The recording industry is hurting. And what began as a bit of malaise in the early days of Napster is beginning to look like a chronic wasting disease. Forrester Research media analyst Josh Bernoff says that the music business is responding to its dire straits just as a person would - with denial, anger, depression and only then, acceptance. Bernoff explains to Bob what the media industry can learn from the fate of big music.
BROOKE GLADSTONE: This is On the Media. I'm Brooke Gladstone.
BOB GARFIELD: And I'm Bob Garfield. The recording industry is in a bad way. What began as a slump in the face of Napster and other file-sharing technologies is beginning to look like chronic wasting disease. Josh Bernoff is a media analyst for Forrester Research who's been tracking the industry for six years. He says the music industry has responded to its condition in a manner more human than corporate. In fact, he sees a reaction similar to the one psychiatrist Elisabeth Kubler-Ross famously observed in patients facing a terminal illness: denial, anger, bargaining, depression and finally acceptance. Bernoff admits he's not the first to discern this pattern, which he says runs through the media business. But he saw the music business enter the first stage back in 1999.
JOSH BERNOFF: What we saw happen there was a lot of denial - hey, this isn't really a problem," followed by anger - we're going to sue these guys, we're going to stop this, you can't do this to us.
BOB GARFIELD: Tell me about the bargaining part of things. How did that play out?
JOSH BERNOFF: It was an attempt to grapple with the problem. They said, you can have any music you want as long as it's by subscription. Yes you can have downloaded music but no, you're not allowed to burn it to your own CDs. They hadn't quite accepted the fact that they had to completely change the way they do business.
BOB GARFIELD: When you say "they," is it the labels? Is it the recording artists? Is it just everybody?
JOSH BERNOFF: Well, the two main collaborators here were the music labels and the music retailers, the stores that sold the music, that thought they were in the business of selling pieces of plastic, and for quite a while they just raised the price a little bit. People continued to buy music because they didn't have any choice.
BOB GARFIELD: Which led, you said, to the depression stage, which manifested itself how?
JOSH BERNOFF: With a lot of depression [CHUCKLES]. [BOB LAUGHING] During the period from 2001 to 2003, there were 277 articles in Billboard magazine about layoffs, not just in the music labels but also in the retail companies. And if you lost your job, you were not going to be coming back because there was just no room left for recording executives.
BOB GARFIELD: Let's talk about Hollywood. Now, I see Hollywood in the form of the Motion Picture Association of America desperately fighting against peer-to-peer technology out of fears of piracy of very expensive-to-produce Hollywood films. But you see a much more adaptive industry. Tell me about that.
JOSH BERNOFF: Well, the movie industry in the '70s was a lot like the music industry is now. When the new technology came up - at that time, it was VCRs - they reacted in a way that included anger. You had Jack Valente saying that the VCR was like the Boston Strangler for content. But in the 30 years since then, they now make more money from videocassettes and DVDs than they do at the box office. They embraced HBO, and they are now embracing new technologies like Internet downloads and video-on-demand from your cable operator. So even as they attempt to fight piracy, which is probably going to have very much the same result as it did in the music business - that is, not much - they have a whole lot more ways to continue to make money in the face of it.
BOB GARFIELD: Is there anyone else who should be paying attention to Kubler-Ross and taking care that it becomes more proactive instead of just a cliché of psychological breakdown?
JOSH BERNOFF: Well, one industry that's now in sort of the middle stages of this sort of dealing with the problem is the newspaper business. There are so many sources of news on the Internet that you see a decline in newspaper circulation. You also see an enormous amount of their other source of revenue - that is, classified advertising - getting sucked up by Internet sites like monster.com. Hundreds of people have been laid off from places like the New York Times and Knight Ridder.
BOB GARFIELD: Their problem isn't that they don't accept the threat of the Internet. Every newspaper had a website at a very early stage. It's trying to extract revenue from it that has been the ongoing problem, isn't it?
JOSH BERNOFF: Even as newspapers embrace the Internet by putting their news online, they didn't really face up to the fact that a newspaper in an online environment is not the same thing as a newspaper in print. They also haven't accepted, for example, that they should sell classified ads to people online even if they don't want to put ads in print in the paper. So while that transition has been taking place, it's a question of reaching the consumer the way the consumer needs to be reached, desires to be reached, and also finding ways to make more money from it.
BOB GARFIELD: Okay. That's a good answer. Now I've got another one for you. I've actually witnessed sessions between psychological counselors and those who have terminal illnesses. The counselors have a message to deliver but it seems to me that often the victims and the victims' families are so caught up in their own personal tragedy that they're really not paying a whole lot of attention. Let's say you're right. Is there anybody in any of these industries who is learning anything from what you have to say?
JOSH BERNOFF: You know, it's really interesting that you ask that. We actually initiated this research because a diversified media company that included both print and television wanted to know what the music lessons were, the lessons from the music industry. So I came in and talked to these executives and they said, "Yeah, there's really a lot to learn here. What does this mean for television?" We began to talk about ad-skipping and digital video records, and they basically came to the conclusion that, "Well, we need to wait and see just how bad this is." And I pointed out that that probably is exactly the same kind of discussions that were happening in the board rooms of the music labels when they were facing their transition. What it requires is that people embrace things that aren't going to make money immediately. A very good example of this is Bob Eiger, who recently made available the shows "Lost" and "Desperate Housewives," Disney shows now, on Apple iTunes. Now, that's a radical move and it probably isn't going to make that much money to begin with, and it's very upsetting to many of the people who work with Disney and ABC, and yet it's a way for that company to say, "We're going to do things differently and then if our main revenue stream gets threatened, at least we're going to have something to fall back on."
BOB GARFIELD: Okay. Well, Josh, thank you very much.
JOSH BERNOFF: It's been good to talk to you.
BOB GARFIELD: Josh Bernoff is a media analyst for Forrester Research. His study is titled, "Music Lessons: Is Your Industry At Risk?" [MUSIC UP AND UNDER]