The Music Industry Doesn't Understand Their Own Business

from the do-you-realize-what-you-just-said? dept

It's no surprise that the folks who run the music industry don't understand the business that they're in, but I didn't expect them to admit it. In the latest article analyzing last week's deal to sell the label-owned-and-created Pressplay to Roxio (so they can rebrand it as Napster), a top executive from Sony Music is quoted as saying, "We are in the content business. We don't have to own the highway necessarily unless it is strategic to do so." That statement shows just how much they don't understand what the business is that they're in. Not that Pressplay was worth anything to them (since it was built so terribly) - but the simple fact is, thanks to digital technology, the music industry needs to realize that they're not in the content business. They were never in the content business. They have always been in the content delivery business. Not understanding that simple fact is the reason they're in the mess they're in today - and the fact that they still don't see that (and, in fact, are moving in the opposite direction) only furthers the notion that the current record labels are dinosaurs that are not long for this world.
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  • identicon
    Anonymous Coward, 27 May 2003 @ 1:08am

    Not so simple

    The music industry does, in fact, have the funds to pay for better equipment, better studios, better technicians to make good music. They also hold exclusive arrangements with large performance venues. Independent artists are lacking in this arena, which is why they never become anything more than your local fat-white-programmers-at-the-local-bar-who-wear-rasta-wigs-on-friday-nights-and-think-they're-cool.


    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 27 May 2003 @ 7:26am

      Re: Not so simple

      That's simply not true. Anyone with $60,000 a night can book any venu in the country. The issue being that your average bar band can't even come close to paying for it. If your issue is big music being bad because it's big, propose an alternative that will work.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 27 May 2003 @ 8:33am

        Re: Not so simple

        So, somebody still has to pay the bills. I don't know where techies get this notion that music has to be inherently free. We pay for transportation infrastructure through taxes, tolls, fares, so why shouldn't the internet and therefore music cost money too?

        reply to this | link to this | view in chronology ]

        • icon
          Mike (profile), 27 May 2003 @ 8:59am

          Re: Not so simple

          So, somebody still has to pay the bills. I don't know where techies get this notion that music has to be inherently free. We pay for transportation infrastructure through taxes, tolls, fares, so why shouldn't the internet and therefore music cost money too?

          Economics says that if the marginal cost to make a copy is zero, the price will eventually get driven to zero, if there's a competitive market. Anyone producing into such a market, needs to realize the risks involved, and figure out a business model that takes that into account.

          In the case of the music business, the actual content alone is not the business to be in. The music delivery business is a different story.

          I have no idea how the "transportation infrastructure" analogy has anything to do with music, which is not a tangible product like roads.

          reply to this | link to this | view in chronology ]

          • identicon
            Anonymous Coward, 27 May 2003 @ 3:41pm

            Re: Not so simple

            "Economics says that if the marginal cost to make a copy is zero, the price will eventually get driven to zero, if there's a competitive market."

            Which begs the question of, why would people compete to make free copies? People don't want to waste their time. The fact is, downloading music does cost time and labor.

            "Anyone producing into such a market, needs to realize the risks involved, and figure out a business model that takes that into account."

            Again, that is a case of techies assuming a magical source of money, without taking responsibility. If they cannot propose a better way for the music industry, then they have no right to complain.


            "In the case of the music business, the actual content alone is not the business to be in. The music delivery business is a different story."

            This is like saying that Hollywood should stop making movies and get into the trucking business. Without content, there is no delivery business.


            "I have no idea how the "transportation infrastructure" analogy has anything to do with music, which is not a tangible product like roads."

            The computers, routers, hubs, wires, cables, wi-fi transmitters, etc. are every bit as tangible as roads.

            reply to this | link to this | view in chronology ]

            • icon
              Mike (profile), 27 May 2003 @ 4:02pm

              Re: Not so simple

              Which begs the question of, why would people compete to make free copies? People don't want to waste their time. The fact is, downloading music does cost time and labor.

              The vast majority of people who make music these days don't make any money doing so... and yet they continue to do so.

              Again, that is a case of techies assuming a magical source of money, without taking responsibility. If they cannot propose a better way for the music industry, then they have no right to complain.

