Archive for August, 2007

Sour Notes in Music Industry: Change the Beat!

August 15, 2007

One of the industries we have and continue to track in my Principles of Marketing class at Emerson College is the music industry. Watching the business implode upon itself in attempting to deal or not deal with the internet disruption over these past 6 years has been nothing short of amazing to watch. We saw Napster, which solved the problem of getting the music people wanted, when, where and how they wanted it… and for FREE completely paralyzed the industry as a whole. We also watched with horror the industry’s response… raise prices and sue the barbarians.

 

We also saw with great interest Apple do the unthinkable. First they came up a music player in what was a crowded field. What made it stand out at the time was coupling iPod with iTunes, so that for the first time anyone (with a Mac) could organize their libraries and EASILY download their music into the thing. That got the ball rolling. And then they jumped across an internal chasm, making a Windows version of iTunes to open up the market at large and get beyond a simple niche play. We all know how this transformed the industry in the process while selling hundred + million iPods, and the company which went from Apple Computer to Apple Inc.

 

I remember very well the press at the time saying the iTunes would be the proof of concept that customers would indeed pay what they perceived was a fair price for digital music… and that then the labels would finally act themselves.

 

Six years later, I am still waiting. iTunes is the undisputed leader in legal music downloads.

 

And labels continue to complain that the iTunes Store is charging too little for their content. This summer it was news that Universal Music refused to sign a long term agreement with iTunes, preferring short term agreement instead. Leverage anyone?

 

Recently Warner Music, the most digital label of them all declared a net loss of $14 million for Q3 2007, even with revenue from digital music up 27%. Perhaps after they get beyond plunging CD sales and cost associated with realigning operations and other charges, things will be better.

 

Plus the DRM (Digital Rights Management) issue. The labels still don’t get it… and Apple does. As our Law of Surrender = Victory attests, the game is over anyway… customers have control, like or not… now exploit it. 

 

However, what if once and for all labels learn what they need to learn from Apple?

 

Why not leverage their assets to which includes basically music of all genres going right back to the beginning of recorded music, and sell directly to the public themselves? They have the assets, they have brand power (although long dormant at this time) and they have retail merchandising prowess that can be extended to the web, plus there are these low cost vehicles to build audiences like never before. Labels also know how to add value, so that once they lift the constraint of DRM, they can still add value to drive revenue, beyond simply extended CD’s or other Bonus content.

 

Sure it’s risky. It probably makes no sense to anger Apple… but if you are Universal Music or Sony or other music giant, you are already probably have.  iTunes needs you too, remember. 

 

The trick then becomes, old rules don’t apply. If the first thing you do, once iTunes is removed, is jack up prices, it won’t work. Remember you are still competing against FREE after all. And there are audiences you have ignored for decades like me (25+) that offer untold opportunities… its just we go way beyond “Classic Rock” and other such genre-specific limitations. You have the content…. You have the need… you have the means.

 

I hope you stop making noise and market to win. Please don’t make us wait another 6 years!

 

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