January 14, 2009

The Lefsetz Letter: Rock Band / Guitar Hero

For you dumb smart brothas tryna get your learn on in the music industry. This dude is ahead of his time. If you never heard of Bob Lefsetz, step your music biz game up. His recent article got to me because it was so genius I didn't even realize the answer was so simple.

In Summary: Everyone knows the music business is about to die. Entertainment is changing. CD's are going down. Yet we're struggling to let go of the ways of old because we don't know what's coming next. So years ago we were bickering over Napster, then a gazillion years later they come to an agreement but now who still uses napster? You ride the wave while it's hot, then get out when the trend jumpts the shark. Brilliant stuff. Get on it.

Does anybody want a Palm Pilot? How about a Zip drive?

Technology moves fast. Declaring obsolescent yesterday’s uber-desirable product. The key is to ride the wave, get in at the right time, delivering what the public wants, and then get out.

But the music industry doesn’t seem to get this. It believes there’s going to be a new CD. A new MTV. So busy waiting for the next "standard", the music business sits on the sidelines, missing out on revenue and becoming further marginalized.

Ringtones were supposed to save the business. But they peaked long ago. Even the iPod has morphed into the iPhone, barely half a decade after the original was introduced. It’s no longer about the music, but the apps. Labels are arguing about pricing and device owners aren’t even referencing music. iPod Touch sales are booming and the old standby? The hard-drive based mega-capacity iPod is now called the Classic. And comes in only one model. SMALLER than the previous iteration.

And now comes the decline of Rock Band and Guitar Hero. Why should these last forever? The game doesn’t change, only the songs. You play for a while and you get over the thrill. But the labels want to argue with the manufacturers about how much money they’re getting for tracks, as the business evaporates.

In the digital world, you license now, then you move on to the next technology. You license Napster, knowing that in a matter of years, most people will no longer want to own. You sell tracks at the iTunes Store in cheap bundles, knowing that no one’s going to want such a horrible-sounding file in the future, if they can even hold on to it, if it will even play on their new computer. The song remains the same, but how you deliver it, how you consume it, that keeps changing.

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