Universal Music Group's View of the Digital World

[notjustjay]

They aren't jealous, they're scared. They're scared that they've already given away the store. And they're right to be scared. One of the truly interesting facts revealed in the article is that Apple is verging on effective control of the retail music business. The industry is not going to want to be dealing with any one retailer with as much power as Apple is gaining, so they are making their moves. No surprise there.

But Apple is making them money. The article even said, the largest portion of their digital music sales came from Apple. I can see wanting control, but seriously!

Man, I was about to declare personal bankruptcy but I found a financial planner to help me out. Now I've given him a large portion of my life savings and he's making me a killing on the stock market and mutual funds. But darn it, he's got my money. Not me. I must have that money back! I must be free to spend every penny I have on things that I think are important! Never mind that I have no clue about finances or investing. Hey, I hear these slot machine thingies can make you rich! I must not let someone else handle my money!

 

[ViveLeLivre]

"There's no one in the record company that's a technologist," Morris explains. "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. It's like if you were suddenly asked to operate on your dog to remove his kidney. What would you do?"

Nice strawman. The average Joe knows nothing about surgery, and Morris is paid very well to know his market and sell music.

Hemorrhaging profits to digital downloads? Hire some analysts who understand that market!

 

[harperska]

Apple has a HUGE cash reserve. I really could imagine then saying screw it and actually starting a studio to reel in the major artists that already like Apple. And then pay them more money. And then get rid of the DRM. And then put the others out of business for good.

It's already happening with services like CD baby getting the little guys on iTunes, I can see them getting the big boys on board and really doing a number.

After all, I don't think Apple is THAT concerned with profit from the store itself, this is about keeping people in the library and buying Apple products.

And after the Apple v. Apple settlement, Apple (computer) is now legally able to do exactly this. Who knows what the future will hold.

 

[LethalWolfe]

According to my friend, it's still common practice to keep fraudulent books and bribe media folks.

"Creative accounting" and paying people for good press aren't things only present in the music industry and will still be around after the majors are gone.

If I were a young musician, I would not be looking for a recording contract so I could afford studio time with the hope that my record company pushed my music and got it played on the radio. I'd be recording in my home or in some small studio and putting the stuff on the 'net for people to hear, and develop my audience that way. A lot of artists do that now -- and I think a whole generation of musicians are growing up in this environment, not in the old one, where you don't get heard without a recording contract with a big label.

You can make a record on the cheap in your home but so can millions of other people. How do you stick out from the crowd and get noticed? How do you get people to your web site? How do you convince people to pay for your music? How do long can you work two full time jobs (a day job to pay rent and a night job creating music, playing gigs, and trying to get yourself noticed on the 'net)?

The video world is in a similar boat, but facing a bit bigger challenge because of the increased "overhead" of video (more people involved, more gear, not as easy to download/stream, etc.,). I mean, YouTube gets over 60 thousands new pieces of media a day so w/o factoring in luck how do you get noticed? The creators of the indie flick Four Eyed Monster pretty much became the poster children for generating grass roots, internet buzz for their movie but in the end they still couldn't monetize on the buzz they built.

Currently building a viable, repeatable business model for monetizing creative works on the WWW is still a sticky wicket. We'll get their eventually, but people with money and connections (be it labels, studios, or private investors) will always have a place in the food chain. It might not be as big a place as it once was, but it'll still be there, IMO.


Lethal

 

[IJ Reilly]

You can make a record on the cheap in your home but so can millions of other people. How do you stick out from the crowd and get noticed? How do you get people to your web site? How do you convince people to pay for your music? How do long can you work two full time jobs (a day job to pay rent and a night job creating music, playing gigs, and trying to get yourself noticed on the 'net)?

Since when is music the road to riches for more than a handful? The same goes for acting. I know quite a number of wonderful actors. They all dream of making it big some day, but all of them have day jobs. They do it because they love the art -- which in the end, is the only good reason to do it.

The sad fact is, even of the artists who do score recording contracts, few see anything more than their first advance, and this includes many fine artists who just don't fit into the record company's marketing plans, or quickly fall out of them when they don't hit it big right out of the gate. The internet allows these people an opportunity to cut out the middle man and meet the audience directly. So what if millions do? I don't see any downside to that!

 

[xnu]

In the spirit of the season, this guy is a fruitcake.

 

[bluedevil14]

i'd like free music, but i'm guessing the hardware companies would have to pay a HUGE amount to subsidize it or Universal will lose a ton of money, and we all know how they LOVE their short term money

 

[748s]

This is an excellent move by universal.
It will hasten the exodus of artists from record Co's.
More artists selling via iTunes or direct digital downloads.
Are those executives that stoopid?

