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Rolling Stone: the record industry committed suicide

Rolling Stone magazine has just published the first part of a two-part article declaring the music industry dead — by its own hand.

So who killed the record industry as we knew it? “The record companies have created this situation themselves,” says Simon Wright, CEO of Virgin Entertainment Group, which operates Virgin Megastores. While there are factors outside of the labels’ control — from the rise of the Internet to the popularity of video games and DVDs — many in the industry see the last seven years as a series of botched opportunities. And among the biggest, they say, was the labels’ failure to address online piracy at the beginning by making peace with the first file-sharing service, Napster. “They left billions and billions of dollars on the table by suing Napster — that was the moment that the labels killed themselves,” says Jeff Kwatinetz, CEO of management company the Firm. “The record business had an unbelievable opportunity there. They were all using the same service. It was as if everybody was listening to the same radio station. Then Napster shut down, and all those 30 or 40 million people went to other [file-sharing services].”

It all could have been different: Seven years ago, the music industry’s top executives gathered for secret talks with Napster CEO Hank Barry. At a July 15th, 2000, meeting, the execs — including the CEO of Universal’s parent company, Edgar Bronfman Jr.; Sony Corp. head Nobuyuki Idei; and Bertelsmann chief Thomas Middelhof — sat in a hotel in Sun Valley, Idaho, with Barry and told him that they wanted to strike licensing deals with Napster. “Mr. Idei started the meeting,” recalls Barry, now a director in the law firm Howard Rice. “He was talking about how Napster was something the customers wanted.”

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(via Red Ferret)

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