Record Execs: Stupid, or Just Plain Greedy?

Read an interesting article this week in Wired. Actually, the entire magazine was phenomenal and prompted me to order a subscription, but one article jumped out. Examining the current state of the music industry through the eyes of Universal Music Group‘s CEO Doug Morris, author Seth Mnookin prompts a series of new perspectives and questions surrounding the idea of where exactly we are now and where we are likely to go in the future with regards to music rights management, distribution and artist promotion. All of which, obviously, are keen topics in the mind of MixMatchers.

Morris is an industry ancient. If it weren’t for the fact that the past several years have seen him hammering other companies over rights to use and sell the Universal catalog with great success, he’d be a dinosaur. But he has. He’s been very busy, limiting who can use the Universal catalog and when, making YouTube sign an agreement with regards to the licensing, he’s engaged in a lawsuit with Myspace, and he has even gotten Microsoft to give Universal $1 for every Zune music player sold because they could be used to play music that wasn’t directly paid for by the listener.

So why’s he involved in all these digital disputes at the moment? It boils down to the record industry turning an ignorant eye in the 90’s to the idea that the huge profit margins on CDs and the public’s willingness to buy them couldn’t be eradicated by something as non-tangible and silly as a, um, what was it called again? Oh, yea, mp3. When you look at this period in time, it would be easy from an outside perspective to see clearly and rationally that the record labels didn’t want to go digital for fear of losing the justification for the large profit margins created by CDs. So rather than get out in front of the mp3 movement and attempt to control its direction, record companies dug in. The obvious initial example is the first assault on Napster. When Apple launched the iTunes store, they were only able to get major labels to sign on because when you break it down, Macs are a small percentage of the population, so how much could they possibly damage the sale of CDs? Of course, this is before the Windows iTunes was released….I doubt Jobs told the execs THAT when he was pitching them on letting him sell their music on the web.

But is Morris willing to concede that they took the wrong road by ignoring and attacking mp3s instead of going along, and are now paying for it dearly? Not really. I laughed out loud when he states in the article, “That’s a misconception writers make all the time, that the record industry missed this. They didn’t. They just didn’t know what to do.” Please. You didn’t know what to do? You mean, you couldn’t think of a way for digital music to make as much for you as CDs, so you chose not to know what to do? This is the part of the article where having read about the ascension in the ranks of Morris, I start to ask if it was because he was an accomplished and intelligent individual that could continually renovate an industry, or simply a good company man with a knack for turning a profit. If you say you didn’t get into mp3s because you “didn’t know what to do,” you’re either a liar or a fool. You could have easily figured it out if you took the long view (that mp3s and the digital music industry will eventually make you more money as consumers have greater control over what they want) versus the short view (these damn mp3s are cutting into our profit margin and need to go).

Well, they did sign up with Apple, and the article points out an interesting quandry: Jobs sold labels on the smaller population of Macs and the proprietary DRM Apple uses. While these are the types of security blankets that the industry was looking for for their revenue streams, they neglected to look at the fact that because the Apple DRM tracks will only work on an iPod through iTunes, and iPod has singlehandedly crushed the entire mp3 player market, they’ve created a golem in the iTunes store. According to the article, 22 percent of ALL music in the US this year was downloaded from the iTunes store. Furthermore, Jobs consistently blames the mess of mp3 players and protected songs on the labels, which leaves him looking pretty good.

So now Morris is taking a different route. Extremely protective over rights and licensing, Morris has decided that the next battlefront needs to make sure that Apple doesn’t run away with the entire digital music industry. By backtracking on his obsessive need for protection, he’s come to the conclusion that the only way to unseat Apple is to offer DRM free music in a wide variety of ways that entice people away from the iPod (good luck with that buddy).

This is a man who clearly has mixed priorities. First it was no mp3s, then it was DRM mp3s. Now it’s DRM-free and a non-exclusive iTunes agreement. His battle cry is that stolen and shared music, or albums sold for $10 when coffee is $3 a cup, are severely damaging the artists. In reality, they’re cutting into his profits. When you continue to pay the artist the same amount, and the net return on the profit takes a hit, it doesn’t matter if you’re selling CDs for 10 or 30 dollars, because you haven’t changed what you’re paying the artist! Now Morris faces an even steeper challenge with the fact that bands (by which I mean Radiohead and the inevitable overflow of copy-cats) realize they can take ALL the profit if they just release it themselves.  Artists that care about the integrity of their message, such as Immortal Technique, have already shunned record label overtures in pursuit of music that doesn’t need to conform to an executive’s idea of music, and profit that doesn’t involve paying out to someone who has had almost no hand in the creative process.

Unfortunately, as evidenced by his continuing victories in the fights he picks, Morris isn’t a dinosaur yet. But you have to wonder when the musicians that he claims to represent, and the fans those musicians want to serve will take a long look in the mirror and realize that together, they can create a place where artists are paid more, the labels that “own” their music don’t get away with highway robbery, and everyone can win. Ancients such as Morris like the win/lose approach (which often results in a lose/lose anyways) over the win/win approach. But with greedy record execs like this, and a populace gradually seeing that they don’t deserve to be slaughtered over the cost of a CD that their artist will see pennies on anyways, you have to believe the meteor is coming.


2 Responses to “Record Execs: Stupid, or Just Plain Greedy?”

  1. 1 kevmoore December 2, 2007 at 8:32 am

    Completely agree with you. Its the inflated profit margins that were their undoing. Particularly in the infancy of CD production, when substandard reissues of old vinyl releases on CD using second and third generation source tapes were sold at ridiculously high prices. Add to the fact that some of these titles, perennial sellers such as Dark Side of the Moon, had already recouped their costs, and that the artists often hadnt provision toi be paid AT ALL from this new medium, and we’re talking daylight robbery. The majors will reap what they sow. That said, I still love to own the CD, I will always prefer to have the “item” even though I use mp3s for convenience. If only the companies wouyld come clean and charge areasonable price for them, the public might be a little more forgiving. Its a sobering thought that, following a poll, it seems that Radiohead realised something like an average of $6 per album download of “In Rainbows”- thats even taking into account the naughty people who took it for nothing. Many have said this is bad business, but consider this: no artist, no matter how famous or influential, gets that amount of money per unit. There is negligible expense, no artwork, printing, etc. Its a wake up call to the industry, of that I’m certain.

  1. 1 Universal Backs Live Video Streams « .Evolving Music. Trackback on January 16, 2009 at 3:55 pm

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