How The Record Labels Are Only Ten Years Behind In Their Thinking About Business Models

from the eventually-they'll-get-there dept

Tue, Sep 4th 2007 10:08am — Mike Masnick

The NY Times Magazine is running an interesting profile of Rick Rubin, the well-known producer who had tremendous success over the past twenty years producing all sorts of successful musical acts -- from the Beastie Boys to Slayer to Johnny Cash -- and who took over as the co-head of Columbia Records back in May. While the story itself is interesting and focused on some of Rubin's peculiarities and his key focus on finding and producing good music -- there are a few other interesting tidbits that come out. The first is how Rubin was completely pissed off at Columbia prior to joining the company because the Sony rootkit debacle hit just as a Neil Diamond album Rubin produced had come out to great fanfare. It was apparently number 4 on the charts -- the highest ever for a Diamond opening. Except, Columbia is a subsidiary of Sony BMG and so the Neil Diamond album was included among those that had the rootkit -- and the furor over that got it pulled from the shelves, and that basically killed its commercial prospects. So, at least we know that Rubin won't be a fan of such things.

However, the article suggests that Rubin and others in the industry are much more interested in setting up some sort of universal subscription system that would allow any subscribers access to any music on any platform. What's most amusing about this is that this is exactly the proposal the EFF suggested many, many years ago, which recording industry executives insisted would never work. What's even funnier is they might be right now, after managing to screw up all sorts of goodwill from customers. Back when the EFF suggested it, it probably still could have worked. However, Rubin is exactly right on where the industry is headed if it doesn't figure out these new business models quickly: "The future technology companies will either wait for the record companies to smarten up, or they'll let them sink until they can buy them for 10 cents on the dollar and own the whole thing." That's why I've always figured that things would work out in the end. If the RIAA members keep shooting themselves in their collective feet, then the problem will eventually take care of itself. Of course, the labels could avoid a lot of the problems if they learned how to actually embrace certain aspects of file sharing. It's not clear that Rubin (or anyone else in the industry) has gone that far yet. They're just still working through the ancient EFF plan they derided when it first came out. In fact, one of Rubin's other questionable ideas is setting up a fake word-of-mouth marketing organization, where Columbia has hired a bunch of young adults to promote their music online on blogs and in forums and such. Hasn't anyone explained to them that word-of-mouth is about people who legitimately enjoy the music -- not those who are paid to promote it? File sharing was legitimate word-of-mouth marketing. Hiring young adults to spam forums is not.

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Filed Under: business model, columbia, music, riaa, rootkits
Companies: columbia records, riaa, sony

23 Comments

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jon, 4 Sep 2007 @ 10:24am

I read the article yesterday and thought the same thing about subscriptions. They wont work, but I don't think they ever would have worked. Netflix works because people don't watch most movies again and again, and it isn't owned by the movie companies but this idea is different. People want control of music. I think that having some sort of faith that music companies will always provide you with your music and won't ever screw you over in some way or another is stupid.

I also think that the word of mouth campaign is smart. It isn't a new concept in the first place. This sort of thing has been happening all over for a while both online and in the real world. I mean the article itself uses word of mouth for no less than three music acts (gossip, potts, and diamond). That doesn't mean I like it, but it is effective, not 100% effective, but effective nonetheless.
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RandomThoughts, 4 Sep 2007 @ 10:29am

10 years behind or just waiting for the right time? Allowing downloads ten years ago might not have been a good idea. I know its better to cannibalize yourself rather than have others do it for you, but you don’t want to do it before you have to. Now it seems downloading is beginning to hit critical mass, so maybe now is a better time for them to jump into it.

Of course, maybe the boat has already sailed, but I don’t think so.
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jon, 4 Sep 2007 @ 10:38am

The problem is that no one I know under 50 thinks of the music companies as anything but greedy. Who would place any faith in folks they think of as greedy?
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technorganic, 4 Sep 2007 @ 10:50am

major label = death
major labels, like major governments and their war campaings will never win, they are born to fail for they go against all laws of god and nature.

the law of the universe is to give and share and love.

major labels don't get it, they think that by lying, coveting, stealing and being greedy they can keep their wealth.

wealth is gained by filling needs and niches and society.

the job of the major label is over.

they need to wake the funk up and hang up the headphones.
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Anonymous Coward, 4 Sep 2007 @ 11:04am

Re:
I know its better to cannibalize yourself rather than have others do it for you,
that's what the record companies have been doing to themselves for some time now. They'd rather send themselves down the toilet than change.
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Anonymous Coward, 4 Sep 2007 @ 11:16am

Re: major label = death
"the law of the universe is to give and share and love" - Seriously? This is your argument? Give/Share/Love? Rediculous.

