The Dinosaur’s Business Model

On the latest blog on Helienne Lindvall’s Behind the Music, commenter “Rockard” completely nails the true agenda of the major record labels:

The market for songs is the same as any other market. Price is determined by the interplay of supply and demand. Songs could be sold at a higher price previously because their supply was restricted by the record companies and radio stations. You could only access them by buying an album, listening to the radio or going to a concert.

The ability to download and stream music along with the wider access that musicians can get for their songs means that effectively the supply curve has shifted to the left. Since this has happened, their whole strategy has been to try and shift that curve rightwards again by freezing the competition. The competition here isn’t just illegal sites but independent bands distributing their music online.

These record companies are not the artists’ friend. They are not music lovers. Their profits are maintained as much by who they don’t sign as by who they do. It should be no surprise that established artists support the anti piracy stance of the big companies as they also profit from the current barrier to entry.

There is no chance of a return to the old model so they need to be working on a new business model. Optimistically I see more live music and greater market segmentation, i.e alternative artists.

Yes, this is what I have been saying for years. I’ve always believed that the major labels hatred of downloading and filesharing had less to do with stopping people pirating U2 and Metallica, and more to do with stopping people discovering new music that they don’t own.