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Apple’s Life Preserver Won’t Save Big Music

To the members of the Big Four record label cartel — Warner Music, EMI, UMG and Sony-BMG — music doesn’t have much to do with music. It’s a commodity they sell to the lowest (and therefore largest) common denominator.

They’ve been seeing a decline in sales and are scapegoating P2P file sharers and commercial P2P application operators for their troubles, refusing to acknowledge that bad, self-generated PR, bad business and marketing strategies and decisions, and over-priced, cookie-cutter releases may have something to do with their troubles.

Sinking Industry

An article in the Economist said recently, “Even Wall Street analysts are questioning quality. If CD sales have shrunk, one reason could be that people are less excited by the industry’s product.”

Cartel half-truths and disingenuous statements are being questioned more and more frequently. The cartel’s biggest lie — that its “sue ’em all” campaign against file sharers is succeeding — is being deconstructed on an almost daily basis.

When a publication such as the Economist, read by world leaders, writes a lead article that in effect underlines Big Music’s failure, or inability, to grasp the realities of the music market, you know the writing is on the wall.

One of the reasons the members of the cartel are still afloat is this: Apple’s iTunes and iPod are functioning as life-preservers.

Apple’s Life-Preserver

“The iPod and iTunes store are a shining light at a very bleak time in the industry,” Cary Sherman, president of the Record Industry Association of America (RIAA) said recently.

Apple’s “success,” due almost entirely to non-stop PR and the ever-faithful mainstream media, gives the entirely false impression that there’s a corporate online music business and that music lovers are thronging to it.

As a friend who spends his days watching the music industry said this morning, “had the journalists seized … on the new Napster (for instance) as the ‘success story,’ the effect would have been the same. It’s the media who need a music industry comeback story, and Apple came along at the right time with a cool-looking Walkman. The iTunes store just got swept along in the wave. And perhaps Apple is really just the beneficiary of all the breathless praise.”

True. But the “breathless praise” generated a continuing flood of mainstream media stories and articles which, en masse, are supporting the Big Music fallacy that there’s a successful corporate online music market.

There’s no doubt that one of these days, there will be one. But not yet. Not by a long shot.

That Apple has sold 125 million tracks since it introduced iTunes is headlined around the world as a major triumph.

The Real World

But it’s taken since September, 2003, for Apple to achieve this, while in the real world of online music, something in the order of 16 billion files moved from computer to computer via the P2P networks in the same time frame.

You never see those statistic headlined, though. Nor do you hear of record label shareholders loudly wondering why label executives haven’t quickly moved into the new, and potentially enormously profitable, marketing, distribution and sales P2P arena.

The iPod is the Walkman of this decade. And you need MP3 music tracks, not tapes, to play on it.

Whose MP3s? According to most mainstream press reports, it’s Big Music’s 700,000 or so tracks.

In the real world hardly anyone; relatively speaking, buys Big Music online product, not even for their beloved iPods. For the most part, they burn music from their own CDs, sometimes sharing or trading with friends (just as they did back when “sharing” meant tape-recording records or shows). Or they download from one of the P2P networks.

Offline, in the physical world where consumers are easily controlled, there’s little awareness of the music revolution that’s happening online.

But that’s changing. And fast. Every day, thousands of people log on for the first time to discover they’re not consumers any more, but customers — customers who have a huge selection of music, not product, to choose from.

P2P Revolution

“In future, using the Internet, the industry will be able to appeal directly to customers, bypassing radio, television and big retailers, all of which tend to prefer promoting safe, formulaic acts,” says the Economist. “That could give the majors the confidence to back innovative, edgy music.”

The magazine also explained that “much smaller independent labels and artist-management firms can do the same, offering them a way to challenge the big firms head on.”

I long ago gave up buying music industry “product,” not because I wasn’t willing to pay for it, but because I was tired of being charged outrageous amounts for consistently shoddy work. Long before MP3 came along, I was buying tapes, records and CDs at second-hand stores and yard sales. It was the only way I could get value for money.

I’d willingly pay up to 20 cents, say, for an MP3 track, and if I had access in-depth to music industry catalogs, I’d probably rack up quite a bill, downloading hard-to-find and out-of-print items. And I’d pay $4 to $6 for a CD.

The music industry came into being during an era when it was considered savvy to Never Give a Sucker an Even Break. It’s now the twenty-first century, but the mindsets of the people who run the labels are still locked into that mode of doing business.

P2P is a catalyst, not a destroyer. It’s already forced a huge amount of change on the way the members of the Big Four record cartel do business.

The Next Step

One way or another, Apple’s association with Big Music has dragged it from relative obscurity into the floodlight and it’s not about to give that up. But every time it gets the mainstream media hooting about the latest product release, it also bolsters the completely erroneous idea that the corporate music online business actually exists.

But the fact is this: The labels as they’ve existed up until now are now are all but dead. Soon, you’ll see the “new” Big Music adopting P2P and raving about it, saying it’s been supporting and encouraging it from Day One.

The lawsuits will gradually stop, offline CD/DVD prices will fall, catalogs will be opened to new corporate sites (backed and supplied by the industry), and deals will be struck with commercial P2P operators so they can offer music from cartel catalogues — not just the paltry 700,000 tracks they’re currently trying to re-sell over and over again.

And while that happens, independent companies and artists — Big Music’s first serious competitors — will continue to establish themselves online as genuinely alternative music businesses where customers are people, not cash cows to be milked by any means.


Jon Newton, a TechNewsWorld columnist, founded and runs p2pnet.net, a daily peer-to-peer and digital media news site focused on issues surrounding file-sharing, the entertainment industry and distributed computing. p2pnet is based in Canada where sharing music online is legal.


2 Comments

  • Since the advent of the iPod and the iTunes Music Store, I have not purchased even 1 new CD. Is this because it is easier to get music or cheaper to get music or because I can buy just one song instead of the entire CD online? With the exception of the third part, the answer is a resounding NO.
    It is because that the majority of new music is junk. It isn’t just the overpriced Compact Disc. It is the music. It is hard to find an exceptionally talented musician these days. There are some, but not many when you consider the sheer volume of new music. So many of these so called pop singers sound alike, look alike, and act alike. Britney Spears is no different than Shakira. Julie Roberts is no different than Shania Twain. So much music, so much sounds alike.
    The majority of music on my iPod IS from my CD collection. I have bought music from the iTunes Music Store, but 99% of it is classical. The rest have been to repalce lost, stolen, or damaged discs.
    The Record labels just don’t get. And with the help of Apple, they never will.

    • How does Apple get pulled down as the bad guy when they did everything right?
      Believe what you want, but access to the major labels library of music was necessary for a successful launch of the iTunes Music store but so were reasonable DRM rules. So faulting Apple for opening the ITMS with label music is like faulting a new hamburger restaurant for using beef.
      But what else did they do? They gave the same distribution deal to the indies as they did for big labels. The refuse to take money for preferred placement. They lowered the price of singles and albums and made it such that you can’t hide 3 good songs on an album and get away with selling 10 other crap songs.
      The only thing left is for them to open up pricing competition to allow Indies to sell songs at a discount and put pricing pressure on the big labels and I’d guess that is coming soon.
      Apple has created a viable Online music distribution system but they do not yet have the market presence to dictate terms to the Labels. Give them another year to grow and spread to other countries and we will see. Online distribution costs appear to be around 20 cents/song at current volumes so song prices below $0.50 seem reasonable with albums at $4-$5.
      ITMS it the correct direction. P2P is not.

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