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Personal finance advice for the average American.

Tuesday, August 26, 2008

Scott to the RIAA: "Give your customers what they want!"

Of my two favorite music websites, Pandora and Muxtape, one has already been shut down and the other is just inches away. Both have been in the sights of the Recording Industry Association of America (RIAA) for some time now, and I guess that their demise has been virtually inevitable. Given the gentle, honest, user-focused values of the music sites and the wealthy, vinyl-and-8-track old-school mentality of Big Music, it's not hard to see why there's an inherent conflict.

I'm a steadfast supporter of capitalism, and firmly believe that consumer demand is the force that drives businesses. I tend to favor less regulation as opposed to more. I believe that businesses should be allowed to make mistakes because they will ultimately have to answer to the mob -- their customers (and potential customers) that demand (or don't demand) their products and services.

The internet challenges everything that our parents knew about procuring and listening to music. Thanks to digitital, downloadable audio, we can now instantly purchase songs and albums online and will someday no longer need CD players in our cars. But the internet changes other things about music -- not just how we buy it. Internet radio stations like Pandora let us discover new artists based on what we already like. Social music sites like Muxtape allow us to express ourselves with our musical tastes and keep tabs on what our friends are listening to. The internet enriches our melodic experiences in so many ways.

The demands of music consumers have evolved incredibly for the past ten years. We no longer want to walk into a record store and buy a CD to put on our shelves. We want to interact with each other based on the premise of song. We want to learn about new artists from our friends and not just Casey Kasem. We want to be musically enlightened. And we want to listen for free. But the RIAA is stuck on the old way of doing things. They have monopolized popular music and will do anything they can to keep our wallets feeding our ears, even though that is clearly the opposite of what we have demanded.

But it can't last forever. No matter how hard they try, the RIAA will fight an uphill battle against its customers. Without substantially changing their business model, they will fail. They do not understand that someone will always find a way to listen to songs for free on-demand. Unfortunately for them, because their product is digital and can be easily duplicated without variable costs, they will never develop a cost-effective solution to stop developers from coming up with increasingly clever back doors and untraceable workarounds. The RIAA's attempt to stop pirating is like trying to stop a swarm of bees with a .22 rifle -- sure they'll nab someone every now and then, but the stings will never stop unless they learn to embrace the swarm and give them what they want.

I believe that the internet has leveled the playing field for musicians. No longer is their success dependant on being discovered by a major record label. I believe that the days of the mega pop star are numbered. If super popular musicians continue to sign with record labels that are constantly at war with their customers, listeners will eventually start to follow the path of least resistance and explore the music produced by more forward-thinking labels.

I don't have a solution for the RIAA that details how they can survive, given the shifting demands of their customers. But I know that fighting isn't the answer.

3 Comments:

  • At August 27, 2008 7:14 AM , Blogger Scott Bliss said...

    This post has been removed by the author.

     
  • At August 27, 2008 7:16 AM , Blogger Scott Bliss said...

    Well, it looks like Muxtape has been replaced.

     
  • At August 27, 2008 10:27 AM , Blogger Steve said...

    Very good summary of what's been going on. The RIAA can't get its head around the difference between a physical record and intellectual property that can be copied and distributed at will with little to no overhead. They still look at the music industry as selling discrete units. That's evolved a little to instances of a song being listened to, rather than physical records.

    iTunes and other online stores haven't pushed the envelope of the economic model at all. iTunes sells discrete songs that you can only download once. They have embraced the digital distribution model very well, but that is a small step towards a mutually beneficial relationship between the public and the RIAA.

    Pandora, iMeem, etc. have pushed towards an economic model closer to that of normal FM radio - free music for the public, supported by ads. Pandora, being completely focused on user experience, refuses to put audio ads between songs (thank you, thank you, thank you). Sites like Muxtape (R.I.P., you will be missed) go with a completely user generated experience with no economics whatsoever. Then, of course, there is p2p sharing.

    All of these economic and distribution models are fairly new, and have only been around for a decade +/- a few years. None of them satisfy the artists, labels, RIAA, and user at the same time. But, some even newer options are starting to peek out between the cracks.

    One amazingly simple, amazingly effective distribution/payment model was made famous last year by Radiohead. They released an album that was available for download online. Fans could pay whatever they were willing to pay - even nothing. The average price paid? $6. All straight to the band. (http://technology.timesonline.co.uk/tol/news/tech_and_web/the_web/article2817679.ece). That turned out better for fans and the band than a physical record, where the cost to the user is much higher and the proceeds that make it to the band are much lower. Labels and the RIAA probably don't like band-to-user online distribution, but I bet the bands and users do.

    Another option that is coming up is a new type of subscription based service. Apple and other distributors are in negotiations with the RIAA and big record companies to start offering their entire library for a monthly subscription fee. So, for something like $20-$50 a month, you have access to practically every song ever recorded, and you can download it, make playlists, put it on your iPod, etc. I think that is a viable option, but its success will depend on how screwed users feel. That will depend on how price and service works out - will it be multi-tier with access to like 10 downloads a month for $5, unlimited for $20, blah blah blah. I think the devil will be in the details, but the idea is fundamentally sound.

    In any case, I find it disgusting that the RIAA is upping fees for online radio stations, a medium where nearly zero overhead cost brings in huge numbers of users and lots of revenue. They claim they can't afford to make as little off Pandora as they are. How? It's ALL extra money. The only cost to them is a couple guys to oversee contracts with the distributors and a couple more to count the money.

    In any case, the next generation of music distribution is going to be awesome for users, or its not going to work. It will require a very unique and enjoyable user experience (like Pandora) for me to shell out cash when I have 90GB of music I enjoy, and I highly doubt I'm in a unique situation.

    Steve
    stevescookingjournal.blogspot.com

     

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