Record labels can identify with President Bush, who appears to be blindly pushing ahead with a plan to send more troops to Iraq, instead of withdraw, as much of the country seems to want. Labels know they are going to have to eat their words on digital rights management (DRM). They simply don’t want to have to eat them so soon. In China where the most music is pirated EMI has inked a deal with their leading website Baidu.com to offer free music. EMI and Baidu.com are going to work together on music services supported by advertising. This resonates an incentive theory of copyright. But maybe the record labels think that in the US ”stay the course” means hold out for as long as they can. Why? Because eating their words is going to taste awful this time around. Revenue from digital music sales is declining. Reports indicate that iTunes sales are leveling off and we all know iTunes music is protected by Fairplay, its DRM system. While it remains true that Apple may be selling tons of iPods and Microsoft selling tons of Zunes the marketplace is once again speaking and it is saying the unthinkable — we want music for free! We may buy some later. This of course happens to be the same marketplace that does not want DRM if they actually have to pay for the music. It appears the death of DRM is near, “It is on life support, but the labels may want to keep DRM alive artificially for a few more years rather than admit a mistake.” In speaking with Jimmy Steal, the VP and program director of Emmis Radio on the subject, he commented that young people are raised on the internet. The new generation wants music in an agnostic format, playable on any platform possible; time shifting is critical. Some people think this sounds like President Bush on Iraq. Once again the indies are saying “let’s have a plan for withdrawal”. By their actions they are making music available in MP3 so it can be downloaded, shared and copied for the enjoyment of the listener. Independent labels have a different business model then the majors.
Indies think file sharing, this “new age” replacement for “radio airplay” will actually lead to album sales. They may have an opportunity to see if they are right. Radio’s influence over music sales is strong, but declining. MTV is hardly relevant to the music industry anymore. Even iTunes growth has been declining. The revolution is underway, the marketplace says no DRM. Returning to the Bush analogy, labels need to get an exit plan. Could any of us imagine if one of the majors stepped up and said “we’re listening to the next generation and they don’t want DRM.” They are betting that more music being played and shared will lead to more music being sold, perhaps it will. Why? Because the new generation views file sharing the way previous generations have viewed the radio. File sharing is the new radio. Anyone who has taken a copyrights or controversies in the music industry class will tell you that the initial material studied begins with a discussion of record companies complaining in the early days of radio about stations playing their music for free – way back in the day, when you could pay DJ’s to spin your tunes. They were wrong then and they are wrong about DRM now. Radio was their money tree, Filesharing is their new money tree. So what does this mean, one critic has expressed that labels should beware, “Let your viral audience promote your artists for you. Have confidence that they will support the music and want to own it. The time has come to bring our DRM home and retire it. Don’t send in more troops (RIAA).” Listen to the generals (indie labels, Internet moguls and the next generation). Do it sooner rather than later and major label revenue might start to rebound.
