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Recording Industry Problems: Mostly About the Product

Yesterday's Los Angeles Times reported that the recording industry is losing large amounts of money because new releases from previously popular artists are failing to sell in expected volumes. The article does mention Internet piracy as one of the drags on industry profits, but it also lists four other major issues: lackluster album sales, eroding profit margins, skyrocketing marketing expenses, and executive salaries.

In our view, the problems that the recording industry is experiencing are quite similar to the ones that are affecting the movie industry: mediocre product. Neither unrelenting hype, nor piracy protestations from Jack Valenti or Hilary Rosen can prop up these important American industries if the new product pipeline is filled with bilge.

Many of these problems would be fixed if the established artists and industry executives were paid solely on the basis of their performance. The record companies must also rationalize their organizations and find a new distribution model that embraces the Internet and does not insult customers by treating all of them as if they are thieves.

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