{"id":184,"date":"2005-10-10T09:29:08","date_gmt":"2005-10-10T16:29:08","guid":{"rendered":"http:\/\/lefsetz.com\/wordpress\/index.php\/archives\/2005\/10\/10\/the-lack-situation\/"},"modified":"2005-10-10T09:46:02","modified_gmt":"2005-10-10T16:46:02","slug":"the-lack-situation","status":"publish","type":"post","link":"https:\/\/lefsetz.com\/wordpress\/2005\/10\/10\/the-lack-situation\/","title":{"rendered":"The Lack Situation"},"content":{"rendered":"
\n

Bertelsmann Is Said to Want Ouster of Sony BMG Chief<\/a><\/p>\n<\/blockquote>\n

Who is going to fix the music business?<\/p>\n

I was stunned last week in the U.K. to find it’s business as usual.\u00c2\u00a0 You’ve
got managers and acts sucking at the tit of the major labels and everyone
decrying the power of the iTunes Music Store.\u00c2\u00a0 It’s almost like they’re living in
1999.\u00c2\u00a0 Before the advent of Napster.<\/p>\n

This is not a momentary diversion.\u00c2\u00a0 This is not a one time dip in sales from
which the business will recover.\u00c2\u00a0 This is a revolution.<\/p>\n

Distribution is king.\u00c2\u00a0 The majors controlled distribution forever and
therefore kept not only indies, but new WANNABE companies out of the game.\u00c2\u00a0 You
couldn’t compete without going though their turnstile.\u00c2\u00a0 And then they made it
worse, by killing the indie retailer.\u00c2\u00a0 Leaving the business to the big boxes with
few SKUs.\u00c2\u00a0 Paying exorbitant amounts to control the endcaps, price and
positioning assuring their dominance.<\/p>\n

And then there became a new way to acquire music.<\/p>\n

The U.K. is almost quaint.\u00c2\u00a0 With its minimal number of radio stations and
relatively low broadband penetration.\u00c2\u00a0 The government and business conditions
have strangled the business at its throat.\u00c2\u00a0 They’re not living on Internet time
in the U.K.<\/p>\n

But we are in the U.S.<\/p>\n

Sure, the Telecommunications Act killed radio.\u00c2\u00a0 But terrestrial radio truly
wouldn’t have died if there weren’t ALTERNATIVES!<\/p>\n

You’ve got Internet radio.\u00c2\u00a0 Satellite radio.\u00c2\u00a0 The dreaded iPod.\u00c2\u00a0 Such that
the majors, the conventional gatekeepers, are no longer in control of exposure.\u00c2\u00a0
Oh, make no mistake, radio still has an impact, it’s the best way to reach
the masses.\u00c2\u00a0 But the ship is leaking so much water at the bottom, and will
continue to do so.\u00c2\u00a0 You’re never going to see terrestrial radio without
commercials.\u00c2\u00a0 But you’ve already got that on the Internet.\u00c2\u00a0 And the big feature of the new cars is iPod compatibility.\u00c2\u00a0 It’s not quite game over, but you can see why
business is off in excess of twenty percent this decade.<\/p>\n

But that figure speaks to the raw ACQUISITION of music.<\/p>\n

The Internet allows people to acquire whatever music they want for free.\u00c2\u00a0
Rather than confront this problem, the majors are building an alternative system,
DRM per track sale and rental subscription, ignoring reality.\u00c2\u00a0 And nothing
prevents indies from competing on an equal footing in these spheres.\u00c2\u00a0 They can
get paid (or not get paid!) just like the majors.<\/p>\n

But the new indies have a different business model.\u00c2\u00a0 In the new indie, you
don’t suck at the tit of the record company.\u00c2\u00a0 Your main goal is to build an
ongoing enterprise.\u00c2\u00a0 Based on touring.\u00c2\u00a0 The music drives people to the show where
if you’re good you knock them dead and blow out merchandise.\u00c2\u00a0 Sure, people
should pay to acquire the music of these new acts, but even if they DON’T, the
numbers work.\u00c2\u00a0 Because, via the new distribution methods, people can HEAR these
acts!<\/p>\n

P2P, burning, they’re the best friend of the indies.\u00c2\u00a0 That’s how you spread
the word.\u00c2\u00a0 The majors want to pull all this back and make everybody listen to
the radio again.\u00c2\u00a0 But this will never happen.\u00c2\u00a0 But to accept the new
reality…they’re just not prepared to do it.<\/p>\n

The Warner Music Group has got this bizarre philosophy where you fire
everybody, load the company up with debt and you end up with a success.\u00c2\u00a0 That formula is equal to the logic of the Bush economic program.\u00c2\u00a0 Where you lower the
taxes and increase spending and the debt.\u00c2\u00a0 How do you ever catch up?\u00c2\u00a0 How does the Warner Music Group ever lower that debt?\u00c2\u00a0 They’re hamstrung breaking new acts because they’ve fired their infrastructure, and as delineated above, they’re
playing in a dying game.\u00c2\u00a0 As for their incubator and Internet-only labels, why
should a band deal with them, give up a piece of their action, when they can
do it themselves and keep all the MONEY!<\/p>\n

EMI’s market share is so low that they swing no weight.\u00c2\u00a0 In America the
Virgin label is such a disaster that one not only questions the lack of sales but
the people who came up with this plan.\u00c2\u00a0 They fired all the old people, moved
the label to New York and hired someone with no experience who was contracted to make a record for SOMEONE ELSE to run it!<\/p>\n

The Universal Music Group?\u00c2\u00a0 They’re just the guys in the boat during the
deluge.\u00c2\u00a0 They think everything’s cool, but they’re further from land than they
realize.\u00c2\u00a0 When it comes to marketing they’re king, and a mainstream pop business
WILL survive in the new order, but their business is being marginalized every
day.<\/p>\n

