Operation Successful, Patient Dying

In June the RIAA started to sue people for sharing illegal music files in order to spread fear and suppress filesharing. Now there is an interesting article in Macworld UK about the effects of this action (via Dana Blankenhorn):

According to Phil Leigh, vice president of Raymond James and Associates, there was a 22 per cent drop in peer-to-peer file trading activity between mid-June and late August. That's certainly something the RIAA loves to hear. But their new medicine comes with some rather unpleasant side effects:
"From June 15 to August 3, CD sales dropped by 9.4 per cent. However, on June 15, CD sales were down only 6.1 per cent year-to-date. The increase in the rate of decline (from 6.1 to 9.4 per cent) translates to acceleration in the rate of decline," he claims.

Leigh admits that a seven-week measurement cannot be seen as conclusive, as other factors, such as holidays, quantity and quality of releases, can affect such figures.

But the analyst isn't optimistic: "The initial data is not encouraging for the labels as it suggests that the fundamental premise underlying their deterrence strategy is flawed. Specifically, curtailing file trading may not improve CD sales, but instead may accelerate their decline."
This just confirms the obvious: fear is not a very efficient marketing tool ! You can scare people away from Kazaa et al., but you cannot scare someone to become your customer and buy your products - okay, the mafia might, but not the music industry... so there still are some differences between these two... ;-)

Anyway, this will most certainly not keep the media companies from digging their own graves and that's actually a good thing !

When established players in a free market economy refuse to adapt to a changing market this creates great opportunities for new entrants. Take for example the iTunes Music Store. Right now they are just a new distribution channel for the big music companies and this draws a lot of criticism. But I think that is unfair: Apple has to cooperate with them if they want to be able to sell the music people want to hear - at least initially.

But as soon as they have acquired a strong customer base, they can slowly start to cut out the then obsolete middle man and sell the music directly from the artist to the audience. If everything works well, more artists will get more money, while the fans will have to pay less. Everyone will be happy except you know who !

Okay, that sounds like pure theory and it probably won't be that easy. But I am confident that in the end, the market will teach the RIAA that "Creative Destruction" isn't just an academic expression and that will be good for all of us...