December 13th, 2010

snark maiden

Why are the media companies so stupid?

I don't mean to be rude: it's an honest question.

Because they are dumb as rocks, breathe through your mouth, tie your shoelaces together dumb when it comes to anything digital. There are examples going all the way back to the 90s that I know of. Like the consortium of musicians like Peter Gabriel and Phil Collins and likeminded folk who looked at the Internet and said 'hey, opportunity *and* threat; lets do something to avoid the trainwreck of the only digital music being pirate music'. They put together a package of rights and came to AOL just about the time unlimited Internet was arriving and AOL was too busy mourning the loss of monthly fees to want something that would keep people online for hours downloading MP3s on a 56K line for a measly fee share. Now replay that approach if it had been EMI and Polygram and Capitol and all the other record companies saying to AOL 'get in the ground floor, own the digital music distribution market as our partner'. There would have been network costs but if they'd been bundled up with some kind of monthly music subscription, the economics might not have got a flat 'no thanks'. Instead, the record industry had its fingers so firmly in its ears that individual musicians were getting together to try to build a bottom-up system that couldn't work given the network economics of the day. It was one of the most interesting, most depressing meetings I ever took at AOL.

How do I know the record labels were stupid rather than just clueless? Because I know they had been told about the opportunities of the digital era and warned about what would happen if they just did an ostrich impression*. They'd been told by Hilary Rosen, who they hired as a spokesperson and enforcer for the RIAA. Yes, that Hilary Rosen; take down Napster, kill the Rio, sue the downloaders Rosen. I can't find the interview she gave right after she left the RIAA in which she explained that on her first day she arrived, ready to shepherd the industry to a digital future where digital would be another distribution channel, warning the executives that if they didn't embrace it they'd be trampled. They politely indicated that if she wanted to keep the job, she'd be following a different tack and given that she believes in intellectual property much the way I do (if you don't pay the producers enough to live on, you don't get new quality content) she concentrated on enforcement.

But she actually likes Creative Commons and has some sage words pointing out that it's not just record labels who screwed the pooch on digital piracy: "The music publishers wouldn't license, the retailers threatened the labels with retaliation if they distributed online at a cheaper rate than they sold physical products, and the artists wouldn't reduce advance requests to try and experiment more online" (

So why am I rehashing ancient history today? Because I read the story about how the networks are glaring at Netflix and planning to make it way more expensive to offer asubscription to stream video legally. And I got to this paragraph and wanted to beat my head on the table.

"Mr. Bewkes explained that in the late 1990s the media industry embraced Netflix as a new distribution outlet for renting DVDs — without foreseeing that the company would eventually accelerate the decline in the sales of DVDs, which for years had been the lifeblood of the film industry. Now, with its success online, Netflix has raised fears that consumers may stop paying for cable television — the much-debated phenomenon of cord-cutting."

I mean, how entrenched does your viewpoint have to be not to see this kind of disruption when it starts? Stop buying DVDs when you can get a rental system that's convenient enough to actually rely on? Why yes, I think people might just do that...

The video industry doesn't want blu-ray and 3D for increased quality or a more compelling experience; they want them because increased capacity and more compelling experience mean you'll go buy your content again or maybe buy it instead of downloading it, but even so it's about getting your content on the industry's terms in the industry's way - pretty much the way they wanted to handle music a decade ago...

* I know ostriches are actually listening for danger; I still like the metaphor for the way it echoes a body part and being stuck - the record industry had its head firmly inserted into *something* or other...