With a slumping economy and rising unemployment, consumers have dramatically cut back on discretionary spending, making it even clearer that some industries are just not accepting their business models as broken and in disrepair.
Indeed, revenues from Internet sales continue to grow, while those of some traditional brick-and-mortar companies continue to contract.
Who's most in denial? Let’s take a look at three industries for which the Internet has put the traditional way of doing business in particularly obvious jeopardy:
Apparel retailers became 2008’s poster child for insolvency. Clothing accounts for 8 percent of all retail bankruptcies, with a 50 percent rise in the July-through-October quarter, up from first-quarter figures, according to The Economic Times. In a poll released December 30, the Top 40 Retail Satisfaction Index showed further evidence of clothing retailers’ absence from the Internet jackpot. Only Victoria’s Secret (#14) and The Gap ( #35) made that list.
The evidence indicates that the faster clothing retailers move online, the better off they’ll be. Traditional stores have suffered with low inventories and shrinking profit margins. Brick-and-mortar companies must pay rent, employee wages, insurance, real estate taxes, and utilities, among other expenses.
Is it possible that the publishing industry needs to be restructured for a completely new business model, or can online and offline publishing coexist?
Sort of, says Clay Shirky, author of Here Comes Everybody: How Digital Networks Transform Our Ability to Gather and Cooperate.
“I don't think there are completely new business models,” Shirky says. “The models are what they always were. One axis is ‘producer pays, reader pays, or third-party pays,’ and the other axis is ‘payment is mandatory, or payment is voluntary,’ and all six possible combinations will work for some pubs.”
The music industry has been challenged for years by peer-to-peer (P2P) file sharing among networked computers. Pirating music for private consumption still hangs in the balance of a Supreme Court ruling. Digital downloading is at an all-time high but cannot offset the 20 percent annual decline in CD sales.
“The music industry has and will continue to become more dependent on revenues from downloadable content... and the industry has been scrambling to find new ways to capture revenues from the market,” says Alex Reese, an intellectual property attorney out of San Diego who has represented recording artists.
So far, traditional record firms haven’t found the balance of copyright, royalty, consumer payout, and quality that will make Internet downloading a true alternative to CDs. Like publishing, they continue to cling to old models.
But none of the above industries can afford to look back. Instead of longing wistfully for times before the Internet’s challenge, they must focus on their core businesses more than ever and avoid associating their products with the ways in which their products are delivered.
It can be a major challenge. Newspaper publishers, for example, may harbor visions of a resurgence in delivery methods that drove news delivery for over 200 years. For them, Clay Shirky warns: “Remember, all that's going away is newsprint, which is already a minority form relative to the Web. Don't let the nostalgists bend your ear.”
There is a common thread that seems pervasive among these struggling industries: the inability to adapt to the changing socio-economic environment. But they must embrace the Internet, instead of competing with it. There is a better mouse trap, plain and simple. Deal with it!
— Chris Poley has been a professional trader for over 20 years
David, I usually agree with you. However, your last point concerning making a file...."how can making a file copy be illegal...I just drop and drag"... Don't confuse simplicity with complicity. Because of both the quality and convenience of illegal downloading shouldn't give anyone a free pass, especially kids.
All children young and old should be aware of right and wrong, and if their not, someone isn't doing their job as a parent.
Take it from someone who has no right preaching to the choir. I know I would be doing it myself at 13. I can at least admit I would be consciously aware I was ripping off the music.....not assuming because its easy it must be free.
The music industry has, in reality, been dealing with copyright issues for decades. Back in the 1970s there was a guy in my high school who made copies of his albums onto cassette tapes. While this was a problem for the industry, it was not a real problem beacuse of:
Quality - The quality of the music on the cassette tapes was not as good as the quality on the original album.
Distribution - Sure this guy gave out a few copies but he only had the ability to reach so many people.
Clarity of the crime - It was pretty clear that this was a violation of copyright laws. It was pretty obvious.
