Yes, the Internet Does Change Everything

With the requisite bow to the moral issues posed by illegally downloading MP3-encoded music, I must admit that the sight of record companies sputtering vitriol about Napster and its progeny makes me smile.

Last month, the recording industry reported a 5 percent decline in sales last year, the largest such decline since the mid-1980s. Industry leaders blamed the MP3-file-swapping orgies of American youth. But Industry analysts attribute most of the drop to the fact that sales during the 1990s had been boosted by consumers who had repurchased in CD form their favorite music from earlier eras.

The Napster-Grokster-Morpheus bogeyman aside, the industry has only itself to blame. For a textbook example of how not to approach e-commerce, look no further than the Recording Industry Association of America and its SDMI (Secure Digital Music Initiative).

During the mid-to-late 1990s, while copyright holders in print and television media were actively seeking ways to market their products online, the music industry arrogantly insisted that the Internet changed nothing.

Instead of grasping the huge opportunities afforded by the potential to deliver music over the Internet—at much lower prices, slightly lower margins but extraordinary volume—the industry decided to build a digital fortress by cobbling together all manner of copy-prevention, watermarking and secure token technologies. Unfortunately, the only combinations that worked would have required consumers, once again, to purchase a new generation of players—not a smart way to compete with free downloads. And most technologies caused such friction between record companies and consumer electronics businesses that make players that international SDMI meetings turned into virtual food fights.

Not surprisingly, the RIAAs digital fortress turned out to be a Maginot line. College students did a blitzkrieg over and around SDMI, employing the Net to turn the tables on what many saw as an irredeemably greedy industry.

The lesson is not that stealing music is right. It isnt. But the movie and software industries should take note. Internet-empowered consumers are not going away. Either content companies will find ways to embrace the Internet to offer customers greater value or their epitaph will read: "They were morally right as the market turned left."

This is my last column in eWeek. Thanks to the many readers who took the time to share their views with me via e-mail. I wish all of you the best in a highly interactive future. Sincerely, Rob Fixmer at rob_fixmer@ziffdavis.com.