Perato said “20% of your consumers provide 80% of your revenue”. In reality its often 10% provide 60%. So basically who cares if 80% or even 90% of your consumers refuse to pay – they are not the brand bonded consumers that keep your company alive, year after year. So why are most labels so frightened of a “Zeropaid” mentality? What has made them truly pissed off their 20% loyal consumers and provide little or no alternative that is relevant to them? And what might save them? Well…
1) Record label executives have never had a major business challenge to face that would have prepared them for their business model being Blown to Bits by Napster. They can’t say they didn’t see it coming because the Internet had already culled Encyclopedia Britannica and that’s a media company too.
2) They have never had to focus on third consumer in the way fast moving consumer goods (FMCG) companies have due to fair competition and category saturation. They are a product based company that only knows how to take costs out of the supply chain and build an oligopoly to fix unit price in the market with extreme extra normal profit.
3) The senior management is old, white and middle class. Their conservatism and management-by-politics is a attitudinal straight jacket that only focuses on the negative aspects of P2P.
4) They have that attitude that says the only way to make money on line is porn. However there is a lesson to be learnt that they refuse to acknowledge: good quality free pics sites (TPG) heavily increase the revenue of a porn site – especially if it offers fast, full screen, hi-definition, quality content streaming video over broadband.
5) The management want to save their careers not the industry. They know that will take 5 years and well they’ll be in another job by then. If they make a mistake they will virtually unemployable in the job market they are in. Well they have got their pensions to think about.
Will they change? no. Will they last out to get keep their pensions? probably. Will the industry change? yes – when broadband mobiles phones get mass penetration, switch to subscription pricing and allow auto-subscription billing on your phone account.
Note: All opinions are those of the author – JonnySpeed 
