Studios Won't Make Same Mistakes as Labels

This column was originally published on RealMoney on Feb. 16 at 2:09 p.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

It took more than a decade before any major label agreed to let unprotected MP3s to be distributed on the Internet. But a few weeks ago, the indie-label consortium, which accounts for about a third of all record sales, agreed to let MySpace.com sell MP3s.

Meanwhile, Steve Jobs is finally saying that Apple (AAPL Quote) wants to sell unprotected MP3s on iTunes. I guess he got tired of the fact that 97% of music that is loaded onto iPods is estimated to be not from iTunes.

The minute iTunes goes MP3, its sales will explode higher. Consumers aren't stupid; they know that what they supposedly "buy" on iTunes isn't really theirs, as Apple and the labels put so much restriction on the usage of iTunes content. Ownership rights matter -- not just for the label, but also for the end users, after all. The total disregard of end users by labels and their distribution networks has hampered sales badly. Because the iPod has become the de facto standard of music players anyway, Apple is ready and excited to move away from its closed network.

The major record labels, including Edgar Bronfman and his Warner Music Group (WMG Quote), continue to flail about and fight the empowerment of their fans. What really blows the mind is that music sales are showing accelerating double-digit declines right this very minute, yet the labels keep pursuing the same policies as they have for the past decade, which obviously has completely failed already. Look, they really can't stop the revolution! And as I told Aaron Task last week, there's 100% chance that we'll all be buying unprotected MP3s from iTunes, Wal-Mart.com (WMT Quote), Microsoft's (MSFT Quote) Zune and so on by the end of 2008.

Now let's apply some of this logic to video. Viacom (VIA Quote) and other studios/networks are playing hardball with the big guns at Google (GOOG Quote). The studios say they're upset because YouTube isn't trying hard enough to keep their content off its site, even as YouTube says it easily can and will start policing its content much better if the studios would only sign on the dotted line to legalize it.