(Ethan Kaplan is the former senior VP of emerging technology for Warner Music Group. This post originally ran on his blog Blackrimglasses, which he describes as "Music + Technology + Random Nonsense from the Music Industry.")
Death to Shiny Discs
Here is a story:
Back at Warners I was in a meeting about "reintroducing" a band to the market, which basically means the last record was a stiff so we needed to "reboot" them. Not dissimilar to what Hollywood does to franchises.
A lot of ideas were floated around: vinyl singles, etc. My statement was "death to the shiny disc!" Basically, eliminate all physical, and go completely digital. Nothing was to be gained by putting out low margin product. This was four years ago. As you can imagine, that statement was met with some glares. I was pulled aside later and advised that the shiny disk still paid for my shiny servers. I didn't use that catch phrase again.
And five years ago, I posted about what I would do if I bought a newspaper.
Both that post and the "death to the shiny disc" statement are rooted in one thing. Killing the cows.
The CD and the physical newspaper are now Nero playing the fiddle. They are viewed as the mountains that can't move on the horizon: omnipresent, and sacred. But they shouldn't be. The CD and physical retail are often pointed out to be that which props up the willingness and ability for record companies to experiment. But to what expense? And is that really true?
Consider for a moment the amount of supply chain management, staffing and processes in place just to produce a CD and get it out to third party retail. And consider the CD itself: a 74 minute bit conveyance mechanism that is pretty much disposable. They are often used just once: to rip the bits.
So in the end, the CD is this:
A once major source of high margin revenue which is now taking disproportionate back line expense to prop up, in order to justify the size of an industry which does not exist anymore. And even if that expense is not significant in hard numbers, the inertia it creates at the resultant diverted and stifled innovation sure is.
It's time to kill it. Bring it out back and shoot it. And then really take a look at what is left.
When I look at what is left, I see a positive: the ability to transcend media with music products, no longer limited by the 74 minute disk. The ability to add value through art, through sound quality (vinyl or USB/digital distribution) and through multi-modal experiences. The ability to change the notion of what an album is. I also see a time when success is not judged on how many units were shipped by an artist (and resultant sell through), but rather how much money the artist made in net revenue across media. A world focused on ARPU and C AC rather than third party retail supply chain maintenance. A business in other words, and hopefully one that treats artists fairly through accountable representation.
I don't think this movement is going to happen by choice either. How many planogram iterations will it take until Best Buy or Target eliminate CD's all together? Or just keep them as end-caps for NOW compilation and Disney pop hits? Two holiday seasons? One? There are no more record stores anymore, save for Indies, and I argue they still have a place for higher end (non CD) content. There are no more Borders Books and Music. And there is much more money to be made in direct-to-fan/consumer retail than there is in third party, if the companies are oriented toward behaving as retailers in staffing expertise and workflow.
And therein lies the issue: orientation. The music business has often, in the last ten years, not operated as a business. It has operated as a simulation of a business that once existed. The reality is, much as newspapers are having to face the fact that there are digital dimes to physical pennies; music companies are going to have the face the fact that when you stack the dimes, it isn't going to be the sky scraper it once was. There are valiant efforts toward this future in every major, but not as well staffed or funded or universal as they should be.
The adage of Web 2.0 was that small, nimble and enterprising beats large, inertial and enterprise. Every time a company got too big and couldn't change rapidly, smaller companies would "disrupt" the space by being able to pivot rapidly and course correct easily. Essentially the current stage in the resurgence of technology innovation is born by companies refusing to believe things were immutable, and instead presupposing that entrenchment has driven stasis. Industries long for the days that once were: 15 billion dollar businesses with high margins off $18 dollar product is one such longing. 85% marketing penetration with little year over year churn was another (for newspapers).
And for a lot of people, longing for a time long gone is more comfortable, and easier, and more profitable in the selfish sense than reducing salary down to a dollar and going for broke to change. It's much easier to keep the cow alive and fed than to kill it. Killing it is sad, scary and irreversible.
But die it must. And it will be a freeing day once it happens. The music industry won't be the same and it won't be as big. Many other sacred cows -- label imprints, multiple subsidiary companies with independent staffs, multiple offices, separate A&R staffs, to name but a few -- might die. But it will be an industry, and a business and revert back to being about talent and artistry instead of fear. About discovery and passion rather than past tense myopia. An actual business rather than a hollow nostalgic simulation.
I remember vividly the promise that the first CD I bought contained. I remember the metal finish on my Sony Discman, the accouterment products I bought to maintain my CD library. And I remember the thrill, just five years ago of seeing my name in the liner notes of a CD I worked on, of getting the first box of CDs of a new release in the WEA box and the thrill of Soundscan on Wednesday as a measure of our success as a company.
I will mourn the shiny disk, but celebrate the elevation and freeing of what it contains when it dies.