              Ok, well, I've suggested numerous ways of making money, but if you prefer to ignore them, that's your issue.

              (a) putting more emphasis on live performances.
              (b) increasing "fan club" support
              (c) programs that require support from fans prior to creation of albums
              (d) offering additional special features to those who buy albums or join fan clubs.

              All of these things get a boost from file sharing.

              Anyway, this doesn't really matter to my point, which is pretty straightforward, even if you don't want to believe it (so, I'll scream it, because it's clearly not getting through): NO MATTER WHAT THE MUSIC INDUSTRY WANTS, PEOPLE WILL SHARE MUSIC FOR FREE. THUS, IT'S BETTER TO FIND BUSINESS MODELS THAT SUPPORT THAT WORLD THAN COMPLAINING ABOUT IT.

              This is NOT an issue of "techies want stuff to be free". This IS an issue where the fundamentals of the market have changed, such that the price IS going to zero, no matter what you want... and as a business, record industry execs need to learn how to deal with it.

              This is like saying that Hollywood should stop making movies and get into the trucking business. Without content, there is no delivery business.

              Um. No. You've (once again) missed the point. At no point did I say they should get out of making content. They should get out of the mindset that they are selling content. The content is still necessary - and they make money on the content delivery...

              The computers, routers, hubs, wires, cables, wi-fi transmitters, etc. are every bit as tangible as roads.

              And... all of those things are paid for. What's your issue?

              reply to this | link to this | view in chronology ]

              • identicon
                Anonymous Coward, 27 May 2003 @ 4:45pm

                Re: Not so simple

                >The vast majority of people who make music these days don't make any money doing so... and yet they continue to do so.< br>
                Still, some people make lots of money, and they have far more listeners. Even your fanciful laws of economics will have to acknowledge that there is a finite supply of superstars, therefore the market can be manipulated.

                >(a) putting more emphasis on live performances.

                Tried and tested. The fate of classical music industry illustrates that recordings simply win out over live performances. People don't like the inconvenience of going to performances.

                >(b) increasing "fan club" support

                How do you create fan clubs in the first place, unless you have promotion money? Fan clubs become bastions for stalkers, pirates, and other detractors. You can try starting a rock band, creating a "fan club", and see how willing people are to give you money.


                >(c) programs that require support from fans prior to creation of albums

                Getting fans to feel sorry for superstars and therefore giving them money? Yes, please contribute to the Michael Jackson Charity Drive.


                >(d) offering additional special features to those who buy albums or join fan clubs.

                And for $19.95, you'll also get this toothbrush that goes under the gumline....

                >NO MATTER WHAT THE MUSIC INDUSTRY WANTS, PEOPLE WILL SHARE MUSIC FOR FREE. THUS, IT'S BETTER TO FIND BUSINESS MODELS THAT SUPPORT THAT WORLD THAN COMPLAINING ABOUT IT.

                People want everything for free, but that doesn't mean they should get it free. Shoplifters would like to take everything out of stores, but we stop them.

                >Um. No. You've (once again) missed the point. At no point did I say they should get out of making content. They should get out of the mindset that they are selling content. The content is still necessary - and they make money on the content delivery...

                So, only some people can make that content, and therefore provide specialized labor. Whether other people want to deliver the content via trucks, couriers, disks, or the internet is moot.

                >>The computers, routers, hubs, wires, cables, wi-fi transmitters, etc. are every bit as tangible as roads.
                >And... all of those things are paid for. What's your issue?

                Paid by whom? Money doesn't rain out of the sky, last I checked. Highways expect users to pay for them directly or indirectly, so why shouldn't the internet? Music downloaders are the 16-ton trucks of the internet, so it's only natural that they should have to pay more.



                reply to this | link to this | view in chronology ]

                • icon
                  Mike (profile), 27 May 2003 @ 5:00pm

                  Re: Not so simple

                  Still, some people make lots of money, and they have far more listeners. Even your fanciful laws of economics will have to acknowledge that there is a finite supply of superstars, therefore the market can be manipulated.

                  What does this have to do with anything? Who says that rockstars have to continue to make billions? Why not a world where many artists make a comfortable living?

