Musical cacophonies and visual epiphanies came in handy this past week. Let's take a closer look.
You spin me right round, baby, right round like a record, baby
I don't know whether anyone was so much surprised by Sony's (NYSE:SNE) role in a payola scandal as much as they were by the sheer stupidity of the embarrassing email exchanges between the company's music label and lots of disc jockeys. That kind of arrogance can make you think that Sony got off cheap with just the $10 million slap-on-the-wrist settlement announced Monday.
It's a story that I had a fair deal of interest in because my band, Paris By Air, was once signed to Sony's Columbia Records music label. No, I don't have any juicy firsthand payola stories. I was young. I was naive. I had eggplant-colored highlights in my hair.
However, the prerecorded-music industry has always been a tangled web of tall tales, urban legends, and really bad boy bands. Disc jockeys were an equally eclectic lot. As a band, we hit stations all over the country in promotional efforts. That approach always irked me. We would do a free show for a station, and then our song would be bumped from light to heavy rotation. And that's why I had never trusted radio playlists or the music charts that were based on radio station rankings. It wasn't until actual sales became a greater part of the mix that it dawned on many of us how popular some genres -- such as rap and country -- really were in comparison with the Top 40 bubblegum that the labels were emphasizing in their promotional efforts.
Incidentally, I remain a fan of Sony even if our professional relationship didn't exactly pan out for either side. But I think the music industry has so much to learn about how it conducts its business. We are living in a digital age where there are numerous advantages to being a purveyor of content, but the record labels continue to resist the necessary change to make it work. They are still tied to fat distribution structures and even fatter recording contracts. Artists and labels are rarely encouraged to work together in revenue deals that would ring logical given the current state of the digital space's economy. That's why Warner Music Group (NYSE:WMG) was such a colossal dud when it went public earlier this year.
The music industry has so much potential, yet the major labels still don't get it. That Sony was dragged into the spotlight under accusations of bribing radio stations -- a practice that has been festering for decades -- only emphasizes how resistant the sector is to change. I mean, we're still even calling them record companies, even though vinyl has been dead for ages, right? When will they learn?
Learning to Reed can open a few investing doors for you
CEO Reed Hastings is back in favor after his DVD-rental specialist returned to profitability in grander fashion than the market was expecting. When Netflix (NASDAQ:NFLX) reported that earnings had roughly doubled for its quarter ending in June, and the company raised its 2005 outlook, pundits were at a loss.
Here was a company that some had left for dead, and now it was claiming that earnings may come in as high as $0.26 a share on the year. Wasn't this the same company locked in a bitter price war with Blockbuster (NYSE:BBI)? Wasn't this the company that took to slashing its monthly dues when it sensed the threat of Amazon.com (NASDAQ:AMZN) entering the niche? Along the way, it came to grips with its own strength. Subscriber defections were at an all-time low, and the company's lean infrastructure allowed it to grow its bottom line despite toiling away in an environment with dirt-cheap rentals.
Movie fans are making the switch from watching new releases at the local multiplex to simply borrowing the discs a few months later. Netflix is at the forefront of that movement, now with 3.2 million queue-building customers. That's a pretty impressive captive audience. It's why Netflix shares have doubled since they bottomed out back in April.
And Sony? If your movie studio has any kind of borderline-unethical working relationships with these DVD-rental chains, please do us all a favor and make sure the emails aren't as embarrassing as they were when some disc jockey asked for home theater equipment or athletic footwear to get a particular song on the air.
You're better than that.
The headlines behind this week's stories:
Until next week, I remain,
Amazon and Netflix are recommendations of the Motley Fool Stock Advisor newsletter.
Longtime Fool contributor Rick Munarriz has always embraced the free, digital distribution of his band's music. He does own shares in Netflix. The Foo l has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
