From Due Diligence:
"The dynamics of a new act are particularly important. Often, a great new act goes undiscovered for a long period of time, then starts to generate buzz in a few markets. Given how social a phenomena hits are, this buzz has to be nurtured and exploited by having enough product on the shelves. Only a big music distributor can guarantee that.
Wal-Mart is destroying that capability..."
These 'dynamics' I think are a business model that was slowly becoming less and less in tune with reality - market the hell out of an essentially inferior good, and keep information asymmetries as huge as possible. Wal-Mart naturally stepped into the breach - offering them volume in exchange for control. Now, the music industry has a golden opportunity to completely eviscerate Wal-Mart - they just won't take it, because they're even more afraid
of changing that business model than they are of Wal-Mart.
The central question is this: are 'hit-driven industries': made by
consumers, or for
These hit driven dynamics have been happening the video games space too. But the strategies of the video games publishers have been, interestingly, evolving just like those of the music industry did - marketing, marketing, and more marketing. Now, everyone is kind of screwed - except for the innovators.
I also take the point about the music industry needing to search for processes beyond selling recorded music to make money. I think this is because music as a medium is less and less important (by itself) to most people. Here's an example of how they are starting to do exactly that.