Digital Piracy or Just Bad Business Models?

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Playlist.com deserves the blame for its failure

Glenn Peoples, writing for Billboard.com, published an interesting piece about the demise of Playlist.com. Interesting because it raises a fundamental issue about the business of digital music distribution and commercialization.

Citing a CNET article written by Greg Sandoval, the piece points out the service’s atrocious financial condition – $2.2 million in assets and a debt to the four major record companies of $25 million – resulting in the company’s recent Chapter 11 bankruptcy filing.

As one would imagine, the author believes that “the usual suspects (the majors)” will be blamed for this. However, Peoples takes issue with this, stating that “the company chose its fate.” Peoples points to its business model, positing that an ad-supported music service simply isn’t viable. “It should have been clear to the company that major labels would not show great support for an ad-supported music service that did not first acquire licenses from the content owners. “

So, what can the music industry and entertainment entrepreneurs take away from this? First, an ad-supported service doesn’t generate the customer loyalty/retention that provide financial security. Content providers and purveyors are wise to “discourage ad-supported models and play-first-pay-later tactics.” Second, the better strategy is licensing content to paid services that create added value through features and innovation. Good examples of this are seen in Pandora and YouTube as the standards of free services.

About The Author

Safeguarding Ideas, Relationships & Talent®

Filmmakers face an often confusing and changing set of challenges trying to ensure that their business remains legally compliant. Yet few can afford the highly-qualified and versatile legal staff needed to deal with today’s complex and inconstant legal and regulatory environment. Adler & Franczyk is a boutique law firm created with a specific mission in mind: to provide businesses with a competitive advantage by enabling them to leverage their intangible assets and creative content in a way that drives innovation and increases the overall value of the business.

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