Technology has solved all these issues
Quality - The quality of a digital copy is as good as the original.
Distribution - If there is one think the Internet has solved, it is distribution and reach!
Clarity of the crime - The Internet has even solved this by making it less clear. This week iTunes has a free song download. If the product is free - then why can't I share it for free. Today's kids don't know from albums, 8 tracks or cassettes - all of which were hard to copy. They know CDs and digital - how can making a file copy be illegal? I just drag and drop it from this folder to another...
The music industry needs a new model - but technology has outstripped their ability/innovativeness to own that new model. So by default there is a new model out there called sharing of music and the industry is trying to not lose revenue while praying for the miracle (Digital Rights Management probably ain't it) to create a new business model.
I don't believe that the "industry" can come up with an encryption or protection scheme that won't be broken. Sony spent billions on a data track on a music cd system that would foil copiers, a Finnish kid with a dollar Sharpie pen figured out how to break it.
The "industry" has come out with technology before that the consumers thumbed their nose at. I remember that DivX cartridges were going to take over, digital audio tape another. Blu-ray appears to be struggling now. I'm embarrassed to say that I bought a Sony Betamax as it was the better format
You can try to seduce the consumer but in the end the consumer rules the market.
Aum007, I agree with you, about "consumers don't like DRM." That's because they're the pirates stealing copyrighted material. They're the furthest thing from consumers.
The film and music industry is so far behind the curve as far as encryption. Apple's iTune will be just another Estore to purchase downloadable music and movies. All the studios broke iTunes stranglehold by signing with Amazon and others will follow. Game, set, match for itunes.
Don't blieve that Memory card albums cannot replace CDs , because over the last decade we didn't thought that Music Tape will be replaced by MP3 and CD albums , it's depending on technology evolution .
I think you all should have a look at this article to get a sense of where the industry is going.
http://news.bbc.co.uk/2/hi/technology/7825428.stm
This line in particular from Jim Killock pissed me off
"Consumers don't like DRM. They want to be able to play their movies on
their computer, ipod, or whatever device they've bought, and DRM gets
in the way. If movie sellers make it difficult for consumers to play
their movies, then they will sell less films."
I don't think movie studios will sell less movies if they bring in a modified version of a DRM which works exactly as they envisage it(Virtual Lockers,with OpenID/Unique IDs,etc)
What really has change is this mentality of free music in particular the P2P softwares,which are a threat to PC Security in addition to the Music Industry.The best way for them is to attack P2P sites by encrypting each and every Music file they find on these sites.Once that happens ,you will see a dramatic pick off in letigimate downloads.
But I agree with what the article says about Apple and its Walled Garden.Consumers are going to force changes in Apple's behaviour (and not competitors) if the DRM Version 2.0 takes off and is successful.
This article summarizes how Apple keeps sticking to its own tune & how frustrating that is for enterprises and will shortly be for consumers as well(They have their heads stuck in the sand).Hopefully with web 2.0 and In the cloud taking off Apple will become Irrelevant...(read david Vellante's blog on IE)
P.S I don't work for the Music Industry but I am sympathetic of their plight;its just that they have to refine their approach to tackling the Piracy problem ,especially in China.Hopefully this Initiative will work out.
I certainly don’t believe that having memory card albums will stop illegal music distribution. As long as you have music in digital format and Internet access, P2P downloads will go on. In addition, memory cards (or any other device) may or may not be able to replace traditional music CDs, but, either the case, the complete transition from CDs to another type of music recording technology will last several (if not many) years. Finally, protected memory cards might provide greater copyright security but unfortunately, there will always be someone breaking through whatever new security capability is developed.
The music industry needs, as Chris Poley wrote, to embrace the new available technology through a new business model, which, I believe, has already been partially designed but not yet completed. This business model should be able to adapt to the new trends of technology, consumer behavior and piracy, and at the same time embrace all the opportunities that online music distribution provides. Few examples of these new trends: consumers may not be willing to pay $10-$15 for a new album, but there is a better chance they will pay $0.99 or less for their song (as on ITunes).Also, some artists have cut off the middle man (music retailers) by distributing music through their own websites.