                  Tried and tested. The fate of classical music industry illustrates that recordings simply win out over live performances. People don't like the inconvenience of going to performances.

                  Tried and tested. The Grateful Dead did pretty damn good touring, and were a lot more profitable than plenty of other "superstar" bands.

                  How do you create fan clubs in the first place, unless you have promotion money? Fan clubs become bastions for stalkers, pirates, and other detractors. You can try starting a rock band, creating a "fan club", and see how willing people are to give you money.

                  Look at the support some popular local and indy bands get and report back to me.

                  Getting fans to feel sorry for superstars and therefore giving them money? Yes, please contribute to the Michael Jackson Charity Drive.

                  Who said this had to do anything with superstars? The economics say that we get fewer superstars and more variety...

                  And for $19.95, you'll also get this toothbrush that goes under the gumline....

                  Look at what Phish and Bon Jovi have done lately offering extras. It seems like a viable market. I recently bought a CD compilation of independent bands that includes additional access to a website with more songs and info about the bands involved if you stuck the CD into your computer. Pretty cool, and made me more willing to shell out for the CD.

                  Besides, again, you're missing the point. You can whine or you can adjust to the times... The MARKET HAS CHANGED. Just because YOU can't think of a business model, doesn't mean that (a) the current business model is doomed or (b) that there is no business model. Just because the new business model doesn't make the same people rich doesn't mean that it's no good either.

                  People want everything for free, but that doesn't mean they should get it free. Shoplifters would like to take everything out of stores, but we stop them.

                  Has nothing to do with anything I'm talking about. We stop shoplifters because they're stealing. Listening to music isn't stealing. Who is missing anything? Besides, my point (let's try this again...) is that the music industry needs to realize their industry has changed, and one of the things they can do is stop looking at file sharing and stealing and realize it's free promotions.

                  So, only some people can make that content, and therefore provide specialized labor. Whether other people want to deliver the content via trucks, couriers, disks, or the internet is moot.

                  Huh? What does this have to do with the point? My point was that people in the music industry need to expand their scope. Right now, they think they're in the railroad business, when they need to realize they're in the transportation industry. The world has changed, and they need to expand their business model.

                  Your argument makes no sense.

                  Paid by whom? Money doesn't rain out of the sky, last I checked. Highways expect users to pay for them directly or indirectly, so why shouldn't the internet? Music downloaders are the 16-ton trucks of the internet, so it's only natural that they should have to pay more.

                  Again... missing the point. People who do use the internet more do pay for it more. It costs more to use broadband than dialup.

                  reply to this | link to this | view in chronology ]

                  • identicon
                    Anonymous Coward, 27 May 2003 @ 7:02pm

                    Re: Not so simple

                    >Who says that rockstars have to continue to make billions? Why not a world where many artists make a comfortable living?< br>
                    If we want a world like that, then we'll need to charge more for music.

                    >Tried and tested. The Grateful Dead did pretty damn good touring, and were a lot more profitable than plenty of other "superstar" bands.

                    How many other bands succeeded on the same model?

                    >Look at the support some popular local and indy bands get and report back to me.

                    What about them?

                    >Who said this had to do anything with superstars? The economics say that we get fewer superstars and more variety...

                    What Mike displays here is the typical lack of business acumen among Standard American Male Engineers (SAMEs). All non-engineers know that economics is nonsense, but SAMEs take it so seriously because their MBA managers told them to.

                    Human nature is to conform, therefore prefer a small number of superstars. SAMEs may wish to think otherwise, that their band of Fat White Programmers will have teenage girls chasing them like Bruce Springsteen. The music industry will tell SAMEs whatever they want to hear about their chance to make it big, so that SAME band members will buy more expensive music equipment.


                    >Look at what Phish and Bon Jovi have done lately offering extras.

                    Downhill, has-been bands scraping by on nostalgia. You cannot tell me that they would have become big by selling toothbrushes from the start.


                    >Just because YOU can't think of a business model, doesn't mean that (a) the current business model is doomed

                    Oh ok, so the current business model isn't necessarily doomed anyway. You were arguing about nothing. :)


                    >We stop shoplifters because they're stealing. >Listening to music isn't stealing. Who is >missing anything? Besides, my point (let's try >this again...) is that the music industry needs >to realize their industry has changed, and one >of the things they can do is stop looking at >file sharing and stealing and realize it's free >promotions.

