In my previous installment, I outlined what I thought was wrong with the music industry today, namely the complete overreaction and panic induced by an unforeseen loss of control over the distribution of their product.
They've controlled the entire chain of music recording for decades and to be scooped by a technology they had not developed, licensed or controlled in some way really smarted them. I also thought the copyright battles are a meaningless side avenue, brought about by an industry trying to regain control over their product and to recoup revenue from distribution, their largest source of profit.
Anyone who has read the news lately knows what's wrong with the record industry today, but now I'd like to toss out a few ideas about how to make it right. The most important thing the industry can do now is quite simple: Get Over It. Yes, hundreds of thousands of people have downloaded music and swapped terabytes of files. Going after the file trading services is not going to work, because people want to download and trade files.
In case you haven't noticed, these same people downloading and trading songs are your consumers and you've managed to royally pissed them off with your antics. Why not do what a business is supposed to do and meet not only your customer's needs, but also their wants? Engage the market and offer a competing product that is superior to the ubiquitous MP3.
The most important thing you need to do is recognize that the CD, as a music delivery platform, is obsolete. It's dead, kaput, no more. It's had a great run, but time marches on and it's time to put it out to pasture. It is now the Age of Digital Music and your task is to figure out how to wrangle this beast and make it your own.
First, look at your target market. Those people, aged 13-25, have grown up with computers and have incorporated the beige boxes into every facet of their life. They also like to listen to music, specifically new and popular music. It’s not surprising then that the two looming giants, Computers and Music, have been effortlessly mated together. It’s easier for them to download songs they like and listen to them on their computers via an MP3 program or portable player than to go to the store and pay an obscene amount of money for a single CD that may have only one song they like.
Why should they have to pay $20.00 for one song? You don’t have to be a genius to figure out that most music on a CD is filler. Perhaps one or two songs on a CD are worth listening to, with the rest being crap. Abandon the CD and half the problem is solved. If you focus on delivering singles to the market, rather than expensive and crap-filled CDs, then you’ve already gone halfway in meeting your consumer’s desires. You can still offer compilation CDs or boxed sets, but that will be a niche market. Your consumers will decide how they want to arrange their music and will most likely use CD's as a means of arranging music to their tastes.
The next decision you'll have to make is how to deliver music to the consumer now that you've abandoned the CD. Judging by the recent spate of lawsuits, I think you're already aware of the various means of music distribution available today. Here's the kicker: you're going to have to knock off all this copyright infringement bullshit if you want to even begin engaging your market in a successful manner. Don't worry, you're still going to be paid a fee, but you'll have to give up trying to thrust your meaty hands into the consumer's pocket every time he wants to listen to a song. If you're willing to accept short-term loss for long-term gain, then you're ready to get back into the game of making money.
A cursory glance at the market reveals the time is ripe for exploitation. MP3's are common but portable devices still haven't reached critical mass. This means you can jump right in and takeover the market. First off, get those R&D dollars flowing because your eggheads need to come up with a music standard superior to the MP3. I'm sure you all went to business school so I'm confident you understand the concept of offering a superior alternative to an established product. Spending thousands of dollars to design and implement exotic CD copy-protection schemes that can be voided with a Sharpie isn’t going to cut it. Developing a standard that offers better clarity in a smaller file-size would be a good start. While you're at it, make sure your standard is backwards compatible with the MP3, meaning people will be able to play MP3s on your products, but won't be able to play your files on current devices and software. Once you've accomplished that, offer the encoder/decoder free. Now don't go choking on your filet mignon just yet! You're still going to get your money, but not in this arena. All right, calmed down yet? Good, let's continue.
Now your software's going to be free, but what about the hardware? Ah, therein lay the profit! Enter into agreements with preeminent hardware manufacturer's to develop various products that will play your software. MP3 players are somewhat commonplace, but if you get Sony or Yamaha to build devices, I think you'll have a sure shot at capturing this segment of the market. People trust devices built by established names in the consumer electronics business.
For instance, most people know that if they buy something built by Sony, they're going to get a superior product that will do more than what they want and not fail. Most MP3 players are built by companies in the computer hardware business, so most people don't entirely trust them. Offer them a superior alternative by a major consumer electronics manufacturer, and they'll bite. Now you might be asking yourself, "How are we going to make money off hardware?" Easy! For every device they sell, you will get a license fee. This fee will not only cover the expenses involved in developing your new music standard, it will also serve in lieu of a copyright fee charged to every consumer who wants to download or "own" a song.
If you can imagine the wide array of audio devices available today, from car stereos to home theater receivers, then you can see what an untapped resource you have just waiting to be exploited. If a manufacturer builds a product that can play your new music standard, they'll have to pay a license fee for the privilege of doing so. Of course, this fee will be passed onto the consumer, but it will be a one-time, upfront fee paid for at the time of purchase, so it won't seem as bad to the customer. I think people would rather have it done that way instead of handing over a chunk of change every time they want to listen to a song on the Internet or download a file from a swapping service.
Okay, so you have the software and the hardware fronts covered, but what about distribution? What will become of your cash cow? I'm afraid you're going to have to bite the bullet on this one and accept that you're not going to have the overwhelming influence you once had over this aspect of the music business. That doesn't mean you'll be entirely shutout, though.
Even though your priorities will re-align with your New Plan, you can still work some magic in distribution. For starters, Sam Goody's going to need something to sell since all those CD racks'll be empty. Sam Goody will have to diversify anyway, but I'm betting you can manufacture portable devices that people can take into a record store and plug into a machine to get their music fix. They can choose as many songs as they desire to download into their device at the rate of a dollar per song. Once they're done, either a receipt will be printed out or the relevant information sent to the clerk. Either way, the customer will stop by the clerk's counter to pay for their purchase and be on their merry little way.
That's just one option. As far as the online world goes, you can try to make inroads there by offering download services of your own for a nominal fee, but any revenue gained from those endeavors will be mere supplemental income. Let private trading services operate instead of hammering them with lawsuit after lawsuit. You're getting your money in the backend anyway.
Well, those are some of the ideas I have for you, the recording industry. There's profit to be made, but it will have to involve sacrifice and an entire shift of focus. You're going to have to swallow your pride and abandon the CD, you'll have to bite the bullet on distribution and you'll need to drop your insane copyright demands. Future profitability will depend on spreading goodwill instead of ill and meeting your customer's demands. They are telling you what they want, and if you'll remember, they are always right.
If you continue down your current path, you will have no future. However, if you call off your dogs and instead try to invent creative means of recapturing the market, then you can regain control over your product while at the same time making a profit and keeping your customers happy. Improvise, Adapt and Overcome. That’s Business.