You Mean Wall Street Just Realized The Recording Industry Was In Trouble?

from the why-you-don't-trust-wall-street-analysts dept

Thu, Nov 8th 2007 4:03am — Mike Masnick

You didn't have to be particularly insightful to realize a while back that the traditional recording industry was in trouble if it kept traveling down the self-destructive path of suing music fans and shutting down unique and innovative distribution tools. However, it appears that the folks on Wall Street are just starting to figure it out. Apparently, the recent defections of Madonna, Radiohead and other big name acts has Wall Street analysts finally suggesting that the recording industry's future isn't very bright, and thus downgrading the labels' prospects. The thing is, they should have realized that long ago. The big name act defections are simply the end result of a long chain of strategic blunders, despite any number of people presenting more reasonable plans forward. Again, this is focused solely on the record labels, not the overall music industry -- which is thriving. In fact, the record labels have had every opportunity to embrace these new tools and be a big part of online promotions -- but they chose not to. One would hope that with even Wall St. analysts telling them their strategy is wrong the record labels might wake up to the opportunity they've thrown away, but the labels themselves (with the possible exception of EMI -- which was recently taken over by private equity folks who seem to realize what's going on) have given no indication of any significant change in strategy.

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Filed Under: downgrades, recording industry, wall street

25 Comments

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Bob3000, 8 Nov 2007 @ 4:38am

Seems like the climate is ripe for a new type of artist marketing company that knows how to get radio play, populate the pay for download sites, do internet marketing, aid with tour promo, etc. All without alienating the user.
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Sherman T. Potter, 8 Nov 2007 @ 5:00am

Doris Day
Mrs. Potter and I love to listen to big band and Doris Day. Brings back memories, some I can't share with Mrs. Potter.

Sherm
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James, 8 Nov 2007 @ 5:05am

grammar change
Hey Mike,

I completely and totally agree with you (it's really hard not to) and you are a truly fantastic writer. I just wanted to point out that the sentence where you mention Madonna and Radiohead would sound much better if you removed "they're using".

It's just a suggestion.

Sincerely,
James
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Danno, 8 Nov 2007 @ 5:40am

Yeah, well, everything's been in the tank recently, so until the market comes back overall, I wouldn't call this a revelation or anything.
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Anonymous Coward, 8 Nov 2007 @ 5:46am

Stick that in your Pipe and smoke it! RIAA - I hope they go bankrupt and also that musicians take their business elsewhere.
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Anonymous Coward, 8 Nov 2007 @ 5:46am

Stick that in your Pipe and smoke it! RIAA - I hope they go bankrupt and also that musicians take their business elsewhere.
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B-man, 8 Nov 2007 @ 6:04am

GREED
GREED isn't it great!! Cut their nose of to spite their face!!!
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Anonymous Coward, 8 Nov 2007 @ 6:45am

The recording industry has been telling two lies. 1) Music downloads is the reason CD sales and profits are down, and 2) DRM will fix that. Business analysts tend to believe what businesses and industry groups say.

Now that the business analysts as a group realize the error the next dominoes to fall will be the majority of the recording companies (there will be some die-hard believers) followed by the industry groups themselves. The last group to see the light will be politicians. The industry groups are not going to be eager to send their paid lobbyists back to Congress to say "Oh, by the way, what we have been telling you for the last decade is 100% wrong."

But eventually the industry is going to realize that things like the DCMA is straightjacketing them and they will return to the politicians requesting repeal of the DCMA and passage of other laws based on their new, flawed business model.
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Jeff Rivett, 8 Nov 2007 @ 6:48am

Corporate greed
The big recording industry corporations will continue their senseless fight until it is no longer possible for them to make money with their old business model. Then they will switch from being in control of recorded media to being a service provided to recording artists. Why will they wait? Simply because there is more money to be made with their old business model. The recording industry has been ripping off artists and consumers for decades. They won't give up all that profit easily.
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Wizard Prang, 8 Nov 2007 @ 6:53am

The end of monopoly
The RIAA has had it their own way for so long that they have started to believe that they have a divine right to make money.

The success of outfits like AoMP3 has shown - clearly that people are willing to pay for good-quality, easy-to-use DRM free content - they're just not willing to pay the $1/song that the RIAA insists is not enough to keep them in the style to which they have become accustomed.

The world has changed, and they are looking back to the '70s and '80s and wondering things are not the way they were...

It's not Art - it ceased to be when the masters were handed over - it's just data.
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TheDock22, 8 Nov 2007 @ 7:19am

Nice Synopsis
As I have said in the past though, Radiohead is not striking out on their own, they signed with a new label (ATO Records). Whether or not ATO is involved with the RIAA I do not know, but one of the owners is a musician who records with Bama Rags who is owned by RCA so the chance that ATO is part of the RIAA is pretty good.
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4-80-sicks, 8 Nov 2007 @ 8:00am

with even Wall St. analysts

"Even" is the key word concerning the previous comment The thing is, they should have realized that long ago. It's amazingly rare how infrequently business workers understand business strategy, at least as a group. There are many, many highly intelligent people on Wall Street, but rarely do trends reflect this.
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R3d Jack, 8 Nov 2007 @ 8:31am

Once upon a time...
...the recording industry provided a real service to both recording artists and consumers. Putting music onto disks (remember vinyl?) and distributing them was expensive. Now, relatively speaking, it's not. The labels ought to adapt to the new reality. However, every person at those companies who has any real say has one goal: maximize profits fir two to three years, keep the share price up, and then retire. Fortunately, it sounds like share prices will start falling. That is the one thing that will cause change.
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oldster, 8 Nov 2007 @ 8:39am

Re: Nice Synopsis
"Radiohead is not striking out on their own.."

