• by Tom Hespos , September 9, 2003

The emergence of online media was disruptive to a number of business sectors, especially travel, retail and automotive. But has any business sector been affected quite like the music business?

Perhaps. Perhaps not. Until the emergence of online travel sites, consumers would call a travel agent and not only take him at his word that the flight or vacation package he was recommending was the best option, but also pay him a commission for that advice. Now, by using travel sites, consumers know more about what travel options are open to them, and they make their choices accordingly. The business made adjustments and moved on - travel agents didn't spend years making legal maneuvers against consumers to preserve their business model.

At the same time, the music business has grasped at straws in attempts to preserve its own model. In moving to CDs as its predominant distribution medium, the music trade established that it's really in the data business. It sells CDs to consumers, who take them home and use their CD players and audio systems to convert the data back into sound that they enjoy listening to. Anyone in the data business has had to adjust to the consumer expectation of digital information on demand.

Most businesspeople would see the Internet as an immense opportunity. After all, a digital distribution network sprung up within a very short period of time - one that didn't require funding by the folks in the music business. Smart business people would immediately begin looking into using the Internet to decrease distribution costs for any digital product.

Instead, the music business saw that consumers could use the Internet to acquire illegal copies of their data. Shunning the Internet, they made every attempt to shut down companies like Napster and even go after file-sharing consumers for lost revenue.

The legal actions against consumers seem to be working. Well, at least they're decreasing the number of illegally pirated files. According to this article, usage of file-sharing programs dropped 22 percent in the weeks following the RIAA's announcement that it would sue individual consumers for making music files available to the public via their computers. One would expect that this drop in file-trading would be accompanied by a healthy boost in the number of CD sales, right? Wrong. The decline in CD sales continues to accelerate.

My prediction: The Internet will take the rap for the demise of the music business as we know it, yet the blame most likely lies with the music itself. Music companies should have invested the necessary capital in Digital Rights Management when they had the chance. Instead of gasping for breath like fish out of water, they could have cut distribution costs, eventually dropping consumer prices after paying for the DRM investment. And everyone would have been happy, especially the instant gratification junkies who want their music on demand.

Instead, we have a situation where consumers are being sued for revenue the music business probably would have lost anyway, and our beloved medium is taking the blame.