Edgar Bronfman Got The Wrong Message About Scarcity

from the time-to-repeat-that-lesson dept

Warner Music Group's chairman Edgar Bronfman is no stranger to failing to see the big picture when it comes to online music. After all, back in the summer of 2000 (when he owned Universal Music), Bronfman was the first music exec to rant and rave about Napster and say he was preparing an army of lawyers to start suing people for downloading music. In retrospect, many now admit that Bronfman's declaration of war on Napster kicked off the recording industry's problems. It was clear then that Bronfman simply did not understand the economics of digital goods, and in the eight intervening years, it appears he hasn't learned very much. While he's dabbled in digital music, the strategies always come back to him trying to control how the music is used, providing less value for music fans. Amusingly, he then complains that downloadable music isn't easy enough. Of course, the only reason that's true is because of the restrictions he insists must be included. In discussing Warner Music's latest earnings, Bronfman complains about the ubiquitous nature of music, and insists that the strategic response is to create additional artificial scarcity. This is exactly the opposite of what he should be doing. All that does is shrink the market, piss off potential customers and create wide open opportunities for competitors to better serve the market. Ubiquity isn't a problem -- it's an opportunity. There are plenty of ways that Bronfman and Warner Music could embrace that ubiquity, expand the market, increase the value and profit handsomely from it. But, instead, Bronfman seems stuck on his failed plan from the summer of 2000, and yet another opportunity will be squandered. Update: Then again, news is coming out that Universal Music will at least experiment with DRM-free music "for a limited time." That's a step in the right direction, just 8 years too late.


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  1.  
    identicon
    nonuser, Aug 9th, 2007 @ 7:56pm

    they need tiered offerings

    The labels should think about away a portion of each act's music on a good-faith, promotional basis, while reserving the rest for sale.

    I'm not sure how this would work, but maybe there could an analog of a "director's cut" for hit tracks... the 3-minute version is given away, while the long jam and alternative mixes are available for sale. And you'd have to buy the non-hit album tracks.

    I think a rough consensus could be built around this type approach. Then maybe they could get the bands involved in asking people to cooperate so the economics could work for everybody.

    This is not really radical in that pop music has always been freely available (legally) in some sense... if you have a radio, you could get the songs you liked for free, just not necessarily how and when you wanted it.

     

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  2.  
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    Anonymous Coward, Aug 9th, 2007 @ 9:15pm

    I just purchased 'god has a plan for us all' by Angtoria after stumbling on the complete album while cruising around easynews.

    Finding music is easy. Buying it is easy.

    Why can't you asses make it legal?

     

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  3.  
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    Wes, Aug 10th, 2007 @ 5:15am

    The record industry is just dumb.

    I know a lot of people that get hopelessly hooked on digital music. If you actually consider what a pirate really wants, all the music he desires at his fingertips, its not to hard to work backwards from there, charge a subscription or even pay by the # of times listened to. It would not take long to have a portfolio of paying customers who pay monthly, and have access to an all artists entire catalogue. Considering, there are 8billion people on the planet, if you could get even 1/3 of them to give you a few cents a day for access to ALL catalogues the royalty scheme would kick in with the principle of economies of scale and the music business is saved.

    Fundamentally, the problem is that music vendors don't understand the internet. In almost all cases you have to give something away (free trial access to the system), then you get them hooked and reel them in :p

     

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  4.  
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    The infamous Joe, Aug 10th, 2007 @ 6:08am

    I got whachoo want.

    If you actually consider what a pirate really wants, all the music he desires at his fingertips, its not to hard to work backwards from there, charge a subscription or even pay by the # of times listened to.

    It's not exactly that simple-- you have to have a reason for the 'pirate' to want to pay for your music-- as it is, illegally downloading entire cd's is a simple and fairly quick task. It's also clear that these pirates don't care much that what they do is illegal-- so just offering the same thing they can do for free and charging any amount for it won't work-- you have to tie it in with something that they can't simply download from someone that copied it and uploaded it.

    ..and even a free service will fail once they smear DRM all over it.

    Simply put: The labels are hopeless. Enough wishing they'll see the light-- forget rehabilitation, it's time for execution.

     

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  5.  
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    Paul`, Aug 10th, 2007 @ 6:46am

    Torrent Fan here

    If music downloaded legally from the net was easy to use on any device I decide to play it on and actually worth the money it costs to buy I'd happily buy it. Why spend 99c a song when the recording artist will get about 3c of that? Why pay like $12 for an album that costs the record company nothing but cheap bandwidth when i can get the music for free, both in cost and effort, and then support the band or artists I love by buying merch and concert tickets?