Given what they have done, it's close enough. The issue isn't really the RIAA anyway, it's the 5/6 major labels that control the operation and activities in pursuit of their own vested interests. Lets face it, the minor labels have little if any say in the matter.
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Mike (profile), 8 Nov 2007 @ 9:05am

Re: Nice Synopsis
As I have said in the past though, Radiohead is not striking out on their own, they signed with a new label (ATO Records). Whether or not ATO is involved with the RIAA I do not know, but one of the owners is a musician who records with Bama Rags who is owned by RCA so the chance that ATO is part of the RIAA is pretty good.

No, they signed a deal with ATO Records solely for distribution. They are not signed to the record label, binding themselves to the label and giving the label control over their music. Two very different things...
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TheDock22, 8 Nov 2007 @ 9:13am

Re: Re: Nice Synopsis
Is that not the point of bands trying to make it on their own? Not to rely on labels to distribute their music, but rather use the internet as a medium instead? I may be confused, but I also thought ATO Records was helping them with recording.

ATO Records has a history though of letting artists do what they want anyway as far as creative control. ATO was built by an artist who believes in complete creative control going to the artists.
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BritJo, 8 Nov 2007 @ 10:00am

Re: comment
Do not EVER, IN YOUR LIFE, ANY OF YOU: Underestemate the power of stupidity when it has freinds, each stupid person in a crowd of smart people will increase itself tenfold. Infact large groups of smart people even tend to get stupid quickly.
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Chuck Norris' Enemy (deceased), 8 Nov 2007 @ 10:09am

Radiohead song on radio
I was surprised to hear Bodysnatchers off Radiohead's new album on the alt rock station in town that is owned by Clear Channel yesterday during the 5 o'clock commute.
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JW, 8 Nov 2007 @ 1:31pm

Good to see the music industry get what they deser
Can't say my heart aches for these greedy music execs. They have tried hard to kill innovation instead of embracing it. The part of the story that is not getting mentioned here about the big music companies doing so poorly now is the crap they are trying to push. It seems anyone who wants to do something different and/or innovative has to go to a smaller company. The big music companies only produce very formulaic records that they "know" will go gold/platinum. It is good to see not even the multi-billion dollar record industry can keep down the inevitability of change.
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In the KNOW, 8 Nov 2007 @ 4:17pm

Music Industry
I work in the INDUSTRY and yes...it's easy for Big Name acts who have already sold 10s of millions of records to forgo the big Record companies because their name is already out there. But for the smaller up and coming acts, they need the Record Labels. Record labels spend millions of dollars on new talent that unfortunately never make it big. Just look at the cutout bins at Amobea and other record stores. Record companies have finite budgets and unfortunately the marketing money spent is on the already big established acts that have the potential for a higher rate of return. So the newer acts may not get the exposure they need. But that was the old way of thinking. Over the last few years (albiet somewhat late) the record companies (at least mine), are rethinking their business model and making changes. They are now starting to use new distribution and marketing strategies. It won't happen overnight. And as long as technology continues to change and the number of entertainment options continue to increase, so will the need for the music industry to adapt. We're not there yet but we are moving in the right direction. It's just not as cut and dry as everyone tries to make it seem. If it was, we'd all be big-time Music Executives.
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Cameron S, 8 Nov 2007 @ 6:45pm

actually
Bands can get success in a variety of ways that have never been easier.

They can do it the old fashioned way. Touring, building a following, music reviews, etc.

They can also embrace technology. Start a web site, build a blog, a pod cast, do video casting, and build an online community that can bring in more than just album sales. Word of mouth is very powerful these days.

Major label economics only benefited the major labels as well as the few bands who actually made it big, and only because they had the clout to renegotiate their next contract.
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Mike (profile), 8 Nov 2007 @ 6:55pm

Re: Re: Re: Nice Synopsis
Is that not the point of bands trying to make it on their own? Not to rely on labels to distribute their music, but rather use the internet as a medium instead?

No, there's nothing wrong with bands using labels to help them in specific areas... the problem is when they sign their life away to the labels.
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Mike (profile), 8 Nov 2007 @ 6:57pm

Re: Music Industry
I work in the INDUSTRY and yes...it's easy for Big Name acts who have already sold 10s of millions of records to forgo the big Record companies because their name is already out there. But for the smaller up and coming acts, they need the Record Labels.

Actually, as we've discussed and pointed out repeatedly, that's just not true. It is true that a *smart* record label could help, but we've seen all kinds of "no name" artists use the tools the internet provides to make themselves popular without a record label at all. So the idea that a small band needs a record label is false, plain and simple.
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Take a Stand, 9 Nov 2007 @ 4:27pm

Music Industry
The RIAA and the MPAA remind me of Enron. The lies, the Exageration of profits; or lack thereof, and screwing their Employees. I wonder if they will have the same fate...
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chiles, 16 Nov 2007 @ 9:05pm

get with the change
yes the music industry needs to get with the change. i'm glad it can be done online much cheaper maybe the original music from the 70's and 80's will come in a new twist and for unsigned artist like myself will get a publishing deal as a songwriter by promoting my music
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