Piracy didn’t kill the major label business model, choice did.

At some point in the future, earlier rather than later if the majors capitulate and agree to live in the present as opposed to the 1990s, music acquisition on the Net will be monetized.  A great deal of revenue will be generated, but it will be distributed amongst a plethora of providers/acts.

The major labels, employing a push mentality, focused on ever-fewer records in an attempt to create blockbusters.  Figuring their lock on exhibition and distribution would help them succeed.  To get heard you had to be on terrestrial radio.  To get bought you had to be in Best Buy.  And the majors controlled those gatekeepers, indies were frozen out, therefore most of the public was unaware of other offerings in the marketplace, to the degree they existed.

The Telecommunications Act of 1996 signed the death warrant for terrestrial radio.  Consolidating, just like the major labels, radio aired fewer records and more commercials.  A formula that might work in Bizarroworld, but was a recipe for disaster in reality.  People didn’t want to listen to the same records for months at a time, and they certainly didn’t want over twenty minutes of commercials an hour, so they started tuning out.

And then came Napster.  Not only could you almost instantly locate and download your favorites from the past, you could do the same regarding any title you read about or a friend told you about.  No Jack format could equal this.

And then came the iPod, a place to store and carry your downloaded tunes.

And then everybody got a high speed connection.  And they could listen to Internet radio.

And those that subscribed to satellite, they listened to the radio of their dreams, with niches never exposed on terrestrial, and many of them.

People are more excited about music than ever, they’re consuming more music than ever, but those who used to be in control of the business…their stranglehold has been broken.

And everybody’s scattered in a different direction.  You don’t have to listen to Mariah Carey.  Her gargantuan hit, "We Belong Together", went unheard by a huge segment of the population.  Everybody wasn’t listening to the same Top Forty radio station, everybody was no longer watching MTV, rather everybody was living in his niche, or multiple niches, listening oftentimes to tracks the purveyors of Mariah Carey had never heard of.

It’s kind of funny how the top-down marketers still don’t see the paradigm.

The iTunes Music Store is a failure because the tracks are too expensive and you can’t test music out, not because of the proprietary DRM.

And merging satellite radio companies will result in blander, more homogenized programming that Mel Karmazin might use to dazzle those ignorant on Wall Street, but will never appeal to the masses.

If you want to get everybody on board, you’ve got to offer…EVERYTHING!  Give me both XM and Sirius channels for the same $12.95.  Don’t slice off the bottom of the Internet dial with heinous copyright fees, let EVERYBODY play and collect the pennies as well as the dollars.  Because what fat cats think is marginal, many people believe is nirvana.

Now there are winners and losers in this new sphere.  The landscape is not completely flat.  But the peaks…they’re not as high.  Because not that many people are interested in lowest common denominator offerings.  And that which sold well in the past ten years had this characteristic.  Or maybe not that many people are interested in rap, or other so-called dominant genres.  Given the choice, people want something else.  And they now have this choice.

Ubiquity no longer is.  No one has dominance over American mindshare.  God, it took Katrina for most of America to finally see George Bush’s faults, and that was almost half a decade after he took office.  What makes you think some POP song is gonna penetrate the popular consciousness?

Network TV ratings plunge.  Why watch news at 6:30 when you can get it 24/7 on a cable channel?  Why watch sanitized programming on network when you can see real life on pay cable?

But there are a limited number of TV channels on a system.  And TV production is far from cheap.

And movies are even more expensive.  And the majors have a stranglehold on distribution.

But music…  Music production is cheap.  And there’s no cap on the number of acts in the marketplace.  Sure, hype is expensive, which is why most indie acts let their audience do the selling for them, which is now possible with new technologies.  Furthermore, the more you market, the more you try to become ubiquitous, the more your core, the revenue-generating machine that you depend on day by day, gets turned off.  Become a huge star, and you’re probably finished.  Then again, if you grow organically over a decade, no one complains.  But the point is you no longer need the major label as a bank, as a marketer, you don’t need that much money and your fans do so much of the work for you.  How do the majors compete in this new landscape?  Good question.

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  1. Pingback by IndieHQ [Choice [The Lefsetz Letter]] | 2007/03/22 at 14:18:11

    […] dustry. I don’t recommend everything that is written, but I do recommend reading his latest post called “Choice”.  Lefsetz has a pretty good take on s […]

  2. Trackback by Glorious Noise | 2007/03/23 at 08:38:49

    WSJ: Doomsday is Nigh!

    The Wall Street Journal delineates the oncoming disaster for the music industry: Sales of Music, Long in Decline, Plunge Sharply. Here are the important quotes: • “compact-disc sales for the first three months of this year plunged 20% from a…

  3. […] ove Too Did Choice Kill the Major Labels? I just got done reading a great post over at the Lefsetz Letter that suggests that “piracy didn […]

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