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6 Reasons Why Major Labels Are Still Screwed

image from www.thispointofview.com 2011 could prove to be a spectacular year.

Spotify may launch stateside. Google Music might start cloud-based music storage off with a bang.

Apple may convert into a subscription service.

Slacker will offer on-demand music streams and may capture substantial market share. Sony is bringing their own service called "Music Unlimited" to market.

Make no mistake, this could be the biggest year that the music industry has seen in quite some time.

Amidst all this excitement though, there are still reasons for concern.

Even if everything above goes as planned and impacts the major labels positivly, they still have a winding road ahead of them. Their product strategy is lacking, piracy has proven hard to force underground, and they are their own worst enemy.

Here's why the major labels are still screwed:

1) The Format Replacement Cycle Is Over. Throughout the history of record industry, the introduction of new formats has driven profitability and dug them out of decline. There appears to be zero new formats that are capable of achieving CD era revenues. Digital music has failed to generate a new format replacement cycle and nothing in sight looks like it will perform much better.

2) Music Piracy Can't Be Forced Underground. The harder labels have tried to force music underground, the more mainstream the activity has become. 

The second that they shutdown one file-sharing client, another turns around, bends the rules, and fits between the cracks of copyright law. MP3 Rocket now downloads directly from YouTube – no p2p technology involved. Speaking of cracks, others are embedding storage devices into walls and creating networks that don't even connect the Internet. Music piracy will only evolve – not die.

3) Complete Lack of Creative Leadership. Major labels are full of leaders who preserve the status quo by sticking with feasible but relatively unoriginal solutions. New research says that creative people are looked down upon and shunned from positions of leadership. This means that those who desire to move the record industry in profitable new directions are likely to be turned down for promotions in favor of those with more practical solutions. Thus, the old way of doing thing remains and after one digital decade has ended, not much is different.

4) The Music Consumption System Is Broken. Here's what fans want. Here's what the major labels provide. Now, if the space between those sentences were equal to the distance between the Earth and the Sun, we might be close to characterizing how far divorced from reality the music consumption system is.

There is a vast chasm between what the Digital Natives want and what the major labels sell. If nothing is done, the gap will only widen. Entire generations aren't being catered to properly and until the consumption system is adjusted to reflect known fan behavior, major label decline will only continue. Piracy will worsen.

Future music products are needed and now. Otherwise, fans will go elsewhere.

5) Major Labels Are Their Own Worst Enemy. Call it "The Hulu Problem." The company is controlled by the major TV networks and has been enormously successful. So much so, that they are now the worse enemy of the people that endorsed it. People love Hulu. What's cannibalizing regular TV viewership? Hulu.

What's the solution? Kill Hulu. If your biggest success is also your greatest enemy, it's sort of a big problem. Major labels are in a similar situation. If Spotify, Slacker, Apple, and Music Unlimited turn out to be enormously successful and digital downloads and CDs decline more, all hell will break loose. If killing off the future of your business is the only way to preserve the future of your business, that might be the main reason why the major labels are still screwed nowadays.

6) [Add Your Fantastic Reason Here!]


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