Music
labels mishandle file-sharing
Boris
Melnikov
LOS
ANGELES (U-Wire) -- It just got a lot more
dangerous to be a college student.
An
overwhelming majority of college students
and other enthusiasts continue to trade
music over the Internet despite the Recording
Industry Association of America's threats
to sue. In that sense, all of the industry's
efforts to curb illegal music are misguided.
If anything, they will lead only to further
decreases in store sales, as angry buyers
will vote with their wallets and stop buying
music altogether. Instead, the industry
should concentrate on its own internal structural
problems that, if left unsolved, might soon
destroy the entire music business.
The
major music recording labels began an assault
on illegal music trading over the Internet
and peer-to-peer networks by announcing
more than 1,000 subpoenas to Internet providers
about individual file-sharers since spring.
This
week, the RIAA filed charges against 261
people for illegal downloads. If convicted,
individuals may face stiff fines of up to
$750,000 a song, but that hasn't deterred
many yet. The reason is simple: economics.
Classical
economics say that firms have to provide
a product that customers want; if they don't,
the firms will fall to the competition.
Music labels are about to learn that the
hard way.
Today's
consumers want more flexibility in the way
they buy music. For example, they want to
own only a couple of songs from an album,
without having to buy the whole album.
But
by and large, music companies do not provide
any sort of mechanism that would enable
users to do that at a reasonable price.
The consumers have to resort to illegal
file-sharing services to get what they want.
The success of Kazaa and Morpheus lies not
only in the fact that they are free, but
also because they provide a better service.
You can get almost any song in minutes,
which is something that other operators
have been hard-pressed to offer.
Legal
alternatives to file sharing are very limited
in scope and very pricey to boot. Hard-copy
singles saw their best days before most
of us were born and are very limited in
selection and seriously overpriced. There
is no way that anyone should have to buy
one song for four or five dollars.
Internet
music services also have problems. Some,
such as mp3.com and listen.com, charge a
monthly fee to all subscribers. This business
model makes sense for heavy users who download
a lot of music every month, but it is relatively
expensive for occasional downloaders who
just want to sample a song or two.
The
best model so far has been provided by iTunes
music store, which is operated by Apple
Computers. It charges 99 cents per download
with no monthly fee. Unfortunately, it is
currently available only to Macintosh users,
making it inaccessible to about 90 percent
of computers.
The
overarching problem for legal online music-download
sites is a lack of music. There are about
200,000 songs available at each major site,
but this is only a fraction of the more
than 10,000 albums released each year in
the United States alone.
The
music industry isn't making it any easier
for itself, since the price of CDs is simply
too high. It is not rare to see them being
sold for $18 apiece. Recording companies
have long claimed that the prices are justified
because the costs of recording are so high.
Yet according to a recent analysis by the
investment research company Sanford C. Bernstein,
the profits of Vivendi Universal -- just
one of five major record labels -- are projected
to be around $900 million this year. Those
profits come during an economic slowdown
when corporate giants like Ford are barely
breaking even.
Fortunately,
there are signs that the music executives
are waking up to that fact. Last week, Vivendi
Universal announced that it will cut the
price of its new releases by as much as
32 percent depending on the artist. That
is a good first step. The record labels
need to win back customers' trust in order
to ensure their own survival.
However,
more changes need to be made. The prices
for music, especially CDs, need to come
down significantly across the board and
the Internet needs to become the primary
medium for distribution of music. Otherwise
we may soon speak of major labels in the
same breath as Standard Oil and Enron, as
the companies that are no more.
This
column originally appeared in the Daily
Trojan at the University of Southern California.
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