16 March 2009

Why Music Companies are Doomed Regardless

One of the favourite tropes in the music industry is that they'd all be rolling in it like the good old days if it weren't for those nasty people downloading music for free. Here's a perceptive analysis that explains why that isn't so:

the newspaper industry is in the same death spiral as the recording industry, without the lawbreaking that’s commonly blamed for the recording industry’s troubles. And it seems to me that this poses a philosophical challenge to DeLong’s theory that the problem is a lack of respect for “property rights.” The decline of the newspapers is clearly a story of technological progress producing increased competition and entrepreneurship—precisely the sort of thing libertarians normally celebrate. The news business has gotten far more competitive over the last decade, and we’re now seeing a normal shake-out where the least efficient firms go out of business.

I think the fact that this is happening in an industry without a piracy problem should give us second thoughts about blaming the decline of other copyright industries on BitTorrent. The newspaper example suggests that even if we could completely shut down peer-to-peer networks, we should still expect the recording industry to decline over time as consumers gravitate toward more efficient and convenient sources of music. Piracy obviously accelerates the process, but the underlying problem is simply this: the recording industry’s core competence, pressing 1s and 0s on plastic disks and shipping them to retail stores, is rapidly becoming pointless, just as the newspaper industry’s core competence of pressing ink on newsprint and dropping them on doorsteps is becoming obsolete. Not surprisingly, when a technology becomes obsolete, firms who specialize in exploiting that technology go out of business.


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