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Monday, August 15, 2005

Record Industry Answers: Raise Prices, More Breakable DRM and Raise Prices!

While the record industry is astonishing in its greed and complete misunderstanding of supply and demand - what's more puzzling is why no one questions the record industry tactics, rumor-mongering and policies? First, as with everything else they do, it's behind the scenes and off-the-record so you have to piece together what they are really saying. We have two major thrusts a) Digital music is being held back because Apple's DRM is closed so "we're not giving consumers a choice." If Apple holds up to 95% of the HDD based portable music player market and over 65% of the flash based (after 3 months), haven't consumers CLEARLY made a choice? Isn't Apple doing its part and clearly the 'other' choice in the market is not much of a choice? If anything, this is the fairest test of them all. Everybody essentially sells the same tracks. No one holds a distribution monopoly (especially now with the Internet) so someone in Butte, Montana or New York City has EXACTLY the same access to players and to digital tracks so the choice is competely fair and up to the consumer. And don't attribute it to marketing - if we equated amount spent on marketing with success, we'd be drinking New Coke, clear Pepsi and lining up to see Van Helsing. Consumers are not that dumb but that's what some competitors attribute the iPod success, it's just marketing! (which apprently stands for - we don't know why we can't compete - it must be marketing). What is their fascination with giving consumers choice? It's to take back leverage from Apple so they can raise prices. It's not able conusmer choice, it's about record label leverage ... to (surprise!) raise prices. After years of WMA online stores wandering in circles, Apple comes and after a few years - 500 million tracks and as the latest example, the Japan store opened to a million track week after Sony had struggled to sell a couple hundred thousand tracks the ENTIRE YEAR! So, what is the record labels response? B) We have to raise prices "to build the business." What kind of economic thinking is that? Yes, thank you for providing a solution to 70% of digital music download buyers - that's nice but what would really do the trick is to raise prices! That will cause the rest of the population to join in - the ONLY reason they were holding out was that prices were too low. What? So, this way when we sell mobile tracks at $3 a pop, it won't seem as obvious? Why would they think like this? Because they don't care about growing the digital business. They simply want to maximize short term revenue and raise prices so high that people will go back to buying CD's. With CD's, not only do they make more money, they make more money they can hide better. Look at the recent payola scandal in New York City. After all this time, they still believe that forcing radio stations to play certain songs is the best way to market - after all, what do they really care - the ARTIST pays for it - not the label. That's right, all "promotional" costs are charged to the artist - with digital tracks, everything is clear and out in the open. Everyone can get an accounting at anytime. U2 can check how many copies of PRIDE they've sold on the itunes music store with just a few clicks - in the real world? "Oh, that's in the warehouse or we're processing returns - we can have a number for you in 7 weeks." That's why they are willing to spend MILLIONS on DRM they know is breakable! In EVERY article when questioned, they admit it can be broken and yet, they continue to pay for it - why? Because the artist pays for it - so what do they care? Most of these CD copy protection schemes can be broken by pressing the SHIFT key or merely by using a Mac normally. Imagine if some security company sold you something just as "secure?" Yes, if you push hard on the door, it will open wide but as long as you only lean against the door, it's pretty much lock! For this, for you, only $30 million! - what Sony reportedly paid for their copy protection that could be defeated with a marker. And related to that is their desire to build the subscription business. Since it's like radio, the record labels pay less royalties since it's not a sold track - they don't really care that you can record the streams and make Mp3's. They are getting a monthly check from Real, Nap & Yahoo. They basically want you to spent hundreds of hours each month arranging and re-arranging tracks to LISTEN to and if you like it enough you might buy the digital track (same price as itunes), or you'll want the CD anyway. Again, it's a great situation for them. This way, you might be paying them 2-3 times for the same track. The record labels are a business - they can be greedy and short sighted and that's their perogative but let's NOT just let them coast on quarter-truths, rumor-mongering and treating us like idiots - we need to ask them point blank - what the hell?

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