Hit Me Baby, One More Time...
There is probably some core part of everyone’s music collection that has migrated through a variety of media formats. Vinyl record, 8-Track, cassette, CD, and Audio-DVD’s. They may even have a few recordings in both ‘original’ and ‘remastered’ versions in the same format.
The same likely is also true of movie collectors with copies of the same title on VHS, Laser-Disk, DVD and even Sony’s UMD format.
What’s interesting here is that despite the fact that people already had rights to the content by virtue of that ‘first purchase’, they still needed to pay for the same content over again simply to change the media it was on. The boom times record companies had from 1985-1995 (during the peak transition from vinyl to CD) were in large part driven by people refreshing their current collections.
So did the record companies offer these people a discount for the ‘content value’ of the vinyl format they already owned?
Not a chance.
They hit them up time and again to pay for the same content. The same thing happened to the people that migrated from VHS to DVD. If they wanted something on DVD, they need to buy a whole new copy.
The fact is, whenever a new media format has been introduced, everyone has been forced to pay full cost for an item in the ‘new’ format regardless of whether they owned a copy in an ‘old’ format. It’s the way the business works, and the media companies depend on it. But despite the obvious financial benefit this approach has given to the media companies, it also sowed the seed of a problem they all struggle with today...
After 20 years of paying for the newest media despite having older copies, the marketplace has come to the understanding that what they are paying for IS the media - the content is basically free!
The P2P generation essentially grew up with this as their commercial role model in this space. So when Napster showed them a way to get the content without any media involved, a cost of ‘free’ seemed pretty much in line with what the media companies were doing.
Of course the media companies try to convince everyone that they shouldn’t share files because it hurts artists. But if they wanted to be honest, they should really say: “Don’t screw our artists out of what they deserve... that’s our job!” While in theory the artists get between 8-14 cents per song on a 99 cent purchase - the outdated structure of music contracts allows record companies to take a whole range of fees out of this amount. Most of them are bogus. For most artists, ‘free’ is just about all they end up with from the sale of their music. Instead, they need to make their money from concert tickets and merchandise. And the ironic thing is, for the non-megastar artist, the visibility and distribution they can get from broad file sharing could actually help them on that end.
Things are changing - just not the way the media companies hoped they would...
More people are starting to look elsewhere for new and interesting music and movies, and artists are realizing that the ‘indie’ route is better for them both creatively and often financially as well.
The days of a musician or band needing air play on FM radio to be successful are coming to an end. You can find great new music in commercials and video game soundtracks. Satellite radio is a whole new venue as well. And the most powerful discovery method - someone telling you about a band you might like - will be accelerated by services like Last.FM and Pandora. In addition, artists increasingly use the web to self promote, stay in touch with their fans, and sell both music and merchandise directly. There are more alternatives open to them then ever before.
This transformation is not limited to the music business. Independent film festivals are gaining in global popularity, and becoming a source of mainstream entertainment. And at the Academy Awards, the movie industry honored more indie films this year as well, recognizing the shift of quality and compelling product away from the traditional production shops. As IPTV and digital cinema pry open the exclusive distribution channels that studios have to movie theaters and television screens, I expect this indie trend in video content production will explode.
The big media companies are quickly finding themselves producing increasingly insipid products, and struggling with broken business models that are completely out of touch with what their consumers want. Instead of facing up to the new reality and working to remake themselves, they blame all their problems on piracy and sue their own customers.
A day of reckoning is coming for these companies, its just a matter of time. Those that can think boldly and transform themselves will come out of it stronger and better positioned for the future. Those that can’t ... oh, well.
But until all that happens, I better start saving some money to upgrade my ‘Lord of The Rings’ DVD’s to their upcoming release in High Definition...
...full price, of course.
Wednesday, March 15, 2006
