A while back I said that I had wanted to return to this post by Fred Wilson and I thought now was as good a time as any.  To briefly recap, in the post Mr. Wilson takes a look at the media consumption habits of his kids and tries to glean some predictions on where the media world is going from those observations.

This time around I wanted to tackle his point on e-books.  In his post Mr. Wilson says...

They still read books the way we did as kids. That doesn’t seem to have changed a bit. They read them for school, they read them for entertainment, and they read them lying in bed waiting to be tired enough to turn off the lights. My son Josh read four 600 page Harry Potter books on our two week trip and he’s not a super fast or voracious reader. But he likes reading. All my kids do. Might books be the only medium that remains unaffected by the Internet (except the ease of finding and buying them)?

Later in the post he goes on to say...

books may be the one category of media and entertainment that aren't disrupted by digital technology. or maybe we just haven't seen the technology that will do it. i honestly don't know. and i don't know how the book business is faring versus five or ten years ago. but at least in my family, books are still a growth sector.

I'm inclined to agree with the theory that we just haven't seen the technology that will do it yet.  There are really two issues here. 

First, digitizing books is harder than digitizing music so the industry has little fear of piracy.  I've been a strong critic of music piracy but I fully realize that fear of it has pushed the music industry into doing good things (as I pointed out here).  The lack of fear on the side of book publishers has made it very hard to get them to digitize their content and that lack of content will continue to hold down e-book readers.  Until an e-book reader can get 95% of the newly published books digitized (in a friendlier format than pdf) I don't think it stands much of chance. 

Second, there still hasn't been a break through e-book reader.  I think people forget how much of a dud MP3 Players were before the iPod came along.  But once it did come along the market boomed in a big way.  The more I look at it the more I think the Kindle is on the track to being that break through device.  Its just a couple versions (and a huge price cut) away.

Anyway, I think once those two issues are resolved the e-book market will boom.  Even if Mr Wilson's son just loves the feel of real books I think he's probably been too conditioned by the world of instant gratification to pass on a device where he can (a) get books instantly and (b) carry his entire library around with him.  Not to mention searching, sharing, and all the other goodies that come along with a digital format. 

That, in a nutshell, is what I think it has come down to.  The iPod has gotten us accustomed to having all (or at least much of) our media constantly at arms length.  As that becomes available for a new types of media I can't see kids saying no to it, even if they have to give up a little to in the process.

There was one last point that I didn't get to address yesterday and that was this lingering theory on the part of the blogosphere that the Record Labels are close to extinction.  That isn't likely to happen and I'm going to tell you why.

In reading this keep in mind that from High School on I grew up in Southern California and I grew up with a parent who acted in live theatre which eventually got me into the tech part of live theatre.  I grew up doing productions and have more than 75 different musical productions to my credit so I know more than my fair share of actors and musicians.

Also, the characterizations below are generalizations and I know they don't apply to every single person in each category.  That doesn't change the fact that they apply to the great majority of each group and because of that fact they are helpful in addressing the issue at hand. 

All that said, lets start by looking at bloggers.

Bloggers like to think the world is filled with people just like them but the fact is that its not.  In this particular topic that is relevant because bloggers by definition are at least mildly entrepreneurial.  Even if they don't run a company themselves the sheer act of putting  up a web site suggests the presence of the entrepreneurial spirit. 

The polar opposite of bloggers are artists who aren't at all entrepreneurial.  They want to focus on their art and they don't want to worry about marketing their art or packaging their art or any of the trappings of selling their art.  Their ideal world is one where they can spend all their time on the art and just have a pay check show up at the end of the day. 

This is why bloggers don't understand the role of Record Labels.

Record Labels rose up to fill the artist's need by doing all the stuff the artists didn't want to do.  Someone had to step up and get the artist's music into the hands of the consumer and the artists themselves had no interest in being that person.  That is why Record Labels exist and that is why they will continue to exist.

Don't get me wrong, it isn't out of the realm of possibility that the current crop of labels will die.  I doubt it will actually happen but it isn't an impossibility.  But the thing to remember is that the only way they'll die is if someone else shows up to take their place.  Because someone has to continue to fill that void. 

If that new group of business people show up they'll still need to protect the artist's interests so they'll still have to hire lawyers and those lawyers are going to advise them to do the same thing the current labels are doing now.  In fact, the odds are good that a new group would make it worse because they will be up for a fight where as the current crop has, to an extent, been beaten down by public criticism.

But one way or the other Record Labels are still going to have to protect their product from being stolen.  That is an inalienable fact.  There is certainly room for new business models but someone is going to have to make the case for those models to a Record Label.  Whether that's the current crop or a new crop really doesn't matter because each will be facing the same issues and each will be advised by the same lawyers. 

You want to make a difference in the industry my advice would be to build a better mouse trap.  Don't bother hoping for, wishing for or predicting the death of Record Labels because it isn't going to happen.  Instead figure out how the Record Labels can still make their money without having to resort to the RIAA's tactics.  Because answering that question is the only way this situation will ever be resolved. 

I thought my last post had gotten too long so I didn't post this in it but the more I've thought about it the more I thought it was a necessary point.  This is taken from a reaction to Scott Karp's post written by Mark Hamilton.  In response to the RIAA's stance he says...