 

[drummingcraig]

You can make a record on the cheap in your home but so can millions of other people. How do you stick out from the crowd and get noticed? How do you get people to your web site? How do you convince people to pay for your music? How do long can you work two full time jobs (a day job to pay rent and a night job creating music, playing gigs, and trying to get yourself noticed on the 'net)?

*SNIP*

Currently building a viable, repeatable business model for monetizing creative works on the WWW is still a sticky wicket. We'll get their eventually, but people with money and connections (be it labels, studios, or private investors) will always have a place in the food chain. It might not be as big a place as it once was, but it'll still be there, IMO.


Lethal

IMO, from a musical standpoint one cannot succeed financially if their music exists solely on the "WWW". The internet is only one piece (albeit a large one) of a bigger puzzle which must include live performances and marketing/management in the real world.

So you are correct to a point in stating that people with connections and money will have a place in the food chain. However I feel that it is MUCH easier for artists to succeed with grass roots style self-promotion. Its also important to point out that radio play is almost a non-factor (unless you're talking about indie stations) as the majority of commercial stations are only spinning the same 20-30 songs from the the most "popular" artists...err...excuse me, "entertainers". So this is another strike against the majors as even a contract with them cannot guarantee airplay.

Craig

 

[rockosmodurnlif]

I understood the dog surgery analogy, and I sympathize with waking up one morning and being in the midst of a revolution. However, we're talking about one of the largest (if not THE largest) music corporation in the US/World. Surely they could've found qualified tech-folks to help them cope with things.

As mentioned in the article, the big labels were too addicted to the high margins of CD sales to entertain the idea of a "new digital world" with much lower profit margins. So instead of at least attempting to learn how to perform surgery on their dog, they simply ignored the illness and watched the dog kick the bucket.

Craig

People also seem to have forgotten about the myriad of digital music stores that existed that iTunes outlasted, thanks to the iPod and it's own limited DRM requirements. Like each record company had their own or came together or something like that. People also seem to have forgotten about the myriad of "digital" companies that went bottoms up around the beginning of the new millennium run by "qualified tech-folks".

It's easy to stand here seven years later and say they should've done this or that. Damn the record company for trying to make as much money as possible! What? Is this being said by the same crowd who cheer everytime AAPL stock goes up? When Apple sets a record for profits in a quarter or some such? If I was a shareholder in Universal Music Group, I'd want the highest possible profits too. I don't understand people who say they shouldn't have tried to protect the CD. Who knew the mp3 was going to be what it is? Given that it's a proprietary technology to boot. Wasn't OGG/Vorbis out at the same time? Apple pushed AAC and what's still dominant? The mp3.

People say the record companies were short-sighted. They went with what was proven, what worked and tried to hold back the fire sale. When I was in a band and heard about Napster I swore not to use it. Free music? I thought Napster users were stealing another form of revenue from the artists (in addition to touring and merch and such). Then I compromised my principles and opened my eyes to whole new genres of music.

Apple took the risk on digital music and was rewarded. But now everybody wants a piece of the pie, that's how the world works. I welcome Universal trying something new. Maybe soon enough I'll be able to get digital albums for $5 without going to something like allofmp3.

 

[TurboSC]

Idiot. He doesn''t know his market, he doesn't understand his customers (he treats them as ENEMIES) and he doesn''t care to learn ...

Total moron. Ought to clean him out of the corporate genepool and improve the breed....

lol for real... he just openly admitted that he doesn't know his own target market. Man, this is horrible, makes you wonder what else in this world is run poorly / inefficiently... thank god there's the Internet / Open Source.

 

[ErikGrim]

He'd sit around for eight years and insist that the dog was fine, eventually blaming the neighbor's cat's when the dog died.

You sir, are a scholar and a genius.

 

[drummingcraig]

People also seem to have forgotten about the myriad of digital music stores that existed that iTunes outlasted, thanks to the iPod and it's own limited DRM requirements. Like each record company had their own or came together or something like that. People also seem to have forgotten about the myriad of "digital" companies that went bottoms up around the beginning of the new millennium run by "qualified tech-folks".

By "qualified tech-folks" I didn't mean "someone who knows all the answers". I meant that I don't want to hear Mr. Morris' blubbering "whoa is me, we were completely helpless" speech. I wasn't there so I don't pretend to know what transpired in UMG's headquarters during the early days of the digital revolution, but based on this article one can surmise that any ideas of album's selling for only $9-10 were quickly tossed out the window.

It's easy to stand here seven years later and say they should've done this or that. Damn the record company for trying to make as much money as possible! What? Is this being said by the same crowd who cheer everytime AAPL stock goes up? When Apple sets a record for profits in a quarter or some such? If I was a shareholder in Universal Music Group, I'd want the highest possible profits too.

