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Boiling Frogs

March 29, 2010

Everyone has heard the boiling frog anecdote.  You can place a frog in a pot of room temperature water and slowly heat it until eventually the frog will be boiled alive.  Try to place a live frog in a pot of already boiling water and it will jump out immediately, etc.  Why does this work?  Because frogs are reptiles, they have a brain that lacks the ability for any kind of advanced cognitive processes.  Frogs are stupid animals.  The people that work at major record labels however are not stupid animals.  So why are these companies continuing to sit in a pot of slowly boiling water?

According to Ed Christman’s article entitled “Losing Track” in the 3/20/10 issue of Billboard, “track sales in the US through the 9 weeks ending 3/7 totaled 225.5 million units, up just 0.7% from 223.9 million in the corresponding period last year.”  We’ve all heard the tired story of the decline of the CD sales, I won’t bore you with more stats on that.  However, this is new, digital track sales are now flat on growth.  Pretty easy to see the boiling water right?  What happens when the water warms more and digital track and album sales start plummeting like CD sales have?

Instead of ignoring these trends and hoping for a new format to come and pick up the slack, why not jump out of the water and truly innovate instead?  Why not quit trying to swindle the minority that still pays for CDs or digital music and go after the majority that procures music illegally?  Build a bigger industry around music instead of gradually slashing overhead, staff, and budgets to reflect the shrinking recorded music business.  Maybe you don’t want an outsider like Spotify to swoop in and take away profits and power like Apple did with iTunes.  That’s fine, I can understand that, so go and build your own competing software!  Very smart people work at these companies and they are more than capable of developing this technology if they so choose.  Surely the majors would license their music to a service in which they all share equity.  The objective then is to grow the number of paying users at a low price point instead of trying to squeeze out a bunch of revenue from a handful of customers.

How hot will the water need to get before the majors realize they need to be in this new business?

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