And then we’ve got Sony BMG.\u00c2\u00a0 A company whose impetus for creation is the
falling through of a Warner BMG merger and a desire for Bertelsmann to get out of
the record business.\u00c2\u00a0 This was a merger with no aforethought.\u00c2\u00a0 No examination
of merging cultures.\u00c2\u00a0 No question of what you’d end up with.\u00c2\u00a0 This is the
house that Andy Lack has wrought.\u00c2\u00a0 And it’s a sinking ship.<\/p>\n

Andy put Sony’s labels on hold for so long, awaiting final merger, that they
lost momentum.\u00c2\u00a0 Bertelsmann is a joke with a septuagenarian breaking acts at
extreme cost telling everybody he’s the king when he’s wearing few clothes.\u00c2\u00a0
Make no mistake, the situation at Sony BMG is WORSE than it looks!\u00c2\u00a0 There’s
disorder, no momentum, and no coherent plan for the future.<\/p>\n

Where IS Clive Davis’ successor?<\/p>\n

Columbia and Epic finally have new heads, but will they ever recover from the
stagnation?<\/p>\n

This is what you get when you have somebody who knows nothing about a
business controlling it.\u00c2\u00a0 Think about it.\u00c2\u00a0 Andy Lack’s copy protected CDs are SO
heinous even his OWN ACTS are rebelling against them!\u00c2\u00a0 PUBLICLY!<\/p>\n

Then again, is Andy gonna lose his job because of incompetence, which he has
demonstrated, or will he be gone because Bertelsmann is in a snit in this
marriage that doesn’t seem to work?\u00c2\u00a0 At least Universal PURCHASED PolyGram, and
blew all the old employees out.\u00c2\u00a0 Could you imagine Doug Morris coexisting with
Alain Levy?\u00c2\u00a0 Which is why EMI must purchase Warner and there can’t be a merger
of equals.<\/p>\n

Then again, what does this merger represent?\u00c2\u00a0 Is it like HP acquiring Compaq?
Two money-losing PC operations merging to compete with Dell which operates
on a completely different business model?<\/p>\n

Yes, the reason Dell was eating Compaq’s lunch, and now HP’s, is that it
represents a different way of doing business.\u00c2\u00a0 You see there’s no RETAIL!\u00c2\u00a0
Everything’s built to order, so there’s no inventory control.\u00c2\u00a0 HP can’t beat Dell
because it’s not playing by the same RULES!\u00c2\u00a0 The majors can’t beat the new indies
because their GAMES are different.\u00c2\u00a0 Korn might make an all-in-one deal with
EMI but no new act will.\u00c2\u00a0 Because EMI won’t offer enough MONEY!\u00c2\u00a0 So, these new
acts go into business with their best friends, and give up less on the dollar,
and share in the upside.<\/p>\n

So even though we lifers in the business are gonna get the last laugh, as
Andy Lack is kicked out, if you think that’s going to solve Sony BMG’s problems
YOU’RE DREAMING!<\/p>\n

More people are consuming more music than ever before.\u00c2\u00a0 This is reality.\u00c2\u00a0 You
can’t stop it.\u00c2\u00a0 It’s good for musicians and good for consumers.\u00c2\u00a0 It could be
good for the majors, but they don’t want to partake, they want to IGNORE
reality.\u00c2\u00a0 They just don’t like it that when there’s 100% broadband penetration the
average joe competes on an equal footing.<\/p>\n

Oh, the old wavers, the people in the U.K., will ask where am I gonna get my
ADVANCE!<\/p>\n

It’s not about an advance.\u00c2\u00a0 There WILL BE NO advance.\u00c2\u00a0 You will cobble your
money together from live appearances.\u00c2\u00a0 The QUALITY of your music will drive
true believers to your band.\u00c2\u00a0 And, most bands will not be superstars.\u00c2\u00a0 They might
ultimately make a ton of money, but that will be because their fans believe
in them and buy music, tickets and merchandise, not because some multinational
writes them a big check.<\/p>\n

You see the major label game is a sideshow.\u00c2\u00a0 Just like they’re angry at Steve
Jobs for controlling online retail, they’re soon gonna be angry at all the
new bands who won’t sign with them who will make more money than by BEING with them.<\/p>\n

It’s inevitable.\u00c2\u00a0 The game has changed.<\/p>\n

If only Andy Lack had perceived this new game.\u00c2\u00a0 Then he might have fired
everybody in new music and just sold catalog.\u00c2\u00a0 Or tried to grow grass roots
projects with little investment worked by a PLETHORA of low paid employees with a
piece of the upside.\u00c2\u00a0 But no, he was only interested in making the momentary
numbers look good.\u00c2\u00a0 And even that didn’t work out.\u00c2\u00a0 Ain’t that America.\u00c2\u00a0 Where
the guy with all the ink has got his head completely up his ass.<\/p>\n

<\/p>","protected":false},"excerpt":{"rendered":"

Bertelsmann Is Said to Want Ouster of Sony BMG Chief Who is going to fix the music business? I was stunned last week in the U.K. to find it’s business as usual.\u00c2\u00a0 You’ve got managers and acts sucking at the tit of the major labels and everyone decrying the power of the iTunes Music Store.\u00c2\u00a0 […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[2],"tags":[],"class_list":["post-184","post","type-post","status-publish","format-standard","hentry","category-music-business"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p96vPs-2Y","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/posts\/184","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/comments?post=184"}],"version-history":[{"count":0,"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/posts\/184\/revisions"}],"wp:attachment":[{"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/media?parent=184"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/categories?post=184"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/tags?post=184"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}