     

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  6.  
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    Wes, Aug 10th, 2007 @ 6:49am

    I don't fully agree.

    By offering back catalogues, pictures and maybe some videos and charge a low rate based on BT architecture, you an offer catalogues and other recordings that for the most part are unknown. By turning the entire world into a royalty pay per play scheme, your cash flows would increase exponentially.

    Are you saying that if you had access to all the beatles recordings EVER you would not become addicted to the system?

    To me its only logical, you can get 1000 radio stations to pay you 100$ or you can get 50 million people to pay you a couple of cents a day.

     

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  7.  
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    The infamous Joe, Aug 10th, 2007 @ 8:34am

    When in Rome..?

    I'm saying that I can already potentially find everything the Beatles ever recorded, and I don't have to pay anyone. If it's been recorded into a digital format then chances are I can find it somewhere. (I'm a very determined person).

    You simply have to add value to it-- with promotional ticket sales (first 1000 people to download the song can buy the tickets to the concert 1 week before they go for sale to the public) or with a gimmick (hey, this NIN cd changes colors) or even, as with the white stripes and others-- offer it on some dumb little limited edition USB drive.

    The fact is, the price of music, once produced, will fall to zero. That is not up for argument-- it is a simple fact: Anyone with moderate computer knowledge can create an infinite number of identical copies and distribute those copies for next to nothing. The problem with Record Labels is that they are trying to fight that fact (They insist on charging $0.99 for reproducing something when millions of other people will gladly do it for free)-- instead of accepting the fact and trying to find a way to use it to their advantage.

    That above fact in mind, a pay-to-play scenario will fail just the same way-- and pay-per-play doesn't work well with offline music on an mp3 player or whatnot.

     

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  8.  
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    Wes, Aug 10th, 2007 @ 10:32am

    My 2 cents

    I guarantee you can't find everything they ever recorded... some stuff may have never even been released. There are different releases of the CD's for each geographic region as well as different releases within those markets. What about singles? what about demo's? what about live stuff? The volume of stuff that the industry has in archive is astronomical. Not leveraging this and allowing one copy of a song on itunes that is DRM is a load of crap.

    I think a counter system for your ipod that counts how many times you listened to a track is not that hard to imagine (and if it cost you a few cents to listen i can't see anyone even bothering with piracy. Who can honestly say they don't have 2c to listen to a song? By reducing the cost to at or around the free offering, you leverage convenience and time savings as part of the marketing mix. Do you honestly want to spend all of your free time tracking down rare music or would you rather explore the magical world of perfect recordings at your fingertips?

    Leveraging the old catalogues of music is just one element. There is no doubt that value added services would increase their offering(USB drives, images, posters...blah blah blah).

    In my opinion this is the only solution that would satisfy everyone concerned. The beatles are just one example. If you could do this with all of the catalogues you would have people so addicted to the service they would be unable to turn it off.

    You could pick a playlist the night before and have it synced up for your morning jog and be listening to anything you want.

    My 2cents

     

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  9.  
    identicon
    The infamous Joe, Aug 10th, 2007 @ 11:30am

    Inflation.

    some stuff may have never even been released.

    Well, as soon as it is released, it can (and probably will) be copied, and after that finding it isn't all that tough.

    Who can honestly say they don't have 2c to listen to a song?

    I listen to music all day long.. from the time I step my car to go to work until it's time for bed, I have music playing from my mp3 player. That 2c will add up pretty quickly. Not to mention, what if I decide that American Pie is just taking too damn long, and skip it 1/3 the way through? Also, any counter system can be beaten, you're still in the same boat. Pirates will *still* opt for free over a paid service unless you give them a reason free isn't better-- even with your 'magical world of perfect recordings at your fingertips', once someone downloads it, it can be copied and then a pirate can download it for free from somewhere else. You're doing exactly what the labels are trying to do-- you're trying to stop people from driving the cost of digital music recording to zero. Stop it. It's going to happen whether you like it or not. Adapt. :)

    The easiest way, in my humble opinion, to adapt is to have the labels commission a band/artist to record an album and go on a tour-- for a set price (like professional athletes) and to give away the album and make all the money from live concerts and connected merchandise. You can't copy the experience of going to a concert, so people who want it will have to go through the labels to get it, but the music is free-- so pirates are no longer pirates, but instead they are 'potential customers'. But, what do I know?

     

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