Core Value And The Package It Comes In : What The Record Labels Can Learn From Tony Montana

Core Value & The Packages It Comes In

If I purchase a Playstation Portable, I own it. It is my property. So what motivates me to buy a PSP? Well, to answer that question, we have to consider the core value that is inherent in a PSP. Yes it’s really just a physical object but its core value is it’s a great little entertainment system.

moving-boxes-kitch-bun One could argue that there are other values to be derived from possessing this physical object, e.g. it’s a status symbol that boosts my popularity with my friends, but few would dispute that it’s inherent value lies in its capabilities as a video game machine, portable movie player and handheld web browser. It’s impossible for me to replicate or share that core value with anyone else unless I give up possession of the physical container that houses that core value.

This is all just a long-winded way of saying that the core value of the PSP cannot be decoupled from the physical container that carries it. While this all may seem like metaphysical babble, this inextricable pairing of perceived value and physical representation is what creates business opportunity. Without that lock-in of value, Sony can’t slap a price on a PSP and generate money.

Sixty-Eight Glorious Minutes Of Wonderful Core Value

music notes When I purchase a compact disc, I own it. It is my property. I can lend my CD to a friend. When I do so, I no longer enjoy its use. Let’s assume for a second that its 1982, and I really can’t easily or affordably replicate the music on the CD. So applying the same test as the PSP, why is the CD valuable to me? Is it because it has great cover art? Is it because it’s shiny and round? Obviously not. Nearly all of its core value comes from the music encoded on it. Take away the music, and it’s pretty much worthless. And so, the physical CD is really just a container. It’s no more valuable than the PSP that is never turned on.

Here Come The CD-R’s!

CD spindle Fast forward 20 years, and hand us 50X CD burners, MP3 encoding and 100 blank CD-R’s for $12, and the proverbial plot thickens. Today, anyone can easily decouple the music (the core value) from the container (the CD). CD’s used to cost $18 or $20 because the ability to extract that core value wasn’t there. This barrier to decoupling created an incredible business opportunity. In other words, a large portion of that $18 wasn’t derived from packaging or paying artists, it was derived from the tight entanglement that once existed between the music and the physical container that housed the music. It’s sort of like a tax that’s been artificially slapped on after the fact.

Now that we’ve untangled things, the opportunity for record labels to tax us is disappearing. So what is that core value really worth? $3? $5? $10? Who knows. We need a reappraisal because the world doesn’t need the containers anymore. Or stated differently, that physical artifact which gave record labels a place to slap on a price tag is disintegrating.

What we’re witnessing now is the flailing and screaming of an entire industry drowning.

Laws Shmaws 

The laws that everyone points to: copyright, "fair use", DMCA and such are hardly worth entertaining because they really amount to feeble attempts to reconcile laws that protect creative works that are indelibly tied to some physical representation (like a painting or sculpture). Nobody’s bothered to speak of how to deal with creative works that simply don’t need physical objects. Our economy is primarily grounded on the ability to buy and sell goods and services. To date, we lumped in creative works with "goods." Well, we don’t need the goods anymore. Now what?

When In Doubt, Load The Shotgun

I’m a premium MP3Tunes customer. MP3Tunes allows me to store my music online so I can access it from anywhere via a web browser, Winamp or iTunes plugin. A few days ago, I received an email from them stating that they were being sued by EMI records for what I guess is copyright infringement. EMI is freaking out because their core value is now flowing over wires. They’re trying to somehow apply the container tax when we don’t need their containers anymore.

"Say hello to my…(eh, you know the rest)"

scarface-4 It really isn’t surprising that record labels are putting up a fight here. It’s a very large and slowly dying industry that is going to go down swinging. There’s a lot to lose here. Still, the carpet bombing approach is just plain ugly. It reminds me of the closing scene of Scarface, where Al Pacino, surrounded on all sides, decides to go out in a blaze of gunfire. College students, grandmas, storage services, software companies. The whole thing borders on silly. It’s sort of like to nut who goes into the mall and just randomly starts shooting.

It would serve the record labels well to replace litigation with dialogue and a broader view of intellectual property. Lawsuits suck. They require time and money. They create stress. They rarely result in a positive outcome. EMI and other labels should put their guns away and start to embrace this inevitable shift.

2 Comments Core Value And The Package It Comes In : What The Record Labels Can Learn From Tony Montana

  1. www.codingthewheel.com

    Decoupling the container from the content, indeed. I wonder if 9 out of 10 readers will really understand what this means, and its implications for our future.
    The record companies, for all their resources, have failed to come to grips with the “decontainerization” of their product; a product they’ve spent decades trying to establish a monopoly over.
    Unfortunately for them, few things are more mobile (when it comes to the Internet) than media, particularly music. The record companies are making the same mistake vis a vis “digital copyright” that the Catholic Church made against Darwinism.
    No singe corporation or coalition, however large, can stem the tide of a mass movement (and music sharing is definitely a mass movement). It’s what people want, and if you don’t give it to them, they’ll go around you.
    The reason I don’t use iTunes is not because I’m not willing to pay for music. I’d love to pay a reasonable price for my music. But I refuse to pay $1+ per song in order to get a digitially locked down version of the content that I can’t play anywhere except on the players which have been “approved” by Big Brother.
    So instead, I do what most people do: borrow, steal, stream, and torrent my music. Given a choice between digitally unlocked music for free, and digitially “locked” music that I can’t share at $1 a pop, well. That’s not much of a choice at all.

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  2. Anonymous

    the core value of the PSP cannot be decoupled from the physical container that carries it. While this all may seem like metaphysical babble, this inextricable pairing of perceived value and physical representation is what creates business opportunity. Without that lock-in of value, Sony can’t slap a price on a PSP and generate money.
    i don’t know if that’s quite true- a psp’s value can partially be replicated non-destructively to your posession of it, by creating an emulator; this could theoretically however be destructive towards the psp’s differential value. -the psp’s pricetag is up for reconsideration when it loses the exclusivity of one of it’s distinct features; psp games. it ofcourse is still intact as a unit, portable and all, but it might even get physical units as competition with the ability to play the same games and [maybe] more.
    anyway; nice article, nice comment above.
    if anyone hasn’t read another nice discussion/site [sorry if it’s already posted]:
    http://www.demonbaby.com/blog/2007/10/when-pigs-fly-death-of-oink-birth-of.html

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