Music biz's future rests on key changes
An online music service website.
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KAI RYSSDAL: Concert-goers in Australia got some advice this past weekend from Trent Reznor of the band Nine Inch Nails. Universal Music is upset that Reznor's been raising a ruckus about his tunes being overpriced.
A while back he said it's no wonder people steal music online. But on Sunday, he went further:
Trent Reznor: Has anyone seen the price come down? Well, you know what that means: Steal it! Steal away! Steal and steal and steal some more, and give it to all your friends and keep on stealing.
Of course, it's the big labels that complain they're the ones being ripped off -- Marketplace's Bob Moon concludes our special series now, with a look at some ideas that might help the recording industry face the musical future.
Bob Moon: Innovation marches on, one technological funeral at a time. As Fred Von Lohmann of the Electronic Frontier Foundation points out, the music industry once made its money selling sheet music for the family piano.
Fred Von Lohmann: That may seem quaint now, but it sure did seem like Armageddon to that business when they were facing a player piano that could do this without the need for sheet music. But of course, it unleashed a much bigger, much more exciting music industry that was made possible by recorded music.
Von Lohmann has little sympathy for an industry that's been complaining about free downloading for almost a decade now:
Von Lohmann: Get out there and do the work, right? Bottled water competes with free every day, private schools compete with free every day, lots of industries compete with free by delivering a better product, a more convenient product.
He says the attraction of file-sharing sites isn't just that they're free -- they offer a far better selection than any pay site, he says, with no restrictions on how files can be copied or played.
Von Lohmann: You've got to give fans what they want. They want the whole catalog, they want it conveniently and, you know, I think they'd be willing to pay a few dollars for it. But oftentimes, you can't really get all the songs -- even on iTunes, even if you want to pay for them.
John Lennon's solo material, for example, wasn't available until recently, and can still only be bought through select Web sites. And don't bother looking to buy any of the Beatles catalog online -- fans are still waiting for that.
One "mind game" facing the industry might be making its music seem to be free. Peter Jenner is a former manager of Pink Floyd who represents an artists' coalition in London. He suggests Internet Service Providers (ISPs) should take the lead and make a blanket deal with the recording industry, on behalf of subscribers.
Peter Jenner: It's got to feel free, at the margin, to the consumers -- so that you're paying a little bit, but then you can take as much as you like if you're an enthusiast, or less if you're not.
Jenner figures adding a few bucks to a monthly Internet bill should cover everybody. But why should everyone be forced to pay for what some might not want?
Jenner: America's the country where you have to pay $2 a month not to make long distance calls. You know, collective solutions. You pay your taxes so that you can all go to school -- even if you're my age.
Others suggest the industry could compensate for free downloading by making money through related merchandising, from ticket sales and T-shirts to product endorsements. Indeed, some music labels have started taking on the management of outside business ventures for their artists.
Harvard University professor Felix Oberholzer says between concert revenue and the ubiquitous iPod, one thing is clear:
Felix Oberholzer: The industry's actually very healthy -- a few of the central players in this industry have not found a new business model that can cope with the new realities.
After comprehensive research, Oberholzer concluded the music giants are wasting time trying to stop free downloading. The Harvard study found no measurable effect on sales.
Oberholzer: The link is essentially non-existent, and so I think it's time for the music industry to move on.
The major labels dispute his findings, but Oberholzer contends downloading helps fans learn about new music, and might even spur sales -- if the industry offers added value that gives fans a reason to buy what they can't get for free. Sony-BMG and Universal, for example, will soon bundle ringtones along with songs on CD singles.
The Electronic Frontier Foundation's Fred Von Lohmann hopes that's a recognition that fans can be rallied to buy legitimately.
Von Lohmann: I don't think we've suddenly had a massive morality shift, where tens of millions of Americans who wouldn't shoplift a CD in a store have suddenly lost their moral compass and are rampaging out there, eager to break the law.
The recording industry's top lobbyist, Mitch Bainwol, insists it is trying to adapt and support the technologies fans have embraced, even in the face of ridicule that it's too little, too late:
Mitch Bainwol: We are seeking to monetize all sorts of distribution channels. I find it ironic when we do what critics want us to do, we get criticized for that.
Online sales are steadily rising, and Bainwol sees that as a reason to keep on suing unauthorized file-sharing fans. He says that legal pressure helps give legitimate Internet sales what he calls "the traction they need." He's convinced history will record his industry's tactics as pivotal.
Bainwol: It took some pretty gutsy actions by the music industry and others to establish that, in fact, intellectual property is worthy of protection.
Industry critic Von Lohmann has a different take:
Von Lohmann: I think 10 years from now, everyone will look back at this entire episode with shame. I can't believe it ever got so bad and we were so unimaginative, unable to transition to a new model, that we actually started treating our customers -- our fans -- as the enemy.
In Los Angeles, I'm Bob Moon for Marketplace.