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
    Bobbias, 10 Sep 2007 @ 11:03pm

    Business model sucks

    Has anyone ever thought about WHY the record companies are keeping the price so high despite the fact that the artist doesn't hardly see any money there anyway? Because it's not the artist who's in trouble! these record companies are fighting a losing way of decentralization. As time progresses and studio equipment becomes cheaper, smaller budgets are required to achieve studio quality recordings, which means that studio quality recordings are becoming more widespread. And when it costs 10 times as much to get a song professionally mixed by someone in a big record label who's at the same skill level as someone who does it freelance, you can be damn sure the freelancer will be more likely to get the job. Following this, we can see that record labels are no longer getting all the bands, which means that they're being eaten from the inside out. Add to it the fact that they're making less and less on record sales while the band still pretty much gets however much money they'd be making regardless of the sales, we can see what's happening.

    Eventually, all the big companies will break down into a collection of smaller companies until bands are forming their own record labels, and the only contracts signed are distribution contracts, and eventually, I think music will become something run by the musicians. A engineer will be part of the band, or part of a group of bands who decide to band together in a small label. There may be a big company or two thrown in there, but overall, the entire entity of the RIAA will likely dissolve over time.

    And that's why they're so damn scared, they know they'll be out of business if things keep going this way.

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