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In Case You Missed It: The Sky is Falling, RIAA Victories, Kazaa Counters
By David Nevue, The Music Biz Academy
(more articles from this author)
2003-02-07
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It seems everywhere we turn these days, we are being told the sky is falling right on top of the music industry. Fresh in my mind is the recent interview with Jack Valenti, President of the Motion Picture Association of American (MPAA), stating with some confidence that the music industry is dead. To quote, "The music industry now is suffering nine, ten, fifteen percent losses in revenue. When you compound that over the next three or four years, the music industry is dead. I don't see a future for it. After awhile, who's going to produce it?" Good point, Jack. He makes it sound so simple, and in a way, perhaps it is. Revenue is the bottom line, and what corporation is going to continue producing records when it's a guaranteed financial loss?

- Valenti'S Views: "The Music Industry Is Dead"

But, you know, I'm not sure it really is that cut and dry. The music industry will come around, won't it? Yes, I think it will, but we will also see a transformation in how the industry does business. There HAS to be a change. Whether that means current industry leaders make adjustments, or whether new companies tuned into the realities of our connected world enter the scene, the industry will survive. There *is* a better business model out there, and some future millionaire is going to find it.

Still, there is going to be serious pain associated with this transformation. Lee Black, a music industry analyst with Jupiter Research, was right on track when he stated that "It's pretty difficult to kill a multibillion-dollar industry." Still, as U.S. News reported in their article "Singing the Blues,", 2003 is going to be a bloodbath. It's going to be a pivotal year in the music business.

- Singing The Blues

Even now, the industry is experimenting with new approaches to marketing music. Six large record store chains, including Tower Records, Virgin Entertainment, and Hastings, are to soon offer customers digital music downloads in their stores. They're calling this joint venture "Echo" (http://www.echo.com) and hoping the service will bring customers into the stores to burn music.

But will customers really go for that? Who is going to bother to go to a store to burn music? Echo has a few other obstacles to overcome as well, namely getting music licenses from record labels who might see Echo as a competitor to its own online ventures, PressPlay and Rhapsody.

- Six Retailers Join To Offer Digital Music Downloads
- Not The Echo They Were Looking For

On other fronts, you just can't talk about industry news without covering the latest from the RIAA. The RIAA web site was hacked, yet again, which at this point happens so frequently it isn't really news anymore. So I'll leave that alone.

However, the RIAA did win a key battle against Verizon, which would force it (as well as other Internet Service Providers, potentially) to reveal the identities of subscribers using their connection to trade music files over peer-to-peer networks. Verizon, of course, appealed the judges decision.

- Verizon Appeals RIAA Victory

The RIAA is also continuing to go after universities whose students trade music on the Internet. 175 students at Indiana University were told to delete music and movie files from their computers or they would have their Internet access shut off and be reported to a judicial board.

- RIAA Trains Anti-Piracy Guns On Universities

The RIAA also wants Internet Service Providers to pay up for giving their customers access to free song-swapping sites. Hilary Rosen (who just stepped down from her position as RIAA Chairman) stated: "We will hold ISPs more accountable. Let's face it. They know there's a lot of demand for broadband simply because of the availability (of file-sharing)"

- RIAA: ISPs 'Should Pay' For Music Swapping

Finally, we're still seeing a lot of buzz about Kazaa, and I expect that to continue for some time. The entertainment industry at large sees Kazaa as one of it's biggest threats, as the file-swapping service now boasts over 185 million downloads of its software, far more than now-defunct Napster ever had. The industry has been attempting to shut Kazaa down, and recently a judge approved a lawsuit against Kazaa aimed to do exactly that.

Now, Sharman Networks, owner of Kazaa, is filing a countersuit against the entertainment industry, stating that though the owners of Kazaa have made every effort to go 'legal,' the industry at large refuses to cooperate with them. Sharman is asking the judge to declare the copyright holders guilty of antitrust violations, and to bar them from enforcing any of their copyrights. What an interesting twist!

- KaZaa Strikes Back At Hollywood, Labels
- KaZaa Looks To Legitimate Arm To Survive
- For KaZaa, Bad Press Is Good Press

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