I honestly don't think this is a totally fair comparison. Yes, UMG is a business and as such their mission is to make money. However mega-labels are notorious for making vast amounts of money often at the expense (and swindling) of their artists (the very essence of their own existence). So it should be no surprise to you that people tend to get a little "sensitive" about their ethics and business practices.

When Apple posts a record gain one would like to think they they didn't step on too many people in the process. I would also like to think that the world which Apple functions in is a little bit more honest then that in which most record labels exist. We all have our own morals, but I for one (of course being biased as a musician) would rather own stock in a corp. which achieves great financial gain through more legitimate means.

Also, if I was a shareholder of UMG I would say that a balance between financial gain and longterm stability would be a plus. I wouldn't be opposed to a short term loss if it meant a better future.

I don't understand people who say they shouldn't have tried to protect the CD. Who knew the mp3 was going to be what it is? Given that it's a proprietary technology to boot. Wasn't OGG/Vorbis out at the same time? Apple pushed AAC and what's still dominant? The mp3.

People say the record companies were short-sighted. They went with what was proven, what worked and tried to hold back the fire sale. When I was in a band and heard about Napster I swore not to use it. Free music? I thought Napster users were stealing another form of revenue from the artists (in addition to touring and merch and such). Then I compromised my principles and opened my eyes to whole new genres of music.

First off, I never said that they shouldn't have protected the CD. It obviously hasn't vanished and I suspect will be with us for a while longer. But here's the rub: People have been ripping tapes and CDs for years without much noise from anyone. All the while, folks continued to buy new albums and set records for CD sales. Now with mp3's, record companies are so worried about their bottom line and DRM that they have polarized people towards one digital format or another, which IMO furthers pirating. I don't think the "fire sale" you speak of would have amounted to much if companies like UMG had just bitten the bullet and said, "OK, you can buy a full quality album on CD for $17.99 -or- you can buy a lower quality mp3 version online (free of DRM) for $9.99. Their margins would've shrank of course, but certainly not by anymore than they have.

My whole point is that this took place when record companies were making record profits on very high margins and their inability to evolve had more to do with "fat belly" stubbornness rather than technical impotence.

Craig

 

[gifford]

haha!LOL im sure someone must have quoted this already as i havent read the comments but...
"They just didn't know what to do. It's like if you were suddenly asked to operate on your dog to remove his kidney. What would you do?"

Well i would personaly pay someone who 'did' know what to do obviously! how dumb can you get!
I would have called the vet. maybe they should have asked a consultant.

 

[markfc]

Is it time for Apple to start their own Record Label?

Apple Music has a nice ring to it!

 

[Darkroom]

man, that Morris guy is such a douchebag...

It's like if you were suddenly asked to operate on your dog to remove his kidney. What would you do?

well, for starters you could stop being a cheap b*tch and, i don't know, HIRE SOMEONE to do it? call me crazy...

Our strategy is to have the people who create great music be paid properly

no, your strategy is to have old fat white men in suits, like yourself, sitting in a board room scratching their heads to get as much money from people who create great music as they can.

 

[rockosmodurnlif]

By "qualified tech-folks" I didn't mean "someone who knows all the answers". I meant that I don't want to hear Mr. Morris' blubbering "whoa is me, we were completely helpless" speech. I wasn't there so I don't pretend to know what transpired in UMG's headquarters during the early days of the digital revolution, but based on this article one can surmise that any ideas of album's selling for only $9-10 were quickly tossed out the window.

I'll agree

I honestly don't think this is a totally fair comparison. Yes, UMG is a business and as such their mission is to make money. However mega-labels are notorious for making vast amounts of money often at the expense (and swindling) of their artists (the very essence of their own existence). So it should be no surprise to you that people tend to get a little "sensitive" about their ethics and business practices.

When Apple posts a record gain one would like to think they they didn't step on too many people in the process. I would also like to think that the world which Apple functions in is a little bit more honest then that in which most record labels exist. We all have our own morals, but I for one (of course being biased as a musician) would rather own stock in a corp. which achieves great financial gain through more legitimate means.

"One would like to think ..."

But that is why you don't own stock in UMG. Other people do. Why is my comparison unfair? Because you like Apple and think they are more ethical?

Also, if I was a shareholder of UMG I would say that a balance between financial gain and longterm stability would be a plus. I wouldn't be opposed to a short term loss if it meant a better future.

Yes. I agree. But what if short term becomes long term? Are you willing to take that risk?

