40,000 Explanations For Why The Recording Industry Is Wrong About Business Models

from the start-counting dept

Among Apple's new iPod announcements was the inclusion of a 160Gb iPod Classic. As Steve Jobs noted, that means you could carry around 40,000 songs in your pocket. Forty thousand songs. Leave it to Bob Lefsetz to use this fact to point out how wrong the recording industry has been about music business models. He points out that this highlights how people want music -- in fact, they want lots of music -- and they want it conveniently and reasonably priced. That means at much cheaper prices (are you going to carry around $40,000 worth of music purchases in your pocket?) and without DRM.

He also highlights how the idiotic focus on getting more per song just as everything else about music and technology gets cheaper is hurting the record labels much more than it helps them. He compares the situation to how expensive it was to use mobile phones a dozen years ago. People were scared to use mobile phones because the charges were ridiculously high. You only used it in special circumstances. Today, however, the rates are much, much lower and that's massively grown the market for mobile services. Do you think the mobile operators would prefer to go back to $1/minute charges? Yet, why does the recording industry insist on $1/song charges when the infrastructure can support an entirely different model. Instead, make the music cheap and easily accessible. Take advantage of the infrastructure that allows people to carry around 40,000 songs in their pocket. Sell iPods that are pre-loaded with all kinds of music and watch them fly off the shelves. The record labels (and their supporters) will claim that it doesn't make sense to sell music for less when people are clearly willing to pay $1/song, but that's misunderstanding the market potential. People were willing to pay $1/minute for mobile phone calls too. And they were willing to pay $150/month for broadband access. But as all of those things got much, much cheaper it opened the markets up much wider, provided all sorts of new applications and services that made them more and more valuable -- and helped make the companies much richer by providing better services at cheaper prices. Why can't the recording industry understand that?

Filed Under: business models, ipods, lefsetz, riaa, storage, trends

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  1. identicon
    Kanna, 8 Sep 2007 @ 9:45am

    It's actually a great idea

    Think about it... a recording exec goes up to Apple and says "hey, we'll drop the price per song, but in return we want some rather specific iPods for sale. We want ones with custom colors that come with a custom play list preloaded. And we want a *small* portion of the sales on *those* iPods."

    So what do you do? You take 1 or 2 well known bands, you drop a *few* of their songs on an iPod, you add a bunch of your less well-known bands' songs, and you've got something that will appeal to more people. Think Pandora. You put in a band name (or song) and 30 minutes later (at least, if you're like me, an average listener) you have about 5 or 6 more bands you're interested in. Bands which you've never heard of before because they're not so big and they don't get regular radio air time. Granted, the added bands need to be tied in with the big names, but that can't be so hard, again, Pandora seems to do it magnificently.

    Don't put every song from any band, put one or two from a group of bands to entice the listener. Then they go out thinking "I'd like more of this band" and, with the price drop, they're thinking "hey, this is a deal!".

    And frankly, the music industry is in the perfect situation to do this. Think of gas prices in the U.S. Always higher, but if prices drop $0.10 everyone thinks they're getting a deal and stops for gas! Let alone that 4 years ago it was over a dollar less! It's a deal *NOW*, and that's all that matters. The $1 song had it's place, it put people on the precipice. Now is the time to drop it (by, say $0.75) and bring them in!

    As many people have pointed out, compressed formats don't have the same quality. And so it becomes a quality vs. quantity issue. If you're not offering the same quality, then you should drop the price and make up for it with quantity. Otherwise it's like selling a Nissan at Ferrari prices. Yes, they both get you where you're going, but the Ferrari shopper is a bit more particular in what he wants (particularly a hand crafted engine that gets him where he's going at 120 mph instead of 80).

    The worst part of this market is that people are agreeing to pay the price (as proven by the number of iTunes downloads). And with the legal junta supporting the recording industry, it's not like we have a lot of choice. Nobody in the "decision making clique" seems to realize that while we have a choice, it's not much of a choice (thanks to our old friend DRM). If I remember my (decidedly somewhat inaccurate) history, the U.S. was much more anti-monopoly than it is now. It seems that then it was "Oh, it's a monopoly, let's cut 'em up!" and now it's "Are we sure it's a monopoly? I mean, really, REALLY sure? It doesn't look like the board game to me at all!"

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