Recording industry executives are claiming that MP3s are responsible for album sales dropping 10% in 2002, 5% in the two years previous. They’re right but not the way they seem to think. In my opinion, if it weren’t for MP3s their sales would be down a lot more. I personally had stopped buying music until MP3s came along. There were too many things demanding my attention for me to sit back and listen to an album. Internet discussion groups, writing web pages, reading web pages, the expansion of work hours, my cellphone, computer games, DVDs, the number of things I want to make time for has increased considerably since the computer revolution.

My physical space is also limited. I’m not going to carry both a walkman and a cellphone, and I’m not going to give up my cellphone. Others will feel the same about their PDAs. And unlike the people who the RIAA is claiming are stealing, people who buy cellphones and PDAs demonstrably do buy things.

When iTunes came out, suddenly I started buying music again. MP3s made it easy to listen to my music wherever I am. I’ve bought more music since iTunes than I had in the twenty years I’d previously been buying music.

People don’t just sit back and listen to albums anymore. They have other things to do with their time. The RIAA needs to become aware of this.

Ironically the one thing that will push consumers who do still listen to music away from buying music, negating the benefit that MP3s have had on record sales, is if buying music no longer means being able to listen to it. The harder it is to listen to music, the fewer consumers will buy it. Consumers will not buy the same music twice. If they can’t listen to it in their car, on their DVD player, in their computer, on their portable music device if they can’t listen to it on what they have when they have it then they’ll go on-line and download music that they can listen to.

The recording industry lucked into what’s called an “open” format when they chose the CD audio format. Being open meant that at the same time as the Internet and our increasingly digital lifestyle has provided competition for consumer attention, music has been able to adapt and become part of that new lifestyle. Consumers who no longer listen to full albums have been able to convert their albums to tracks on their computers. Consumers who would otherwise have stopped listening to music continue to purchase music. Because the audio CD format is open and easily converted, new technologies can make use of it, and the format remains viable even though listening habits have changed.

By using an open format, the recording industry ensured that sales would not drop as drastically as they otherwise would have when technology changed. It ensured that consumers who now have computers can listen to music on their computers; that consumers who jettison their walkmen for PDAs can listen to music on their PDAs, even though neither the computer nor the PDA even existed when the CD audio format was created.

But their choice seems to have been a lucky fluke. The recording industry is out of touch. They didn’t choose an open format on purpose, and today they see it as a mistake. They’re trying to close the one thing that has kept them afloat. They're introducing copy restriction schemes that keep consumers from playing music that they buy for one device on the other devices that consumer owns. If the recording industry continues trying to restrict how consumers can listen to their music if they continue to try to convert to a closed format then their product will no longer be able to adapt to people’s listening habits, and their sales will drop even further than they already have. They will become another “grey market”, selling to fewer and fewer consumers until their market dies of old age.

Consumers will not buy the same music twice. One problem appears to be that industry executives are part of this lifestyle change, and they don’t listen to music either. They sell product, and their goal is to sell lots of product. That’s good. But they’ve lost touch with their customers when they think of “product” in terms of the format the music is in, and the medium it comes on, and try to increase product sales by selling the same music to the same consumer in multiple formats and media. To the consumer, the product is the music itself, not what it comes on, and consumers will not buy the same music twice. They will not buy one copy for their CD player, another for their portable music device, another for their computer.

Forcing them to do so will only send them on-line. And a consumer who is forced to go on-line to download music that they’ve already purchased will quickly realize that there was no reason for them to purchase it in the first place.

I think that this is the music industry’s biggest problem: their executives don’t listen to music. They either don’t know what their real competition is, or they’re deliberately using the rhetoric of one “enemy” to fight what they see as a much larger problem: consumers listening to music.

They don’t know that their competition is all the other things that consumers do, leaving less time for their consumers to listen to music. Or they’re deliberately pretending to be fighting “piracy” when what they’re really trying to do is milk the fewer consumers that they currently have for more money. Either way, they’re going to fail.

Sometimes I think that record company executives don’t see any point in listening to music; that they feel that the only use for a record album is to hang the CD on your wall, because that’s the only thing they do with it (and they only do it for best-selling albums). They can’t understand why on-line music would be any use, because how can you hang your hard drive on your wall, and why would you want to?

On the other side, when they do sell on-line music, they don’t discount the price, because, since they don’t listen to the music themselves, they see no benefits to the physical format. They don’t see the benefits the consumer sees to having the lyrics in the inside booklet (you can’t read the inside booklet when the packaging is hanging on your wall); they don’t see the benefits to having a physical copy of the music itself (they’d just as well like to sell the CD with just the packaging if they could get away with it); they don’t understand that consumers want to be able to listen to their music for as long as they live; and they don’t understand that people who actually like to listen to music also like to listen to music in their car, while they work, and while they’re out on the town.

They don’t understand that requiring our computers to contact a company that could go out of business makes us wary of buying such music. They either don’t think about the long-term viability of music, or they consider it a bad thing. Why would anyone want to listen to music twenty years after it came out? The artist has long since passed his optimal revenue opportunities.

For CDs, their competition is everything else that people do with their time, not on-line free downloads. For on-line services, their competition is CDs. A physical copy of the music holds many advantages over a purely digital copy on a hard drive, especially if the hard drive version contains restrictions on use. And yet the companies not only don’t add any benefits to the on-line version to overcome those disadvantages, they never change on-line prices to reflect that the on-line, closed-format version is worth less than the physical, open-format version.

An open format is what saved the music industry, but it’s a solution that the recording industry is blind to. They don’t want to see that an open format that made it easy convert to MP3s was their savior, not their enemy. “Open format” is not a phrase that record company executives understand, but they will have to learn it if they want to continue making money in an increasingly flexible world. Closed formats cannot adapt to new technologies or to new lifestyles.