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
    Matt, 8 Sep 2007 @ 10:12am

    Intellectually Lazy...

    Your statement about how artists can't be supported by music that costs less than a dollar a song is intellectually lazy. A well-paid musician will see less than a dollar for the ENTIRE CD if it is sold at a retail outlet. The rest of the money goes to the record labels, the retailer, the distributors, the unions, the studios, the RIAA and the various and sundry other leeches that make up the current music distribution model. THIS is why the RIAA fights; they're trying to perpetuate a model that enriches THEM, all under the guise of standing up for the people who actually MAKE the music. The reality is that the recording industry has the goose (or geese) that lays the golden eggs. They're able to get by with feeding said the musical geese a handful of grain.

    Meanwhile, the RIAA sells the eggs and buys themselves private jets and, probably, specially trained wombats that will be used to sniff out illegally downloaded songs.

    Also, if you're going to turn the music marketplace into a commodity-driven market, then you can't (and shouldn't even try) to level the market place by having a "one price fits all" model. Commodity markets are driven by supply and demand, with a price that fluctuates in response to the demand. So, yeah, there would be some artists that would be able to command a whopping $0.001 a song because nobody wants to listen to them. Conversely, other artists could, in theory, command a larger sum.

    However, there is one glaring hole in all of this, and that is to consider the impact of scarcity in valuation of any given product. Diamonds are expensive because they're hard to get, and they're available only in a few geological areas. How would you address this one? Make it to where only the first 500 people are able to purchase a given song? At that point, you're practically begging folks to start pirating the music.

    Piracy exists for a variety of reasons. Some people engage because yeah, they just don't want to pay for music. Some people engage because they don't feel that the prevailing pricing model is not conducive to their economic situation.

    The solution is to cut out the middle men and create a model that actually supports the musicians/artists rather than one that treats them like a collection of trained monkeys.

    By the way, what the hell does "songs are not about technology" supposed to mean?

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