09 July 2007

That other Apple product

Over at the Secret Diary of Steve Jobs, Fake Steve explains the doom that faces the music industry.
The music companies are in a dying business, and they know it. Sure, they act all cool because they hang around with rock stars. But beneath all the glamour these guys are actually operating two very low-tech businesses. One is a form of loan-sharking: they put up money to make records, then force recording artists to pay the money back with exorbitant interest. The other business is distribution. They’ve got big warehouses and they control the shipment of little plastic boxes that happen to have music in them.

The guys running the labels are pretty stupid -- most are just dirtbags who started out as band managers or promoters -- but now at long last they are kinda sorta finally vaguely getting clued in to the fact that both parts of their business model are fucked. Their loan-sharking business is being eliminated by low-cost digital recording technology that lets people make an album for very little money. And by letting us build the online music store they've taken themselves out of the distribution business. In the days of vinyl and then CDs, the labels managed to control the value chain by having loads of retailers in a highly fragmented market, and playing them off each other. In the digital world they've got us. And that's it.

Ironically the mistake the major labels made was the same one that IBM made when it gave the DOS franchise to Microsoft nearly 30 years ago. They were faced with a new market that they didn't understand. They had a piece of work that they couldn't do on their own or didn't want to do on their own and they didn't view it as critical or important, so they outsourced it to a partner.

Couldn't have happened to nicer people.

1 comment:

Conner said...

The job of music companies used to be the distribution of music. In the past decade, this has turned so completely around that their primary job is actually preventing the distribution of music.

One hopes that having switched to providing exclusively negative services to everyone will, in fact, lead to their demise.

And I suspect that even they know this, and know that they're shoveling back the tide. But that doesn't stop them from doing it; however inevitable it is, every year they stave off their doom is another several billion dollars they collectively receive.