First off, I never said that they shouldn't have protected the CD. It obviously hasn't vanished and I suspect will be with us for a while longer. But here's the rub: People have been ripping tapes and CDs for years without much noise from anyone. All the while, folks continued to buy new albums and set records for CD sales. Now with mp3's, record companies are so worried about their bottom line and DRM that they have polarized people towards one digital format or another, which IMO furthers pirating. I don't think the "fire sale" you speak of would have amounted to much if companies like UMG had just bitten the bullet and said, "OK, you can buy a full quality album on CD for $17.99 -or- you can buy a lower quality mp3 version online (free of DRM) for $9.99. Their margins would've shrank of course, but certainly not by anymore than they have.

My whole point is that this took place when record companies were making record profits on very high margins and their inability to evolve had more to do with "fat belly" stubbornness rather than technical impotence.

Craig

Are you saying CD/tape copying is the same as mp3 downloading? The two are so different it doesn't make sense to put them in the same sentence. That's what I mean by people forgetting what it was like before Napster.

But you still haven't addressed my point. You restated yours. New technology is a risk. The record companies did eventually try to work with the technology using all sorts of DRM trying to prevent pirating. I don't agree with DRM but I understand it. Let's not forget pirating had the jump on legitimate sales of digital files. $10 for an lossy format or I can get the same lossy format for free and its DRM free. Free is a hard price to fight. Like I said, mp3 was not embraced by the music industry, it was thrust upon them.

But they did try to work with digital downloads and they got it wrong over and over and then iTunes got it right. After iTunes set the price point (and the iPod started to sell) the market started to work. iTunes wasn't the first digital music store and I don't think it's the best either. If eMusic had the selection of iTunes ... but that's another topic for another day.

 

[csimmons]

But you still haven't addressed my point. You restated yours. New technology is a risk. The record companies did eventually try to work with the technology using all sorts of DRM trying to prevent pirating. I don't agree with DRM but I understand it. Let's not forget pirating had the jump on legitimate sales of digital files. $10 for an lossy format or I can get the same lossy format for free and its DRM free. Free is a hard price to fight. Like I said, mp3 was not embraced by the music industry, it was thrust upon them.

But they did try to work with digital downloads and they got it wrong over and over and then iTunes got it right. After iTunes set the price point (and the iPod started to sell) the market started to work. iTunes wasn't the first digital music store and I don't think it's the best either. If eMusic had the selection of iTunes ... but that's another topic for another day.

The main point that you and other pro music industry people still fail to address is why Napster and similar services back then, Bit Torrent sites and now (for the past 5 years) the iTunes store were so successful: the unreasonable pricing of CD's since their inception. CD's are WAY TOO EXPENSIVE. The pricing of CD's is of course not the only reason for the rise of file sharing, but if you look at the success of the iTS, then it's clear that pricing is the main reason.

Jermain Dupri recently wrote a blog at the Huffington Post website where he said "the customer gets what they want too much, and that hurts the artist". Dupri and Morris are prime examples of why the music industry as we know it are pretty much doomed. The sooner artists can get their music directly to the fans and truly start to get paid for their efforts, instead of being raped by the labels, the better.

 

[bartelby]

This is a very revealing article about why the music industry is the way it is. I was surprised by it.

arn

Were you really surprised or was is sarcasm?

Me? I'm not surprised by any of it!

 

[iPie]

I thought that the article nicely shows how outsiders can break into new markets and shake things up; Apple in this case. There is absolutely nothing new about "insiders" being blind to changing industry dynamics.

I just don't understand how one can criticize Morris and praise Jobs on:

1. Short Term Profits: look at the damned iPhone.
2. Closed systems and DRM - no need for comments...

What is so bad about copying good business models? It just leads to further innovation and (we hope) lower prices for consumers. It should keep Apple on their toes if they want to continue to be leaders.

 

[Blue Velvet]

CD's are WAY TOO EXPENSIVE.

I'm with Doug Morris on this. When a coffee costs a couple of bucks, how much should a CD cost?

 

[bartelby]

I'm with Doug Morris on this. When a coffee costs a couple of bucks, how much should a CD cost?

The cost of CDs is very subjective though.
I've paid £30 for one cd (6 tracks) and thought it was great value because every track is bloody awesome. I've also paid £7 for a cd (14 tracks) and thought is was a bit crap as there were only 2 good tracks on it and they were both released as singles. I bought the album because the singles were good.

 

[calculus]

Do people really think that CDs are too expensive? They are cheaper now than they have ever been.

 

[pavelbure]

why is this on page 1 of a MACrumors site ?

 

[bartelby]

why is this on page 1 of a MACrumors site ?

Possibly because of the potential impact on iTunes Store and Apple...