Suing 12-Year-Old 'Pirates'

As regular readers of this column can attest, the head-in-the-sand anti-technology antics of the recording industry are always a fun target. For instance, take a look at last Tuesday's front page of the New York Daily News (below). They finally did it. The recording industry is suing its own customers, initially 261 individuals.

The industry claims that stopping downloads will cure all its ills. They know that's wrong. For instance, earlier this month a Forrester Research study was released claiming that in five years CDs and DVDs will decline, with 33 percent of music and home video sales shifting to downloads. While one can debate the merits of the study, Universal Music Group reacted the next day: It cut CD prices. Retail prices for CDs by Universal's top stars will be $9.98. The Daily News quoted Universal Music chairman Doug Morris about the price cut. "We hope this starts a revival in the music business."

You'd better hope that Morris is right. The recording industry is killing the audio hardware business. Take a look at the numbers.

The Consumer Electronics Association released its first-half audio sales numbers in August (TWICE, Sept. 1, p. 16). Factory level sales suffered double-digit sales declines for June and for the first half. And it gets worse. Combined home-system and home-component sales for the first half were less than autosound's sales for the first time. Home audio volume fell to $1.096 billion, while autosound sales were $1.101 billion for the same period.

And it isn't like the autosound market is booming. Sales for the first half were down 9.7 percent and down in June by 17.8 percent. Some retailers I've spoken with in recent weeks say the situation in autosound could be the bottom of a bad cycle. Or things are so dire that one dealer quipped, "It could be an 'end-of-an-era' type of deal."

Of course the blame for autosound's woes, and the problems with home audio, can't all be put on the recording industry's doorstep. In autosound, car manufacturers have become far more adept at providing top-notch audio systems and designing their cars to make it harder to install aftermarket product.

And in home audio, the home-theater-in-a-box trend has spawned the new catch phrase "good enough audio." That's what your customers have been telling you when you try to sell them audio components for home theater. MP3 is "good-enough audio" because it is free and convenient. For many Gen X and Gen Y members, their PC has become their audio system of choice.

So what can be done to turn the situation around? There are no easy answers, but the CE industry can at least design and produce hardware that can take advantage of the downloading trend. But for the recording industry, which got rich on high CD pricing, baby boomers replacing their vinyl LPs with CDs, and the many compilations of music from artists who recorded before the CD era, the choices are tougher.

Cutting prices is a good first start. Investing and cultivating new talent, both executives and recording artists, is vital. Embracing the Internet and providing sites with real value is another key step. The day after she was featured on the front page of the Daily News 12-year-old Brianna LaHara and her mother apologized to the Recording Industry Association of America (RIAA), which filed the suit for the industry. They said they'd pay a $2,000 fine to keep the RIAA from going to court. Great PR move by the RIAA. If that organization, and its president Cary Sherman, had any class they'd either wave the fine or donate the $2,000 to the kid's school. Shame on the RIAA and shame on the recording industry for sinking to a new low.