Who Was Really Napping?

What if I told you that major international companies were suing their customer base? Sounds a little ridiculous, doesn’t it? Now here’s the really ridiculous part: It’s true.

Yes, everyone loves to bash the record labels. And, to some extent, they deserve it. What were they doing when the world went digital? Happily selling CDs, of course, convinced their fortunes were set for eternity. They forgot 3 things: 1) the customer, 2) innovation and 3) the customer. Did I say the customer? When you get right down to it, this is about listening to the customer. It's about the very real impact of a very real Fear of Marketing.

It's like this:
The major labels were happy enough with the innovation of the CD. It was small and portable with amazing sound. And, even better, it meant that everyone had to replace their LPs and their (yuk!) cassette tapes. (Personally, I never warmed up to cassettes ⎯ the sound quality was waaay too bad!) So for over a decade, the heat was on with reissues galore as baby boomers, their younger cousins and siblings replaced LPs with CDs. And of course there were the ongoing releases of new music and artists.

Then Napster reared it’s head (whether that was ugly or beautiful depends on your point of view). People were trading music instead of buying it. So what did the record labels do?

1. They carefully studied the phenomenon, using the technology to better understand their customer and learn to create an environment that will make trading MP3s for free an undesirable option.
2. They invested in secure watermarking technology that would make it impossible to trade songs without paying for them and converted all their assets to MP3s. (In fact, Napster founder Shawn Fanning undertook just that solution with a company called Sno Cap using watermarking technology developed by Phillips Laboratories. No major labels have used it though, and the company has been acquired by one of its former partners.)
3. They threw up their hands until profits started to drop then blamed their customers for making a poor choice.

What was missing from the recording industry’s analysis? The customer (After all, wasn't it the customer who was doing all the damage?). In all fairness, the Internet sprang to life in the 1990s and changed business by creating online giants that gave some real competition to the “brick and mortar” retailers. What changed with Napster in 1999 was that media itself, not the medium of distribution, became commoditized.

This was a shock to the media industry and sent ripples that have become waves. Now I’m not proposing that trading music illegally is right. But what is the customer telling them?
I remember an interview I once read with music legend and entrepreneur, Les Paul. Not only did he help create the solid-body electric guitar, he was a key driver in multi-tracking recording. The musician’s union, as I recall, told him he would put musician’s out of work. In fact, there are more working musicians now than there were then. Why? Because recorded music reaches in to the hearts and souls of the consumer. The new technology made it easier to do that.

So here’s the conundrum: Is it better to put your finger in the dike (translate: sue your customer base), build a new damn (translate: find a different solution that doesn’t put you at odds with your customer) or head for higher ground (translate: reinvent your business to map to the current landscape)? My father used to say, “Don’t bite the hand that feeds you.”
The finger-in-the-dike is a short term solution, but come on guys, it’s been nearly a decade. That doesn’t really qualify as a “flash flood.” Building a new damn seems to be where things are headed, but how long can it stand against a rising tide? This is the age of the wiki and people are wiki-ing music. Whether by design or default, the international community has begun to rewrite the copyright laws. The question is whether the business community, the big labels, can get out in front of the tsunami.

In my opinion, the record labels get the "Asleep-At-The-Switch" award: They should have been paying attention. I'm not feeling sorry for anyone, but here's something to think about: Radical changes call for radical solutions. Try talking with your customers, not at them. Maybe it’s time, in the words of Monty Python, “for something completely different.”

Maybe it's time to start listening. Try it, in between some of those lawsuits.