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Music Industry: Finally Catching On

I've written previously about the porn industry's confrontation with online piracy, which occurred earlier than that of the music industry. The dynamics are similar - a media industry develops a business model around proprietary creative content. Then the Internet comes around, enabling users to share content with each other for free, drastically cutting the traditional model's ability to profit from each unit consumed.

The both industries followed a similar pattern in responding to this threat, though the porn industry was much more fluid in its response. When the problem first began, essentially with the advent of the Internet, large porn studios tried suing users who pirated their content. They quickly realized in the early '00s that this was a waste of time and started innovating business models which profited from online sharing. Some companies started giving away content, in exchange for promotional links driving traffic to their site (since in the Web world, traffic is everything). The industry adjusted, many businesses embraced the Internet, and others who were too stuck in their ways perished. Some of the behemoths still struggle to shift their focus away from DVDs, which are quickly becoming obsolete (movie industry--take heed!), and finding ways to generate revenue online.

Still other businesses are a bit craftier. They are realizing that the flood of online content includes a huge amount of junk which consumers must sift through in order to find what they want. Even consumers users are successful, this content has low production values and often is produced by amateurs. (I realize that many people are really into amateur porn right now, but I insist a large part of the appeal is the novelty and low cost - I expect interest in amateur porn to decline in the next few years.)

Smart businesses are realizing that instead of competing with the massive amount of free, low-quality content available--and really, what sensible businessperson would target a consumer who wants to pay nothing for product?--they should differentiate their content. Enter the return of high production values, attractive actors, and compelling content. There is a reason why Pirates, the most expensive porn movie of all time, was also the highest grossing. A market exists, but consumers are easily distracted by free access to naked ladies. What would impel them to buy crappy porn from a production company rather than spend an extra hour finding crappy porn for free online?

Offering them a different product will weed out those who are quality customers (people who appreciate quality and are willing to pay in order to get what they want),and those who are lost causes. (And this part may be pushing things a bit, but I'm gonna say it: You know who likes to buy stuff? And who appreciates pretty packaging, brand names, and attractive products? Women. The best consumers in the world. Gasp! Could women be the ones to save porn??)

Circling back to the music industry, the RIAA is following the path of the porn industry and has decided to stop filing lawsuits against petty pirates. One small step forward - now they need to figure out ways to make money in the new Internet world. The iTunes model is a start, but many customers dislike the limited selection and low-quality files (again we return to quality differentiation!). It will be a difficult task, as the industry is about 10 years late to the party, but we can probably keep an eye on the porn industry to get a clue as to where they are headed.


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