“The real problem was the public. Consumers were breaking the law. They forked over hundreds of dollars for iPods but wouldn’t give the record industry a dime. They still, somehow, didn't seem to understand that file-sharing was illegal.”
Stephen Witt relates the captivating story of music piracy in the well articulated How Music Got Free: A Story of Obsession and Invention. This story seems almost surreal; it details how the music industry suffered because of idealism and resistance to change. The .mp3 was rejected by the industry because it undermined profits, but it was the ultimate champion in the market because people chose it for its technological edge and price. The music industry did not support new technology that would decrease profits so, at first, .mp3s were only available for free. A subculture of curious, street smart, technologically savvy teenagers and young adults with extra time became iconoclastic innovators that irrevocably disrupted the music industry. The technically unsophisticated public approved of what they knew was illegal, but did not fully understand. This fascinating look inside the disruption of a massive industry offers great lessons for organizations and teams that are striving to stay relevant in a shifting market.
The Big Idea
Create Quality and Value for the Consumer
"You no longer had to buy the whole album. Even if you held on to some atavistic notion of paying for your music, you could just buy the mp3 single on iTunes. For years the industry had been selling songs that even their creators acknowledged were not very good. Now they were paying the price."
Music, the intellectual property of recording artists, was work that sold for a substantial price. The industry sold CDs produced for a dollar, for a retail price of $16.95 (or more). The artists and the industry would profit considerably even if the consumer bought the CD for one good song. The industry benefited from offering little value to the customer. They recognized trends in music, but ignored young patrons financial limitations and had an indifference and ignorance when it came to the emerging power of the internet.
This corporate profit-driven perspective often results in tunnel vision. We become attached to what drives profits and ignore the point of view of the consumer. When we resist technology that reduces profit and ignore innovators, we may lose our customers. Be aware of the early adopters—new technology often fails, but if we recognize innovation that improves lives, saves money, or makes life more convenient or enjoyable, we can identify new opportunities. It is important to understand not only the interest of our customers but also their worldview. If people feel taken advantage of, they easily justify actions they know are wrong. Sometimes moral judgement depends as much on fact as it depends on individual understanding and perspective.
Be Open to Exchange of Ideas and Technology
"But the biggest draw of all was the mere existence of such forums. They were a place to learn about emerging technology, about new brands, about underground shows, and even about the way the music business really functioned. iTunes was just a store, basically a mall - Oink was a community."
Those who started file-sharing and music piracy were culturally opposed to selling the pirated music, movies, or software—their mission was driven by an ideological desire for community, not profits. Many people spent their money and time on purchasing and uploading files with no financial gain. Their goal was to archive music or share information and connect with a community as often as it was to disrupt the unreasonably affluent entertainment industry. The average person did not understand why something amazing that was accessible, convenient, available and shareable for free should be illegal.
People are wired to think about themselves, yet focusing on the wants and needs of the customer is the best way to protect your business and help it flourish. The more open we are to free exchange of ideas the more aware we become of developing technology and the changing perspectives of our customers.
The internet has connected us as we have never been connected before. We can exchange ideas, information, programs, and files, with anyone with an internet connection. The internet eliminated many gatekeepers of the past—the record labels, publishers, etc. who ensured the creators of intellectual property profited from their work, and who chose who would profit and how much. The open exchange of information allows ideas to win instead of people—meritocracy, not politics, determine earnings. Consumers have the same amount of disposable income whether or not we restrict their choices. With more options and information available, people invest in the most useful ideas and products. If we can move beyond gatekeeping to facilitate connections, we open up more possibilities for significant innovation.
Recognize the Opportunity in Every Crisis
"Vevo took over thirty years of creative output from more than 10,000 artists that had been written off as promotional cost and transformed it into a high-growth profit center."
Now, music is almost entirely digital, and piracy is largely a problem of the past. Advertisers pay for exposure on music videos previously produced to sell albums. The videos are now a source of free music to the public. The public willingly pays for quality streaming and downloaded mp3s. The cost of a single CD exceeds most monthly subscriptions to music, movies, books, software, and even classes. These are all affordable and widely available online. The music industry is not as prosperous as it once was, but the industry has found new ways to provide the consumer with what it wants while making a profit.
The Chinese character for crisis includes the character for “danger” then the character for “opportunity.” Often in a crisis, we sense the danger and forget to look for the opportunity. Our reaction may be denial and avoidance, like the music industry’s response to piracy. The public at large saw the opportunity and ignored the danger. The law protected the music industry, but people did not understand the law or identify with extravagant riches flaunted in the entertainment industry. Understanding the customer’s perspective and recognizing new opportunities has facilitated change that benefits both the consumer and the industry.
Knowing your customer is one of the most necessary but often elusive requirements for any successful business. Your client is not only the one that pays for the goods or services you provide but also those who use them and are affected by their use. People recognize what benefits them. The best way to identify new benefits to the customer is to become aware of and responsive to their choices and perspective. Unexpected events may result in crisis, but a strong defence might close the door of opportunity. Respect for the customers perspective and desires allows us to find new and better ways to serve them and profit from their choices.