I’m paranoid enough to believe that this isn’t mere legal wrangling on the part of the RIAA. I’ve suspected for a while this is where the music industry wants to take the argument. My reasoning is fairly simple: a huge part of the huge amounts of money flowing into the industry over the past 40 years has come from new technologies and the need to rebuy. Every time the method of delivery changed — from vinyl to cassette tape, from cassette tape to CD — serious music fans have laid out millions of dollars to repurchase music they already had to replace their “old” library.

But then a few paragraphs later he goes on to say...

Small pieces of the industry are changing: any number of smaller, independent labels and a growing number of artists are finding innovative new ways to connect with music lovers and navigate the tricky waters of massive change. Three of the big four labels have dropped DRM from at least some of their offerings.

I'm cherry picking here so I encourage anyone reading this to read his whole post but it was the best way to make a point that I think is really important which is that the industry is making strides to allow people to keep music on their PC digitally and even the most anti-RIAA people know it.  I personally think strides like stripping DRM from new releases shows an industry that is really trying to work with its customers and completely contradicts the characterization of them as people attacking even customers who just want to legally back up their music.

Please Note: I'm not saying the industry has always been this way I'm saying I think they've learned their lesson.

A real quick post on the RIAA's suit against Jeffrey Howell which has exploded due to an article in the Washington Post.  In it the RIAA is claiming that Mr. Howell committed an illegal act simply by copying the music to his computer even before he illegally distributed it.

The reality here is that this issue is much bigger than the blog posts I've read are making it out to be.  The issue isn't the RIAA's greed it is the fact that the United States is becoming an increasingly litigious nation.  So someone gets hurt by a defect in a product that the manufacturer could never have foreseen.  That person then gets a lawyer who convinces a jury to award the person a million dollar settlement out of pity (as opposed to the facts of the case).  Not being able to afford another suit the manufacturer then turns around and changes their user agreement to essentially say "if this product blows up and destroys your whole neighborhood because of a defect that is completely our fault you still can't sue us"

The same issue is at stake in the RIAA's case in that you may not like the RIAA but their product is being stolen and most people don't see it as a big deal.  So they in turn have made an unreasonable user agreement saying that it is illegal to even copy your music to the computer at all.   I honestly don't think anyone believes the RIAA would prosecute someone who was only storing legally purchased music on their PC and had no plans to distribute it.  The RIAA is simply doing what the manufacturer in the above example did and making an unreasonable user agreement to protect their interests.

Saying that its illegal to store music on the PC is simply a way for the RIAA to have an iron clad case against those who are distributing the music illegally.

So Is the RIAA right?  Hard to say.  When society doesn't take things like theft seriously it invites an over reaction from the person being stolen from.  I do think the RIAA's claim is unreasonable on the surface but I'm not sure you can blame them for following the advice of their lawyers.  As long as people continue not to equate the stealing of music to the stealing of a physical product I think you'll see more unreasonable claims like this.  If you want to stop those claims then your argument is for tort reform not against the RIAA.

On a side note, the idea that the media industry will be "utterly destroyed" by digital technology as put forth by Scott Karp is ridiculous.  These issues will exist even if artists self distribute.  The RIAA explained simply is just a group of lawyers hired by the music industry to protect their interests.  So if the labels disappeared tomorrow people would just start stealing directly from the artists who would then hire a lawyer to stop it and be advised to do the same thing the RIAA is advising the labels to do now.  Music will still have to be paid for no matter what happens. 

Addendum: A friend pointed out that the Washington Post article quoted above did not mention that Mr. Howell was sharing songs over Kazaa (a real breach of Journalistic ethics imho) so many might think the RIAA was just going after him for backing up his songs.  That isn't the case, as can be read here: http://www.homemediamagazine.com/news/html/breaking_article.cfm?article_id=11723

I have to say that Fortune’s various “Lists” have made it all but impossible for me to take the magazine seriously.  Today’s article on the “25 most powerful people in business” is as perfect an example of this as any.  In it they name Steve Jobs of all people the “most powerful man in business” 

Here’s the quote… 

Since returning to Apple in 1997, he has changed the dynamics of consumer electronics with the iPod, and persuaded the music industry, the television networks, and Hollywood to distribute their wares with the iTunes Music Store. With his hugely successful Apple Stores, he gave the big-box boys a lesson in high-margin, high-touch retailing. And this year, at the height of his creative and promotional powers, Jobs orchestrated Apple's entry into the cellular telephone business with the iPhone.

That's five industries that Jobs has upended - computers, Hollywood, music, retailing, and wireless phones. At this moment, no one has more influence over a broader swath of business than Jobs. 

Upended?  Really?  Because last I checked all those industries were still working in pretty much the same way they always had.  Did Apple really “destroy, overthrow or completely change” these industries or does someone at Fortune just need to consult a dictionary?   

Don’t get me wrong, I’m obsessed with my iPhone and the only thing stopping me from getting an iBook before Christmas is my good judgment (since I already have a relatively new notebook) which doesn’t stand much of a chance against my gadget lust.  But Jobs is a guy who still runs a relatively small computer company (albeit with an extremely large market valuation) and whose other businesses are dependent on a group of people who have all but turned against him.   Those “other” businesses being iTunes and that group of people being the heads of every major media company who all seem to think Jobs is getting too much power in their industry.  Heck, if Murdoch alone (#2 on the list btw) decides to pull his support from iTunes then Apple is all but out of the TV business.   

I’m not saying that Apple isn’t doing well or that Steve Jobs isn’t more powerful than he’s ever been (and certainly more powerful than most people in the business world) but they still have a ways to go before they conquer the world.  This Fortune article seems to think they’ve already having done it.