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Labels tuning in to Net

Is the Internet rendering the traditional record business obsolete? Yes. But it is no different from what is happening in every other industry. The Internet also presents a whole new field of opportunity for new and traditional record companies.

Is the traditional, mainstream record business being made obsolete by the Internet?

Is the Internet rendering the traditional record business obsolete? Yes.

The revolutionary force of the Internet like a monumental wave, scattering the beach with thousands of new opportunities for delivering content to consumers. Music is a large part of this wave of change, if not the leading ripple in the waters. Technology companies, music companies, artists, record labels, and individual Web site pioneers are combing the beach, grabbing up new ideas like shells and trying out as many different options as they can.

This is no different from what is happening in every other industry, MP3: Sound and fury of course. Drugstores and grocery stores are sprouting up on the Web, moving the shopping aisles and checkout counters into the virtual world. Amazon is reinventing book sales even as people experiment with electronic devices that may redefine the book. Car shoppers are using the Internet for everything from pricing information to car and insurance purchases. Whatever the industry, it's the end of the world as we know it--and the start of something promising and new.

That the Net is radically changing the distribution models and economics of the record industry (and many other industries) is abundantly clear. But it's also true that human nature will drive the evolution of the Net--not the other way around. The human landscape includes artists, business people, brilliant musicians, talented promoters, creative marketers, and shrewd financiers working together to bring consumers new music. And then there is the exceptional hybrid, the one-man-band who has the ability and inclination to combine these pursuits. The Net creates a marvelous playing space for such entrepreneurial artists to develop their own microlabels and business models on the Web. Already there are artists posting the musical equivalent of shareware on Web sites and experimenting with subscription-based music distribution.

The Internet also presents a whole new field of opportunity for new and traditional record companies. Just a few years ago, when a record company invested heavily in producing and promoting an artist's album, Hilary Rosen they had one way to recoup money on that investment: by selling the actual recording on vinyl, cassette, or CD. The Internet cracks the channel wide open for record companies, and with many more distribution opportunities, record companies have other ways to expose and distribute their artists' product and much more precise methods for targeting the ideal customer for their music. More revenue opportunities means more abundantly available, affordable music. This is good not just for established artists who will continue to see more money spent to promote their work but for new artists hoping someone will invest in their work.

A recent analyst's report divided the coming years for the music industry into three eras. Forrester Research described 1999 to 2000 as the "pirate era," 2001 to 2002 as the "promotion era," and 2003 and beyond as the "commerce era." The pirate era hardly needs elaboration. In the promotion era, old dogs learn new tricks: Record companies, experts in pre-Internet era promotion, must rapidly evolve their techniques to make commercial recordings visible and accessible to consumers online. What's more, they must make room for Gen-X and Gen-Y puppies to rush in and shape their merchandising in exciting new ways for the wired world. The commerce era kicks in when the public has been presented with an easy, appealing, wholly satisfactory avenue for acquiring music exactly the way they want it, and online sales move to dominate the music market.

Right now, there's a deafening noise level around the implications of MP3 and other emerging and proposed standards. But while the flashy sound bites focus on swashbucklers amassing illegal music collections, the sophisticated thinking trend has shifted away from piracy, toward legitimacy. Virtually all of the major technology players are building security features into their compression systems, and legitimate online music archives support copyright protection. They are not seeking to "lock it up" in a cumbersome way but are finding ways to allow the music to flourish and the creators to get paid. There is a general consensus growing around the long-term advantage of creating a fair and secure system for distributing and enjoying music on the Internet.

The array of music posted on the Internet today is like a giant yard sale--loads of stuff that's cheap or free. To the extent that music merchandising happens at all, the selection is like a giant food court at the mall, where nachos and pizza Hilary Rosen and corn dogs and teriyaki burgers--anything you want--are out there on the steam table, and you have to sort through it to find something you want. On some days that might suit your time, taste, and budget.

But on another day, you might want to go to a restaurant that has some ambiance and puts some care into the "packaging" of your experience: The menu is carefully composed, the food is high quality and attractively presented. People seem to be willing to pay for that careful, discriminating packaging. Here again human nature prevails over chaos, quality over quantity.

When an artist and a record company work together to package an album or song and deliver a unique artistic vision, or when a retailer creates an in-store or home page display of little-known blues singers recommended by a major hip-hop star, this is not a matter of big business skimming profits or homogenizing public taste. This is marketing and promotion that adds value and vigor to the creative community. It showcases artists and lights a path for the consumer. It creates a connection among people who can easily identify and navigate among musical choices and genres, creating shared listening experiences.

And shared experience is the essence of the musical tradition. It's about what happens when music passes through the rosined bow or drum skin, the mixing board, the audio file, and enters that most technically refined and discriminating of devices, the human ear. As the recording industry adds value, and speeds that sound along to deliver a great listening experience, it will handily earn its place in business's brave new world.  

Hilary Rosen is president and chief executive officer of the Recording Industry Association of America, a Washington trade group representing the U.S. sound recording industry. Rosen was named president and CEO of the RIAA in January 1998. In addition, Rosen is a founding board member and current board cochair of Rock the Vote, an organization that encourages young people to become more involved in the political process. Prior to joining the RIAA in 1987, Rosen operated her own consulting firm and served as a vice president for the lobbying firm of Liz Robbins Associates.

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