Divided Camps

After years of digital disruption, the music industry is still divided on the best strategy to move forward with.

So far, recorded music distribution has commanded most of the attention during this disruptive phase, at least in major press circles. Sales of CDs, the rise of online formats, the challenges presented by P2P networks – these are all immediate concerns and issues felt most acutely by labels. Quieter aspects of the business include the live concert industry, brand sponsorships, merchandising, and publishing royalties, areas that labels rarely reap direct revenues from. And wedged in-between are mobile formats, led by the explosive ringtone phenomenon, which now benefits both labels and publishers alike.

The distinctions are important, and so are the widely-divergent opinions on where this business is going. In one camp, there is a strong belief that disruptive technologies like P2P file-sharing can be controlled and contained, that music fans can be retrained, while formats like paid downloads and even CDs can power a long-term revenue stream. Others point to massive shifts in the way consumers are discovering, receiving, and ultimately listening to music, and question any attempt to fundamentally alter P2P networks as they exist today. One suggested solution is a licensed P2P architecture, not with filtering or controlled selection, but through broad-based methods like ISP monthly surcharges. Still, another group disavows any attempt to harness P2P at all, and instead focuses on a far broader revenue outlook for artists – an approach that could include free file-sharing for promotional effect, and paid concert revenues from core listeners, for example.

In between, endless variations exist. But a key question is whether the skies can be tamed on digital distribution. Continued efforts by the RIAA reflect a belief that they can indeed be reclaimed. "A vibrant, online marketplace is taking root," said RIAA chairman Mitch Bainwol and MPAA chief Dan Glickman in a recent Wall Street Journal opinion, while noting that "file-sharing networks like iMesh and BitTorrent are showing that the technology can be used legally." The pair also pointed to surging paid download levels, and ongoing legal action against illegal services.

The piece has a more-than-healthy bit of spin, and the opinion was timed with the one-year anniversary of MGM v. Grokster. Certainly, some positive developments are happening for the industry since that decision, particularly in the paid download realm. But that game is still early, and a-la-carte purchases still present a dangerous change in bundling practices – despite jumps in total revenue. Meanwhile, most music fans are still grabbing files en masse from applications like eDonkey and LimeWire, and earlier claims that file-sharing volumes are being "contained" are thinly supported. Elsewhere, attempts to offer a filtered, paid file-sharing platform have been either non-existent or unsuccessful. Companies like Mashboxx have yet to see the light of day, SnoCap never emerged as a legitimate P2P backend power-player, iMesh has made little noise after its inception, and a recent deal with BitTorrent was largely superficial. Meanwhile, according to figures from BigChampagne, there are more than ten  million active file-sharers online at any given moment, a figure that continues to increase – albeit at a slower rate over the past year.

So when do things change? The question for the RIAA is whether the current state-of-the-industry reflects a deeper, structural shift that is inconsistent with the philosophy of the trade group. Alternative approaches have been kicked around for years, including more diversified label business models, ISP-based blanket licensing of P2P networks, and DRM-free, cheaper paid downloads. Certainly, the weeds on those approaches are complicated, and their success is less-than-guaranteed. But the current report card for major labels is mixed at best, and sales of pre-recorded CDs are continuing to drop.

Meanwhile, the RIAA seems doggedly attached to its strategy, despite serious questions about its success possibilities. Ultimately, consumers will offer a final verdict, part of an increasing power-shift across numerous industries. If that is the case, then why is the RIAA pushing so hard with "we’re winning" opinions like the one found in the Wall Street Journal? Does a well-executed PR campaign have any effect on the underlying market? Perhaps the perception of a recovering major label could boost stocks like WMG, but will it make consumers buy more CDs, or purchase more tracks on iTunes? The answer is no, especially since the most engaged music listeners – teenagers – are mostly disengaged from mainstream media outlets. And in an increasingly fragmented media landscape, the market is likely to change on its own, regardless of what major press outlets – and anyone else besides consumers – have to say about it.

From Paul Resnikoff at Digital Music News

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