Michael Arrington writes that music industry will surrender to the inevitable, but not until 2011.
They also understand that recorded music will largely be little more than marketing collateral, meaning that the Internet services being sued today for copyright infringement will be embraced in the future as ways to get the word out on hot new music. These services pay for the privilege today (either through high streaming rates or in court), but in the future they’ll be the ones getting paid by labels. Think radio payola at a whole new level, and there won’t be any more talk about social networks giving stock to labels and artists. Money will flow the other way, as it should.
By 2013 (maybe as early as 2011) it’ll make sense for the labels to finally reorganize their business models around the reality created by the Internet and person to person file sharing services. No longer will the labels be tied to revenue limited to sales of master recordings - by then most or all artists will be under 360 music contracts that give the labels a cut of virtually every revenue stream artists can tap into - fan sites, concerts, merchandise, endorsement deals, and everything else.
I write about this in the music 2.0 blog post.
There is a lot of innovation taking place where the web meets music. Music industry should leverage this innovation in stead of feeling threatened by it. Their survival depends on it.
But do they get it?
As a business CEO over the last decade, I understand that it can be excruiciating to see your renvenue model that has been bringing you billions of dollars getting turned upside down. So it is perfectly understandable to protect the old model as long as possible.
But you have to understand and move towards the enevitable. You can not try to stop it by lawsuits and threats. If the music industry starts leveraging internet and mobile platforms not to just sell, but to help people discover, sample and share music it can help grow the customerbase. I don’t see enough of this happening. You don’t need to wait until 2011 to start doing this. This is not mutually exclusive with protecting your old model. The revenue streams from CD sales will continue to decline. The power will continue to shift from the labels to musicians and consumers. This can be really disconcerting. But I believe new music business will be even bigger than the current one. The only question is which companies will rule the new world. If the labels don’t embrace and leverage the new NOW, then someone else will rule it. They should stop suing customers and partners and figure out a way to grow the pie. They should not wait until 2011 as it will be too late.