                    Using software isn't stealing. Who is missing anything? Besides, my self-righteous point is that the software industry has changed, and one of the things they can do is stop looking at file sharing and stealing and realize it's free promotions.

                    Some SAMEs argue that all software should be freeware, but the reality of SAMEs needing to make a living dictate otherwise.


                    >My point was that people in the music industry need to expand their scope. Right now, they think they're in the railroad business, when they need to realize they're in the transportation industry. The world has changed, and they need to expand their business model.

                    No, the people in charge of railroads or transportation are SAMEs. The music industry has been about artists and will always be about artists. SAMEs have been trained to look down on artists and will habitually tell them what to do, but artists do things their way.

                    >People who do use the internet more do pay for it more. It costs more to use broadband than dialup.

                    People who do use highways pay more. It costs more to run a mack truck than an economy car, but they are still expected to pay extra tolls. So it is with music downloaders -- they impose a burden on the net at large.


                    reply to this | link to this | view in chronology ]

                    • icon
                      Mike (profile), 27 May 2003 @ 7:46pm

                      Re: Not so simple

                      If we want a world like that, then we'll need to charge more for music.

                      Actually, we don't... as I've explained about a thousand times here, there are other business models that are working, by not charging for the music directly, but realizing that the music itself is a promotional item.

                      How many other bands succeeded on the same model?

                      I know plenty of bands that make their money touring. They're not superstars, but they are professional musicians. They don't sell many albums, but make most of their money touring.

                      What about them?

                      They're making money offering things other than selling music. Many offer downloads of their songs online.

                      What Mike displays here is the typical lack of business acumen among Standard American Male Engineers (SAMEs). All non-engineers know that economics is nonsense, but SAMEs take it so seriously because their MBA managers told them to.

                      Funny that you assume (1) I'm an engineer and (2) I don't know anything about economics. Neither of these are true. However, your lack of understanding of economics shines through loud and clear.

                      Trying (and failing) to insult me doesn't improve your argument.

                      Human nature is to conform, therefore prefer a small number of superstars. SAMEs may wish to think otherwise, that their band of Fat White Programmers will have teenage girls chasing them like Bruce Springsteen. The music industry will tell SAMEs whatever they want to hear about their chance to make it big, so that SAME band members will buy more expensive music equipment.

                      Not quite sure what this has to do with anything, but it's (again...) missing the point. The point is that the future of music is likely to be defined by more bands "getting by" and fewer super stars. Even folks in the music industry seem to admit that. There will still be some superstars, and there will still be some "least common denominator musicians", but that has nothing to do with the argument at hand.

                      Downhill, has-been bands scraping by on nostalgia. You cannot tell me that they would have become big by selling toothbrushes from the start.

                      Nope. But that's not the point (again!). These were just examples.

                      So, let's take a new band. You start out by playing clubs, building up a following. If you're good enough maybe make enough money playing live to record some songs. Give 'em away online or sell CDs cheaply at shows, and build up a stronger following. Maybe tour a little. Then, once you have the following, you can start to offer more features to people who are willing to buy an actual CD or to join a fan club. Maybe private shows or meet the band members or whatever. The fact is there are thousands of ways to make money once you have a following... and to get that following you have to play music and attract an audience.

                      Why is this so difficult to understand?

                      Some SAMEs argue that all software should be freeware, but the reality of SAMEs needing to make a living dictate otherwise.

                      Man, you could make a living missing the point. The point is NOT *SHOULD*. THe point is ECONOMIC REALITY. If you're selling something with a zero marginal cost to produce, the RISK is that you will be forced to price it at zero. I DON'T GIVE A FUCK ABOUT WHAT SHOULD HAPPEN. All this discussion has been about is what economic pressures are put on anyone trying to sell content. If they can hold off those pressures, good for them... but denying they exist isn't going to get you very far.

                      No, the people in charge of railroads or transportation are SAMEs. The music industry has been about artists and will always be about artists. SAMEs have been trained to look down on artists and will habitually tell them what to do, but artists do things their way.

