How the Music Business Spent the Summer Killing Itself | Hacker News Reader

How the Music Business Spent the Summer Killing Itself

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31 pointsmakimaki19 comments

All articles like this fail to understand the reason why this is happening. They're looking at the companies as if they were run by people who were forced to hold their shares for the next 25 years. They're not.

They're run by execs who know they won't still be working there in 5 years and who get paid mainly in stock options. (That's how most public companies are run). The incentive of the people who run the company is just to maintain what little they can for as long as they can, and they're actually doing a pretty good job of it.

With the possible exception of suing actual customers, they've done a fantastic job of maintaining the status quo just long enough for them to cash out their options every year for some amount of profit.

This seems to imply that in 5 years (or less) time, we can expect the music industry in its current form to collapse in on itself?

Or am I reading too much into this? Otherwise it might not be too bad a time to start thinking about what Music Industry 2.0 might look like...

What I don't understand is why the back catalog isn't more of a draw - in the music industry, but especially in the film industry.

Instead of trying to push new releases, you could be flogging (selling) a raft of your back catalog for almost zero marginal cost. Aside from some perennial classics, this catalog must be earning nigh on zero.

There is lots of obscure music and film that I'd happily buy/view/etc if the cost was low.

There is a lot of obscure music I'd happily buy even if the cost was the same as the new stuff; I'd just like to be able to acquire it!

Yup!

This is key. The Internet is a new distribution channel - the marginal cost is very low compared to traditional methods...

It's perfect for selling IP that can't beat the higher marginal cost for traditional distribution methods. There are probably orders of magnitude more people that would pay $1 to watch "They Live" than would fork out $10 to buy the DVD...

We'll see. I'd love to see a massive groundswell in music. But so far, we still have junkie 'hits'. Most peoples itunes playlists are essentially like the other guys' itunes playlist.

if the price was low? why would they release a n lower-cost product to compete with their higher-price poroducts for your attention and money?

Yup - but I think this is a stronger case with traditional distribution methods. Where marginal costs are higher and there are other fundamental limits (e.g. your local music store can only hold so many CDs).

The internet potentially has a significantly lower marginal cost. That channel is better suited to volume. (The expectation is that because you have n lower cost products, that people buy n rather than just one).

There's a limit as to how much users can buy/watch/listen to/afford though. That's the reason the whole long tail theory has been mostly evaporating anyway.

I'm not sure. I think it just means that the recording industries (like all major corporations) will always be behind the times on new ways of doing business by some years.

It took Apple to pull them into digital music sales, long after they should have been doing it. It took YouTube to pull them into making Hulu.

At some point it will be obvious that new ways of making money have completely eclipsed the old, or that the old just can't be kept alive by lawsuits anymore. But they'll fight the changeover for as long as they can, rather than making large investments in it and waiting a few years for those bets to pay off.

It means that if high risk is required and/or the world in which they operate is about to turn upside down, the structure of major companies doesn't put them in the best position to take those steps.

BTW, it's not just execs that aren't holding stock for 100 years, its shareholders too. At least those that influence stock price.

But I don't think it's impossible to change course completely. IBM famously turned things around. But they had some things going for them. The industry grew around them so they could go from being 50% of the industry to being 6% of the industry (made up stats) and still grow in absolute terms.

But recording Companies are recording companies. Even if you buy the claim that you can the industry can shift to selling t shirts, concerts tickets & personalised albums & still make the same amount (I don't), you can't walk away from that simple fact. Their whole world depends on a reality that no longer exists.

1.It's expensive to produce a recording. (they'll fund you)

2.You must have economies of scale. (Gotta cut at least 100k)

3.You have physical control over distribution via limited channels (copyright exists, physical objects are worth money)

The current world simulates that reality to keep record companies in bread. Why the hell do you need a record company if you can record an album for a couple of grand, promote it on user generated radio where things are spread virally out of the control of record companies & distribute it in the same way the Rolling Stones do? The Wal Mart model has room for record companies (if your not one of the top 50 or top 100 your not there. The itunes one does not.

Even if the execs were to take longer term positions, they would have incentive to keep this up. The future doesn't include them. Keep it away.

Does this imply that I should short music company stocks?

I would take it even further. There is no evidence that whatever business models emerge after the current situation collapses, will be anywhere near as profitable on the whole as the previous one.

There is even less reason to think that the future model(s) will be as profitable for the same players.

They're on a sinking ship bucketing water. Why not get off? Maybe there aren't enough lifeboats? A sinking ship is better then open ocean after all. If the future of music doesn't contain the current players, prolonging the inevitable demise of the way things are done is 100% rational. When it sinks. It sinks. No point getting wet before you have to.

I actually buy CDs, and I discover lots of new music through Pandora and Last.fm. The music industry is trying to promote album sales by killing internet streaming?

I'm not sure about streaming. But they do have some evidence that keeping hits off of itunes for some big names can improve album sales enough to make it worthwhile. Short term & silly. But there is reasoning.

Title correction: "How the Music Business Continued to Kill Itself this Summer"

Call me when they're actually dead and I can get into music again. Until then, meh.

Gosh, you would think they would take a summer break, no?

Well. If you by "the summer" mean "ever since Napster hit the internet and digital music became mainstram", I'll fully agree.

Though it is interesting to see how even marketing people, not just geeks or "pirates" are starting to catch on to these people doing absolutely everything wrong.

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