Rick Aristotle Munarriz of The Motley Fool has just released a scathing piece that calls the record industry to the carpet over the mishandling of digital downloads in the post-Napster (free) era.
"Behind every disruptive technology, there is always an established industry crying foul. Digital downloads are no different, only this is a unique situation because the whining has come from the same camp that stands to benefit the most from the disruption."
Munarriz makes the point rather aptly that that record companies are missing the boat, and missing out on opportunities to cash in on consumer interest in wider ranges of music than the top 40.
What is valid and important about Munarriz's remarks and why is this significant? Because Munarriz isn't a music journalist, he's an investment journalist. Maybe he's a music fan but by and large, and by profession, his job is to analyze what's right and what's wrong with publicly traded companies. His perspective as a shareholder, or one speaking to the shareholders, and his message to the labels to "Wake up" is telling. Investors aren't happy with labels suing customers, strong-arming Apple, and missing opportunity.
It's quite one thing for fans and artists to stand up against lawsuits and digital music insanity; it is altogether another when the shareholders say the same thing.
[via The Motley Fool]
1. For a change, Rick's article actually had a few good points (neither of which you mentioned). But it was odd to read him talk about so many missed opportunities after he has over-applauded all that Warner Music Group has done in digital innovation. He never mentioned those missed opportunites when he was praising Edgar Bronfman in past articles.
If he means not embracing P2P was a missed opportunity, I think he's wrong. P2P is not a saviour (though he was correct to point out it *does* introduce people to music and did set a stage for iTunes and the success of the iPod). It's fool's gold. There's no clear way to shift the industry toward such a business model. If any music company really wants to do wrong to its shareholders it should embrace unfettered P2P and shift away from physical sales. It would be complete suicide.
One of Rick's errors is thinking that P2P drives sales. I don't think so. P2P traffic is driven by radio, TV, Internet, print and touring. It's no coindidence that the Top 10 singles and MTV charts bear so much similarity to the Top 10 list at BigChampagne. P2P isn't influencing radio, sales and video play. It's the other way around.
Strong-arming Apple is some kind of sin to this blog and most journalists. That's odd as well, since tough negotiations on behalf of your shareholders is a good thing. Agreed, the lawsuits may very well be hurting shareholders, but how would that damage be quantified. The 10% drop in album sales in 2006 may be seen as a leading indicator of consumer sentiment, but digital sales are up and ringtones and OTA downloads must be a huge chunk of money by this point. (For what it's worth, some music execs are saying digital sales now make up for the loss of physical sales.)
I can't even see any good anecdotal evidence that lawsuits have created a *real* consumer backlash. To the contrary, I see a nation of indifferent consumers with very short memories. How angry were consumers about Sony BMG's rootkit scandel? (Which was one of the few music-related controversies to hit the national news, by the way.) Not very, otherwise Tool and Dixie Chicks wouldn't have recently gone to #1. The current #1 single (thanks to huge downloads) is by Sony BMG artist Shakira.
But I completely understand that to many it all comes down to P2P. Many people think P2P is the true measure of the music industry's willingness to go digital. I don't agree, and I see a lot of other indicators of where the industry is going. It is in a different direction and at a different pace than desired by technology writers, but it is indeed moving forward.
Posted at 4:35PM on Jun 8th 2006 by Glenn