Anthony Bruno wrote an interesting piece for Billboard Magazine this week analyzing the mobile music business and highlighting the upside and downside.
On the downside, Anthony points out that adoption of “mobile music has failed to live up to the expectations that the early success of ringtones had inspired. Combined ringtone and ringback tone sales have fallen almost 23 percent so far this year, according to Nielsen RingScan”.
Bruno goes on to write “But it’s not all gloom and doom. The mobile content business is undergoing a dramatic sea change, evidenced by the introduction of downloadable applications for such devices as the iPhone, BlackBerry and Android-powered phones. This new app-based distribution model allows developers and service providers to create mobile-specific services and sell them directly to users without interference from mobile operators, which historically have restricted the flow of new services available on their networks”.
Analysts point to the success of iTunes for iPhone as well as early market drivers like Pandora and Slacker for setting the stage for subscription-based services like Rhapsody and Spotify to make their way onto mobile devices. This opens up the market by end-running the mobile operators, who have historically been problematic for both content owners and end users.
So this sounds like a pretty significant silver lining for record labels. I’m sure that they were thrilled when they woke up on Monday morning and read Anthony’s story in Billboard. Could this finally be the big breakthrough that labels have been hoping and praying for, especially since the ringtone rush has quieted?
Maybe. I sure don’t know. But if there’s a way to fuck things up, you can count on a major record label to find it. And they really don’t have to look too far to do so.
I hate to keep harping on the same old sour note, but a big factor that will keep the business from thriving again is pure greed. Greed in the sense that record label executives think that their content is worth more than the market says its worth. Full stop.
Let’s face it; the record business is a business that was built on volume. When your volume begins to drop, you adjust prices in an attempt to expand the market. We’ve seen this over the years with CD pricing. So now that digital downloads are taking over with consumers, the labels are trying to replace revenues from lost CD sales anyway they can. Fair enough. The Internet provides them with the ability to expand their markets and hopefully regain lost volume.
However the fact that half of the major record labels are owned or controlled by private equity groups leads to a greater desire to get as much cash in the till upfront as possible. After Guy Hands basically admitted in public that he overpaid for EMI, he now has to do whatever he can to compensate. And here’s where the problem starts. Labels demand so much money in advance from start-ups that it turns off most investors and thus limits the number of outlets labels have for their product.
This leads to the domination of the retail music space to a handful of players who are not dependent on music revenues. Music content drives other revenue streams for them.
So how do you solve the problem? Simple. Blanket licensing. Of course the industry will never go for it. But ultimately it would be in their best interest. It would eliminate a huge amount of legal costs, spur growth and competition in the marketplace, and hopefully push labels into reevaluating the valuation of their content and build volume.
I know that I’m pissing into the wind here. So, like with the labels, take your medicine and live with it!
