Record companies just don’t get it

Posted on May 26, 2009 in Teknologi

Record labels are scared. They see their profits dwindle as their CD sales drop. And they are not afraid to blame it on the internet as a whole, and piracy in particular. But they refuse to face the real reason they are in trouble: They are obsolete.
The business model they have been making a lot of money on for the past 50 years are simply not working anymore. Why? Because the core business of the record labels is distribution.
They lived of charging artists to distribute their music on LPs, Tapes and CDs. And made sure they were paid well (TLC were payed as little as 65 cents for each album sold, and even artist that have a good deal won’t see more than 7 or 8 dollars for each album sold). The rest of the money is distribution: Record labels, shipping, revenues for record stores and so on.
The record labels have now had 10 years to react since Napster came out and changed the way the world distribute music. They have done very little, but more importantly they have learned absolutely nothing. Instead they are now so afraid of the web and internet distribution that they developed a reflex reaction to anything happening online: Shut it down!

In fact every single thing the major records labels have done the past 10 years have been focused on one thing: Preserving their CD-sales. Digital Rights Management, changes of copyright law, spreading fake mp3s online, lawsuits against people who download, shutting down sites … everything is aimed at bringing the CD back.
Of course the real problem is that nobody wants CDs anymore. Not because you can get music for free online, but because downloading an mp3 is more convenient!
And when you realise that convenience is the number one reason people download their music instead of buying it on a cd, then it is very clear why all the things the record labels do in order to maintain their CD-sales are failing.
Digital Rights Management are designed to make it impossible to copy music off a cd, or in case of a legally purchased mp3, make it impossible to copy your mp3 to other devices. In other words DRM is by design an inconvenience.
The changes to copyright law the record labels have lobbied through Congresses and Parliaments all over the world is meant to do exactly the same: Outlaw distribution of music on anything else than a disc.
But none of the things the record labels do, are facing the actual problem at hand: If you listen to your music on your laptop at home and on your iPod when you are out, then it makes very little sense to travel to a store in order to buy your music on a piece of plastic.
It all comes down to very basic business knowledge: It is very hard to sell people stuff if you have a lesser product than the competition.
Record labels have ample opportunity to offer music fans a product that is far superior to what pirates can offer on peer2peer. They just have to forget about making money on distributing CDs

Anyways … that whole rant came from a little experience I had recently. I wanted to show a friend a video of the inmates of a correctional facility in the Philippines dancing to Soulja Boy. And what do I see?

“This video was muted and deleted after getting 7M+ due to copyright issues with WMG. It can’t be put up unless i swap the audio. Sorry guys … i’ll add a link to another site later to view the original video and audio” See the edited version here:

This made me absolutely furious. (And it is not because I am a big Soulja Boy fan).
Let me break down for you why this is both outrageous, stupid and disrespectful!

  • First of all it is outrageous because Soulja Boy started on youtube. He was an online phenomenon before Warner Music ever heard of him.
    Check out video of how Soulja Boy started (It is a presentation presented at the Library of Congress by Michael Wesch –watch it here)
  • Secondly it is stupid not using the channel that already loves your artist. 7 million people watched these inmates dancing to the song without any marketingdollars being spent. Furthermore (as the original poster of the youtube clip also write) the clip won’t go away because you get it removed from youtube, it just moves somewhere else. But you just pissed off the community that created your artist for you.
  • Thirdly is it disrespectful towards the online communtiy. He had a huge fanbase and hype that was in part created by this very video of the inmates dancing – before they even signed him! So in reality WMG got all the hype, fans and viral marketing they could ever dream of for free. Created by people on youtube. And then after you sign him, you go back to that community and say “hey, you can’t use that music – we own that!”.

Record labels! You need to wake up very soon. Before the artists realise that they dont need you either.

Leave a Reply