Op-Ed: Timeline – By Bob Lefsetz

JANUARY

Eric Nicoli fires Alain Levy and David Munns. Desperately trying to save his own job, the biscuit king axes the architects of PolyGram’s

success. A company that was stolen from under Levy and company by Universal when the Frenchman spent too much time and money trying to enter

the movie business, where any savvy soul knows it’s primarily about library and distribution, which PolyGram didn’t have. Although Levy and

Munns preached revolution, one would be hard pressed to call their management style evolution. Venerable label Capitol Records is shut down.

A fitting end cap to the closure of Tower Records as the sun set on 2006.

MAY

Apple launches iTunes Plus. Which has no economic

impact, since sale by track is not the future. Anyone clamoring for DRM free tracks is stealing them anyway. But what is important here is

EMI’s willingness to move. Sensing disaster ahead, Nicoli tries to pull a rabbit from the hat, tries to move the company forward. Although

more drastic measures are necessary, this is a signal moment in the history of the music business. Suddenly, the labels are playing offense.

Sick of being beaten up and seeing their revenue erode, they’re willing to enter the twenty first century, to try something. Universal gets

all the credit, with its bullying of iTunes/Apple/Steve Jobs, but it was Nicoli who took action. Not that it was enough to save his

job.

JULY

Prince gives away his album with the "Daily Mail".

Retailers cry foul. Only one problem, no one’s on the retailer’s side anymore, nobody cares. It’s a big box world, only the heartiest of

indies is surviving, and they’re a major label afterthought anyway. As for the consumer, he can suddenly find all those wares no stores stock

online, whether it be for free via P2P or pay via iTunes. He’s not complaining. He’s happier than a pig in shit. He can take his now giant

collection wherever he wants via iPod.

Prince makes more money than he would have retailing his CD. It’s great fanfare for his month long stint at the O2 Arena. The only ones

pissed are the old guard. The aforementioned vocal retailers, and the labels…especially Sony, which thought it had a deal for the U.K. with

the diminutive superstar. The old guard says music is being devalued, but with more music in the hands of more people for less money and the

artist richer and happier, where’s the problem?

SEPTEMBER

Rick Rubin is profiled in the "New York Times". Those

in the know wonder if the "Times" is relevant when it comes to the music business, especially since it quotes the now out of the industry

David Geffen. Although desiring to appear forward-thinking, Rubin is mocked for his focus on the label’s building, as if it’s still the

seventies. But Rubin does put the word "subscription" on the lips of every old wave player in the business. As if Napster wasn’t failing in

front of everybody and Rhapsody’s footprint wasn’t tiny. But, suddenly, the oldsters are waking up, thinking something’s got to

change.

SEPTEMBER

Britney Spears is a laughingstock on the MTV Video

Music Awards. MTV cites a ratings increase, the show is pummeled all over the Web, which now functions as the public square MTV tells Madison

Avenue it is. This is the nail in MTV’s coffin, even though the station doesn’t realize it. You know you’re in shit shape when Justin

Timberlake complains that you don’t air enough videos, because when he broke through with ‘N Sync you already showed very few clips. His

complaint is equivalent to drivers bitching about the phasing out of vent windows. They’re never coming back and neither are videos on

MTV.

SEPTEMBER

Amazon launches its music store. Universal

believes it’s fucking with Apple, but the only relevance of the launch is the hastening of the demise of DRM.

OCTOBER

Radiohead distributes its album direct to

fans, at a price they determine, even zero. Suddenly, a tidal wave erupts. Jamiroquai and Oasis, also out of their deals, are said to be

following suit. The Charlatans just give away their album completely. In nine months, music has gone from something you pay for, at CD

prices, whether it be for the complete album or tracks at the aliquot price, to free. The major labels are to blame, for sticking to the old

model rather than monetizing the new, but it seems too late now. Acts want to do it for themselves. We may not know for months how successful

this Radiohead model is. One doubts the band will release sales figures. But, the acts won’t go back to the majors unless they get much

better deals and transparent accounting. For even if the album is free, they can make a fortune on touring and merchandise. The album is the

loss leader.

OCTOBER

The Eagles release their album via Wal-Mart. You get

the saturation advertising of the majors without a major involved. Whether or not tracks ever become hits on the radio, the band will profit

handsomely, since Wal-Mart has made a guaranteed purchase, using the band as a way to get people into their stores to buy more merchandise

with higher margins. Suddenly, the major labels don’t look like they’re in control anymore.

THE FUTURE

Rapid change. More has happened in the landscape

of online music/distribution in the past ten months than in the previous seven years. Tower Records has closed, CD sales have tanked, iPod

penetration only increases, the majors can keep their heads in the sand no longer.

The Minnesota courtroom victory is the last hurrah of a failed strategy. Lawsuits might not be abandoned, but they will be back-burnered. The

majors have to figure out a way to get people to pay for music. And the only way to do this is to create an attractive value proposition.

Don’t be surprised if in the next twelve months some form of P2P is licensed. More probable is an expansion of the eMusic model, wherein for

a low price you get a bushel of unprotected MP3s.

Who blinks first?

Certainly not Universal. Doug doesn’t do anything without a check. Hell, this is the guy who held up Microsoft for a piece of the Zune! If

you follow him, you’re in trouble.

Warner’s Bronfman pleads a digital strategy but insists on higher per track prices and DRM, both anathema to an increase in online revenue/a

solution. Will he wake up? Or will he focus on taking Warner private again, with the stock price so low.

Sony BMG. Sony’s a wreck and BMG’s purely old school. It’s not clear who could put forth change even if it was desired.

EMI? The smallest company, with the worst assets, EMI must change, or merge, or die. Merger is going to be tough, certainly without more

major label decline. IMPALA alone will make approval difficult. Nothing inspires change more than imminent death. New ideas will come from

EMI, if at all.

But suddenly, all the movement is coming from acts. The acts are all making their money on the road, which the majors have no control

over/interest in. This road revenue allows them the ability to experiment.

The acts are leading. Look to them for new ideas. They might not all be right, but after Prince, Radiohead and the Eagles, no one’s afraid to

take the leap anymore. Just today Trent Reznor went on his own.

The acts will give their music away for free in order to generate ticket sales. This leaves the majors out, unless they find a way to

monetize music. The old way obviously doesn’t work, otherwise all the acts wouldn’t be deserting them.

We’ve finally got a game here. Frustration is dissipating, action is beginning. A new landscape will emerge. Probably run by new players.

King will be the Web filters, in bed with the acts. The majors may just end up as licensing houses. Unless they’re willing to give up their

old model to get into the new world.

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