"major labels don't get it, they think that by lying, coveting, stealing and being greedy they can keep their wealth" - Wealth has been gained and maintained this way for centuries...I doubt that it is going away. But definately stick to that give/share/love mantra of yours...you may be going places with that one.
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sehlat, 4 Sep 2007 @ 11:44am

I'm over fifty, and *I* don't think of the music (or movie) companies as anything but greedy, vicious, despicably self-oriented bastards.

They long ago forgot the age-old wisdom, whose modern expression is: "The bottom line is the value you GET. The top line is the value you GIVE. Companies that worry about the top line never have to worry about the bottom line."

MPAA/RIAA? bottom-feeders all.
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jLl, 4 Sep 2007 @ 11:44am

Re: major label = death
Based on your words, I'd say you believe humans are the only viable species in this universe.

The only true "law of nature" is survival. Beyond that are the effects of religion that only go as far as to effect, and usually alter, human nature.

Because, of course, a wolf eating its own runt offspring is doing so out of love...

Now, I'm glad to see you have a religion and believe in it; but, at least, try to be honest when you preech its credits.
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chris (profile), 4 Sep 2007 @ 11:52am

Re: major label = death
"the law of the universe is to give and share and love."

that may be, but it certainly isn't human nature, let alone corporate nature.

the idea of "making more money by letting people pay you to do what they are going to do anyway" just will not register with the recording industry.

they would rather go under than admit defeat.
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argh, 4 Sep 2007 @ 12:13pm

Re: major label = death
The nature of the universe is to expand. Further than that, as far as I know we have no idea.

But good luck with that giving sharing and loving thing. Maybe you should have a intervention against all those big mean black holes.
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W.B. McNamara (profile), 4 Sep 2007 @ 12:24pm

The devil is in the details...
I'm a little less optimistic: while one possible reading of the Rubin quote could look a lot like the EFF proposal, I'd give better odds on Big Content going with a different reading:
"You'd pay, say, $19.95 a month, and the music will come anywhere you'd like. In this new world, there will be a virtual library that will be accessible from your car, from your cellphone, from your computer, from your television. Anywhere. The iPod will be obsolete, but there would be a Walkman-like device you could plug into speakers at home. You'll say, 'Today I want to listen to ... Simon and Garfunkel,' and there they are. The service can have demos, bootlegs, concerts, whatever context the artist wants to put out. And once that model is put into place, the industry will grow 10 times the size it is now."

The reading that I'm afraid of is that the "virtual library" is a centralized, DRM-encumbered repository, and that the "Walkman-like device" is a locked down player that can be plugged into headphones, home stereos, or what-have-you and only streams music from the repository, rather than downloading full, device-independent audio files.
It seems unlikely that the big labels would go--even now--for an approach like the EFF's, where you're selling customers something that I believe an exec actually called "a license to steal." The term "subscription" (rather than, say "license") suggests that the labels get to discontinue providing access to the library when the customer stops paying...and that, in turn, suggests to me that the mindset is still DRM-tastic.
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AMP, 4 Sep 2007 @ 12:33pm

Re: The devil is in the details...
Yeah, I agree. The scary part is that "walkman like device". There could be many different types of those devices. All made by different manufacturers. Unless there is any standardization, i.e. all devices will play all formats and the music is not DRM'd to limit the devices that it will play on; we end up where we are today. Having to purchase multiple devises and paying subscription fees to different organizations to get the music you want and the ability to play it on the device(s) of your choice. The organizations involved have shown no ability to agree on anything in the past. I see no reason that would change.

All that being said, I applaud the sentiment and the fact that an industry insider is speaking out for change.
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Ajax 4Hire, 4 Sep 2007 @ 12:59pm

Re: major label = death
Major Labels are going the way of the print newspaper.
The parallels are strikingly similar.
Both newspapers and Record labels made money selling "media" (paper, vinyl, CD) but actually they were selling content.

Now people no longer need the media and can access the content in many ways. Both the newspapers and RIAA are trying to maintain that control over customers. All of their tactics are from old techniques that hinged on control of the media = control of the content.

