A New Model for the Recording Industry

Barry Ritholtz has a very good entry for the Great Recording Industry Business Model Contest.

The industry had a golden opportunity to establish the "cooption model," working with Napster as a centralized downloading center. This involved a jiu jitsu of the Napster sharing framework. The goal of the model would be to turn the Napster network into a massive data mining / advertising promotion / sales machine.

Each aspect of this model emphasizes the accumulation, analysis and application of consumer music data. The first goal would be to find out a) what people are listening to; b) what else they might want to listen to; and c) extending their relationships with the artists whose music they appreciate.

One of the best aspects of the Napster framework was user's ability to peruse other people's hard drives. Tracking downloading habits relative to that data could have been enormously powerful.

Exactly. Tracking user downloads would have provided valuable information that could have been used to market more music and movies to consumers. CD sales would probably be up now instead of way down, if the industry had partnered with Napster.

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In my opinion, the business leaders at the major record labels should be embarrassed that they are such lousy capitalists, and that they were resting on their laurels instead of innovating new ways to make money and satisfy consumers. Instead of suing everyone who is downloading music, they should spend their time figuring out how to apply these new technologies to their business, and earn a better return for shareholders. They could start by hiring Barry.