Investors, "Beware" of Record Companies

NewYorkCountryLawyer writes "The Motley Fool investment Web site warns investors to beware of 'Sony, BMG, Warner Music Group, Vivendi Universal, and EMI.' In an article entitled 'We're All Thieves to the RIAA,' a Motley Fool columnist, referring to the RIAA's pronouncement in early December in Atlantic v. Howell, that the copies which Mr. Howell had ripped from his CDs to MP3s in a shared files folder on his computer were 'unauthorized,' writer Alyce Lomax said 'a good sign of a dying industry that investors might want to avoid is when it would rather litigate than innovate, signaling a potential destroyer of value.'"

Comments

The vicious last bites of a wounded animal

[elrous0]

The traditional music industry is like a wounded animal at this point. They're hurt and desperately striking out at anything, in hopes of somehow surviving. They missed their opportunity to innovate a long time ago and now they're just the walking dead, stubbornly digging in their heals and refusing to just lay down and die.

They may get to the point where lawsuits are the only real income they have left. When that day comes, and all their Congressional bribe money has dried up, I think we'll see the courts and politicians finally start to hit back hard and finish them off. And they'll die still clutching their outmoded CD's, like pathetic John Henry's fighting innovation to the bitter end.

Re:Trade Associations Gone Wild!

[mea37]

Or rather the columnist believes that's the business model they're now in and predicts it won't work well for them.

The inference people here seem to be drawing (that the labels are in trouble because of the lawsuits) resonates well -- we want to believe that kind of justice works in the market -- but really it has the cause and effect reversed. Sales dropped first, then the law suits started.

Now, the thesis is correct in so far as "sue the customer" is not a productive response to an adverse market. They continue to spiral not because they file the lawsuits, but because meanwhile they do nothing to address the orignal failure of their position in the market.

The "ripping mp3s is unauthorized" angle is FUD all around, though. FUD on the RIAA for using that wording in the first place (yes it's unauthorized, in the same sense that I'm not authorizing you to disagree with my post), and FUD on everyone who cites this as the moment where the RIAA calls all users thieves.

Now, sure, the bad press from the lawsuits doesn't help the RIAA... among the small part of the market that sees what's going on and cares. Don't get me wrong, I'm among that small part of the market (not anti-copyright, not convinced that everything the RIAA says is wrong, but on the whole opposed to their actions over the past few years); but don't be fooled into thinking that slashdot is the world.

As to the investment point of view... yeah, to a point, I wouldn't want to be putting money behind the major labels right now. But Sony? What would be the total impact on Sony if their record label arm spun off or died out completely?