EMI Music backs a label that turns the traditional economics of the recording industry on its head. Vivendi’s Universal Music Group creates multiple pricing schemes for CDs. Sony BMG Music Entertainment and Yahoo decide to sell a single without digital rights restrictions.
These moves typify a flurry of experimentation by major record labels in recent weeks, and stand in stark contrast to earlier behavior by an industry that six years ago was best known for launching anti-piracy lawsuits against Napster — a network that originally swapped music files for free — and individual users. This experimentation has been preceded by a series of court victories that favored entertainment companies, including record labels and moviemakers. The most significant was the Supreme Court’s June 2005 ruling against file sharing networks Grokster and Streamcast Networks. In that lawsuit, brought by the Motion Picture Industry of America and the Recording Industry Association of America (RIAA), the Court ruled that Grokster and Streamcast Networks could be held liable for copyright infringement by people using their software.
Even as the courts have made it clear that that downloading music files without paying for them is illegal, the recording industry has been searching for new business models. “The music industry is showing a greater willingness to experiment,” says Wharton marketing professor Peter Fader. Other observers point out that the music industry has all the tools to navigate a new Internet-enabled landscape. “I think we are over the hump in our transition to the digital world and respect for property rights,” said RIAA CEO Mitch Bainwol in a June 16 webcast with Inside Digital Media senior analyst Phil Leigh, posted on the firm’s site. “We are in a transition and this is a journey.”
Wharton business and public policy professor Joel Waldfogel notes that the music industry’s journey isn’t as easy as it seems. The biggest task, he says, is still convincing young consumers that they can’t share their tunes at will. And to do that, the industry has to walk the fine line between wooing consumers and protecting copyright. “Part of the challenge here is cultural. The industry’s strategy has to change values about music.”
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