RIAA - from creators to destroyers

Among other things, Tim Oren is managing director of the Pacifica Fund which, "invests in Information Technology and Materials Science companies" focusing on, "companies with core technology assets that have the potential to become industry-shaping platforms".

He's a hard core capitalist, as he freely admits on his web page, saying, "I've got the word 'capitalist' in my job title, unreservedly support private property rights, and don't have ethical issues with the concept of intellectual property (some implementation details aside). I don't copy music I don't own, nor do I encourage others to do so."

And yet on Due Diligence, his web page with thoughts and opinions on technology, venture investing, Silicon Valley, "life, the universe and everything," he admits, "I boycott the RIAA and take frequent opportunity to trash them publicly."

Why's that? - you ask. Trash the RIAA? How could it be?

Read on >>>>>>>>>>>>>>>>>>>>>>>>>>>

Call me naive - [Chorus: You're a hopeless naif.] - but I've got this quaint idea that the idea of a business is to add value. And that the value is judged by the customer, not the seller. By its obstinate and culpably idiotic refusal to understand that technology has changed the way in which the value of music is delivered and understood by listeners, the RIAA and the labels it stands for have turned from value creators into value destroyers, in many different ways. They are well on the way to permanently damaging an industry that has been part of America's cultural heritage, as well as a decent part of our exports to the rest of the world. The bill of particulars...

...starts with the obvious: digital music and the Internet. From the customer's side the value is overwhelming - no more stacks of polycarbonate discs, access to a world of choice instantly, removal of most of the risks of format obsolescence. Even from the selling side there are advantages: no more inventory holding costs, more packaging flexibility, no more takebacks on unsold product. But, it does require that you rebuild your model for creating value from one based on scarcity, to one based on abundance. Something the industry apparently can't deal with until it's rammed down its throat by a customer revolt.

The industry's response? While the P2P systems grew, built on networks of machinery operated by its customers, it went off on a tail chase, seeking digital rights management (DRM) approaches to locking up digital music. In other words, to restore the scarcity value model, regardless of the benefits to its customers. Kevin Marks has for some time been saying 'DRM destroys value'. If value is in the customer's eyes, shouldn't that be obvious? Is a locked piece of music more or less convenient to use, and more or less likely to be a problem to copy to other devices? Which version would you value more? It's amazing that it's even a question that artificial scarcity is a stupid idea. How much more obvious should that be, when the customers already know there's an alternative, and have it in their hands?

Abundance presents its own opportunities to create customer value. Google, just to take an example, owns an insignificant amount of content, but is valuable because of the overwhelming abundance of it on the Internet. The music fan in a world of abundance has problems as well. How do I organize my songs? Is there new music I should know about? Are any of my favorite artists coming to town, and how do I get tickets? Are there new acts that I might like? Where can I find like-minded fans to hang out with? How do I make sure I can get the music I want anytime, anywhere, on any gadget, and don't lose it? All of these are opportunities to create value, and potential ways to extract revenue and rebuild a business model in a post-scarcity world.

The recording industry has blown off every one. It allowed the venues business to fall into the hands of a rapacious monopolist. My music is organized by iTunes and Gracenote, little thanks to the labels, and inter-device portability has been colonized by open standards and operating systems vendors. There's more value in the free recommendations and reviews on Amazon than the entire RIAA's output. I get more use from free concert indexing sites than the entire Top-10-hit-worshipping industry. Is there anyone still in there that loves the music, or is it lawyers all the way down? It doesn't seem to bother them that they have created llittle to no customer value that can survive in the face of abundance.

Customers value and will pay for convenience. Apparent convenience changes with the technology. Once upon a time, the size of 33 1/3 RPM vinyl records defined the convenient 'bundle' called an album, then later the limits of a CD. But when digital music makes physical limits an anachronism, there is no longer a convenience value, and the one-hit-wonder album must die. Still, the industry tried to maintain an obsolete, overpriced bundling strategy until its channel began to collapse. Meanwhile, it took other convenience values such as subscriptions, and crippled them with unworkable DRM schemes, proprietary formats, and limited catalogs.

The RIAA did not stop there in its search for value to destroy. There were the whole industries of consumer electronics, computing, and communications, all exacerbating the problem of abundance. They must be stopped, and scarcity restored. Fortunately, entire industries are able to fight back, and have bribery lobbying budgets that they can put on the line, but this game is still in doubt. But will you be more or less likely to buy a new computer - or operating system - if it's got DRM inextricably built in?

There are values beyond commercial exchange. Little matters like free speech and the freedom to invent. The RIAA took the profits derived from its customers, and bought the influence to help ram through the DMCA. Now we have a most peculiar sort of thought police - something even Orwell failed to imagine - to track you if you dare to subvert artificial scarcity. Again, why is there any question at all that this has destroyed both customer and social values? If the buggy whip industry had had the gall and resources of the music industry, we might still be scraping horse dung from our streets, and hiding gasoline engine projects from the enforcement cops in our basements.

For its repeated and unremitting stupidity, the music industry has earned my contempt as a business person. For its willingness to infringe rights, corrupt the political process, and attack other businesses to save its own sorry neck, it's earned my direct enmity. It's a sorry, dying beast, but quite able to savage us and our society as it goes. As money is energy, the best way to limit the damage is to cut off the profits, and the cash flow. I'm boycotting the RIAA, please join me."

Next up in this occasional series of rants, adds Oren, "some thoughts on business models to take the fight to the heart of the music market, rather than nibble at the small acts".

Should be interesting.