Thursday, September 27, 2007

Cutting through Music Biz BS

This recent Freakonomics Quorum on the Freakonomics blog is the best read I've had on the music business so far this year. Nothing like the lense of economics to dispell the bull that the RIAA and others spew out.

Five people from very different walks of life are asked their opinion on the subject, some of which aren't so good, but a couple are really quite thorough and insightful. Here's the money quote right here:

From Koleman Strumpf (a business economics prof who's written extensively on the subject):

(from a list of other factors contributing to the industry's decline): recorded music has had trouble competing against other products that vie for consumers’ entertainment spending. Consider home video products like the DVD. It does not seem implausible that a good chunk of the $11 billion rise in spending on home video products since 1999 represents foregone CD sales. (Music industry revenues only fell $2 billion over this period.) Entertainment spending was also likely channeled into cell phones and video games, both of which experienced large sales growth and have been particularly popular with the key teen demographic.

From Peter Rojas (founder of Engadget):

The emergence of Napster (the original one) was the wake-up call, but the record industry would be in trouble now even if no one had invented peer-to-peer file sharing.

The fact of the matter is that the majors thrived in an era of inefficiency, when there was value in physically producing and distributing music. There isn’t any value in that any more (or at least, it’s very quickly declining), and there’s no good way for labels to compete given that the cost structure of the business was designed around physical releases

Those being said, it's amazing to see how some of the other opinions come from heads firmly stuck in the sand. Amazing.

I'm extrememly curious to see how the industry fares with iTunes, Walmart and Amazon all offering DRM-free music downloads. If it has a positive effect on the market, maybe the games industry can learn a lesson or two from the music industry and rid ourselves of DRM, as it seems to be one of the factors that is hurting the PC platform in particular.

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