| I don't know why the industry didn't change with technology. Are they run by unions?
Encyclopedia Brittanica is a good parallel. This company's entire business was built on a direct sales force of some size... guys who literally went door-to-door selling encyclopedias. If you're sitting in the conning tower at Brittanica headquarters, you see this thing called CD-ROMs coming, and you realize that it means the death of selling encyclopedias door to door. What used to cost several hundred dollars to produce, throwing off a markup that paid for selling the things one-by-one with a salesman, was going to turn into a $10 item that could not possibly be marked up enough to cover door-to-door selling. BUT... today, and for the forseeable future, your revenue depends on that sales force out there. The entire sales bureaucracy in the company -- not a small contingent -- argues that these CD's are a fad and they'll all go away. People will want real books. You can imagine the noise these people make as the world changes around them and they see that The End Is Nigh. If you make the damned CD and put it in Costco, you shoot the pins out from under your own sales force, and your business. So what you do is, you put on blinders and watch Microsoft put you out of business with Encarta. All the record companies have the same problem. There's a lot of record stores out there. They are 80 to 90 per cent of revenues. Every one of 'em says, "You put that stuff on the Internet, and we're dropping your whole line like a hot rock." This is why the record companies will watch Apple or Microsoft put them out of business. They will dither too long, hoping to keep their record-store channel happy, while iTunes or something like it slowly takes over the marketing and distribution of music. Bertelsmann was right to buy Napster. Somebody in that place 'got it.' But then they lost their nerve, and didn't follow through. They'll probably die for that mistake, but not for another 10 years. |
Technologies that disrupt distribution channels are very often the death of established companies. The risk that any one RIAA member faces here is huge, and I wouldn't minimize that. But failure to move is just as deadly.