Doom In the Music Biz, Top Rock Manager Warns Apple & Labels

Peter Jenner, former manager of such top rock bands as the Clash, Pink Floyd and Billy Bragg, says record labels are doomed unless they end their flawed approach to music downloads.

Traditional music companies have seen declining sales for several years, despite launching new online services. In contrast, Apple seems to be doing fine with iTunes, the dominant mp3 download service with an estimated 70%+ market share.

But Jenner seems to warn that despite the apparent success of iTunes, which has racked up 1.5 billion dollar-a-song downloads in the past five years, it is out of step with the main market for music, youth. This could be an important signal that Apple and the music industry must continue to evolve to stay relevant:

"The unitary payment doesn't suit the technology, it doesn't suit how they are actually using downloads. You don't want to pay a dollar for each track when you want to explore music."

In a damning interview with U.K. online site The Register, Jenner describes an industry facing disruption. In many ways, the issues Jenner highlights have shown themselves to be critical in other industries that have faced disruption, including telecommunications, newspapers and the auto industry.

The recording industry is awash in incompetence protected by an oligopoly power structure of the four largest music labels, he says. Highlights from the interview:

• Digital rights management schemes are a scam because they force listeners to pay multiple times for the same product;
• The music industry has started to give up on these schemes;
• Music labels should outsource everything except finance and distribution;
• Within a few years, blanket license regimes will be in place in most countries, despite the early political failure of such a regime in France;
• The battles over online music downloads are precursor skirmish compared to the bigger battle: Mobile music downloads;
• In a related interview in the Sunday Times, Jenner proposes a monthly charge of €4 on broadband and mobile phone users for music.

**Related Information**

Music industry association IFPI reports music sales decreased 4% in the first six months of 2006, including an alarming 22% drop in U.S. hip hop sales, until now one of the main growth engines of the industry. UK music sales have declined or stagnated every year since 2001. In an interview, IFPI market researcher Keith Jopling says people love CDs and offers other classic denials of an impending disruption, "after all we still sell 2 billion albums a year".

Jenner is organizing  Beyond the Soundbytes, a music industry conference to be held on Nov. 15 in London with a goal of helping the music industry "Evading oblivion and building tomorrow's business."

Anti-Marketer Paul Paetz blasted Microsoft and its new Zune mp3 player for its failings on Digital Rights Management. He also carefully dissected the larger issue of Intellectual Propterty rights, saying China will win, consumers will lose, and that clever industry marketers have hoodwinked us all.

Ron Gertz at Music Reports Inc. seems to know a lot about copyright issues for new and established media. Gertz spoke at the Future of Music Policy Summit in 2002, along with entrepreneur Mark Cuban, Columbia Law professor Eben Moglen and others.

Electronic Frontier Foundation published a whitepaper on a voluntary blanket licenses schemes.

Music sales are in decline but not because of downloads, says a 2004 report by Harvard and UNC business professors who studied user behavior in late 2002. "Downloads have an effect on sales which is statistically indistinguishable from zero." The causes of the downturn in the music business may include: Weak economies, fewer album releases, competition from video games and DVDs, consolidation and homogeneity in the radio industry, and "a possible backlash against record industry tactics." Record sales also declined sharply in the late 1970s and early 1980s they observe, prior to the rise of downloads.