Incentivizing Your Customers to Steal Your Product

Bob Lefsetz explains to the major labels why they are either incompetant business people, or just plain ol’ dumb:

It’s this kind of stuff that got the labels in trouble in the FIRST PLACE!

Why do these companies feel that their actions have no consequences?
It’s not only record labels, it’s the radio industry too.  They cut the
playlists, added a ton of commercials and what happened??  PEOPLE
STOPPED LISTENING!  Yup, they keep making new people every day, the
population is increasing, but radio listenership is down.

In the nineties the labels released shittier and shittier acts with
only one good track on their CDs that kept going up in price.  The
companies believed they had all the power, that they could DICTATE to
the marketplace.

Wrong.  The customer ALWAYS has the power.  To see P2P services purely
in the context of free is to miss the point.  From the very BEGINNING
of Napster, when fewer people were trading files than today, however
much publicity the practice was receiving, college students were
TESTIFYING!  Albums sucked and were overpriced to boot!  And that they
wanted to acquire music in a new way.

The battle is over.  Apple’s already sold 22 million iPods.  Don’t
expect a fall-off for Christmas.  The iPod Nano will be hotter than any
album released by the Big Four.  iPod users want the file, the CD is
irrelevant, unless it’s used as a ripping device.  WHICH IT CAN NO

Instead of looking towards the future, getting AHEAD of the marketplace
and corralling the public in a profit-making venture, the labels want
to keep everybody in the past.  They want to focus on CD sales.  Oh,
Edgar Bronfman, Jr. and the other powers say they BELIEVE in the
digital sphere.  But the iTunes Music Store and Rhapsody and Yahoo
Music are INHERENTLY crippled services that the public is not
interested in.  Only a tiny FRACTION of the public utilizes these
services.  Because they don’t deliver what people want, which is much
more USABLE music at a LOW PRICE!  But, these services do one thing the
labels LOVE!  They make the CD look like a good alternative.  This is
like selling
Hyundais with three wheels and saying horse and buggies look good in comparison! 

Or, as the Firesign Theatre once said, "How can you be in two places at once when you’re not anywhere at all?"

TODAY the CD is the main revenue generator.  I have no problem with labels selling CDs.  To switch to files only would decimate their bottom lines.  But, by not preparing for the future adequately, they’re INSURING their marginality in the era to come.  They somehow believe their big budget productions sold solely in the way they want will rule in the future.  I don’t think so.  I think independent acts are going to eat their lunch.  After EMI gets burned by giving all that money to Korn they won’t be ponying up that kind of dough in the future.  Which will INSURE that the artists of the future, or at least SOME OF THEM, those who treasure artistry over greed, will do it all themselves. 
Invest little in dollars but a lot in sweat and get a lot back.  NOTHING is being done by the majors to combat this paradigm.  This paradigm is what they fear.  Then again, maybe I can’t berate them for defending a dying business model.  But do they have to do it via a disinformation campaign and the suit of music LOVERS?  I mean they can live in the past, but must we ALL?

But what’s bad about copy protected CDs is they’re insulting the people who are PLAYING ALONG with the majors’ game.  The people willing to plunk down ten to fifteen bucks for a disc.  They can’t duplicate the CD for use in their car, and they CAN’T RIP THE FILES FOR USE ON AN iPOD!

What I hate about fat cats is they’re so technologically stupid.  You insert one of these CDs into your computer and it adds all this software, just to PLAY the disc!  Windows XP is rickety enough.  You’re going to add an untested program which might interfere with not only other programs but your whole SYSTEM just to hear a fucking CD??  Talk to computer users.  They see that warning that they’re about to install software on their PC and they FREAK OUT!  In an era where viruses and spyware make your machine almost unusable you DO NOT want to add anything unnecessary to the mix.

But, you can rip copy protected WMAs.

I’ve got to ask you, when you think of digital music do you think of MICROSOFT??  Is that the big name in digital music?  No, you think of APPLE!  And, Apple’s iPods won’t play copy protected WMAs.  Why should they?  Apple should give Microsoft an in after the company monopolized the market for desktop
software?  (Yup, Microsoft was ADJUDGED a monopolist by the government.)  It would be one thing if the Microsoft solution was better.  But it’s not.  There ain’t a player on the market as good as the iPod.  There’s not JUKEBOX software as good as iTunes made by Microsoft or any other third party.  Microsoft’s tethered download software Janus???  It’s so defective that Yahoo won’t even charge for its use.  And APPLE is supposed to capitulate?

But, you say, Apple has DRM, known as FairPlay.

But I’m gonna let you in on a little secret.  Just about every file on the iPods in this world have no copy protection.  Because they were ripped from CD or acquired P2P.  As far as this copy protection battle goes, the public thinks it’s a joke.

