Plugged:
The upside of oppressing competition is that it sometimes forces a much-needed sense of reality onto a given market. That’s exactly what happened this week with the partnership trifecta of MTV, RealNetworks and Verizon Wireless.
Forget about the nonsense of trying to create an “iTunes killer” because that’s not going to happen. This is much more a circling-the-wagons move. Together, the three can offer a much better service than they could individually — and that’s exactly what the market needs.
There was very much a “build it and they will come” mentality two years ago with regards to digital music services, particularly subscription. Anyone with something to offer — no matter how small — rushed into the game thinking their little hook tied with “all-you-can-eat” music would be in instant cash register. That didn’t happen. That little hook wasn’t enough to lure users away from free P2P services, or convince them that music should be a service, not a product.
Let’s put it into contemporary military terms — the floundering subscription music market needs a surge. When you’ve got a heavily entrenched enemy on high ground (iTunes), you don’t spread your forces thin and attack all along his line. You gather your forces into a sharp and narrow line, like a spear, and pierce the weak spot.
The combination of MTV, RealNetworks and Verizon is a combination of weapons that on their own couldn’t get the job done, but together have much more of a chance to gain some ground on iTunes. Time will tell whether this is enough, but at least it’s a step in the right direction.
UnPlugged:
The Institute for Policy Innovation put out a report this week claiming that music piracy has cost the U.S. economy $12.5 billion.
I don’t know what these guys are smoking over there, but pass it over here.
Maybe it was a headline-grabbing move to stir up a little attention, or a bid to gain some entertainment industry clients, but this study just doesn’t pass the sniff test over here.
First of all, it bases much of its premise on the theory that 20% of music files downloaded freely from unauthorized P2P services would have been otherwise purchased legally, reflecting lost revenue to the industry.
Other than the fact that this 20% figure seems to have been pulled from their nether regions, it completely ignores the marketing potential of P2P networks. As the tech blog Ars Technica points out, a P2P download doesn’t necessarily reflect a lost sale. In fact, earlier studies have found that P2P users actually buy more music than non-P2P users — in many cases the same music they’ve downloaded.
It also doesn’t address the positive impact P2P networks could have had on both the music industry and the U.S. economy had the music industry found a way to monetize them from the start rather than fruitlessly trying to sue them and their users out of the practice.
All but the most stubborn music industry executives will admit, when cornered, that suing the original Napster was a mistake. They lost a huge opportunity there to monetize a massive digital music service in their favor through advertising and sponsorships, but instead wanted to try doing things their way. Lesson learned. The same labels are now working with companies they would have tried suing just five years ago — YouTube in particular.
I’d like to see a study five years from now that examines the revenues gained from ad-sharing relationships with services like YouTube as a way of extrapolating how much the industry could have made pursuing a similar deal with Napster.
