Op-Ed: Atlantic Records Says Digital Sales Trump Physical CD Revenues – By Bob Lefsetz

My inbox is filling up with this inane story.

What blows my mind is that the "New York Times" can write this tripe with no analysis and Websites like Rollingstone.com can repeat it. This wouldn’t have happened when Jeff Leeds was on the beat. But he’s gone. Cut off your nose to spite your face. The newspapers are good at this…

To say that Atlantic is making more money from digital than from CDs is like saying Harley-Davidson makes more money off tchotchkes than motorcycles. Like HP trumpeting its printers are selling like hotcakes but its computer sales are down. Like HBO saying that they sold a ton of "Sopranos" DVDs but ten million people canceled the service.

The point is, Atlantic Records is in the recorded music business. And sales at the iTunes Store are not making up for the fall-off in CDs, they’re factoring in ringtones, satellite radio, all kinds of revenue. The question is, when are they going to come up with a reasonable way to monetize music?

They didn’t license P2P. They sued their customers…

The labels destroyed their business, and now they’re asking us to forget that as they move into a new business. It would be like GM saying car sales are down, but more people visited our Website and our advertising revenue is up! Huh?

iTunes is a shitty replacement for CDs because you get to pick a song instead of the whole album. The key here is not to try and get Apple to only sell albums, that would be like getting Trojan to stop selling condoms to prevent teenage pregnancy. The key is to come up with a better solution!

And that’s very clear. Make everybody a music customer for a very low price. Worked for the mobile phone companies, why can’t it work for the record labels?

Cell phones used to be a grand and calls cost a buck a minute. Now phones are free and so are nights and weekends, and what talk time you are paying for is cheap. We’re never going back to $13.99 for ten songs. Not even $9.99. When are the labels going to give up this fiction? It’s like the oil companies lobbying for the return of land yachts like the Cadillac Eldorado!

MySpace Music certainly ain’t getting traction. Not because they didn’t have a CEO, but because of the lack of usability. Can you figure the site out? What’s there, what’s not? There’s no uniformity on the pages. It’s a fucking mess. It looks exactly like what it is, a site designed by committee.

If you make music accessible enough, all of it for a very low price, easily played, people will pay for it. That’s immutable. Work from that point backward, not from the premise of getting the public to have collective amnesia and go back to the pre-Napster days.

Anybody who believes music should be free is an imbecile. It’s just that we need innovative marketers who can figure out how to package it so people will pay for it. At more than a buck a throw.

You can’t buy heated windshield wipers on your car without also getting heated seats. They call this a package. Great marketers figured this out long ago. Fewer choices at a higher price point. The opposite of iTunes. What’s unclear here?

As for HP… They bought Compaq and still didn’t win the market share war. They fired Carly Fiorina and Mark Hurd came in and brought the company back to health. Printers kept it alive, but computers are now contributing significantly to the bottom line. Along with networking.

Instead of competing with Dell, HP realized that there was a market shift. Computers were commodities that people wanted to buy in big box retail stores as opposed to customizing over the Net or phone. HP realized this and now it’s the big kahuna and Dell is in trouble. Furthermore, Carly didn’t want to emphasize HP’s networking for fear of pissing off Cisco. This is like record labels being afraid of digital initiatives because they might piss off Wal-Mart. A company that is constantly shrinking SKUs and floor space.

If those digital guys Guy Hands hired were truly smart they wouldn’t be figuring out how to sign and market the acts that they have trouble signing and have no money to promote, but how to get people to pay for music.

Start there. Innovate. Try selling a bucket of tunes for a low cost. Emphasize eMusic more than MySpace. Take a fucking risk, so we don’t have to be exposed to any more double-talk like this moronic Atlantic announcement.

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