How To Fix The Music Industry

Now this is a headline that is irresistible because it is so outrageous. Who has the answers that will save the music business?

I confess, it's not me, but I do have some ideas and they're based on my observations of smart Internet people and the next generation which I have gotten to know very well over the past three years.

Amazon has announced it will begin selling digital rights management-free music as it creates its own version of Apple's iTunes.

For the rest of us, this sounds like good news. More music available without anti-piracy technology and it all plays on our iPods.

But it's not that simple.

Only EMI has agreed to join Amazon in unlocking the music. Amazon says it has 12,000 labels participating but we're not talking about the majors nor are we talking about the major artists. EMI recently did a deal with Apple to allow iTunes to sell DRM-free music with enhanced audio for 30 cents above the traditional iTunes 99 cent per download price point. This went over like a lead balloon with my USC students if that's any indication.

Amazon has not announced pricing for its DRM-free music nor has it revealed any of the other three major labels as participants in their new initiative.

There are some who speculate that Amazon's entry into the digital music store business will only help Apple sell more iPods which brings me to the crux of the situation.

The labels are not running the music business -- Apple, and more specifically Jobs, is.

The labels are choking on DRM -- looking at decreasing legal sales, increasing illegal sales and married to their losing strategy to hide behind protecting digital rights.

Music lovers, used to buying a CD and using it any way they liked including the freedom to share it, now want the same from their digital music stores. You can argue all day and night that this is a battle the labels have to win but the pragmatists will win out in the end. The next generation -- the record buyers -- are demanding DRM-free music or they will continue to find other ways to access it (translation: steal it).

I am intrigued by their willingness to steal music when they would not likely steal a CD from a brick and mortar store.

I'm not an expert on the motivations of Gen Y, but I have observations.

To many it's about stealing from the rich to help the poor (Robin Hood). Others defend stealing by saying they are just trying to find out what they might like to buy (many young people say that they also buy CDs even now). Some are incredulous about not being able to buy digital music and share it the way they would a CD.

The Internet makes it possible for the masses to revolutionize the record industry while the record industry rests on its history of backing into the future.

Add to this Steve Jobs and Apple and it won't take long to deduce that all music will be DRM-free in the future -- the distant future if the labels have their way, the immediate future if Jobs and his customers have theirs.

The labels can only hope and pray that all of this transpires before it's too late -- that is, before the next generation becomes too comfortable with not buying music.

Jobs, for his part, is smarter than everyone else -- as usual. He advocates DRM-free music out of one side of his mouth while reaffirming that he won't remove Apple's proprietary DRM system called Fairplay out of the other. It seems Jobs doesn't want his domination of iPod sales and iTunes operability to help his competitors.

This is like a bad movie.

Fast forward to the end now.

Skip the part about the labels fighting for DRM protection and Amazon trying to be iTunes. Scroll your way through the lawsuits against consumers, the death of radio as a hit-maker and the loss of consumers to social networks.

Go right to the end -- or better yet -- to the new beginning.

Music sold for less than 99 cents a download which will sell more volume the way text messaging sells volume among this generation. I like 49 cents or lower.

Drop the lawsuits.

Use the Internet and social networks to "scout" for your new artists and the next hot genres.

Embrace digital music stores of all kinds -- they are selling your stuff.

Get the gold records off your walls and start keying on the new standard -- building volume using the long tail, the medium tail, short tail or no tail at all. Sell volume.

Oh, one more thing.

Help Internet streaming (radio) get established. It will be your best strategic move and will potentially pay a heavy return on your investment.