The Most Important Article You Will Read This Week….by, Bob Lefsetz

Posted on November 14, 2011 by

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“Newspapers’ Digital Apostle”: http://nyti.ms/rI8kIY

We are not going back to the past. Both artists and rights holders are guilty of reminiscing about the days of yore and doing their best to put the brakes on the future to maintain their old business paradigm.

Let me put it simply. Was it better for the labels to sue file traders and prolong the longevity of the CD or would they have been better off scrapping the past, the CD and the antiquated distribution mechanism attached, and jumping into the future?

You can bet if the labels and publishing companies were privately held, by individuals worried about their long term future, they would not have played the game this way, it would have ensured future death. Which is what the labels are gunning for, irrelevancy. Yes, their catalogs will generate revenue for years to come, the life of the copyrights, but could they have been administered better by Apple than the Big Four, now the Big Three? Old music is in no way prepared for the new landscape, and neither are most of the artists.

There is no CD replacement revenue.

But if you’re dumped by Brad Pitt do you stop dating or find the next best thing? When is music gonna believe in the next best thing?

Give the labels credit, they licensed Spotify. Stop bitching about what Spotify pays, you’re missing the point, Spotify kills piracy dead, it no longer makes sense to spend all that time stealing when you can have everything instantly at your fingertips. Think about all that money left on the table for the last ten years. Sure, eventually you could buy overpriced files at the iTunes Store, but illegal acquisition has dwarfed legal consumption for a decade, and label revenues have been decimated. This is a business plan? The labels would have been better off licensing trading operations.

Clayton Christensen famously claimed in “The Innovator’s Dilemma” that you built your new company across the street from the old and when the time was right, you jumped sides. This means that Netflix was a CD by mail company, then it became a streaming company. The fact that Reed Hastings mismanaged the transition does not mean the thinking wasn’t sound.

So…

1. Streaming wins. It’s just a matter of when.

So LOWER the price of MP3s. If you think people will be listening to 256 AAC files ten years from now you’re probably still skiing on straight skis, you drive a car without a catalytic converter. The songs at the iTunes Store suck. Bandwidth is going to improve and even if ownership were to win, people would pay again for higher quality. We saw this with the transition from vinyl to CD, do you think it’s really any different here?

Access wins over ownership. Which is why streaming wins. No one owns a house big enough to hold everything he wants to consume. Which is why it’s stored remotely online for when you need it, that’s the concept of the cloud. You pay for the ability to use, not to own. Ownership is cumbersome, it ties you to the past. Hell, play any of those 8-tracks or cassettes recently? If you’re a Spotify subscriber and bandwidth and streaming rates improve, you benefit, you’re not locked into 320.

2. It’s a race to quality.

Distribution has been flattened. Anyone can play. The fact that the labels only operate in Top Forty will end up marginalizing them, they’re not preparing for an era when all the other genres add up to significant income. Look at it this way, cable channels are frequently more profitable than networks. Cable channels have anemic ratings, but can charge a fortune for advertising, because of the ability to reach a targeted audience. Network shows cost a fortune and must have good ratings to achieve premium pricing for advertising. Which is why all the networks bought the cable channels. You’d think the majors would realize the profit is in owning the independent artists. But they’re too stupid to realize that.

3. You can’t rip people off anymore.

Until they go to transparent accounting and give the lion’s share of the money to the acts, the majors will be in a death spiral. Who is going to remake the majors for tomorrow? No one is going to sign with them if they know they’re going to get screwed.

It’s about seeing the future and jumping at the appropriate time. And we’ve already learned you can’t sue your way to the past. Trying to get people to overpay for music is like trying to prevent a twelve year old from entering puberty, utterly impossible.

Just like in that old Jack Nicholson movie, the music industry can’t handle the truth.

But it’s coming down the pike anyway.

New people are going to control the music sphere because of sheer denial of the old guard to play by the new rules.


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