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Thursday, Apr. 19, 2007 at 5:30 am

Are Record Labels Being Shortsighted?

By Jeffrey Eisenberg
April 19th, 2007

Internet radio broadcasters have lost an important copyright battle in court that will make streaming music much more expensive and that could force them out of business. The record labels see Internet radio as a threat. They think that radio encourages record sales but that streaming music does not. The record labels haven’t been so smart in the past. Are they being shortsighted now?

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Comments (6)

  1. Hello Jeffrey.

    Is it possible that the legacy radio providers with their legions of influence in the FCC, NAB and lord knows where else are also strong arming behind the scenes to pinch off this new medium. The Clear Channels of the world have the motivation and resources to do it. Even though they themselves are pushing into the online space, they can outlive and out fund license fee increases while they struggle to augment their analog systems and stem the digital tsunami. I would imagine the same effort may be occurring on the satellite front as well with huge monies flowing into preventing a merger between XM and Sirius. Better to have them competing among themselves than pairing up against Clear Channel et al.

    While I consider Satellite Radio as much of a dinosaur legacy system as FM radio, (one way proprietary delivery vehicles – i.e. non-IP) they both leave huge shadows and footprints even as they walk into the tarpits of yesteryear… along with the record labels whose luddite ways are sealing their business model into amber.

    Other than that, I have no opinion ; )

    Hope all is well and am looking forward to hearing from you and your team sometime soon.

    Robert Cerreta

  2. Record companies are being extremely short-sighted in this case. A venue like Pandora is ideal for encouraging sales, since it’s all about introducing listeners to new artists whose work is similar to the music one prefers. More broadly, the medium offers play to far more artists than conventional stations do, so that’s a clear boon to record labels. I participated in the petition drive to save internet radio and encourage all to do so.

    I also agree with the prior comment about conglomerates’ seeking to stifle competition — precisely in the spirit of those wretched new postal regulations proposed by Time Warner, which if approved will put many small publications out of business by driving their costs sky-high. (Another worthy petition drive is underway for the cause of saving small-press magazines.)

    Awfully sick, how those who have most always want more.

  3. Relatively speaking, it wasn’t that long ago that record companies were paying Radio stations and jocks under the table to play specific songs. They knew that promotion resulted in sales — enough so that they were willing to pay for it. Now, the industry has gone 180-degrees, and record companies are being paid to promote their product. Can you imagine your favourite grocery chain or local diner demanding cash for the privilege of having their ads aired?

    As far as a conspiracy by legacy broadcasters to use copyright as a way to choke out Net Broadcasters — that’s about the same as the local Ford dealer pushing for higher gasoline prices to make it tougher for the local GM dealer.

    Radio’s strength always has been, and always will be its ability to serve its two client groups — listeners and advertisers. Not an ability to ‘ride out’ fees that affect others. But that’s a whole different discussion. And everyone complains about the big guy ‘choking out’ the little guy but no one wants to act on the easiest solution (supporting the little guy) because it costs THEM more. Again, a different discussion.

    Take care.

  4. From everything that I have seen it’s not the radio broadcasters or the record companies that are causing this issue, it’s the songwriters and songwriters association. They are the ones who get paid the royalties, not the record companies. The only way the record companies can loose is if people stop buying records, online places like Pandora and other online radios sell records as a way to increase revenue. So why would they have an issue? If people switch from traditional radio to online radio, the radio stations still have the easiest way to switch and they increase revenue buy selling records and ad time. The song writers are the only ones who are short sighted in this and feel they are left out not realizing that album sales also = income. But with older artist, many people do not go out and buy the albums, they just wait to hear their favorite song on the radio, so if online radios are not paying, the song writer looses out.

  5. My comment may be off topic but relatively close to. Do record companies feel dowloading a REAL threat. or have they always.. Will this get worse or better for you labels in the future……
    Has the recording business outsourced itself? take care.

  6. I listen to Pandora–and I have bought a couple of things that I’d have never have heard about otherwise.

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Jeffrey Eisenberg, founder of FutureNow, is a professional marketing speaker and the co-author of New York Times and Wall Street Journal bestselling books Call to Action and Waiting For Your Cat to Bark. You can friend him on Facebook.

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