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September 30, 2005
You Can't Always Get What You Want
Mark Schultz
Not getting what you want as a consumer is bad news (of course, sometimes you get what you need), but failing to supply what consumers really want is a big mistake for marketers. Sometimes it's hard to figure out what consumers are thinking, but sometimes it seems even harder to figure out marketers. Case in point: The new Rolling Stones album will be marketed as a $40 flash memory card as well as an ordinary priced CD The music industry has been down on its luck, and I know you all sympathize, but what are they thinking? For the extra $25, the press release tells us (along with a lot of other useless information supposed to fire my imagination) that you also get (1) copy protection and (2) bonus material. The bonus material is . . . drum roll please . . . previews of other songs in the Stones catalog. Wow. They're going to sell dozens of these. (By the way, SanDisk has chosen a truly hideous trademark for its new format: GRUVI. The "u" has a gratuitous umlaut to make it all the more shudder inducing.)
I understand that the music industry needs to minimize its plight, but this is not a useful compromise solution. Kids are different these days; they don't want to buy music that is locked onto a tangible medium. If the industry wants to keep content under its thumb with DRM, it needs to come up with a value proposition that gives me a reason to switch to new media. I'm no schoolboy, but I know what I like. My current CD player suits me just fine. My computer on which I've stored 100s of CDs and live concert recordings and hooked into my receiver via a digital optical cable is also satisfying.
Lame Stones lyric references aside, if the music industry wants consumers to switch to a new format in order to allow it to have DRM, then the music industry needs to give consumers something in return. The upgrade needs to be at least as compelling as the difference between video tapes and DVDs. In that instance, the copy protection went along for the ride with a great new product, rather than driving the new product.
In a big picture sense, it is interesting to watch the music industry struggle to find the right business model. I remember that as an undergraduate I perceived capitalism as a system of ruthlessly efficient competition. An education in economics did little to dispel that perception. A few years in the business world cured me of that idea. I came to realize that winning in the marketplace rarely requires heroism worthy of an Ayn Rand novel; rather, one usualy need merely be less incompetent than everyone else. Actors do not have perfect information. Moreover, within a corporation, individuals often are just as (or more) worried about satisfying internal constituencies rather than consumers or shareholders. Thus, an album is issued on a $40 "gruvi" (a deceptively misdescriptive trademark if I ever heard one).
The music industry will probably eventually get it right, but it may take an accident first. Economist Stan Liebowitz discussed this problem a few years ago in a Salon interview regarding filesharing. As Liebowitz points out, for years the movie industry priced videotapes too high--around $100. They thought that there was no market for consumer purchases. Then one year, they did a holiday promotion where E.T. was priced affordably. People shocked the industry by snapping them up. Thus was born one of the movie industry's most important revenue streams, but it took the movie industry a while to figure this out.
Liebowitz notes that while we are going through these changes, they seem to take a long time. Historically, however, they appear to happen fairly quickly. Liebowitz hazarded that it might take the music industry a decade to find its footing (that was three years ago). It remains to be seen whether filesharing will allow the luxury of trial and error.
Still, you can't say they never tried.
Posted by Mark Schultz at September 30, 2005 01:33 PM | Copyright
Comments
Where was the marketing department in all of this? Surely they did some market research to try to ascertain what consumers value...didn't they? Eric.
Posted by: Eric Goldman at September 30, 2005 07:52 PM
Eric-- Well, maybe. I have learned to be careful not to assume that consumers wont like something just because I don't. This one, however, has business development deal written all over it. More than once, I've seen business development people conduct market research in the following fashion: "This is great isn't it? Yes, it is! People are gonna want these. You'd buy one, wouldn't you? Everybody's going to want one! etc." All said with ever-escalating enthusiasm. Sometimes the dialogue is between two bus dev people on opposite sides of the deal, but its most awe inspiring version occurs in monologue form. I've also seen VPs and other officers engage in this form of "market research." You know, all this aside, as a bus dev deal, this may make sense if it was initiated by SanDisk. They get exposure for their new format. The Stones' label gets to try it out. If it works, great. If it doesn't, then there may be no real downside, except the cost of a press release. And, like so many bus dev deals, nothing much will ever come of it.
Posted by: Mark Schultz at October 2, 2005 06:00 AM