Anyone who continues to try to control the message/content by controlling the medium is doomed to failure.
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Sclath, 4 Sep 2007 @ 1:03pm

What the labels are forgetting is services like iTunes consolidate music from multiple sources plus provide other valuable services (such as music suggestions, pod casts, etc.). I think few people will be willing to 'subscribe' to multiple labels to get all the music to which they want access. Unless all the labels are willing to consolidate their libraries under one umbrella and come up with a viable revenue sharing plan then subscription based plans are doomed.
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anonymous coward, 4 Sep 2007 @ 1:27pm

huh, using mp3sparks to download mp3 files does give me access to any music on any platform. TODAY!
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Nick, 4 Sep 2007 @ 3:13pm

Quality Content
What I thought was most interesting about the article was the focus in Rubin as some sort of musical rainmaker. You can argue that its easy for producers like Rubin to work with known stars and help restart their careers, rather than to find and develop new talent, but I was impressed with the way the article keep focusing on Rubin's desire for good music. Plenty of music that comes out these days isn't very good, and Rubin had a nice critique of the majors by speaking of their brute force methods of getting people to buy crappy music.

That's they key: good music makes money, regardless of piracy and all that.

While the majors are having problems figuring out what to do about the Internet, a more fundamental problem is that it's been too easy for them to package crappy music and crappy musicians in such a way to sell them to the public. Now, since no one listens to radio and fewer major record stores the labels have influence over, they can't dictate the market as effectively as they used to. Rather than realize this, they keep doing their same old thing (which they were very good at) and blame the Internet when their methods don't deliver as it did in the past.

If people like the music, if it rocks, people will go buy it. While the majors maybe can't make the same bazillions of dollars they used to, they'll be alright if they devote enough resources into finding and developing quality talent, which is what the article makes Rubin seem to be all about.
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Anonymous Coward, 4 Sep 2007 @ 4:07pm

Re: Re: major label = death
The only true "law of nature" is survival. Beyond that are the effects of religion that only go as far as to effect, and usually alter, human nature.

Because, of course, a wolf eating its own runt offspring is doing so out of love...
And so by extension, human child abusers are only following your "law of nature"? Survival of the strongest, and all that rot. Bullshit. That's the kind of self-serving, amoral, antisocial thinking we need less of.
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NovaScotian, 4 Sep 2007 @ 4:28pm

Re: Greed
I'm 70 and I think of the music companies as greedy.
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Fan, 4 Sep 2007 @ 5:24pm

To Mike:
Hear hear!!

(and applause to NovaScotian as well. Rock on.)
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mike allen, 4 Sep 2007 @ 11:22pm

Re:
I resent that comment Im 50 and a bit and I definitely consider them greedy and you can add stupid and ignorant of their own death nell.
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Peter Kohan, 6 Sep 2007 @ 10:06am

Re: Jon's comment
It's not just control of music in terms of ownership. Watching a DVD is at least a 60-90 minute time commitment, if not longer. People want control of when and how they access their music because music is a utilitarian art - it can be used in many different situations in one's life. People would like to be able to have access to all of the music they own at their fingertips and not have to deal with the complexity of competing interests of device makers, different software, and the record labels and music publishers. We want simplicity and a single, effective standard.

Re: word of mouth - People only accept word-of-mouth recommendations from people they trust, not from some poseur paid to surreptitiously "plant" recommendations by the record companies themselves. It's one thing for the record labels to distribute certain music to smart tastemakers, it's a completely different act to say to those tastemakers "hype my record." If those tastemakers get found out and are discovered as nothing but shills, then their credibility with their peer group is shattered and the negative PR will far outweigh the desired outcome.
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Peter Kohan, 6 Sep 2007 @ 10:29am

Re: Re: major label = death
I find it funny that people who work in other industries outside of the entertainment business often spout that creators and owners of copyrighted works in the fields of music, movies, or TV deserve all the pain they are suffering. Those whose companies depend on copyrights, patents, and trademarks in other fields - to build and maintain brands, to reward creativity in business, to provide competitive advantages against competitors - seem to regard the creation of a song or a film as an "other" which doesn't deserve as much robust protection under the existing laws as other types of businesses.

Would we be so laissez faire about consumers being as cavalier with theft in other businesses? At the grocery store? At a mall specialty retailer? Would we be as belligerent as the RIAA if someone stole your trade secrets and distributed them, resulting in a severe drop in company income and layoffs for you personally and many colleagues of yours? I wouldn't think so.
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Ed C., 6 Sep 2007 @ 5:20pm

Re: Re: Re: major label = death
Oh, so it has nothing to do with the fact that people find diminishing value in the works of the entertainment industry or the fact that they're overpriced to begin with? People will only pay for things that they feel has value and only pay the value that they feel things have.
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