The Year Was 1982

My assertion for today is that the recording industry has seen its heyday and it’s absolutely unclear how they’re going to save themselves. Let’s see if you agree with me.

In 1982, the audio compact disk or “CD” was introduced to the eagerly awaiting public. If you were an exec in the record industry that year it would have seemed that the world was yours for the taking! The once-in-a-lifetime chance to sell music lovers a new, more expensive copy of the same thing they already owned and loved! Ironically, the very technology that brought superior sound quality to the masses signaled the apex of power for the recording industry rights holders. How could that be, you ask?

The Hi Def Moment
Despite the claims of audiophiles, most people can’t perceive better sound quality than is provided by CDs. For the recording industry their “hi def” moment was over 20 years ago when CDs started supplanting records and tapes. Unfortunately for the industry there’s now no more product innovation to be had by increasing the quality. Contrast that with TVs, DVDs, and games. Those products have been progressing steadily over the past decades.

The difference between video games in 1982 and now is stunning. We’ve gone from the Atari 2600 to the X-Box 360 – and gaming technology has no end in sight with things like modeling individual hairs on a character or shards of glass in a broken window pane. DVDs didn’t even exist then – and they are about to be upgraded to Hi-def standards like BluRay and HD-DVD. Conceivably, 15 years from now we’ll look at current HD video and think “yuck”.

Perhaps I’m mistaken but 15 years from now we’ll look back on current CD quality audio and think “same old, same old”. CDs may be outmoded by then, but the new media storage won’t give perceivably better audio quality.

When Quality Is No Longer A Possible Innovation Point
Let’s put our RIAA caps (helmets?) on for a little while. I guess when you can no longer make your product better in the most obvious sense your options are as follows:
a) re-invent the product
b) co-opt a related product
c) attempt to preserve the status quo

As RIAA execs we view our $15 Billion+ annual industry as a sacred cow. With regard to option (a) I’m not sure about you, but I’m a little scared to walk into the boss’s office and tell him “let’s do the ‘New Coke’ thing!”

Let’s then look at option (b). The first big problem with this is ... what related product could be co-opted? There is no equivalent of the web-browser to be integrated into our operating system. Even if there were, with the exception of Microsoft, most enterprises don’t successfully co-opt new technologies within the context of multi-billion dollar industries. Microsoft co-opted the web browser and killed whatever chance Netscape had of becoming their angel of death. However, Microsoft has the advantage of having some really gutsy executives like Bill Gates around. I’m pretty gutsy but no one in the music industry commands the power that Mr. Gates does in Microsoft.

So, as RIAA execs we’re left with whatever the final option is.

Preserving the Status Quo, Consumer Revenge – Now What?
CD sales still account for 96% of music sales. iTunes seems pretty successful but it has barely made a dent. The only way to read this is that RIAA has been phenomenally successful at maintaining the status quo. The truth is, RIAA has a monopoly – they’ve got the rights to songs and we (the consumers) have to live by their rules in most circumstances.

Life is good as a monopolist because if you’re the only guy selling water in the desert you can charge pretty much anything you want. The problem RIAA has is that illegal download services like Napster and Grokster gave expression to what I call “consumer revenge”. Consumers have been gouged by RIAA for a long time, there’s no disputing it. Unlike some, I think that consumers generally shy away from activity that is generally understood to be illegal. Therefore, when consumers engage in widespread illicit behavior they do it only when they really feel like they’re getting screwed. When that happens, if the opportunity presents itself, consumers fight back with a vengeance and the phenomenon is something akin to civil disobedience.

In the final analysis, RIAA is now trying to figure out how to bring the glory days back. Unfortunately, they haven’t offered us anything new or exciting in over 20 years. Maybe, just maybe, some enterprising company will invent something new and compelling that grows the music industry - if and when that happens its unlikely that RIAA will go along with it willingly.