Downloads Die, Apple Lives, Music Industry Suffers

NEW YORK ( TheStreet) -- At Billboard, Glenn Peoples makes a reasonable argument that digital music sales (downloads) are not dying by drawing a worthy distinction between album and individual track sales.

At the outset of his article, Peoples says The data should create the narrative, not the other way around. I argue he's doing exactly what he accuses other journalists of doing, but just to make his favored point. I'm one of the guys who, according to Peoples, misinterpreted what's happening with music consumption. I recently wrote an article citing a Rolling Stone blurb that didn't contain the context Peoples was looking for.

Fair enough. We could argue over what happened in the past and what's happening in the present all day and go absolutely nowhere. That's the unfortunate by-product of a multi-faceted argument dominated by a bunch of people with special interests or an insatiable desire to prove they're right.

Even if digital sales are doing well in the face of streaming's continued growth, the music industry should act like they're not. Haven't label executives and others who make up the music industrial complex studied their own history? Haven't they come to the realization that how things were last week, are today or will be five days from now means very little? It's the long-term that matters. You know, the Amazon.com ( AMZN) approach that works so well even if a stubborn core of bitter holdouts refuse to endorse it.

Consider my favorite Jeff Bezos quote that comes after a reporter's question:
Q: Do you have a goal for when you can throttle back on expenses and become profitable?
Our strategy is very, very clear: We're focused on long-term returns for investors. And to throttle back on investment now would be shortsighted. When we have less opportunity, that will probably happen. But as long as we have lots of opportunity, we're going to continue to invest commensurate with that opportunity in a very disciplined and methodical way, but in a long-term context. To do anything else, we believe, is irrational.

That exchange, by the way, took place in freaking 1999. About 427% ago. For the record, AMZN stock is up 427.3% since June 1, 1999 and a whopping 20,061% since going public.

Crappy strategy, I know.

Anyhow, as Bezos indicated more than 14 years ago, the Amazon strategy cannot work nor is it appropriate for every company. It works for Amazon because Bezos isn't fooling himself, his co-workers, his investors or the general public when he speaks of the long-term opportunity Amazon has. Contrast this to Reed Hastings who takes a similar perpetual startup approach at Netflix ( NFLX). Hastings makes a risky, unsubstantiated bet on Netflix's long-term potential; Bezos absolutely does not. I'm comfortable using the last 14 years as evidence to support my contention.

That said, the music industry -- thanks in large part to Internet radio -- has massive long-term growth and diversification prospects. They're real. They're spectacular. And they're on par with Amazon's. So why waste your time clinging to the way things are today?

Independent labels appear to have accepted iTunes Radio terms from Apple ( AAPL) that emphasize downloads. Because today a download is worth more than a stream. And, of course, it's in Apple's best interest to get as many free streams as it can, push iTunes Store music sales and offer a relatively minuscule amount of revenue sharing.

But, because Apple "promises" to keep the download dog and pony show going, it's all good. I have yet to see objections from the indies. And I assume the majors all signed on to a similar, if not the same deal.

You never win when all you do is protect your existing business model.

Some folks will try to make Netflix comparisons, but they fall short. Consider this one from BGR that attempts to link a sales-related issue in the music industry to shifts in television:
Are Netflix and its ilk going to demolish 70% of the TV and movie content industry sales and then reignite growth on their own terms? Kill the whale in order to gorge on its blubber, so to speak?

No and no.

These questions tend to miss a crucial and distinctive point.

While the major players -- mostly old guard entities -- own the content in both music and television, the music guys tend not to and have shown little interest in delivering it themselves. That's not the case in television. The old guard TV media certainly continues to protect it's cash cow model of charging retransmission fees, but they're merely managing the transition to digital because they can. Again, they own and have pretty solid platforms -- their own platforms -- to deliver content digitally as they see fit.

So if the music guys are going to rely on third parties almost across the board to get their stuff out to the masses, they better damn well have a solid handle on the future, particularly if they never plan on taking control of it.

You can show me today's numbers all day long. Twist them any way you like. But have some respect for history and something resembling vision. Digital downloads will end up like CDs, the cassettes, 8-track and vinyl records that came before them. It's only a matter of time before the music industry wonders where digital sales went just like they were left wondering what happened to physical sales.

To not come to the table and take full advantage of all forms of Internet radio and the data and technological prowess the space is so chock full of has industry-wide suicide written all over it. Why the music industrial complex would so willingly play ball (or Russian roulette) with Apple, a company that, at day's end, will survive just fine with or without digital music downloads, yet fight Pandora ( P) and Spotify every step of the way is beyond me.

-- Written by Rocco Pendola in Santa Monica, Calif.
Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.