Why the Music Industry is (Really) Broken

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found here

‘The whole point of digital music is the risk-free grazing’ – Cory Doctorow

Every major label 's setting up an iTunes these days. They're all, in the immortal words of Johnny Cash, 'born to lose, and destined to fail'. Why? The music industry doesn't understand the microeconomics of it's own business. If it did, it would see that it's business model is not just misguided, but broken- because, DRM or not, the implicit contract it signs with listeners is being broken in both directions.

I reached this conclusion because, as I was scoping BoingBoing one day, I read Cory's statement, and it struck me as exactly right. For many people, digital music's more about risk than it is about music itself. Not legal risk - but transactional risk, the kind of risk you take when you buy a used car. Now, this statement has deep economic meaning. I'd like to explain why.

Fundamentally, I'm going to argue that consumers download music, as much to derive extra value from getting something for free, as they do because they want insurance against buying something they didn't want in the first place. File-sharing is as much about risk-sharing as it is about the 'theft' of value. Technological changes have made this possible - but the way the business model of the music industry is at odds with the implicit contract it signs with listeners is what makes it probable.

Here are the basic economics of the music industry: The major record labels assume market risk in exchange for value. They take on the risk of assuming search, development, and distribution costs, in exchange for uncertain profits. more..




sorry if this been posted before..i noticed in a december WiR an article started off with ->'born to lose, and destined to fail' as well, but itwas a different one..