Ch. 8: Technology creates opportunties

Technology creates opportunties,
but opportunities get ignored

The technology industy has handed the record business a potentially amazingly wonderful lifeline: They're selling kids (and, not to mention, adults) MP3 music players that hold 20,000 songs!

Yet what is the record industry doing to take advantage of this opportunity? Nothing.

Let's do the math: The net price per track of music when purchased in the CD format -- with nice packaging, near-perfect fidelity, and no copy restrictions, and despite expensive physical distribution costs -- is about 90 cents. But for download sales -- with no packaging, reduced fidelity, and signficant copy restrictions, and NO physical distribution costs, they're trying to get 99 cents! (And apparently, given what we read about how Steve Jobs had to cajole them into that, they're not happy with that!)

And then they have the sheer, unmitigated gall to complain to Congress that they need legislative relief because download sales aren't growing fast enough to perfectly supplant CD sales declines!

Realize that their pricing scheme means it would cost a teenager $19,800 to fill up their MP3 player legally. But the execs who run labels intend to hold that price, no matter what is happening in the worlds of technology, society, or their competition (e.g., declining DVD prices)! Why? Because they feel they have the right to maintain the same pricing, sales volume, and profit margins as they had in their glory years. It's the Maserati Imperative!

Footnote: Yes, I'll admite there is a legal way for kids to fill their MP3 devices (as long as they're not iPods) -- the subscription plans offered as Napster-to-Go, Rhapsody-to-Go, etc. Two problems, though: (1) They are not consistent with the American desire for ownership of things (which is especially true for kids ("Kids, collect 'em!")). (2) To maintain your collection of tracks, you're looking at a commitment of $15/month for the rest of your life, so it's still a prospective $10,000 commitment if you want to go that route. In contrast, if you spend that same $15 on a CD this month instead, at least it's yours for the rest of your life.