Tuesday, June 22, 2010

Universal Music Group Expects Millennials to Pay for Music, Wants Government Pressure on ISPs

Yesterday I received an open letter from Jim Urie, CEO of Universal Music Group Distribution (UMGD), the distribution arm of the world's largest music company. In his letter Jim reveals his plan to encourage ISPs to regulate illegal downloading of music and compensate the music industry with a viral campaign. Read his letter followed by a quick reality check from me.

Dear Nick,

I’ve received hundreds of e-mails enthusiastically reacting to my “call to action” at the National Association of Recording Merchandisers convention last month. The music business is facing huge challenges from piracy and theft. Never before in American history has an entire industry been so decimated by illegal behavior. Yet the government has not responded in a meaningful way to help us address this crisis. My call to action is for all of us to become more aggressive in lobbying our government, more outspoken in drawing attention to the problems caused by piracy and more actively engaged. We cannot win this fight alone.

Governments outside the U.S. are legislating, regulating and playing a prominent role in discussions with ISPs (Internet Service Providers). Sales have dramatically improved in these countries. How is it that the U.S. – with the most successful music community in the world – is not keeping up with places like South Korea, France, the UK and New Zealand?

As I said in my speech, I hope that the industry can negotiate a voluntary deal with the ISPs. We need our government representatives to encourage this. But whether or not we reach a deal with the ISPs, our government needs to know that we’ve got a piracy problem and we need real solutions. To accomplish this, our government needs to hear from all of us, so they know that their constituents are out here. Join me in calling on our elected officials to fight piracy. Please help by forwarding this email to your colleagues, friends– everyone who loves music. And consider enlisting your entire company to help in this fight. Then by clicking on the link below a message will be sent to your representatives in Washington. Help us launch a viral campaign to cut off access to the online sites that are used to steal our music, our property and our jobs. In only takes a second but it can make a tremendous impact.

Click HERE.

Please help us by forwarding this link.

Jim Urie
Learn More at www.musicrightsnow.org

Let's get some facts straight.

The Millennial generation (born 1977-1994) doesn't like to pay for things that can be downloaded or streamed for free.

Music falls into that unfortunate category of products. Books and publications are meeting the same fate. This trend isn't changing at all - in fact it's accelerating as mobile and cloud computing becomes more prevalent.

You can't force Millennials to pay for music again.

It just won't work. The model is forever broken. Market and sales data supports this conclusion and most of the major music companies know it. Attacking ISPs and trying to force their hand won't work either. ISPs have a working revenue model and a product that still holds value to Millennial consumers.

There is a better way.

I encourage anyone who is struggling to come to grips with declining revenues from digital music downloads to rethink engagement with Millennials. It's time to work with them with the realization that you won't be able to pry open wallets with your existing business model. That's right; I'm telling you that you will never make money again by selling music under your current distribution model. A top down industry reinvention is required. So far I haven't seen a major label take a step in the right direction. The first music company to do it will win big.

I invite anyone from UMG to email me for a constructive conversation off the record about the future of the music industry.

What do you think? Can Universal Music Group kick off a revival of a dying business model through regulation? Will you participate in their viral campaign?

UPDATE 7/6/10: Prince decides "the Internet is over" and shares some cooky wisdom about why digital is "no good".

Nick Kinports (follow him on Twitter @ADMAVEN) has worked in the interactive technology world for over 9 years, and helps the Fortune 100 identify unmet consumer needs, create ideas to fill those needs, and bring them into market. He currently works at Maddock Douglas.
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