In 1964, Marshall McLuhan? published Understanding Media: The Extensions of Man and popularized the quote “the medium is the message”. McLuhan? recognized an ever-present symbiotic relationship between creative content and technology, noting that the medium of delivery to the consumer often defines the content itself. In this vein, the medium of consumption, rather than the content, is most important in developing and studying business models and the legal compensation mechanisms in the media industry.

With the invention of the sound recording, music changed from an experience that could only be heard live (or on the radio) to a commodity that could be owned. Consider that in 1910, prior to the creation of sound recordings, 374,000 pianos were manufactured in the US for use in the home—by 1984, the number was 206,000 (pianos were the only way to create music “on demand”). The commoditization of sound recordings provided a limited amount of content to the purchaser, who could then listen to it at his or her convenience. However, since records were relatively expensive, thereby entailing a high marginal cost, consumers selected small amounts of music to own based on personal taste and the successful promotion of each artist.

The “record” defined the business model of the music industry, which consolidated to form four major multinational profit-maximizing corporate record labels that collectively owned over 80% of sound recording copyrights and accounted for more than 77% of all retail music sales by 1998. These labels also owned ancillary businesses such as the distribution network to reap huge profits. The music industry thrived under this system until the late 1990’s, when technology destroyed institutional control and made established revenue streams obsolete (practically overnight).

These three technologies, 1) p2p file sharing (distribution); 2) MP3 compression; and 3) increased storage capacity (the iPod and other similar devices) had a profound impact on the way consumers interacted with music. Previous generations had viewed music as a commodity to be bought at a store, as one would buy a car or furniture. With “free”, albeit illegal, access to an infinite digital library, modern consumers began to accumulate huge collections of previously inaccessible or prohibitively expensive music from a wide variety of artists. Importantly, consumers would have never bought the music from many of these artists in the form of a CD.

As sociological expectations changed and consumers began to expect to hear any song on demand, music shifted from something acquired to something accessed. No longer were consumers forced to savor an unowned song as one would savor a sunset without a camera—-new technology (especially the advances in mobile telephony and storage capacity) fundamentally changed the entire business model, but record labels stubbornly refused to accept the new media landscape, especially facing the diminishing importance of their control over the business. As noted by the EU Commission, "[[http://www.mediafuturist.com/2009/07/i-love-spotify-but.html][The failed music industry business model is [caused] online piracy]]”.

While online piracy ran rampant through the 2000’s, the record labels frantically tried to retain their control over all aspects of music from studio to (digital) shelf. They created their own online stores; licensed catalogs with incredibly burdensome DRM technology; and viciously prosecuted their former consumers for file sharing, but ultimately none of these strategies sated the growing consumer thirst for (illegal) universal music access.

-- MikeAbend - 18 Oct 2011

TOPIC: Abuses of market concentration for interactive services

Any "interactive service" under the copyright act, i.e. Spotify or Mog, must negotiate directly with each individual copyright holder to publicly perform (stream) it (these owners have the exclusive right to digital public performance). Since 4 labels own about 85% of all sound recording copyrights, it is absolutely essential to get all of them (Sony BMG, EMI, Universal and Warner) to agree to license their entire catalog. This unusually superior bargaining power allows them to demand huge concessions from services and severely impede the development of consumer friendly music providers

1. Services/labels don't adequately compensate artists/songwriters

2. Independent labels are paid less by these services, while at the same time they are forced to agree to the terms

3. Labels have abused their bargaining power to stifle competition in the "interactive services" market

POTENTIAL SOLUTION: Statutory license based on a "willing buyer willing seller" market model Consumption of music in the past few years has only INCREASED, the music industry's wounds are completely self inflicted through artificial scarcity

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