Interviews with Digital Media Thought Leaders
Two Years Ahead of the Record Labels
Podcast Video | Posted by Phil Leigh on January 4, 2008
About two years ago we published a research report entitled Digital Music Goes Mainstream concluding that it was in the best interests of the record label industry to abandon digital rights management (DRMs). You can get a copy of the February 15, 2006 report by clicking on the preceding link.
Over a year later EMI decided to sell DRM-free tracks, followed by Universal in the autumn, and Warner Music just last month. Finally Business Week reports that Sony-BMG will be the last of the four major labels to throw in the towel sometime during the first quarter of this year.
In our analysis DRM abandonment will benefit the industry for two reasons.
First, it will remove a significant impediment to the purchase of legitimate digital tracks. Basically, consumers won’t pay anyone to further complicate their lives. Unfortunately, DRMs created incompatibilities and complexities that confused the mainstream consumer.
Second, dropping its obsession with the DRM White Whale will enable the labels to focus on finding ways to use the Internet to popularize new releases and generate advertising-supported revenues. Consider that the industry produced about $12 billion in revenues last year as compared to the $20 billion of broadcast radio. Significantly the labels charge for their product whereas radio stations let consumers listen for free in exchange for advertising.
While radio stations have denied the labels a share of ad revenue, Internet radio requires operators to pay the labels. More importantly, label executives will likely discover new ways to capture ad revenue for Internet-distributed music in addition to conventional Internet radio. This will become especially important once the wireless Internet moves into the mainstream.
To learn more about how our research services can help you stay ahead of the market, feel welcome to contact me directly.
Categories: Podcast Video
Tags: advertising, Business Week, digital media, digital music, DRM, EMI, Internet, Phil Leigh, radio, Record Label, Sony BMG, Universal Music, Warner Music, wireless internet
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