The Dream Is Over: Music Labels Have Killed Their Digital Future

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By Wayne Rosso

John Lennon would have been 70 years old this week. It got me thinking about one of his most famous lyrics, a line from ‘God’: “The dream is over.”

Lennon may have been reflecting on the demise of the Beatles, but it seems to also apply to the once enthusiastic promise of digital music services…

The hope of pioneering the music industry’s most profound transformation, that inspired entrepreneurs over 10 years ago, has finally been snuffed out by the very people who would have profited the most—the music industry.

The table is now set. There will be no new players of significance to enter the business. Investors don’t want to entertain the remotest possibility of funding any start-up that deals with music, no matter how clever and innovative. As one major media venture firm told me a few months ago,they’re tired of writing cheques for big advances to record labels. Not to mention the huge legal fees that start-ups have to spend in order to get licensed, a process that takes at least a year (for no apparent reason, I might add).

What’s most ironic is that the record labels have now put themselves in the position of having to depend on the bulk of their digital sales from companies that actually couldn’t care less about selling music: Apple (NSDQ: AAPL), Amazon (NSDQ: AMZN), and now Google (NSDQ: GOOG). These behemoths have huge revenues, 99.9% of which are not related to digital music sales.

Remember when the industry was screaming “never again” when they finally figured out that Apple was making a fortune from iPods? They would never let another hardware manufacturer get away without forking over a piece of their sales. Then Doug Morris brilliantly delivered on that promise. He got $1 for every Zune sold. Good work, Doug. You should be slicing pastrami at Nate n’ Al’s. The money you made from that deal would pay for your lunch.

One senior digital music executive told me “they (major labels) are despicable scum. They fly out to Cupertino and let Steve Jobs smack them around and then fly home and try to take every dime they can get out of start-ups in order to make them feel better about themselves.”

The fact that Google is now interested in getting serious about a music play has gotten every record company lawyer wet in the pants. They think that this is going to be a game changer. It won’t be. People forget that, just because it’s Google, doesn’t necessarily mean that it’s going to be a hit. They’ve had plenty of bombs. Remember Google Wave and Buzz?

The record labels are counting on Google rescuing them from Apple’s death grip. Not going to happen. Google may suck up some market share, but not at Apple’s expense. This has been the pattern with Amazon’s digital download store.

From what has been reported, Google is not pitching anything particularly innovative either. Basically an iTunes clone with a paid locker service. It’s looking like nothing that hasn’t been done better by others. Nobody’s going to pay Google $25 a year to store their music in a cloud. The labels are counting on half of that revenue. On top of that, some of the names that have been floated in the media as potential Google music heads are downright ludicrous.

What the industry has accomplished is exactly what they didn’t need. They killed competition. Brilliant. The dream is over.

Posted via email from Music Business Information