Opinion: Why Everyone Hates The Music Industry - InformationWeek

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10/11/2005
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Opinion: Why Everyone Hates The Music Industry

Forget technology and piracy, the record companies are their own worst enemies.

I recently read a research report from Forrester Research with the provocative title "Music Lessons: Is Your Industry At Risk?" That's a very important question these days, as the recording industry struggles with falling sales and critical challenges from new technology. No one wants to be the next passenger on that train.

But as I leafed through the exhaustive, well-thought-out report, I started thinking that the authors—along with most observers—may have missed the most obvious, most important points.

Subtitled "Why Media Monocultures Are In Big Trouble," the report posits that media businesses that derive all their revenue from a single source tend to exhibit rigid monopoly-oriented thinking behavior that makes them vulnerable to technological and cultural changes. True enough, but if you ask me, that's not what wrecked the record companies.

No, the record companies' real problem is that everyone hates them.

He Hate Me
Musicians hate them for habitually sucking the creativity out of the music and the profits from the CD sales. Usually they do it legally, if not morally, but all too often nave musicians with few options end up swindled out of their rightful earnings.

And music lovers—don't call us consumers; music can't be consumed—see the record companies as greedy, clueless profiteers quick to jack up prices while placing limits on what music gets released and how you can listen to it.

Record companies add little real value to the process of creating and distributing music, and technological advancements make their role increasingly irrelevant. Movie studios and publishing houses still stand for something, some artistic orientation, but the big record companies don't. These days, who knows or cares which label their favorite artists happen to have signed with?

The only people willing to defend the record labels seem to be a handful of superstar performers who have gotten rich on the blockbuster mentality pervasive in the music industry. Or in the film industry—movie studios seem determined to follow the same antagonistic path. Oh, and a smattering of radio DJs who rake in the payola to play what they're told to play.

Forrester report author Josh Bernoff (with Chris Charron, Jennifer Joseph, and Tenly McHang) acknowledges that the music industry "was out of touch with users," but that drastically understates the severity of the problem. It's not that vendors (musicians) and customers (listeners) aren't in touch with the record companies, it's that they know them and loathe them. And that was the rule even before the companies started suing thousands of their best customers.

The Five Stages Of Musical Death
Forrester's report argues that the music industry is finally coming to terms with its situation. Adapting Elisabeth Kubler-Ross' famous five stages of death and dying to track the music industry's suffering (no, I'm not kidding), it argues that the industry has moved beyond "shock and denial" (stage 1) over Napster to "anger" (stage 2) by suing file-sharers, through "bargaining" (stage 3) by offering digital music subscriptions and into "depression" (stage 4) when it realized that approach wasn't going to work. The fifth and final stage, "acceptance," comes as iTunes exceeds half a billion legal downloads and the industry tries new download services.

I'm not convinced. iTunes was a good start, but that service still has more digital rights restrictions than I'd like. And the companies are once again bickering with Apple over pricing and DRM issues. Plus, they're still suing listeners, and they still don't see their own culpability in their demise.

Making Money From Those Who Won't Pay
One positive sign: Universal Music, the world's largest record company, recently announced that it's "transforming itself into a broader entertainment company that derives more revenue from untapped sources like advertising and apparel," according to Reuters. The goal is to "tap into the enormous demand for free music, and generate revenue from those who can't or won't pay." Instead of being obsessed with controlling how people listen to music, a few record execs may finally be starting to recognize that they need a new business model, that selling recorded performances can no longer be the cash cow it was during the 20th century. (And really, is that such a bad thing? Most of the money from CD sales never reaches the artists anyway, and it makes more sense for records to be loss leaders for live performances and other merchandise. Mariah Carey might have to sell one of her houses, but she'll be OK.)

But most insiders still seem to want to finesse the rights issue. I recently chatted with Stefan Roever, CEO of Navio Systems in Cupertino, Calif. Navio supplies technology to record companies so they can "sell rights, and not just files." The idea is that these rights would offer more flexibility, because listeners could use the right to access the content on multiple platforms, for example, or to download the file again if your media was lost or destroyed. But I think that's putting the cart before the horse. People don't want "rights" to the music they buy. They want to own it. Only when everyone accepts that fact will we be ready to worry about what Navio is selling.

Don't Hate Me Because I'm Rich
It may be too late for the music industry. But what does Forrester's report tell us about other technology and media sectors? Well, I guess if your industry exists in a monopoly monoculture, heavily depends on a single channel and revenue stream, and steadfastly refuses to change along with advancing technology and cultural shifts, it's clearly time to start worrying. According to Forrester, that means TV networks, radio networks, and especially newspapers.

But I say all that stuff is just window dressing. If your vendors and customers hate you, you're dead.

Fredric Paul is Director of Online Editorial Development for CMP Media LLC, TechWeb's parent company.

TechWeb's editors are busy assigning and editing and linking and otherwise creating the content you see on TechWeb.com and the Pipeline sites, but we wanted the chance to tell you what we see and what we think about it directly. So, each week, The TechWeb Spin will bring you the informed insight and unique perspective of a different TechWeb editor: Fredric Paul, Scot Finnie, Tim Moran, Stuart Glascock, Alexander Wolfe, Val Potter and Cora Nucci. We hope you like it, and even if you don't we hope you take the time to tell us what you think about it.

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