Slashdot Mirror
New EMI Boss Says 'Downloads May Be Good'
warrior_s writes "Douglas Merrill was just installed as CIO of EMI (one of the big four that forms the RIAA). The ex-Googler recently stated it is a 'poor business model to sue your customers. I don't think that's a sustainable strategy.' Quoted by the Guardian, he was referring to Warner Music, EMI, Vivendi Universal and Sony BMG's current practice of trying to use legal systems around the world to force their customers into buying products rather than using the free P2P networks and independent music sites and services. 'Previously, the music industry has rubbished studies that claim file sharing can have a positive effect on music sales. "I think people will pay," Merrill said. "There is evidence that people we think are not buying music are buying music. They're just not buying it in formats we can measure."'"
poor business model to sue your customers
It's sad that has taken this long for "insight" like that to surface in the industry. You would think that would be an important topic in business 101, but I guess not.
I got a catholic block.
Wow, the music industry decides fighting the inevitable isn't a viable business strategy, and only a decade too late!
Prediction: The real iPhone killer is going to be sex robots from Japan. Think about it.
Something that even this executive hasn't received a clue about: Where do you and your corporation fit into a distribution system that you do not own, can't control, and add no value to?
Maybe I'm giving this bozo too much credit - since iTunes is currently the number one music retailer, then even this clown could figure out that music downloads "may have some value". I suspect the concept that their target market will obtain their music from the vendor that offers the most convenient product at the lowest price will completely elude him. They'll continue to turn out a substandard product, cripple it with intrusive DRM, and try to sell the digital version at the same price as a physical CD (or even higher).
The record companies need to take a look at the past to see their future. Much as the producers of buggy whips, button hooks, electron tubes (and many more) have had to either find another product to produce or go out of business, the record industry is rapidly sliding into irrelevance. "Record company" - their fate is in their name. Who produces, sells, or buys records these days?
The problem with your analogy is that there has never been a high cost of duplicating product in any of these industries. In economic terms, the marginal cost of producing an additional unit is low. However, the fixed costs (paying the artists, recording studio, etc.) here are proportionally much larger. It may cost $1 million to develop a piece of software, and then $5 per unit to put it all in a box and ship it out. Let's say the software costs $50. Now, you create a better way of distribution and the marginal cost is now $0. This doesn't mean suddenly the company is going to be giving them away for free...in this simple scenario, in order to get the equivalent amount of profit per unit (ignoring changes in supply or demand), they would be able to sell the product for $45.
Now let's take a look at the auto industry. Here, marginal costs make up a much higher percentage of the total cost. To make things simple, let's say each car costs the company $10,000 to produce (in materials and labor costs), and they sell the car for $12,500. If you suddenly can lower the costs (due to your magical technology) for each car to $100, then to get the same profit per unit (again ignoring changes in supply or demand) they would only charge $2,600. In one case we only reduced the price by 10%, in the other we reduced it by almost 80%.
The problem is that people in general expect to pay near the marginal cost for an item, but in general do not take into account the fixed costs with producing a particular product. For this reason, it's easier for a person to justify spending $100 on an object they know costs about $95 in materials to produce, while they hesitate to spend $15 on a CD they know costs only pennies to create.
For more information on marginal cost and how it applies, I highly recommend taking a look at the Wikipedia article on Marginal Cost.
Note to self: Stop putting jokes in my insightful comments so I can get something other than +1 Funny!
Film companies like Kodak and Fuji faced exactly that challenge. Imagine a world where no one has to buy film to put in their camera and no one has to pay for film processing to print their photos. Less than 15 years ago, Kodak made most of its money from camera film and photo processing supplies, chemicals and equipment. That market has all but disappeared and yes, Kodak has had to lay off staff and close plants, but overall the company is still doing well. How? Rather than fearing the new digital technology or trying to sue or legislate it away, they have embraced it. The music industry could learn from that.
Support Right To Repair Legislation.
... It's 95%. At least. I don't know anyone that is going ever pay $0.10 for a recording ever again. Do you have a source for this other then your ass? Mind citing it please? You may want to take note that the largest music retailer is now Apples music store which last I looked, was selling tracks at $0.99 cents each. This begs the question, How many people do you know?I couldn't disagree more. I use allofmp3.com as an example because people were spending substantial aggregate money there en masse in order to use a convenient, non-crippled, reasonably-priced, easy-to-use service. If the industry could manage to open a store exactly like it, they would make plenty of money from the moral majority who don't mind paying for things. But they expect market forces to answer to their demands.
~ I am logged on, therefore I am.
Come on, do you know anyone that would actually pay for music today? Someone that uses the Internet? Naa, I didn't think so.
Honestly, I don't know anyone that still does get their music through file sharing unless they have absolutely no extra money. It stopped being convenient years ago. It's not worth dealing with the fake songs, mislabeled stuff, and crappy rips.
Besides, once you get a full time job you tend to value your time higher and your money lower. It also tends to make people appreciate the work put into making the music.