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Posted By Barry Ritholtz On May 20, 2011 @ 12:30 pm In Music,Think Tank | Comments Disabled
Bob Lefsetz is a music industry observer, and publisher of the Lefsetz  letter:
A company mired in the past that is unable to develop new products within that constantly misfires in the future. A major label or Google?
This is a Google failure. If it weren’t for search/AdWords, Google would be on suicide watch. The vaunted Android? They bought it. Maybe if they bought Google Music, it would work better.
But not everything is technology. Business always comes down to people. And we can speak of the intransigence of the record companies, but somehow Apple manages to get deals done. Google and Amazon do not. Not that I want to excoriate Amazon. The retailer is always looking to the future, always investing proceeds, building infrastructure, knowing that if you sleep, your lunch will be eaten by someone you didn’t even recognize in the rearview mirror.
The record industry is losing this battle too.
Having lost its distribution stranglehold, major labels needed to reinvent themselves. Only selling Top Forty wonders is not the future, for Top Forty radio is not the future. Having ceded almost the entire landscape to indies, the major label future is bleak. Instead of starting with a clean piece of paper, they insist on holding on to the old crumpled one.
Clayton Christensen got this right almost fifteen years ago, with his book “The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail”. When confronted with a disruptive technology, you’ve got to build your new business across the street and when the time is right, close the old building and move into the new. This is what Netflix has done. They were renting DVDs by mail and one day they announced they were a streaming company and subscriptions are over twenty million and arguments are now about rights and bandwidth as opposed to postage rates. With DVD sales tanking, the movie industry must do business with Netflix or its competitor. With CD sales tanking, what is the major labels’ plan?
We’ve got to go to subscription. It’s the only model that works. Getting a little from a lot. Hell, people don’t have a problem with buying Netflix subscriptions now, even though so much is unavailable for streaming. Which is why Spotify is making a mistake thinking it needs all four label groups to launch. That’s no longer true. Lead, and the rights holders will follow you.
Netflix proved that people will not only embrace the rental model, but new technology.
Hell, if you’ve got a RAZR you’re laughable. Everyone wants a smartphone. But the labels are still selling CDs?
And wireless companies keep coming up with new price points, to entice customers, lowering the price to get them hooked and then raising them when they get addicted.
You can pay per text. But eventually you get a subscription.
When is the music industry going to hook the public on subscriptions? You can always raise the price, isn’t that the American way?
We’re selling a drug here. And the problem is the public has never taken the first hit. That’s the magic of Spotify. Give it to people free and they’ll become addicted.
And it’s all about the hand-set. With today’s subscription services, not only Spotify, 2,000 plus tracks live on the hand-set, so there’s no streaming/bandwidth charges at all!
But no one knows this because no one uses them.
This is the Apple paradigm. Get people to use iPods and iPhones and then they’ll buy Macs and iPads, everything you sell. But before the iPod and iPhone, most people had never tried an Apple product, they had no idea how good they were.
No one’s gonna try Google Music. It’s just about incomprehensible. Kinda like Google Wave. Huh?
Apple will get the deals done. Like a great A&R man, they know how to close talent.
But cloud access is not the future, subscription is.
You just don’t know it yet
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 Lefsetz: http://lefsetz.com/wordpress/
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