Online music and TV: A continuing lesson in Postmodern economics

Online music and TV: A continuing lesson in Postmodern economics
Coke is launching a music download service in the UK, according to a Reuters report. Makes sense to me. At 99 cents each, download services make no money on actual downloads. (Steve Jobs admits that his download business model is based on selling iPods.) The copyright cartel takes every penny in royalties. That means download companies have a flawed business plan, unless there’s another good business reason to supply downloads. Ah, advertising!

Meanwhile, record company types were busy patting themselves on the back at the Music 2.0 gathering in Los Angeles. They predict 2004 will be a banner year for online music SALES. The AP story paints Apple Computer’s iTunes Music Store as the model. It launched in April and has sold more than 17 million song downloads as of last month. That’s 17 million bucks for the recording companies. Nothing for Apple, except the sale of iPods to play those 99-cent tunes. What’s wrong with this picture?

Meanwhile, blogger/reporter Dan Gillmor writes in about Hong Kong’s new broadband video-on-demand service. Apparently, it’s a thing of beauty. High quality video via a copper wire and, get this, channels are purchased à la carte instead of in groupings provided by cable companies. You only pay for the channels you watch! Sounds great, huh? Oops, there’s a problem. The same entertainment cartel that gave us the $18 CDs and demanded we be happy are blocking the ability of anyone to record any entertainment programming. Dan rightly calls it “control-freakery.”

Denying customers the flexibility to make even a lower-quality analog recording of shows takes away much of the value of the à la carte programming model.

But this is the way Hollywood and the copyright robber barons want the future to work. We’ll get to watch what they produce on their terms, or not at all. To imagine that analog copies from Hong Kong TV systems are anything remotely like the threat of DVD factories stamping out thousands of counterfeit disks per day is absurd, but Hollywood puts them on the same plane, and the little guy loses what should be routine.

What we see from the entertainment industry today is Modernist desperation, attempts to maintain the status quo in the face of disruptive innovations. Ultimately, the market will decide if this is acceptable, and my money’s on the consumer. Since music downloads make zero money, it’s evident that companies offering them — unless they have a secondary reason to do otherwise — will raise prices. That’s not going to sit well, and file sharing will be back in vogue, regardless of the (expensive) legal attempts to stamp it out. More and more musicians and entertainers will do their own direct selling to consumers, further eroding the power base of the cartel. The Hong Kong broadband TV experiment will fail, because it’s so dramatically restrictive and so contrary to the whole Postmodernist revolution. The real issue in all of this is copyright, and until we do something about it, we’ll continue bouncing around in the world of Hollywood greed.

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