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Torpedoing the good ship EMI
The music market is finally driving the industry
by Ross Chater
Wednesday, January 16, 2008
I'm not a religious man, but on the rare occasions anyone asks me to
qualify my spiritual leanings, I hint that I am a Consequentialist.
Consequentialism is a simple concept, and its acolytes tread a simple
path: do what you must to be at peace but remember that every
action has a consequence.
Cause and effect is not a new idea, but it's amazing how many people
fail to grasp it. For example, treat people with common courtesy and
you will be liked and respected; break into a farmer's house and you will
get blasted in the back with a shotgun. You get the idea.
My favourite story of the year so far has concerned a classic case of
cause and effect, and how unmitigated greed has come back to haunt
the music business.
Anyone growing up in the 1990s will remember wandering into their local
HMV or Our Price to buy music. Singles were usually priced at £4 each,
with albums varying between £10-15 – quite steep for a youth with no
job, and parents less than eager to expedite the exposure of their
children to the aural pleasures of Aerosmith. Despite frequent claims to
the contrary, over a twenty year period the major players in the music
industry ran an effective cartel that exploited artists and consumers.
However, capitalism always proves to be a fickle mistress and sooner or
later a reaction was inevitable. It came in the form of the Internet, and
the MP3 player; music, like all other consumer products, became a
disposable commodity.
The ability to download individual tracks gave consumers much greater
control, and slashed costs because no physical CD was required. This
was further exacerbated through the popularity of illegal file-sharing
programs – effective deterrents have now essentially vanished as music
piracy has become endemic. The effects have already been startling.
Following a series of profit warnings last year, EMI suffered the indignity
of a takeover by a private equity firm, when Terra Firma laid down a
cool £3.2bn. Now the music giant has announced plans to shed over a
third of its jobs worldwide, and many of its major artists are threatening
to jump ship. It's not just this side of the pond either. Only three
months ago, Warner announced a 58 percent drop in profits, with
shares dropping to 70 percent of their 2006 value. The download
industry has made major labels superfluous, and the trend looks set to
continue.. *
Does anyone care? It's hard to see who. Certainly recording artists will
be better off in future. Instead of watching music executives snorting a
vast majority of their album profits off a Soho cistern, they may now
cut out the middleman and sell directly to their fan base. As long as the
prices are reasonable, fans will be happy to pay; if they are not then
fans will desert, or rip off the tracks illegally. The market is finally
driving the industry, as it should be.
Biting the hand that feeds can only ever be counter-productive. If
companies such as EMI and Warner had thought consequentially, they
would not now be paying such a high price for their arrogance.
And they say capitalism is evil...
---
* That drip-dripping you may hear is my heart bleeding.
The music market is finally driving the industry
by Ross Chater
Wednesday, January 16, 2008
I'm not a religious man, but on the rare occasions anyone asks me to
qualify my spiritual leanings, I hint that I am a Consequentialist.
Consequentialism is a simple concept, and its acolytes tread a simple
path: do what you must to be at peace but remember that every
action has a consequence.
Cause and effect is not a new idea, but it's amazing how many people
fail to grasp it. For example, treat people with common courtesy and
you will be liked and respected; break into a farmer's house and you will
get blasted in the back with a shotgun. You get the idea.
My favourite story of the year so far has concerned a classic case of
cause and effect, and how unmitigated greed has come back to haunt
the music business.
Anyone growing up in the 1990s will remember wandering into their local
HMV or Our Price to buy music. Singles were usually priced at £4 each,
with albums varying between £10-15 – quite steep for a youth with no
job, and parents less than eager to expedite the exposure of their
children to the aural pleasures of Aerosmith. Despite frequent claims to
the contrary, over a twenty year period the major players in the music
industry ran an effective cartel that exploited artists and consumers.
However, capitalism always proves to be a fickle mistress and sooner or
later a reaction was inevitable. It came in the form of the Internet, and
the MP3 player; music, like all other consumer products, became a
disposable commodity.
The ability to download individual tracks gave consumers much greater
control, and slashed costs because no physical CD was required. This
was further exacerbated through the popularity of illegal file-sharing
programs – effective deterrents have now essentially vanished as music
piracy has become endemic. The effects have already been startling.
Following a series of profit warnings last year, EMI suffered the indignity
of a takeover by a private equity firm, when Terra Firma laid down a
cool £3.2bn. Now the music giant has announced plans to shed over a
third of its jobs worldwide, and many of its major artists are threatening
to jump ship. It's not just this side of the pond either. Only three
months ago, Warner announced a 58 percent drop in profits, with
shares dropping to 70 percent of their 2006 value. The download
industry has made major labels superfluous, and the trend looks set to
continue.. *
Does anyone care? It's hard to see who. Certainly recording artists will
be better off in future. Instead of watching music executives snorting a
vast majority of their album profits off a Soho cistern, they may now
cut out the middleman and sell directly to their fan base. As long as the
prices are reasonable, fans will be happy to pay; if they are not then
fans will desert, or rip off the tracks illegally. The market is finally
driving the industry, as it should be.
Biting the hand that feeds can only ever be counter-productive. If
companies such as EMI and Warner had thought consequentially, they
would not now be paying such a high price for their arrogance.
And they say capitalism is evil...
---
* That drip-dripping you may hear is my heart bleeding.
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