Record Industry About To Stab Its Last Friend (Radio) In The Back

One of the regular readers of this blog noticed some interesting associations being made in the FAQ.pdf and other parts of the SoundExchange "Legislative Alert Center".

Sit down. Stay away from sharp objects and read this in amazement:
  • Webcasting is to blame for the slump in CD sales.
  • "CD sales have slumped 25 percent since 2000, while webcasting audiences have grown dramatically."
  • "Do AM & FM stations pay these royalties? Not at this time."
  • "The United States stands alone among the major developed nations in denying artists any right to collect royalties for performances on traditional FM/AM radio and television."
Unless your head is buried deep in the ... in the sand you can see what's going to happen next. Your friends in the record industry -- distraught over the alarming drop in CD sales -- are about to do what it seems to do best. Lash out against its friends in the radio industry.

It's telling what SoundExchange is peddling in the bowels of its "Legislative Alert Center".

That webcasting is so powerful it alone is responsible for a 25% decline in CD sales since 2000.

Are they serious? Really? That's like blaming The Netherlands for all the deaths in the Iraqi war.

Webcasting is getting to be a big deal, but there are lots of other reasons why CD sales are slumping.

How about consumers would rather cherry pick the individual songs they want?

How about they want them in digital form for their iPods and computers?

How about record company acts have by and large been sucky since 2000?

Or that record labels are watching the bottom line more than what's happening on the street?

And what's this? "Do AM & FM stations pay these royalties"? "Not at this time." (Italics are mine). Oh boy, I don't know if not at this time means maybe later to you but that's how I am reading it. Does this make it any better? "The United States stands alone among the major developed nations in denying artists any right to collect royalties for performances on traditional FM/AM radio and television".

This is going to get ugly.

The record labels are clueless as to how to reengage the music buying public with what the public wants. You don't have to be a genius to know it's not CDs and that CD sales will continue to erode. So why take it out on radio?

Radio is a chump.

All those music stations have been exposing the record industry's new music and future stars and the labels have been making all the money from this free over the air exposure. Meanwhile the stations are also paying rights fees for the right to make the record labels rich.

Such a deal.

Who wouldn't want it? Apparently the record industry. And that's why you don't have to look any further than the CRB flap over royalty rates for Internet streamers to know that radio stations are next.

Let's see if we can look at this situation with a bit of sanity.

As the labels falter, they do what they do best -- sue and complain. The market is telling them that they are selling the wrong products at the wrong prices and in the wrong places. They no longer have control of Sam Goody or Tower Records. The consumer has control of the Internet and if they don't like the price of music, they can steal it. And many still do. So much for the RIAA scare tactics.

As radio falters, they do what they do best -- cut their playlists. The market is telling them that they are doing the wrong thing. Radio no longer has control of what music receives exposure through its playlists alone. The consumer has control of it through the Internet, peer-to-peer file sharing, social networks and Internet streaming. So much for strong arming listeners.

These two dying business models -- radio and records -- are acting contrary to what the marketplace is demanding.

I went to Temple not Harvard but even I could tell you that this strategy will not work. Why can't they see it? Maybe they went to Harvard and not Temple? Just kidding.

Radio and records is trying too hard to hold onto the past. Their executives have reason to -- it's called obscene profits. Both industries are still profitable -- very profitable -- even if Wall Street doesn't think they're a good investment. Wall Street operates on futures and radio and records doesn't have one without the next generation on board. Radio can be a good business for a long time to come because it throws off a lot of free cash flow. Has anyone noticed that Warner Records does pretty well?

This is about the future.

The consumers who are in college now and will be joining the work force and having families later don't want CDs. They don't want tight-playlist radio.

Everything they want is either on a computer or a mobile device.

So, if the record industry wants to be around in ten years it had better cut back the RIAA lawsuits against its customers and back channel plans to assault its only remaining friend -- radio -- or else they'll both be history.

I'm not optimistic for the very reason I've just stated -- record labels and radio stations still make plenty of money. They don't really think things are that broken.

But one day these executives will wake up and find that they have no future because they've lost their consumers to a place they fear and cannot fathom.

That place is the future.