A 5 Step Program for the Music Industry

Back in the early days of the internet a close friend of mine called me up and made me drive over to his parents house (yes, it was THAT long ago) to show me something he had just discovered online. After he played for me the first .mp3 file I had ever heard and told me the file size I instantly knew that the age of the music CD was effectively over and that unless the industry made real attempts to embrace this new technology they were going to be effectively screwed. That was almost 10 years ago. Surprise! I was right, looks like they are screwed. With CD revenue down 26% between 2000 and 2006 I think it is long past time for someone to explain the situation to them in simple, easy to understand terms. So here is a simple 5 step program they can take to maybe salvage the situation before they end up going the way of the dodo.

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Step #1 Stop looking at the past.
You can’t see where you are going if you are constantly watching the rear view. Sounds like advice everyone should never need to hear but the music industry seems to be fixated on past sales numbers in a worthless effort to hang on to those numbers. Wake up! Time to realize that those numbers are not useful anymore. The technology (Music CDs) that was such a stable and easily controlled medium for revenue growth is outdated and unreliable as an indicator of future prospects in this new digital market. Welcome to a new reality where you need to focus on what today’s digital sales numbers look like and where new markets and technologies are taking your customers (key word….CUSTOMERS). If you remember one thing from this step, it’s all about customers now. Big media or fancy record “labels” don’t matter as much anymore.

Step #2 Figure out where you can offer value to the consumer.
This should be second nature by now but most of the big record companies (and the RIAA) seem to keep missing this point. In the digital music market you need to offer value on the dollar, simply having your catalogs “out there” is not going to cut it. Subscription services are a red herring and the majority of consumers know it. Why is Apple so successful? They offer a fair value for the price they charge. If you want to compete you are going to have to offer more value or convenience over the competition. In the digital world there is just no way to “capture” the audience or channel them into a set business model. By its very nature, this new digital medium is a disruptive technology and you need to adapt to that reality now, not later when someone else has 80% of the market (opps, see #5).

Step #3 See both ends of the business.
There are providers and there are consumers. Artists want in on this digital revolution and they are eager to embrace new technologies. Companies that continue to count on CD sales as being core to the business are short sighted and are going to look like dinosaurs to both artists and consumers. For years music companies were able to sit between these two groups but with the digital music marketplace open to anyone, large or small these two groups might start talking to each other. So companies in the digital music business need to still offer value to both the consumer AND the artists otherwise they will just cut out the middleman and save themselves the hassle.

Step #4 Drop subscription services, embrace ownership.
Lets face facts. Nothing beats owning your own music. You can burn a CD with it, you can play it on whatever device you wish, and most importantly, if you can’t afford to keep paying a monthly fee you get to keep it. So why would anyone bother with a subscription service? I might see a tiny minority who might enjoy the access to a large library of music but the vast majority of users out there don’t really relish the idea of losing it all if the service goes belly up or they run low on cash. This looks completely insane when you consider the target market for the majority of music, teens. Whoever thought teens and college students would be up for paying a monthly fee for music must have taken the short bus to school and should be fired immediately since they clearly don’t understand the digital music market (no really, fire them). Moral of the story, you want have as much success as Apple? Then you need to do what they do, just better.

Step #5 Don’t wait, act now!
The switch to digital music is not up and coming, its already here and is going into high gear. I can’t even remember the last time I actually played a music CD. I regularly listen to my iPod and both my own vehicle and my girlfriend’s car both support iPod integration along with the ability to play MP3 CDs. Let me make this point very clear. Established music companies have no time left to milk CD sales, since there are very shortly not going to be any.

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1. Why DRM-Enabled Music & Video Could Be A Waste Of Money