Wall Street Week/Fortune

Damon Cassell dcassell@gmail.com
Sat Feb 12 13:08:25 EST 2005

> Bad analogy.  Digital music is a threat to the recording industry because
> people can get it for free.  Satellite radio costs money each month.
> Traditional radio is free.

It is not a bad analogy. Apple is making killer money legally selling
songs for 99 cents each to iPod owners through it's iTunes Music
Store. They've sold 200 million songs so far. Do the math. Those are
people who are now no longer walking into record stores and buying
little plastic discs for $16. The distribution side of the business
has changed entirely and it does not favor the big record labels any
longer. Worse yet, customers can pick and choose what songs they want
to listen to. If they download a song that stinks, they aren't going
to buy any more songs from that album or artist. They just paid 99
cents to avoid a $16 mistake. So not only has the distribution gotten
away from the recording industry, people have far more control over
the quality of what they listen to. And this hurts the recording
industry bigtime because most of what the major record companies put
out is complete crap. Indepedent labels with good talent are now back
on a level playing field. Basically, what goes around has come around
for the record companies. They have resorted to suing their customers
to maintain cash flow.

Satellite radio is built on the same principles. Low cost, high
quality, variety and control. People know what this is worth and will
pay for it. Radio will continue to tightly-format and demograph itself
to death and in the end radio station owners will still wonder what
they did wrong. You'll see more NAB lawsuits and lobbying designed to
hurt satellite radio but no real competitive changes.

We haven't even mentioned next-gen cellular services, which promise to
stream digital music and entertainment to handsets. Sprint is already
testing it. Combined with Bluetooth and wifi, you'll see all kinds of
devices ready to receive, record and share streams. We've only seen
the tip of the iceberg in terms of things that will hurt radio.


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