May 28, 2004

The Record Labels' Problem: They Are Obsolete

So USA Today is running an article about bands who support filesharing, and the reasons why bands support it and record lables don't. What it comes down to is this: filesharing (allegedly) hurts record labels, but it helps artists (financially). Why? Because the Internet is doing one of the millions of things it's advocates promised it would do back when we first started to get it in our homes: eliminating the middle-man. By distributing their music online, artists can generate audiences for their concerts (which is what they need to get money) without record labels. Furthermore, once they have generated these loyal fans, who will even help them distribute their music online, and become all the more loyal as a result, they can afford to pay for the recording of their own CDs independently of record labels, and sell them at concerts and online and actually make a profit on CDs (which artists signed to record labels rarely, if ever, do).

So what is the record lablels' problem? No one needs them any more, their current business plan has no future, and unless they try something new, come up with some new business model on which people actually need them, they may soon have no source of profit. What are they going to do about it? Sue everyone in sight, and lobby the government to make laws that stifle technological advancement, hurt both consumers and artists, and give them money. Sound like someone else we know? As a matter of fact, a similar fear came upon the movie industry many years ago, and MPAA president Jack Valenti insisted that the VCR would mean the end of the movie industry. This, of course, proved false. Admittedly, filesharing and digital copying represent a much larger threat to traditional business models for music (and movies, and software), as infinite copies can be made with no loss of precision, but the key point is that it is not a threat to the future creation of new music (or movies, or software) but a threat to traditional business models.

What does this mean? Well, first, the RIAA, the MPAA, and the SCO Group need to be told in no uncertain terms that their tactics will not be tolerated, and that we will not allow technology to stagnate in order to fill their bank accounts. Second, after learning this lesson, said organizations need to do one of two things: find a business model that is actually profitable in a world with the technology available today and that doesn't rely on income from lawsuits in order to be so, or die. In the case of the MPAA, this shouldn't be a problem: they make tons of money at the box office. In the case of SCO they might need some more capital to do anything, but they know where to find it (they have been getting plenty of money from Microsoft), and there are plenty of software companies that have been able to make a profit without suing everyone in sight. In the case of the RIAA, record labels simply need to adjust to provide services that artists still need in the digital age. This should be easy enough. For instance, people could easily be persuaded to pay money for downloads if they were fast, reliable, of high quality, and easy to find. This is a service a label could provide. They can also continue to provide the services they do now, as these things still need to be done. What the Internet changes is that it is now possible for artists to perform these tasks themselves. If labels can do them better/cheaper/more efficiently than the artists could themselves, then they will still have a viable business. What has happened then? Competition. Hopefully this will force record labels to come up with an arrangement that is beneficial to both artists and consumers in order to survive. Wouldn't that be something?

Posted by Kenny at May 28, 2004 12:00 AM
Trackbacks
TrackBack URL for this entry: http://blog.kennypearce.net/admin/mt-tb.cgi/30

Post a comment





Return to blog.kennypearce.net