It is know, with the traditional music distribution business model, that most of the revenues from music sales go for the record labels (artists make money mostly from concerts). An Internet based business model is an opportunity to level the music industry playing field and, at the same time, reduce the impact of illegal music distribution.
I think that the idea that papers are dying is exaggerated.No doubt they will have to change and adapt to the changing economic realities of today but somehow the idea that Paper/newsprint is bust does'nt seem right.
As for the Music Industry I have no doubt that the Music Industry has to figure a way similar to their old DRM package to protect content.Also,they need to make it harder for consumers to copy content.I don't know how that would work-maybe something which would involve sophisticated Crytographic keys and Signature IDs?
But I think today's situation makes things unworkable for the music industry.Either that,of the entire industry just gets dismantled and every artist moves to selling His/Her Album/songs himself through his own myspace page/website.That would get rid of the Music Industry completely.Maybe thats not such a bad thing after all...
With state budgets getting beaten down due to income tax and sales tax revenue declining, the Internet may be a way to make up some lost revenue streams.
The fight may get ugly, as Amazon.com Inc. is suing NY State for requiring Amazon to collect taxes on shipments to NY residents, even if the online company is located out of state.
Forrester Research, gives a rough estimate for as much as a $3 billion windfall to governments.
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CBS had been the last major network holdout to acknowledge the Internet as, not only a viable alternative to television, but potentially a profitable alternative.
Baidu Inc. (Nasdaq: BIDU), the massive Chinese search engine firm, has been granted the right to pursue a lawsuit against Register.com by Judge Denny Chin of the US District Court for the Southern District of New York.
A trend in the science of marketing and advertising has emerged that threatens to further impinge on our privacy. It involves disturbing and subversive personal data mining and unauthorized surveillance by retailers and advertisers.
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Two studios have filed suit against an ad broker for placing ads to help monetize P2P sites suspected of copyright infringement. That's taking a dangerous step toward what might be a worthy goal.
Marketers want to sell you stuff, and they need your help. It's crazy, it's crass, it's fun for the whole family! It's the art form of the new millenium!
Is book culture better than Web culture? A recent op-ed in The New York Times provides a balanced view on this question, but reproduced in another paper, the piece becomes one-sided. Oh, the humanity!
AT&T showed off lots of improvements to its IPTV service this week. The overall message: IP, Good! Cable, Bad! Phil predicts what it all means for the broadcast proletariat.
Ireland has joined two other countries in enacting a three-strikes disconnect rule for folk caught file sharing. But 80% of perps don’t even know they are doing it!
As banks seek to improve their online customer experiences, they are recognizing that many of the Web-oriented skills they are looking for are already at mature levels in the retail industry. Increasingly, banks are breaking with the tradition of hiring from within the industry and are importing retail talent.
High on the list of desired improvements from the mobile industry are: shared digital storage for the Internet; phone capability across borders; reduced electro-magnetic radiation; and rewards-based service plans.
Because 25% to 45% of broadband cost is due to sales and marketing, we could reduce our broadband prices by eliminating advertising and promotional spending by providers.
The next edition of one of the greatest English language reference books, the "Oxford English Dictionary," might not be published in paper. Bibliophiles might mourn, but should they?
RIM is giving in to demands by India to snoop on encrypted BlackBerry data. It's time to develop cheap or free encryption software for BlackBerrys and other cellular phones.
Nielsen’s recent numbers on the increasing use of texting bode well for enterprise networks. Shunning the phone in favor of text messaging could mean reducing bandwidth.
Two studios have filed suit against an ad broker for placing ads to help monetize P2P sites suspected of copyright infringement. That's taking a dangerous step toward what might be a worthy goal.
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