So, what we need are unprotected files that everybody can acquire and pay for.  We’ve got every element except the last.  We’ve had P2P for five plus years.  But the labels refuse to charge for it.  We have the SOLUTION, but they’d rather spend money suing than collecting.

The labels are clueless here.  They think the fact that copy protected CDs are selling today means nobody cares.  The backlash is BREWING!  There are entries on Weblogs.  People are PISSED!  The majors are just further breaking the trust with their customers.  Insuring division.  PROMPTING file-trading.

Really, you label heads, the people making this inane decision to copy protect CDs.  I’m telling you now.  You’re wreaking havoc on your bottom line that you can’t foresee.

Then again, maybe you don’t foresee further employment.  Maybe you don’t plan on sticking around that long.

If you believe CD burning is the culprit, the reason sales are down, then you probably believe landlines are hurting the cell phone business.  You probably believe that cheap typewriters at flea markets are hurting the computer business.  You probably believe copy machines are challenging e-mail.  You probably believe the floppy is hurting hard disk sales.  You probably believe the cassette Walkman is challenging the iPod.  You probably believe radio is hurting album sales.  You probably believed home taping killed the music business.

But it did not.

It’s not free to burn a CD.  You’ve got to BUY the CD.  You’ve got to take the time to burn it.  You’ve got to give it to a friend.  It’s absent artwork.  And it’s not what you want ANYWAY, you just want the FILES!

Why can’t the labels just cut to the chase.  Why can’t they make files available cheaply and easily.  We’re living in the future.  No, we’re living in the PRESENT!  This is the system that exists TODAY!  Can’t anybody acknowledge it?  Do we have to wait until EVERYBODY trades P2P and sales are dismal?  This is not unlike what happened in New Orleans.  Everybody knew the levees were weak, that there was an accident waiting to happen.  They just figured if they ignored it, maybe it wouldn’t happen on their watch.  Then, disaster hit and the public saw how incompetent those in charge were.

The public already knows how incompetent the record labels are.  The only people who DON’T know are the labels themselves.

But every fucking week sales get worse.  You’d think they’d address the underlying problems.  Lousy overhyped acts selling overpriced CDs.  But rather than deal with the CORE they’d rather deal with the penumbra.  It’s not THEIR fault but the customers’.  If we just make it a little harder to steal, everything will be all right.

But it’s not.

And you can still steal anyway.  By burning the files to disk and then re-ripping them.

But why do that?  When from the moment you purchase the CD the unprotected MP3s of the music contained therein ARE ALREADY AVAILABLE ON THE INTERNET FOR FREE!  Only the record labels would INCENTIVIZE their customers to steal.

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Discussions found on the web:
  1. Josh commented on Sep 20

    Lefsetz is 100% right. I used to buy 100 cd’s/year. Last year I bought one, and I bought it directly from the artist. Oh yeah, it was unprotected.

    We all share some blame in this mess though. We let the RIAA and their lobbyists bribe, er I mean lobby, Congress into passing the DMCA and other legislation that took away our fair use rights. Unless we all demand that our elected representatives stick up for our rights, we will get more of the same.

  2. Jason commented on Sep 20

    Label’s need to realize that their product is not worth as much as they think it is, but label execs won’t accept that because it means accepting that they aren’t the galmorous masters of the universe of yore, but rather closer to grocery store owners.

    With the state of recording technology, it costs about $32 to make a high-quality recording these days, the labels’ fabled market muscle returns pennies on the dollar in increased sales. Independent labels will obliterate the majors because a time is coming soon (if not already) when there will be no incentive to sign with one.

  3. gary lammert commented on Sep 20

    The Final Few Lower High Days of Distribution

    This Friday will be day 104 completing an ideal daily growth fractal
    sequence of 52/130/104
    (x/2.5x/2x) dating from August 2004. This sequence represents the
    completion of a third fractal of a larger weekly growth fractal
    sequence beginning in the early spring of 2003. It is still possible
    that some or all of these next trading days from Monday through Friday
    of this week will represent the final distribution days where the
    final lower high saturation buying occurs, where the final euphoric
    traders buy from the willingly-selling economic realists. The
    realists, who have made up the smarter half of the recent trades, are
    surveying the economic landscape and appreciate the awful ledge that
    the wary, as judged by recent sentiment, American consumer finds
    himself and herself on.

