by MEL LAMBERT
VALUE-ADDED OWNERSHIP
There has been a great deal of controversy in recent months over whether or not "normal" home taping represents a problem to the record industry. Some home taping of prerecorded tapes, CDs, and LPs almost certainly displaces additional sales of these music sources. In addition, the new DAT recorders make the process a lot more hi-fi than ever before, a development that may, in some cases at least, encourage even more home taping.
Thus, one can make an argument that home taping should be discouraged. Until now, however, discussions of the ways in which we might prevent home taping have centered around technological "copy protection." I'd like to present an alternate proposal.
It's not still another anti-copying technology because, as I'll explain, no technological solution, by itself, can completely solve the problem.
My suggestion to the record labels is not to just ignore home taping, mainly Mel Lambert is a freelance writer, magazine columnist, and technical consultant with over a dozen years of active involvement with professional and consumer audio on both sides of the Atlantic.
because such a tactic would also ignore the fact that some home taping almost certainly does displace some sales of prerecorded tapes, LPs, and CDs. The solution proposed here is one that only record companies, rather than hardware manufacturers, can implement. For that reason, it's worth a quick review of the home taping problem from the viewpoint of equipment makers.
Recording equipment manufacturers have an interest in home taping, primarily because they have a strong interest in the protection of "intellectual property" and in a healthy recording industry. Such interest results not only from the record companies' strongly voiced opposition to DAT and other digital audio recording technology; it also has its origins in the fact that a healthy recording industry (read that as healthy sales of LPs, tapes, and CDs) is absolutely vital to continued sales of both consumer playback equipment and professional recording equipment.
Thus, manufacturers of DAT recorders and the record companies have a common meeting ground. That common ground has even produced an agreement that will apparently allow U.S. consumer sale of DAT recorders equipped with the Serial Copy Management System (SCMS). Yet The Los Angeles Times, in a July 26, 1989 article, described the development as "an uneasy truce." Why? Because few, if any, of the record companies believe the SCMS technology or any other anti copying technology, for that matter, will truly solve the home taping problem. They're right.
No technologically based solution to the home taping problem can be entirely successful. SCMS, for example, contains serious loopholes-lots of them. Excellent analog copies can still be made, in any quantity desired. Multiple digital copies can be made by simply using multiple digital tapes or multiple digital machines. No wonder the record companies are still worried.
So, what's the solution? Better anti copying technology? No! And the reason is extremely simple. No anti-copying scheme--no matter how technologically successful--can completely solve the problem! Consider the highly successful Nintendo video game products. Distributed on circuit boards containing ROM cartridges, Nintendo games have a virtually perfect anti-copying technology.
Yet this virtually perfect anti-copying technology does not bring increased sales to the Nintendo company, at least not in the quantity you might expect. Why? Because the children who use these games have an informal, but highly effective, game trading network.
When an associate's 11-year-old son finds out about a newly available Nintendo game, he networks around the neighborhood until he finds a friend who has it. Then he offers to loan one of his own games as a trade. As a result, no child owns all of the Nintendo game cartridges that he or she uses. Instead, each child has a few, and he trades when he tires of them.
Nintendo could easily claim that these trading networks are displacing sales of its game cartridges. And, to some extent, the company would be right. But even with a highly effective anti-copying technology, Nintendo still cannot stop children from trading cartridges. What can the company do? The answer is that it must do the same thing that the record companies must do: Learn to promote the value of owning their product.
At this time, there is little value to a child in owning a Nintendo cartridge.
To the player, the value is in playing the game. That is, the value is in the use of the cartridge. The record industry has the same problem. Ownership of an LP, CD, or tape has little intrinsic value; it's the use of the LP, CD, or tape that has value. Technically, of course, no one owns the music they listen to.
Ownership rights are retained by the record companies and the artists they represent. However, when I purchase a CD, I do own the disc, if not the music. Therefore, it is ownership of the LP, CD, or tape that must be promoted. Learning how to promote value of ownership won't be easy, but there are lessons to be learned from another industry that has made major strides in promoting the value of ownership of their product.
In the beginning, computer software companies believed technologically based copy protection was their only hope of preventing widespread pirating of their product. "Illegal copying is ruining our entire industry," they cried.
Dozens of different copy protection schemes were tried. In response, dozens of different copy protection bypass schemes appeared. Little by little, software companies learned that copy protection didn't really provide the sort of protection they wanted. Finally, most firms turned away from copy protection and leaned toward value-of-ownership promotion as their best hope of discouraging copying.
How did software companies implement value-of-ownership promotion? They added value to their products, value that could only be realized by registered owners. That value has come in the form of 800-number help lines (you have to provide your serial number), well-written instruction manuals, low-cost upgrades, discounts on related software and hardware, and other owner benefits.
