pleading or policing will make downloading music go away. Bullying, creating scapegoats, scare mongering and engaging in hi-tech vigilantism will not win you friends or customers. Instead of suing college students and other music fans, try offering them an online music product that will command their attention and money.

3. DRM is DOA

There’s a fundamental reason why digital rights management (DRM) will not solve the record industry’s woes – the human ear is an analog device. Every ‘digital’ recording must be converted into analog sound waves to be perceived by human beings. If it can be heard, it can be re-digitized at high quality sans any DRM.

Moreover, even if a completely hack-proof DRM scheme could be developed, every CD currently in circulation would still provide would-be infringers with pristine masters.

4. Technology doesn’t ‘steal’ music. Dissatisfied music fans ‘steal’ music.

Make no mistake. Every person you denounce as a “thief” is a music enthusiast and potential customer. Piracy is largely a symptom of consumer dissatisfaction with industry offerings. And it is not just an online problem. As long as CDs are priced exorbitantly, the incentive for piracy – online and physical – will persist. It’s laughably easy and cheap to “manufacture” bootlegs – whether in virtual copies or otherwise.

BTW, the proper term is copyright infringement. Calling it ‘theft’ might satisfy your sense of moral outrage but it won’t bring you any closer to solving your problem.

5. Artists and their rights matter.

On the issue of moral outrage, you should do unto artists as you would have their fans do unto you. Part of the ambivalence that music fans have about downloading music for “free” is the sense that record labels rip off the artists anyway. If fans truly understood the extent of unfairness with which you treat the majority of their idols, that ambivalence would harden into downright hostility.

The answer? Play fair. That means no more 7-album deals, bogus royalty reductions, excessive recoupables, controlled composition clauses, domain name hi-jacking, etc. Treat the talent as valued partners; Hollywood and the professional sports reluctantly did that decades ago and are thriving today.

6. Technology isn’t the enemy, it’s a potential ally.

P2P, MP3, AAC, as threatening as technology must seem to you, it can help create some win-win solutions. Think catalogs and indie music for example. If you eliminated access to the fewer than 50 multi-platinum albums a year that the industry salivates over, it wouldn’t make a dent in the demand for music online because people care for a lot more than the current pop flavor of the day.

The fact is that the current major label dominated system doesn’t do a good job of marketing and distributing current non-pop and catalog material – to the continuing frustration of artists and fans alike. There is a tremendous opportunity here to leverage catalog materials in new and exciting ways. But don’t forget to play fair with artists and fans. Paying mechanical royalties of 2 cents per sale to songwriters on classic songs sold in 2003 is simply unconscionable. Charging consumers an arm and a leg for music that has generated profits for decades is also verboten.

7. Don’t meter music. Make music ubiquitous!

The key to success with music online is in making music more easily and widely available, not locking it up and metering its use. You must increase, not reduce, access to music.

The last thing you should be doing is devising ways to prevent people from listening to music. Apart from the fact that it is an impossible task (see point#3 – DRM is DOA - above), you’re competing with films, video games, books, television, and other forms of entertainment for people’s leisure time. Viewed properly, your task is to gain as large a share of the 24 hours in a day with compelling, convenient and affordably priced content that the consumer values and will pay for.

The only way to make online music ubiquitous and profitable is in collaboration with technology partners, especially broadband ISPs and consumer electronics players. But don’t forget rule #1!

8. It’s bigger than the music industry.

First, artists – the creators without whom there truly is no content – have not been adequately represented in the little that has passed for debate about the future of music and copyright. Next, the changes that the record labels and the movie studios are fomenting affect a lot more than copyright but extend to freedom of speech, privacy and other civil liberties. With all due respect, the global information society cannot afford to have the music industry in the driver’s seat on these critical issues.

Already, the RIAA and MPAA’s litigiousness and bullying is having a chilling effect in academia. Further, it adversely affects the economic interests of the telecommunications, computer hardware, software and consumer electronics industries whose hundreds of billions of dollars in revenues dwarf the record industry’s $12 billion.

9. You must prove your relevance. How? By reinventing the recording industry.

In the past decade or so, the minimum cost required to create the two essential music business assets – copyrights in music compositions and sound recordings – has dropped remarkably, thanks to new recording technology. Yet, neither musicians (your suppliers) nor music fans (your customers) have benefited economically from this change because the old industry with its bloated economic infrastructure is fossilized. Way too much is spent on promotion and marketing, to the main benefit of radio and Viacom’s music video properties.

Technology has also undone CDs and other physical media as containers and de facto units of trade. This means that unlike CDs, introducing audio DVDs will not create windfall revenues. In fact, you can no longer lock people into paying for music they don’t want – regardless of the medium. If the album is to remain relevant as a format, it has to represent compelling value to the consumer.

If there is any single lesson to take away from the success of the MP3 format, it is that convenience, choice and affordability trump sound quality for the modern music fan. Give the people what they want!