Recording Industry has to change for customers to buy music again

It just got a lot more dangerous to be a college student. All University of Southern California students got an e-mail last week saying that USC will comply with all requests from the Recording Industry Association of America for names and addresses of students whom the RIAA suspects of sharing music over peer-to-peer networks.

The industry should concentrate on its own internal structural problems that, if left unsolved, might soon destroy the entire music business.

This week, the RIAA filed charges against 261 people for illegal downloads. If convicted, individuals may face stiff fines of up to $750,000 a song, but that hasn’t deterred many yet. The reason is simple: economics.

Classical economics say that firms have to provide a product that customers want; if they don’t, the firms will fall to the competition. Music labels are about to learn that the hard way.

But by and large, music companies do not provide music at a reasonable price. The consumers have to resort to illegal file-sharing services to get what they want. The success of Kazaa and Morpheus lies not only in the fact that they are free, but also because they provide a better service.

Legal alternatives to file sharing are very limited in scope and very pricey to boot. Hard-copy singles saw their best days before most of us were born and are very limited in selection and seriously overpriced. There is no way that anyone should have to buy one song for four or five dollars.

The best model so far has been provided by iTunes music store, which is operated by Apple Computers. It charges 99 cents per download with no monthly fee. Unfortunately, it is currently available only to Macintosh users, making it inaccessible to about 90 percent of computers until the already announced Windows version become available.

The overarching problem for legal online music-download sites is a lack of music. There are about 200,000 songs available at each major site, but this is only a fraction of the more than 10,000 albums released each year in the United States alone.

The music industry isn’t making it any easier for itself, since the price of CDs is simply too high. It is not rare to see them being sold for $18 apiece. Recording companies have long claimed that the prices are justified because the costs of recording are so high.

Yet according to a recent analysis by the investment research company Sanford C. Bernstein, the profits of Vivendi Universal – just one of five major record labels — are projected to be around $900 million this year.

After seeing those figures, the cries of music industry executives like Zach Horowitz – who told the Los Angeles Times that the file-sharing services “have ravaged our industry” – seem hollow indeed. Any sane person can tell that the industry is not in trouble when it posts profits consistently, as the record labels have done over the past decade.

Fortunately, there are signs that the music executives are waking up to that fact. Last week, Vivendi Universal announced that it will cut the price of its new releases by as much as 32 percent depending on the artist. That is a good first step. The record labels need to win back customers’ trust in order to ensure their own survival.

However, more changes need to be made. The prices for music, especially CDs, needs to come down significantly across the board and the Internet needs to become the primary medium for distribution of music. Otherwise we may soon speak of major labels in the same breath as Standard Oil and Enron, as the companies that are no more.

Boris Melnikov, Daily Trojan, University of Southern California.