The software companies have even discovered that they can increase overall sales by using such value-added features. By providing periodic upgrades, these firms are turning what used to be a one-time sale into what now amounts to a subscription. The owner/user keeps sending money to the software company; in return, the software company keeps providing valuable upgrades. Everybody is happy. Most important, potential users of a software package with this kind of ownership value are much more likely to actually purchase the software package and much less likely to simply ask a friend for a copy.
How can these ideas be implemented in the audio industry? Some already have been. When my associate takes his two children to the mall to purchase a new cassette, they often want to spend their own money to purchase two copies of the same tape! Why? It has nothing to do with the recorded music and everything to do with the value-added features in the cassette box. Those features often include color pictures of the group and a small booklet containing song lyrics.
There are many other possibilities that would promote ownership value. I divide them into four groups: Inserts, subscriptions, related products, and warranties.
Inserts can include the color pictures and lyrics booklets that already come in many prerecorded cassettes.
They could also include ads from companies not directly related to the music business. How about getting Coca-Cola to sponsor the lyrics book in return for an ad? Vision Street Wear could offer to do a free artist poster with their logo. Many artists already have tie-ins with sponsors; an insert could take this association a step further and could also represent extra income for the record company.
Subscriptions are attempts to persuade the purchaser to keep buying more tapes, LPs, or CDs. Subscriptions can come in two basic forms.
One is a coupon for a store discount on another purchase of a-tape, LP, or CD, in the form of a simple "cents off" offer. "Collect 10 coupons and get a free album" or "cents off on the next album from the same artist" offers are other possibilities. One fun idea would be to include a "rub-off" contest coupon that entitles the winner to an instant prize (probably another tape, LP, or CD).
The second type of subscription would be some type of special offer to join the record company's own record club. There could even be a special club aimed directly at the buyers of particular tapes, LPs, or CDs. Classical music buyers or buyers of classic rock albums, for example, could be offered a special discount on "Best of" series, such as Best of the '60s, a re-mastered Beatles Collection, or Organ Classics.
"We'll send you one now, and another one every six weeks." You know the story.
In any case, the special offer should only be available to the original purchaser of the tape, CD, or LP. The idea is to promote the value of ownership of the recording by making an offer available only to its owner.
Related products include anything else available from the record company, its ad agency, or from the artist or the artist's promotion agency. How about coupons for a low-cost poster of the artist or group, or a low-cost fan club membership? How about a coupon to order a book about the history of the group or a coupon that gets you an itinerary of the group's concert touring plans? Many music buyers would consider such information to be invaluable, and it might even increase concert ticket sales! Related products could also include special offers on hardware. Possibilities include tape or CD carrying/storage cases and even "special purchase" electronics, like headphones.
Again, these offers must be truly valuable and available only to the owner of the tape, LP, or CD. Otherwise, while they may bring in some income, the offers do not promote value of ownership and won't help solve the home taping problem.
Warranties on tapes, LPs, or CDs are something the record companies may shy away from. They shouldn't. A cleverly crafted warranty could provide real ownership value to the buyer without causing major problems for the record company. The warranty would protect the buyer against defects in materials or workmanship, just like the warranty on an electronics product.
"No problem for a CD," you say, "but what about a cassette tape?" The answer is to have a special kind of warranty on cassettes: An offer to replace a damaged cassette within 30 (or 60 or 90) days of purchase, provided that the owner sends in proof of purchase, the damaged cassette, and $3 (or some other nominal amount) for shipping and handling. Then, the warranty would be honored regardless of the cause of the problem. This plan would work for at least two reasons.
First, the $3 fee and proof of purchase requirements will prevent most unqualified warranty returns from coming in, and thereby contain costs. Second, the fee could actually cover a major part of the record company's real cost of a new cassette. But most important, the warranty would provide a real ownership value unavailable to anyone who had copied a cassette. Similar warranties could be provided with CDs and LPs and any future formats.
The point of these ideas is to give the buyer a reason to own the cassette, CD, or LP and, in the process, to persuade him to buy more music and related products and enjoy them all more. It's a win/win concept. More important to this discussion, these techniques, I believe, represent a far more powerful and effective way to combat home taping than any conceivable anti-copying device or other technological approach.
Value of Ownership may even work so well that record companies will find they don't need a technological anti copying solution. Even if copy protection is still attractive, the combination of copy protection and value of ownership will work much better than copy protection alone.
Will the record companies implement value of ownership concepts? We'll have to watch and see. If they do, they and everyone else will benefit. If they don't, we're probably doomed to continue fighting over the introduction of new consumer digital audio recording equipment. That's not a happy prospect.
(adapted from Audio magazine, Jul. 1990)
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