From major to minor
Last year was terrible for the recorded-music majors. The next few years are likely to be even worse — IN 2006 EMI, the world's fourth-biggest recorded-music company, invited some teenagers into its headquarters in London to talk to its top managers about their listening habits.
Context & Ripple Effects
The Economist's grim outlook caps an 18-month run of retreat at the majors: EMI dropped DRM from its iTunes catalog in April 2007, saw digital album share firm up afterward, and by late 2007 EMI and Universal were distributing MP3s while Universal, Warner and EMI all committed to preloaded flash drives. The move followed EMI's own 2006 admission of ignorance — inviting teenagers to its London headquarters to explain their listening habits to top managers.
The diagnosis matches what the trades were already saying: TechCrunch's October 2007 argument for recorded music's march towards free, and The Register's December finding that customers who go legal get screwed on pricing and restrictions. Unconfirmed reports that EMI may pull funding from the RIAA and IFPI add a political dimension — the rumor has not been verified, but the fact it is circulating at all signals how hard EMI is scrutinizing legacy costs.
First-order effects
- The four majors enter 2008 with shrinking CD revenue and no proven replacement: EMI's DRM-free experiment cushioned its digital slide but did not reverse it, leaving cost cuts as the immediate lever.
Second-order effects
- Rivals are forced to match EMI's unprotected-MP3 stance — Universal and Warner had already followed on format experiments like flash-drive releases — compressing the premium the majors once charged for restricted files.
- If EMI actually withdraws money from the RIAA and IFPI (so far only rumored), the trade bodies' anti-piracy lobbying loses a pillar funder and other labels face pressure to justify their contributions.
Third-order effects
- The pattern points toward recorded music being priced and packaged as an unprotected commodity, shifting label power from controlling copies to owning artist relationships and licensing — a reordering that would leave the majors smaller and the trade groups weaker if it holds.
The trend: Recorded music is transitioning from copy-protected, CD-led sales toward unprotected digital formats and near-free access, with the majors' cost structures and trade associations absorbing the shock first.