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
    Opus Rex, 9 Sep 2007 @ 1:12pm

    Re: Buy them out

    Not as simple as you think.

    Many here have bandied about the phase "middle-men" like its a single enitity. That is about as far from the truth as you can get.

    Let me give you a snap shot of what hoops one has to go though just to use a thirty second snippit of a song.

    Earlier this summer I more then toyed with the idea of starting a regular podcast and had a theme song picked out.
    Its a fairly well know song that gets air-play even if it is about four decades old. And I only need it for the intro about 30 seconds or so. To be legal I would have get permission (which realy means pay a fee) from the writer of the song, the preformer of the song and the owner of the master recording.

    Now the Composer rights are handled usually by one of three orginazations: ASCAP, BMI or SESAC and you can get the rights to a song for annannual fee of about $300 USD. This only gives you the right to preform it your self or to have somebody preform it for you, but you still must have this premission even if you want to use the Orginal Artist recording.

    So, now you have to get the preformers premission and these are controlled by the record labels and is called
    The Mechanical License which is the right to reproduce a preformence of a song, the Harry Fox Agency handles that on a song by song basis. The title I desired was about $1500.

    Next is the Master Use License which is the owner of the master recordings and is usually the Record Label. This would have been $2500.

    $300+$1500+$2500=$4300 not including the cost of certified mail and checks.

    Much cheaper to invite my brother-in law over to pizza and have him do a riff or two in my home studio.

    But if you noticed, its more then jsut one company and I doubt tht the privatly held Harry Fox Agency will entertain any buy outs from Google.com.

    Kinda gives you an idea why the Stones keep touring. Can't Get No Satisfaction, indeed.

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