Analyst Speak.(Industry Trend or Event)

The music industry is apoplectic, we are told, at the prospect of mass digital distribution over the Web. This is the same industry, remember, that was recently investigated by the Government for cartel pricing, led by the Obig fiveO; and the same industry which has an estimated Osuccess rateO for commercial releases of around 2%.Music is just one example of how established business models are being pushed to breaking point by changes in the commercial landscape, and incumbents are being threatened by upstarts playing by different rules. Having been forced into confronting new media, record companies are now having to find ways of protecting intellectual property.

The industry, it seems, is still fixated with the idea that music is about a middle-aged personOs CD collection at home, containing all those classic back-catalogue discs that have now been around for 20 or 30 years; have been resold to the same punter several times in several formats; and that continue to be attractive because the marginal profit on each unit is so high.

It was the build-up of these collections that supposedly kick-started the first Odigital musicO revolution in the 1980s E vinyl to CD. But whereas technology is still important, itOs not the only factor. Being digital does make a difference because the copy is now indistinguishable from the original. Illegal copying is therefore much more of a potential threat, and has been the focus of major activity to date, via schemes such as the Secure Digital Music Initiative (SDMI).

But todayOs piracy could be tomorrowOs business model Egiving away music does work, as CDnow has proved by increasing sales through free downloads.

Instead of fighting a rearguard action to protect established and artificially inflated revenue streams, however, what more visionary companies could try to do is think about how music usage has evolved over the years, and investigate ways of meeting the demand not for a static set of physical discs, but for an ephemeral portable resource.

Increasingly, the economics of music is shifting towards greater time-sensitivity, particularly in the pop and youth markets, value is at a maximum now, and begins to depreciate immediately and quickly to zero. Call it obsolescence or fashion, either way it can be seen as a threat to established practises, or the opportunity to create new ones.

So-called Ostreaming musicO over broadband, always-on connections is obviously only applicable for certain fixed-location scenarios E in the home, office, club E and even then itOll be a while before the quality and cost of the network will be up to it.

With the proliferation of channels and devices now available for consuming music E from DTV to Internet radio E record companies have the chance to look beyond music as simply OsinglesO and OalbumsO and consider how it might be a more profitable utility.

Trying to protect the exploitative pricing models which have traditionally underpinned this massively redundant business is little more than stalling. Looking at the potential for music as a low-cost, user-centred service, which is smart enough to fit into and work effectively in myriad lifestyle situations, priced according to both the economics of digital entertainment, and the premium consumers are willing to pay, is one way forward.

If the Obig fiveO donOt start doing it, someone else will.