barry ritholz beat me to the punch on the story (i’m gonna blame the flu). there’s not a lot i can add – in classic barry ritholz-fashion, it’s well-documented and well-sourced and even his spin pretty much echoes the spin i’d put on it (gee, what DID happen to this story?). plus, he’s got a pie chart.
anyway, since i got beaten to the punch on this one, it puts me in the [much easier] position of picking the nits.
barry spends some time exploring the relative merits (or is that value) of dvds and cds – the big picture has a lot to do with the attention economy (not to be confused with the dollar economy). most entertainment is still linear process, so the ears you’re trying to grab as a musician may be otherwise occupied if the brain between them decides something else is more worthy of their attention.
a tiny nit i should pick here (just a tiny one – i don’t want to give you the impression i’ve gone to the dark side!) is that for films and concerts (that end up becoming dvds), the dvd is a secondary source of revenue for the production. the film or concert already made some money on tickets, and might already be “in the black” – so dvd revenue might be pure gravy. that gives the producers some pricing flexibility, and may go some distance toward explaining the cartel behavior of the record labels: they fear for their primary revenue stream.
fear is a powerful motivator, but the suggestion i have is to expand the view a bit – i’ve found at least three ways to create value with music and i hardly even tried. the “sell a million cds at $20 a pop” formula is only perfect for some artists. technology has given us the tools, now it’s time to get creative with them.
i’ve had a little theme i’ve been beating on here for a while – the death of the album theme. to fold that into this discussion, i need to point out that there’s no “death of the album” problem with a soundtrack or concert. the tracks are coherent, and already work together (and if they weren’t connected before, they are now by virtue of being in the film or concert). also important is that the artist(s) should already have been paid once (when their music was licensed for the film or tickets sold for the concert).
there’s a point of philosophy that’s going to stick in my craw, but barry has promised to dig into this later, so i should wait…
The more dangerous long term challenge facing the labels is “disintermediation.” The internet allows for the labels to be removed as the middle man between the consumer and the artist. Networked technology, not free MP3s, may very well be the meteor that eventually destroys the dinosaur labels.
to give you a little hint, my observation of “net era economies” is that this concept of “disintermediation” hasn’t played out very effectively. but let’s see what barry thinks before i show all my cards…