The labels are going to have to understand that they no longer hold all the cards. Yes the own the content, but they do not understand the technology industry. Now is the time for the labels to grow up and realize that they made a mistake by not initially embracing the Napster concept. Napster opened the door to back catalogs for a whole new generation of consumers who might not have experienced the music their parents enjoyed.

Why did Napster work? There was no DRM. Yes it was free, but it was easy. Now is the time for the labels to reenact the Napster experience through DRM-Free music services with tiered pricing.

In order to save the industry and not merge into the studios they are going to have to stop being greedy, cut their losses and take a chance. Without that risk, the industry will continue to decline. Will 2007 be the year that the Music Industry goes over the cliff?

Well yes and no. Free will not save the music industry. Innovation, expression and weaving music into as many social experiences as possible should be the goals from here on out.

Free Tiered P2P Services are a bust. Look at iMesh. Even BitTorrent got the picture and is launching out with a Windows Media Rights Manager based offering for PCs. That should be a sign of the future for all of us.

Bronfan said it best I think:

Warner Music chief executive Edgar Bronfman Jr. said in a call with analysts that the argument to drop copy protection also known as digital rights management (DRM) is “without logic and merit. We will not abandon DRM.”

The discussion point here should really be more about when is Apple going to License FairPlay or support WMRM on the iPod?

Free is not the answer, it just provided a model for us to study to consumer behavior. In order for the industry to move forward it must look to the past and realize that DRM was a huge failure. Napster worked because it was easy and had no DRM. Why not take a percentage of a catalog and put it online in a DRM-Free format that consumers can load onto any device?

With respect to Bronfman, he is wrong. Consumers want convenience and ease of use, with the ability to play the music they purchased on any of their devices. If the industry does not give them this, they (the consumer) will continue to get the music in a way that is convenient for them.

Bronfman has been consistently protectionist, to his company’s detriment.  As far as the argument being “without logic”, try having a combination of devices (PC/Mac/iPods/PSP etc.), and managing your LEGAL purchases. It’s a Harvard B School case study in atrocious customer service. We pay for downloads, then must contend with the fact that the download is too crippled to know that we are persistent customers across device IDs. He’s way out of touch in this regard.

When a free product is more friendly and flexible than a priced product, the selling entity has no one to blame but itself.

BTW if Sony Music hadn’t had taken this posture, Sony CE might have held onto the portable market they owned with Walkman/Discman – and likely never would have handed the game to Apple in the first place.

It was the label’s game to lose - and they lost utterly.  They need to listen to their customers and suppliers (artists) or be disintermediated.