Last modified: May 22, 2003 12:41 PM PDT
The Net threat to record labels
The record companies are good marketers? I have to assume you're kidding.
Look at the ride they've had with CDs, which had nothing to do with marketing. The advent of CDs meant an instantaneous 100 percent price increase over vinyl with lower manufacturing costs (those big cardboard covers cost a lot more to ship and print than jewel cases). The real kicker that no one writes about is the near-zero defective rate for CDs.
I managed a multimillion-dollar retail record store just prior to the introduction of CDs. Our return rate was between 25 and 35 percent. CDs instantly eliminated this enormous cost. The point is that the record business had an unbelievable cash cow in CDs for 15 years. This influx created the idiocy we see now because they really didn't have to market or innovate.
When you think about it, all the labels have is control over distribution. Any artist can record cheaply with digital technology (I know--I also owned a 48-track digital recording studio in the early 1990s) and get CDs pressed for pennies. And now they can distribute globally via the Web, completely eliminating the record business.
If I'm (Apple Computer CEO) Steve Jobs, I take any artist's work and add it to the database regardless of who they are--local garage bands, obscure niche stuff, you name it. It costs me nothing to maintain a little server space. The artists get the cut the label would get, and it's up to them to promote. This is the scenario that is freaking out the labels. Without distribution they are nothing.
You might argue that they "develop" artists. They don't. The development process is entirely in the hands of independent producers who sell their product to the industry. These producers will wake up and realize that they don't need these middlemen, with Internet distribution.
Back to marketing. The labels' marketing consists of paying the major radio station groups to play the songs and creating PR flack around artist's personal lives. This is not rocket science. With satellite radio and Internet radio, the lock on exposure is cracking. And that will be the end of the "industry."
They know it, and they're scared...make that desperate. Suing college students won't cut it. Watch for a major artist (Rolling Stones- or Radiohead-level) deciding to walk away from their label and go it on their own. That will be the tip to sell the labels short in a hurry.