Record Industry Protectionism Killing Digital Music Innovation?

Stifling demands have meant most investors are unable to turn a profit and have thereby turned to other ventures like Twitter and Facebook where they are able to build a viable business model.

The RIAA has claimed for several years now that it finally gets it, that it’s working to build viable alternatives to illegal file-sharing for music fans to enjoy in order to answer previous criticisms that it had none.

But, as we’ve all witnessed, it’s been a slow march to reality, and even now it doesn’t quit understand what music fans have wanted since Napster’s birth back in 1999. It’s the combination of community and selection and it’s what’s made BitTorrent tracker sites like,, and OiNK before them so wildly popular.

We have yet to see any legal site of the sort and now it seems we can see why.

For according to an article on CNET, investors who used to put money in digital music startups have left for other areas like Twitter or Facebook where they are able to build a viable platform around the core product.

“There are not a lot of entrepreneurs involved in this space,” said David Pakman, a music industry veteran and now venture capitalist at Venrock Associates. “Investors lost a lot of money in this space. “The loss for the industry, he said is that entrepreneurs have moved on to areas like Twitter and Facebook.”

He said of at least 109 venture-backed digital music startups that he knows of, less than five have turned a profit.

The reason?

“What the music industry never encouraged or even allowed was building an ecosystem around its product,” he added.

Most digital music services face the daunting task of securing permission to even sell music, let alone a brokering a deal that makes the venture profitable.

It’s no wonder the best they’ve come up with so far is Apple’s iTunes, which even they seem to despise because they’re only getting a percentage of profits rather than the whole pie.

So with investors apparently turning to other areas with less hassle music fans surely can expect more of the same bland digital music services (imagine a legal!).

Great job once again RIAA.

Stay tuned.

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