    The six major economic parameters that result in money growth and
    contraction and hence valuation fractal growth and contraction are:
    assets and their relative valuations; ongoing wages (including new
    wages funded by governmental planned and unplanned spending, the
    latter of which Katrina is an example); total debt, including pension
    obligations and entitlements; cash and savings; prevalent interest
    rates; and amplifying(or contracting) lending practices. These major
    macroeconomic factors have, within limits, a degree of fluidity and
    can and do change the lengths of asset valuation fractal growth which
    are directly dependent upon them. But, unless nearly everyone is on
    the governmental payroll – negating the realities of a private
    enterprise and a real market economy where private business ownership
    requires a profit and owners cannot arbitrarily double, triple,and
    quadruple wages – boundaries to unlimited growth do exist. With a
    significant private sector economy , the capacity for the government
    to hyper inflate and cause asset appreciation via governmental
    printing presses to increase base wages of all of its citizenry is at
    least transiently cumbersome and becomes a less likely immediate

    Annual money growth represents such a very very small fraction of the
    totality of value of – cumulative value of all noncash or cash
    equivalent assets, massive collective debt and entitlements as defined
    above, ongoing wages, and cash and cash equivalent reserves. The near
    perfection in the evolution of the valuation growth fractals dating
    from early 2003 suggests both – that relative to the Mount Everest of
    cumulative worth of the preceding four entities- the Federal Reserve’s
    and government’s ability to control the economy via money growth is
    significantly limited and ultimately unsustainable and that the US
    second fractal credit cycle(with a base of about 70 years ending in
    1858), now in its 147 year, is near its nonlinear and early end of a
    potentially 35 year range: 140-175 years, ideally ranging from

    Since early 2003 the weekly growth fractal sequence has been:

    1st fractal (x) 22 weeks
    2nd fractal (2.5x) 54 weeks (a little short of the 55 ideal
    but ending with a hallmark nonlinear gap lower.)
    3rd fractal (2X-2.5X). This fractal consists of a 11/27-28/21-22
    of (currently) 22 to 23 week period.

    This is the 59th week of the third weekly growth fractal. Notice the
    last third and final fractal goes beyond the ideal 2.5x or 54-55
    weekly limit, but is within its own idealized y/2.5y/2y weekly limit.
    The lowering of the fed funds rates and the new lending practices
    with no principal payments, 40 year loans, and large amount of
    adjustable mortgages have had an identifiable effect on money growth
    and hence fractal evolution; albeit a modest one. The new weekly
    growth pattern with a base of 11 weeks starting in August 2004
    captured and exactly represents the ongoing integration of the six
    determining economic elements resulting in a consistent but very
    slightly changed (extended length) fractal pattern of the terminal
    third growth fractal.

    This combination of initially lowered fed fund rates with most
    probably the even greater factor of imprudently unregulated lending
    practices was the primary cause of the US and world economic growth,
    money expansion, and debt expansion – ballooning the
    valuation(overvaluation relative to traditional wages) of the high
    tech replacement bubble asset represented by the housing industry.
    Credit from overvaluation in the housing bubble has been greatly
    amplified by the secondary effects of the second mortgage and
    refinance industry luring the ready American consumer to further use
    this mirage credit and further overextend personal debt in the
    purchase of low cost Chinese goods( whose recirculated dollars have
    been invested symbiotically in US government debt), inefficient SUV’s
    and trucks, furniture, durable goods, vacations, college educations, The baited American consumer has been the debtor of last
    resort, who has been primarily responsible for increasing global
    economic activity after the NASDAQ implosion and for continuing the
    eking out of a possible small real US GDP – if governmental inflation
    figures are accepted as valid.

    While this changing and integrative money growth activity has
    slightly deformed (lengthened) the ideal long term weekly growth
    fractals dating from early 2003, as of Monday 19 September 2005 the
    Wilshire 5000, the largest of the world’s equity indices has not
    exceeded its 3 August 2005 summit and is still contained within the
    ideal 22/54/54-55 maximal weekly growth fractal pattern. Possible
    terminal saturation buying this week will determine if there has been
    enough money expansion in the last 28 weeks for the Wilshire to best
    its 3 August peak.

    The first daily decay fractal which includes the Wilshire 3 August
    2005 top now appears to be 13-15 days (vice 11 days)in length with a
    maximum 3/6-7/7 daily pattern. The second decay fractal should
    ideally contain all the trading valuations above the slope line drawn
    from the first day to the last day of the second daily decay fractal.
    While the originally proposed 11 day fractal decay base (first
    fractal)did end at a lower point at the expected 27-28 day range, the
    slope line containing the first and 28th day of this possible second
    decay fractal was not under the inclusive set of the 28 days. The
    idealized three sequential dacay fractal pattern is x/2.5/1.6x-2x-2.5.

    The coming major nonlinear valuation readjustment will both occur in
    a defined fractal manner and decay pattern and will ultimately reorder
    the six economic parameters into a new beginning growth fractal.
    Because of the severe imbalances contained within the internal
    compositions of each of the six primary determinant economic elements,
    the realignment will be necessarily severe.
    Gary Lammert

  4. guerby commented on Sep 20

    I wonder what economists expect from government major interventionism in the flow of the free economy in the form of “intellectual property” government granted monopolies?


  5. panasianbiz commented on Jul 17

    I stumbled across your blog while I was doing some online research. I found this posting quite thought provoking and it really showed an understanding of the marketplace and how it works.

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