                      You're not responding to the point again, but going off on some bizarre tangent.

                      People who do use highways pay more. It costs more to run a mack truck than an economy car, but they are still expected to pay extra tolls. So it is with music downloaders -- they impose a burden on the net at large.

                      What does that have to do with what I said?

                      As far as I'm concerned, this debate is over. You clearly don't get the point I'm trying to make, and it's useless for me to keep trying to explain it. You seem to think that I want everything to be free. This has nothing to do with what I want. This has to do with real-world economics - something you don't seem to watn to believe in.

                      Feel free to respond, but I'm not going to bother with you any more.

                      reply to this | link to this | view in chronology ]

                      • identicon
                        Anonymous Coward, 27 May 2003 @ 10:21pm

                        Re: Not so simple

                        >Actually, we don't... as I've explained about a thousand times here, there are other business models that are working, by not charging for the music directly, but realizing that the music itself is a promotional item.< br>
                        What if people don't care about damn toothbrushes, but just want the music? What if they are willing to pay for the privilege of getting *just* the music, no strings attached?


                        >I know plenty of bands that make their money touring. They're not superstars, but they are professional musicians. They don't sell many albums, but make most of their money touring.

                        What are the names of the bands?

                        >Funny that you assume (1) I'm an engineer

                        No, you're not good enough to be one, so you run this slashdot wannabe site instead.

                        >(2) I don't know anything about economics.

                        Yes, all your self-righteous hand waving about "laws of economics", which change by the year, mean nothing. Maybe you failed the audition for Julliard, maybe your Fat White Programmers band isn't selling. Just give it up.

                        >The point is that the future of music is likely to be defined by more bands "getting by" and fewer super stars. Even folks in the music industry seem to admit that. There will still be some superstars, and there will still be some "least common denominator musicians", but that has nothing to do with the argument at hand.

                        I was perfectly on point. Human nature is not changing, so they will prefer to idolize a few superstars, not 15,000 different bands of fat white programmers.

                        >So, let's take a new band. You start out by playing clubs, building up a following. If you're good enough maybe make enough money playing live to record some songs. Give 'em away online or sell CDs cheaply at shows, and build up a stronger following. Maybe tour a little. Then, once you have the following, you can start to offer more features to people who are willing to buy an actual CD or to join a fan club. Maybe private shows or meet the band members or whatever. The fact is there are thousands of ways to make money once you have a following... and to get that following you have to play music and attract an audience.
                        Why is this so difficult to understand?

                        Again, you have offered no compelling reason why your grass roots model would work better than the traditional model of mass media, in which a band receives instant global audiences.


                        >Man, you could make a living missing the point.

                        Or is it that you have no better argument, other than the claim that I "missed the point"?

                        > The point is NOT *SHOULD*. THe point is ECONOMIC REALITY. If you're selling something with a zero marginal cost to produce, the RISK is that you will be forced to price it at zero. I DON'T GIVE A FUCK ABOUT WHAT SHOULD HAPPEN.

                        You do give enough of a fuck to keep posting about the music industry, though. ;-)

                        >All this discussion has been about is what economic pressures are put on anyone trying to sell content. If they can hold off those pressures, good for them... but denying they exist isn't going to get you very far.

                        So, who is in denial? I'm not aware of anyone in the music industry that denies the existence of file sharing. I am aware of a lot of SAMEs who think the music industry is somehow in denial, when they know nothing about it.

                        >Feel free to respond, but I'm not going to bother with you any more.

                        The coward runs!




                        reply to this | link to this | view in chronology ]

                        • icon
                          Mike (profile), 27 May 2003 @ 10:39pm

                          Re: Not so simple

                          Again, you have offered no compelling reason why your grass roots model would work better than the traditional model of mass media, in which a band receives instant global audiences.

                          Okay... one last time... I am NOT arguing that one model is better or worse. I am arguing that this is the way the market has changed.

                          However, I will say that, historically, those who embrace the new markets tend to find them much larger than the old markets.

                          Now, go off to wherever trolls hang out and enjoy yourself.

                          reply to this | link to this | view in chronology ]


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